“We cannot solve our problems with the same level of thinking that created them” - Albert Einstein
It typically takes more one than industry to solve a worthwhile problem. If we want to feed the ~9.7 billion people who will populate our planet by 2050, the challenges that we face in terms of available land, water, and climate change are too big, dynamic and complex to be solved by one company or one industry. We will need more than a village - a bigger ecosystem of stakeholders to solve this problem - farmers, agricultural equipment OEMs, agro-chemical manufacturers, seed companies, local government, and agricultural research universities. Since the Industrial revolution, we have been used to thinking of industries and companies as the organizing units of our economy. The scale of the problems that we face and the opportunity in solving demand new ways of organizing our economy - with ecosystems.
So what is a business ecosystem?
We can define an ecosystem as a community of diverse players enabled by advances in digital technology, who collaborate seamlessly to solve problems which cannot be solved by themselves individually. Take the problem of making our cities liveable for the large urban populations of the 21st century. We will need an ecosystem of stakeholders including national, state and local governments, planners & developers, private investors, utilities, energy, transportation and infrastructure suppliers and service providers coming together to solve this problem.
So what will drive the rise of this new business ecosystems? Some of the drivers revolve around your motivation for change while others revolve around your ability to make that change happen. Here are some thought provoking facts that could drive you to build your ecosystem…
Your customers are looking to you for outcomes
Customer buy products to solve problems. The share of services in the economy has been growing. The growth of the services economy indicates their increased commitment to solving their customer’s problems. As commoditization, global supply chains, market saturation in mature economies drive down revenue and product margins, manufacturers are going beyond the basic break-fix services. They are taking more responsibility for customer outcomes and tying their fortunes to those outcomes. Since the customer outcomes are typically not just dependent on your product, you will need to work with others.
The real big problems cannot be solved alone
If solving a bigger problem can make you richer, the question is can you solve the biggest problem all by yourself? The growing population and limited natural resources have created seemingly complex, intractable problems which need new ways of tackling them and would need you to work with several others.
Boundaries are dissolving
One of the critical drivers of ecosystems is the blurring of boundaries - between industries, between producers and consumers, between distant locations, between the physical and the digital. These leads to new ways of solving very old problems. The rise of digital technologies has enabled blurring of the boundaries which have limited the actions, transactions, objectives and the problems that organizations have chosen to solve.
Big data links multiple industries
The customer and process knowledge that is embedded in your organization can open potential revenue opportunities. You may or may not think of these as part of your core business. The digital ecosystem enables you to make money from this knowledge, without necessarily getting in a business that you don’t want to be in. Similarly, the data residing with other players can help you offer new services.
The enabling technology is here, and you are already deploying it inside the company
With the rise of the Chief Digital Officer, and digital strategy effectively being treated as corporate strategy, companies are getting on to the digital bandwagon. As companies use digital technologies to break silos and erase boundaries internally, they are also wondering if they can use a fraction of that capability to collaborate with other players in a seamless manner.
Somebody is getting paid to eat your lunch
The market for start-ups has never been better. In a world, awash with capital, start-ups are looking to disrupt existing markets or create new customers from non-consumers with ecosystem business models which will differentiate them from the existing players and VCs are ever more willing to throw money at them. The incumbents need to up their game to stay in it.
Since the days of the British East India Company, corporations have evolved and came of age in the industrial economy. How will they navigate the ecosystem economy?