CIOs need to think about strategy, relationships and value exchange when considering digital ecosystems.
Your dynamic business ecosystems may sometimes create partners from competitors, at least for a little while. When BMW and Toyota need to develop key technologies, such as batteries, they may join together and then later go on to compete in the marketplace. Apple, Fitbit and Garmin created an ecosystem focused on fitness and apps. In a less-competitive ecosystem, groups such as a government, charity and a community group might collaborate on health or public policy because each entity has a shared interest and goal.
“Digital business drives dramatic changes in organizations’ business ecosystems, making them larger, more complex and essential to strategy,” says Betsy Burton, vice president and distinguished analyst. “CIOs and IT leaders must shift and expand their mindset and approach to focus on their organization’s strategy and execution within their business ecosystems from an outside-in perspective.”
Ecosystems enable organizations to respond and exist in an increasingly digital world, assuming that CIOs and senior IT leaders consider the eight dimensions when making strategic decisions about how to participate and when to change tactics.
Dimension 1: Ecosystem Strategy
Bottom line: Every organization exists in multiple business ecosystems. These business ecosystems are dynamic networks of entities interacting with each other to create and exchange sustainable value for participants. The challenge is deciding how your organization will survive and thrive in its ecosystem.
Know that ecosystems can emerge organically or deliberately. Organic business ecosystems are created based on evolving industry, government and market trends. Deliberate business ecosystems might emerge in a more planned manner — for example, Amazon’s ecosystem of sellers, buyers, advertisers and collaborators.
Decide what role your organization will play in these ecosystems: Leader, disruptor, niche player, orchestrator, or something else.
Dimension 2: Degree of Openness
The degree of openness within ecosystems is driven by strategies, common goals and shared interest. An ecosystem may be public, private or a hybrid. Many organizations actually participate in a hybrid of public and private ecosystems.
The openness of an ecosystem has two implications. The degree of change is dependent upon the possibility of new entrants and disruption to relationships and value. It will also define the nature of the relationships in the ecosystems and how they are formed and maintained. It will define the nature of collaboration and competitions.
Dimension 3: Engagement of Diverse Participants
Dimension 3: Engagement of Diverse Participants
With increased connectivity, organizations will need to figure out how to integrate things like smart advisors and artificial intelligence into their ecosystems.
CIOs need to understand that the diversity of an ecosystem and the roles that people, businesses and things play will change and evolve depending on the situation. For example, the primary person in an ecosystem may be a business customer, and then, suddenly, a smart advisor will take over the roll. This constant situational change will determine how solutions are defined and supported.
Dimension 4: Types of “Relationships”
With 7 billion people and more than 30 billion devices connected to the internet by 2020, interconnection will create an ecosystem challenge. Digital platforms — wherein participants with different goals and objectives are connected on a commission basis — are how most companies are mediating relationships in ecosystems. The platform provides the core integration, application and management services for participants. For example, Outdoorsy connects camper owners with those looking to rent campers.
Dimension 5: Form of Value Exchange
In addition to monetary-based value exchange, ecosystems may dynamically leverage information, reputation, services, and other non-monetary forms of value. For example, Boeing collaborated with 50 vendors to create the 777 aircraft. Ecosystems enable companies to exchange products and services for information or analytics. It’s important to understand the changing definition of “value” that ecosystems create.
Dimension 6: Diversity of “Industries”
Ecosystem expansion can result in unexpected partnerships for organizations. Partners could include organizations within the primary industry, adjacent industries or, most unexpectedly, far-neighbor industries outside of the business’s industry (i.e., travel and healthcare).
Dimension 7: Complexity of Multiple Ecosystems
Large organizations will most likely be involved in multiple ecosystems. The key is to understand how these ecosystems interact, identify potential fractures and overlaps, and acknowledge constraints and implications. Keep in mind that some overlapping ecosystems will create a new ecosystem, while other overlaps will highlight redundancy.
Dimension 8: Technologies
Discussions about ecosystems can be overwhelming, but CIOs should keep in mind that they are responsible for the technology that will enable the business ecosystem strategy now and in the future. Leverage a digital business platform (i.e., open APIs, analytics, security capabilities, etc.) Success will require a strategic integration of technology, information and business processes.
Organizations that do not work toward understanding their business ecosystems risk falling into a participatory role only, enabling other competitors or partners to take the leadership role and thus define the rules for engagement in that ecosystem.
Specifically, CIOs must:
- Proactively reach out to collaborate with business counterparts on how and why to integrate ecosystems to improve the overall corporate strategy.
- Ensure any customer-, partner-, employee- or supplier-focused applications or solutions being developed today are at least considering these future business ecosystems
- Make sure to set aside development budget every year for the next five years for the most critical customer-, partner-, employee- or supplier-focused applications, solutions and supporting infrastructure to enable change to reflect evolving ecosystem strategies.