Unlocking the ecosystem paradox to drive business model innovation and digital growth

Senior leadership teams expect partner ecosystems to be central to unlocking significant growth and new digital revenue in the future. However, our research shows that just a handful of organizations are going to realize their ambitions. Most are still trying to address the future with the mindset and the tools of yesterday. Not enough is being done to seize the opportunity, with the paradox being that many are ‘talking the talk’ but few are ‘walking the walk’. Drawing on our unique ecosystem diagnostic, we provide industry-specific insights on how companies can accelerate ecosystem progress and turn their high ambitions into concrete results.

In 30 seconds:

  • We define an effective partner ecosystem as an open, multisided collaboration between different parties
  • Senior leaders understand the importance of ecosystems as key to business model innovation but fail to harness its full power by not breaking the status quo – the ecosystem paradox
  • We recommend leveraging ecosystems to create compelling products and services driven by genuine customer insight

The partner ecosystem paradox

In our previous report, Re-thinking the European Business Model Portfolio for the Digital Age, we spelt out why many companies will miss out on their digital growth ambitions.1 With many focused on incremental operational improvement, they miss the opportunity to create new and more compelling products and services, backed by an attractive new business models that maximizes value to the end customer.

In this follow-up report, we take a close look at the central role that effective ecosystem management plays in companies achieving their digital growth ambitions. New digital business models require the connectivity and collaboration provided by an ecosystem of partners to create sophisticated products and services that competitors cannot copy. However, simply bolting on ecosystems to an existing business model will not accomplish the digital business growth that organizations are aspiring to.

This tendency to take a bolt-on approach is one reason why a gaping chasm exists between leaders’ ambitions and their willingness to take the actions to deliver. This chasm is the heart of the ecosystem paradox. As we have seen, companies have high hopes for their ecosystems, with over two-thirds of senior executives (67%) saying that they expect ecosystems to help their organization grow its revenue by between 11% and 25% over the next two years.2 However, many organizations will not achieve this ambitious goal and are failing to harness ecosystems’ considerable power. Examples of companies who have taken this bolt-on approach are too numerous to mention. However, our research indicates that some organizations are starting to think outside the box completely. One example is Maersk, the world’s largest container shipping line, that has teamed up with Alibaba, owner of China’s largest e-commerce platform, to allow customers to reserve space on its vessels via Alibaba’s OneTouch booking website, illustrating growing cooperation between e-commerce and logistics firms. They are able to offer many digital services to customers while at the same time creating a launchpad for building, partnering and investing in the future stars of trade.7

Business model reinvention and digital business growth depends on effective partner ecosystem management that maximizes value for the end customer. However, the pursuit of this goal is being undermined, for a number of reasons:

  1. Failing to break the status quo. Organizations are mistakenly trying to achieve new growth aims by essentially doing the same thing they always were, but expecting things to be different this time. They are simply adding partner ecosystems to the existing (and linear) business model that served them so well in the past, but which is not fit-for purpose in a digital age. As a result, they are not creating a diversified, portfolio-based business model that introduces new revenue streams while also creating synergies with the core business model.

  2. Developing shallow customer value propositions. Organizations are failing to draw on rich and deep customer insight to develop new and innovative products and services that offer the best solution to real customer problems. Many are failing to shift their focus away from simply selling products to selling outcomes and tailored experiences. Unless you are going to create a richer experience at a competitive price, there is little reason for customers to switch and limited value in participating in a partner ecosystem.

  3. Failing to prioritize the future over the immediate. Organizations struggle to prioritize between allocating resources to meet the demands of today’s immediate performance goals and the urgent strategic need to drive new revenue streams in the future. Meeting immediate performance targets, and servicing legacy businesses, end up consuming most resources. The changes required for effective partner ecosystem management are being blocked by protecting existing business models and short-term financial performance.

Many mid-sized European organizations are challenging the status quo to achieve new growth potential. Industrie 4.0 originated as a German governmental initiative, aimed at combining digitalization, regional and industry components. This initiative, now being adopted in other countries, has spurred significant innovation. Mid-sized organizations such as Kärcher have leveraged sensors in many of their products to be more ecologically-efficient and to introduce new types of services3 Another example is The Schaeffler Group, a global automotive and industrial supplier. Schaeffler has taken full advantage of digitalization and created innovative new products and solutions for the automotive.4

To address these issues, we recommend that company leaders:

  • Invest in engaging and managing ecosystems that are not linked to existing linear business models as a key enabler for digital business growth, abandoning linear modes of thinking in favor of multi-sided business models that enjoy a network effect.

  • Leverage ecosystems to create compelling products and services driven by genuine customer insight, using the rich data the organization has at its disposal, even if the best view that can be developed is only partial.

  • Manage internal conflicts between satisfying near-term performance goals and building major new revenue streams by focusing on the desired business outcomes.

To guide organizations as they tackle these issues, in the following section we outline a unique diagnostic tool that assesses how organizations are progressing in terms of effective ecosystem management.

Download the full report and infographic below
  • The ecosystem paradox 1.45 MB Download
  • Infographic: the ecosystem paradox 245.13 KB Download
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