“In times of change learners inherit the earth, while the learned find themselves beautifully equipped to deal with a world that no longer exists.”
Eric Hoffer – Philosopher
Challenges require collaborative and innovative solutions
Acording to the Cambridge University, ‘COLLABORATE TO INNOVATE: How Business Ecosystems Unleash Business Value,’ it is becoming clear that organisations acting alone are not best placed to capture the opportunities available or solve the challenges that face them as to secure more lasting success.
Companies have already explored different forms of collaborative mechanisms, such as alliances and joint ventures, and other forms of collaborative arrangements with selected partners.
But more is needed.
Change is a certainty and what we see is that it will take on an even greater pace where corporations will need increased flexibility and agility to survive and grow, linked to external capabilities… Considering the future demands on resources, corporate strategies for the 21st century ought to be reflecting where the next shift will come and how well they are positioned to address these.
David Hawkins, Director of Operations ICW (Institute for Collaborative Working)
Create and capture new value through increasingly productive and sophisticated models
Companies are constantly searching for ways to achieve sustainable success. Opinion on how to achieve that success has differed over the last fifty years or so. The latest research suggests that the path to success is linked to another aspect of organisational life – the
ecosystems within which firms operate.
corporate success stories like Google and Apple, confirm that ecosystems can be an extremely effective way of coordinating effort between organisations to achieve a common purpose.
The importance of relationships, partnerships, networks, alliances, joint ventures and collaborations is well documented.
Equally from anthropological studies to philosophy, to behavioural economics and neuroscience, we know that people want to belong beyond their own immediate limited physical domains. Today, technology has transformed the ways in which such a desire can be fulfilled, and many ecosystems like Facebook, Twitter, Linkedin have emerged.
Understanding and engaging with the broader ecosystem is the answer. An ecosystem is a constellation of diverse players, coalescing around a particular challenge, collaborating to deliver a complex solution. Apple, Google or the lending NGO platform, Kiva, have shown what can be achieved by leveraging the power of the ecosystem.
Ecosystems are dynamic and co-evolving communities of diverse actors who create and capture new value through increasingly sophisticated models of both collaboration and competition.
Eamonn Kelly – Director and CMO of Strategy and Operations practice – Deloitte Consulting
The Ecosystem Advantage
And that by understanding those ecosystems, and their role therein, companies can create
an ecosystem advantage, allowing them both to create new opportunities and to seize opportunities that might otherwise have eluded them.
Ecosystems have always been found in nature, but until recently they have not been as prevalent in business.
Key ideas like symbiosis and co-evolution are central in that literature and businesses will increasingly need to master them to thrive.
Both business ecosystem and value network concepts have been used to explain how
firms operate in an interdependent manner. Peltoniemi has made a comparison of the concepts of cluster, value network, and business ecosystem, concentrating on the differences in innovation, knowledge creation, and knowledge transfer aspects.
Our analysis is within a shared services business context, whereby the business ecosystem definition emphasises the companies’ joint utilization of complementary capabilities in pursuit of new innovations, and the value network concept is presented as a succeeding concept of the value chain, through the integration of complementing competencies and united core capabilities.
When an organisation understands the roles in the ecosystem, and its own role therein, it can do its job more effectively. In turn, this can lead to greater resilience and sustainable success within that ecosystem. It may reveal new opportunities.
Ivanka Visnjic Kastalli
Assistant Professor, ESADE Business School & Research Lead, Cambridge Service Alliance
Professor, Cambridge University & Director, Cambridge Service Alliance
According to Deloitte research, a distinctive characteristic of many ecosystems is that they form to achieve something together that lies beyond the effective scope and capabilities of any individual actor—or even any group of broadly similar actors.
At their core, ecosystems are a powerful way of looking at collaboration through which companies can realize increased opportunities for innovation.
- Increase value of the core offering to existing users.
- Increase attractiveness for new users.
- Accelerate innovation through open innovation.
- Collaborate with partners to share cost and risk of innovation.
- Collaborate with partners to reduce development and maintenance costs.
- “Platformize” functionality developed by partners in the ecosystem (once success has been proven), to grow your core offering.
In the book, ‘Shared Purpose: A Thousand Business Ecosystems, a Worldwide Connected Community, and the Future’, Professor James F. Moore details lessons learned from his comprehensive study of ARM’s collaborative, connected community, and provides blueprints for how other companies and industries could benefit from a similar ‘Collaborative Business Ecosystem’ approach.
All firms operate in one or more ecosystems, whether they realise it or not, and there is growing interest in ecosystems, as companies become more aware of the ecosystems that they inhabit, and think about how they can build, design and shape them.
Take open innovation, where firms innovate with other participants beyond their boundaries, or virtual enterprise, a temporary alliance of organisations that combine to exploit business opportunities, and are facilitated by IT.
Consider the Shared Purpose ecosystem that VISA pioneered in 1976 with a financial credit shared platform to pool resources and grow fast. Apple conceived its products and services as an ecosystem that would provide customers with a seamless experience. Facebook went on building its “developer ecosystem”.
Ecosystems do not emerge just around an entirely new opportunity, or a challenge that has never been tackled before.
They also emerge to find a better solution where an existing organisational solution is becoming ineffective.
Pharmaceutical companies have viewed themselves as a drug manufacturer and be part of an ecosystem of different players, including suppliers, and contract research organisations, that would help them achieve that goal.
New ways of creating value are emerging everywhere in the form of networks of connection, collaborative arrangements and transactions, bonded by some combination of shared purpose and interests, and together can work beyond the capabilities of any single organisation, offering the opportunity for creating competitive advantage.
From internal efficiency to ecosystem alignment
According to Helena Holmström Olsson, Professor at Malmö University, companies are increasingly shifting perspective from internal efficiency to ecosystem alignment, in a way that allows for agility, risk sharing and allows the company to focus on the key differentiators.
Efficiency (late 19th century): To facilitate the production of products and services with the least amount of wasted time, materials, and labor.
• Scale (1970’s): Exploit economies of scale that yield lower unit costs and enable sharper pricing of their goods and services.
• Quality (1980’s): Quality movement with processes like Six Sigma quality control becoming hugely popular.
• Network (1990’s): Companies begin to compete based on how many people (or businesses) use them, e.g. Microsoft, Google, Facebook etc.
• Ecosystem (today): Co-opting third parties to build on and leverage your products and services such that they have more total utility to your customers
According to Professor James F. Moore we distinguish 4 progressive interactions:
1. Symbiotic relationship: Close and often long-term interactions between two or more objects.
2. Co-evolution: The change of an object is triggered by the change of a related object.
3. Co-creation: Joint production of a mutually valued outcome.
4. Platform: Tools, services and technology used in ecosystem to enhance performance
And 4 Roles in ecosystems
• Keystone: Central firm
• Complementor: Provides a product/service that complement the ecosystem
product/platform and enhances value (e.g., suppliers, developers etc.)
• Integrator: Brings together parts provided by different ecosystem players into an
integrated solution for the end-user.
• Customer or end-user.
A new model called Strategic Social Partnerships is emerging to enable business, government, and social sector collaboration on issues of sustainability, human rights, and cross-sector knowledge sharing for social and economic impact.
High performing organisations understand the potential that partnership strategies offer. But for partnerships to work and deliver sustainable winning results, we should match the partnership model to a shared purpose context and partnership culture, with each bringing their respective strengths and experiences on the table to create positive change.
Take for example, the evolution of supply chain management to value chain management to business ecosystem resilience. Rather than treating an organisation as a supplier that needs managing and controlling, we treat the organisation as a partner within an ecosystem where synergies are created that benefit the whole as well as the parts. Rather than viewing supplier management as a linear chain, we view it as a web of interconnected relationships within a value-adding business ecosystem.
Another example is the evolution in approach of human resource management to employee engagement to stakeholder empowerment. Rather than treating the employee as an asset to be managed and controlled, we treat the employee as a stakeholder within a community of differing, interdependent stakeholders empowered to create synergies through mutually beneficial relationships with other stakeholders.
Such collaboration based on mutual understanding and shared values, helps embed a culture more open to dynamic change. It is the openness of connections across, within and beyond the organisation that drive the opportunities for value enhancement and builds resilience from the ground up for the organisation and the business ecosystem within which it thrives.
The firm of the future creates the conditions conducive for creativity by building a culture that facilitates, empowers, unlocks and supports people’s creative potential; an organisation that encourages people to overcome fears and inhibitions, where the work dynamic is of constant evolution, where failure is not criticised but embraced for what it is – an opportunity to learn, adapt and evolve.
While economies of scale may bring the benefits of lower unit cost of production, economies of scope bring benefits of increased synergies through greater connections, hence improved innovation. Balancing the benefits of economies of scale with the benefits of economies of scope is crucial for the survival of the firm of the future.
Higher profits. Lower costs and risks. Competitive advantage. Increased shareholder value.
The rise of business ecosystems is fundamentally altering the key success factors for leading organizations, forcing them to think and act very differently regarding their strategies, business models, leadership, core capabilities, value creation and capture systems, and organizational models.
Eamonn Kelly – Director and CMO of Strategy and Operations practice – Deloitte Consulting
The world has entered an era in which ideas and insights come from everywhere. Ecosystems provide businesses access to thought leadership who will push new thinking and smart resources to do things differently, whether they are located with suppliers, customers, partners.
Shared Purpose Business Ecosystems Collaboration, provides businesses access to thought leadership who will push new thinking and smart resources to do things differently, whether they are located with suppliers, customers, partners.
Shared Purpose ecosystems provide a new mindset that captures a shift in the business landscape. Now is possible for companies to take advantage of assets they do not own nor control. The new “sharing economy” platform businesses such as Airbnb and Uber, have disrupted industries and the results have been amazing.
Businesses now need to change more frequently and in more fundamental ways.
As value creation across ecosystems continues to grow in importance, coupled with an ongoing quest for innovation and resilience, new business models emerge. The command and control hierarchies and siloes have been connected and integrated, with the focus being on the core of the business, and the rest of transactional activities traditionally performed in-house are handed over to supply chains, being outsourced, as resources and capabilities need not necessarily be owned or directly controlled.
Increasing emphasis being placed on renewing business models that lean on relationships outside the company, play an even more strategic role in shaping the future of enterprise, as the focus goes beyond continuous improvement of existing operations, by doing things differently, and creating new value in the process.
All businesses are part of a supply chain.
Engaging supply chains in more collaborative relationships was generally seen as a UK business challenge, linked to issues associated with creating a collaborative culture that encompasses suppliers, customers and partners. Poor communication and understanding are listed as other barriers for more collaborative relationships.
Collaboration should be seen as a means of organising, establishing or formalising the necessary procedures or systems to explore and capture added value.
At a higher level, collaboration creates and sustains the environment necessary for open, honest and value-adding conversation with internal or external stakeholders.
Rethinking the fundamentals of how a business creates and captures value
Rosalie van Ruler Thaker a global specialists responsible for business transformation challenges “from the outside in” for Philips Lighting says: Promoting ecosystem development from the earliest stages of business model transformation can help build collaborative, future-oriented logic into the very center of the new business; we expect that the most successful business models of the future will likely be those that have a significant ecosystem component.
Successful businesses are those that evolve rapidly and effectively. Yet innovative businesses can’t evolve in a vacuum. They must attract resources of all sorts, drawing in capital, partners, suppliers, and customers to create cooperative networks. . . . I suggest that a company be viewed not as a member of a single industry but as part of a business ecosystem that crosses a variety of industries. In a business ecosystem, companies co-evolve capabilities around a new innovation: They work cooperatively and competitively to support new products, satisfy customer needs, and eventually incorporate the next round of innovations.
James Moore, “Predators and prey: A new ecology of competition,” Harvard Business Review
New leadership capabilities will be increasingly valued, as relationships based on reciprocity, mutual trust, and shared interests become increasingly vital and effective.
Frank Crespo Vice president and chief procurement officer for Caterpillar
Going forward, corporations will increasingly use strategic transactions to stake out and adjust their positions in dynamic business ecosystems. Sometimes they will explore acquisitions to build the platforms that create foundational capabilities for other participants in the ecosystem. Sometimes they will divest assets and focus more tightly on the capabilities they need to succeed in highly focused roles, engaging with other firms via someone else’s platform.
Leaders have to constantly be asking the hard questions.
Do the businesses I presently operate still make sense in relation to the competitive environment now taking shape?
What really is our core business and do the various pieces we have strung together, perhaps over years of building the company, still complement one another in light of today’s market circumstances?
Peter Shea – Operating partner at Snow Phipps, past president of Icahn Enterprises, and former managing director in Europe for H. J. Heinz Company.
Sensors and the Internet of Things enables predictive supply decision making. Other technologies like 3D printing reshape supply chains, by being able to manufacture replacement parts rather than having to stock.
Apple is taking advantage of sophisticated robotics manufacturing for polishing the coloured plastic cases of iPhones and laser-cutting the aluminum bodies of MacBooks.
Jeff Bezos, the Amazon CEO, in a 60 Minutes interview revealed a radical shift in its package delivery technology with unmanned aerial drones to drop parcels at consumers’ doorsteps.
New technologies like these—and this is only a sampling—will guarantee that supply chains grow ever more anticipatory, and that the ideal way to buy, make, and move a given product will perennially need rethinking.
According to Kurt James, VP of supply chain, McDonald’s Japan, a shared supply chain system, has given a unique competitive advantage that has enabled McDonald’s to enter new markets at a scale.
“We talk about the supply chain at McDonald’s as a shared system, rather than as our system. This mentality of joint ownership allows us to work as one efficient organization with our suppliers, planning for the future and adapting to the present in a cohesive and integrated way.”
ONE FOR ALL AND ALL FOR ONE
Using ecosystems to coordinate organisational efforts towards meeting specific challenges is becoming more prevalent in the twenty-first century economy.
Understanding and maximising effective use of ecosystems is the strategy that organisations must adopt in order to survive, grow, and succeed in the long term.
An ecosystem typically has these defining characteristics:
1) Diverse — Ecosystems enable and encourage the participation of a diverse range of large and small organizations, and often individuals, who together can create, scale and serve markets beyond the capabilities of any single organization.
2) Distributed — Participating actors interact and co-create in increasingly sophisticated ways by deploying technological tools of connectivity and collaboration that are still evolving.
3) Shared Purpose — Participants, often including customers, are bonded by some combination of shared interests, purpose and values, which incentivizes them to collectively nurture, sustain and protect the ecosystem as a shared “commons.”
Everyone contributes, everyone benefits.
This enhances the longevity and durability of ecosystems.
According to Giles Hutchins, overall, a deeper understanding and a greater sense of belonging is needed, rather than just being aware of the upcoming changes we need to empathise with what it means, why it is happening and how it affects the ecosystem of stakeholders involved.
This deeper understanding not only helps the transformation within the department or wider organisation, but also across the interconnected network of stakeholders which the organisation is part of – its business ecosystem.
A firm of the future has a culture that is rooted in shared purpose values, that allow for openness, acceptance and motivation for collaborative engagement.
Pearson Education: Ecosystem Case Study
Increasingly, higher education institutions are rethinking the historically highly integrated services and traditional ecosystem roles.
Take Pearson Education, for example, a leading global learning services company that provides learning solutions for clients in multiple ecosystems, ranging from elementary education to corporate learning, drawing on educational materials and services and business information through the Financial Times Group.
Pearson participates in and supports multiple ecosystems, which pursue shared objectives that include preparing students for productive jobs in the workforce, developing responsible
citizens, and conducting basic and applied research.
Below, we describe a typical higher education (HE) ecosystem by listing the participants and identifying the roles that they play.
The university plays the role of the hub responsible for identifying which services are provided and how. These services are typically highly integrated, and include teaching and
assessment, marketing, recruitment, course development, and credentialing, as well as student and faculty services.
The university also typically plays the role of capital through funding department- and college-level activities.
Multiple influencers shape and affect how these ecosystems carry out their objectives, including local government, local school districts, and not-for-profits.
The primary stakeholders of HE ecosystems include the students, parents, and employers, as well as government funders at local, regional and national levels. On the supply side
are included other universities that train faculty and a growing group of technology, curriculum, assessment and service providers.
Teaching is a prominent sub-activity in an HE ecosystem. University faculty typically carry out this service and therefore take the ‘scale’ role.
The teaching programmes or courses of different faculty members are integrated in the curricula for students.
The role of integrator for content and teaching is entrusted to university departments and colleges. There are many other ecosystem roles connected with the teaching aspect of the HE solution.
Besides teaching, fundamental sub-activity represents support services, where the administrative staff takes on the scale role. The integrator role is usually scattered around different departments.
Increasingly, higher education institutions are rethinking the historically highly integrated services and traditional ecosystem roles.
For example, Pearson is increasingly playing an integrator role for online and hybrid learning programmes. This role involves coordinating multiple services across the student lifecycle, from market research and services,
recruitment services, to online curriculum development, and student services.
Engaging with partners like Pearson for integrator roles enables university leadership to focus on being the most effective hub for its ecosystem role. It can focus on devising strategies for the future of the ecosystem, deciding how to tackle the challenge of growing free educational platforms, such as Coursera.
There are other opportunities that Pearson can capture by reconfiguring its role in the ecosystem.
For example, offline support services could be professionally integrated in the same way as online services to support college readiness and student success.
Further integration of services might be possible. Pearson could consider integrating student experience services with placement and career services, as well as alumni relation management. This type of integration may offer better career preparedness for students while at university and better career placement services.
Podcasts: Business ecosystems
A historic transition in the world of business in the 21st century
Learn more about the trends featured in Deloitte’s latest report, “Business ecosystems come of age,” part of the Business Trends series from Deloitte University Press. In these audio podcasts, report author Eamonn Kelly discusses what’s behind the trends and implications for forward-looking business leaders and organizations.
Podcast 1: Business ecosystems come of age
Enabled by digital connectivity and new tools for collaboration and co-creation, the business world is moving beyond the traditional bounds of “industries” and coalescing into rich “ecosystems”—creating new opportunities for innovation as well as new challenges for incumbent enterprises.
Listen to the podcast.
Podcast 2: Blurring boundaries, uncharted territory
Today, long-standing boundaries and constraints that have traditionally determined the evolution of business, the economy, and society—such as those between producers and consumers; large and small organizations; developed and developing economies; human capabilities and machine capabilities; and the physical and digital worlds— are blurring, and even dissolving. As old constraints diminish, new opportunities emerge.
Listen to the podcast.
Download Shared Purpose – ARM >