The natural world is a great source of inspiration for business. Ecosystems, where many different living things work together to produce a thriving entity, are replicated in the corporate world. The variety of goods and services that humans depend on are increasingly provided not just by biology, but by vibrant groups of businesses working together. The DNA that underpins it all is data.
Data-driven business ecosystems, where a single source of digital information enables independent economic actors to offer useful services to customers, are on the rise. Whether it’s Amazon or eBay, Airbnb or Alibaba, collaboration is now a source of competitive advantage where data is shared – and it’s not just marketplaces online that are blooming.
Last year, more than half of the world’s largest companies seriously engaged in ecosystem business models, according to the BCG Henderson Institute, with innovations across many economic sectors. From John Deere to Walmart and Maersk to Grab, many companies are getting in on the action. They deploy ecosystem models that involve a network, linked by flows of data, services and money, where the whole works better than the sum of the parts.
“There is no doubt that digital platforms, connectivity and data have fueled the dramatic growth we have seen in recent years. Successful ecosystems can provide access to new capabilities, scale rapidly, be highly adaptive, enjoy high asset productivity, and transform entire industries,” said Martin Reeves, President of the BCG Henderson Institute.
“High-performing ecosystems also take advantage of and exploit the network effect whereby value for users and providers increases the larger the ecosystem,” he adds.
Indeed, data-powered digital platforms can offer more to the customer, such as personalized recommendations on a wider range of products, and at a lower cost. This greatly expanded the offering, breaking the trade-off between complexity and scope.
Explainability is a key area for business ecosystems. There is a perceived difficulty in taking complex issues around data and explaining them to stakeholders
When Chubb offers integrated insurance through the super app Grab, the big traditional players shudder, while Netflix gets into gaming shakes up the markets. Why? Because ecosystem players have the potential to exploit and disrupt entire economic sectors at scale.
As early as 2011, the CEO of Nokia said: “Our competitors are not taking our market share with devices; they are taking our market share with a whole ecosystem!” Stephen Elop’s comments resonate today. Customer and partner data is the cornerstone of these strategies.
But the shopping ecosystem model extends far beyond online shopping malls such as Walmart Marketplace. It is now deployed along value chains. John Deere does this with its smart farming ecosystem, as it brings together tech tractors using cloud computing, field mapping, and data analytics. Maersk is focused on integrating end-to-end container logistics, helping customers’ supply chains by connecting the dots in transportation, finance and port services. Both organizations realize the power of being information-based businesses.
Dependence on a common data platform
Companies that have been successful with an ecosystem model have started by deploying a common data and digital platform. It is the backbone, allowing other players to connect and work together using a single source for customers and supply chains. This also allows for synergies between businesses. Data frills are also starting to grow as more information is collected from the ecosystem, informing how, what, and when products and services are offered to customers.
“Companies, however, must first assess how data can drive their business strategy. We see data lakes becoming more prevalent as a means of storing data, largely because it’s easy to run analytics on these lakes and then use them to power an ecosystem of business tools. benefit from it,” says Christian Pedersen, Chief Product Officer at IFS.
And this is where data-driven business ecosystems are different from simple digital platforms. Ecosystems depend on shared data to inform strategies and decision-making by stakeholders. Their success also largely depends on how humans interpret this data and act on it – the easier it is to digest, the better.
“Explainability is a key area for enterprise ecosystems. There is a perceived difficulty in taking complex issues around data and explaining them to stakeholders. Today, however, we’re seeing new techniques like explainable AI that deliver more information, much faster to people so they can make accurate decisions,” Pederson points out.
Not an easy business model
Becoming part of a data-driven business ecosystem is not easy. The scale of Meta, Tencent, Gojek or Yandex is breathtaking. According to a study by the BCG Henderson Institute, only 15% of the 57 ecosystems studied were sustainable in the long term. It’s a jungle, with a huge attrition rate, while the incumbents that dominate the markets are even less successful than the big tech players or startups.
“One of the most common mistakes is to automatically assume that one has the right to be an orchestrator of an ecosystem when most do not and being an add-on can be a viable role and attractive,” says Reeves.
“Building an ecosystem comes with costs and risks. Industries that experience significant friction with customers, such as high intermediary costs, delays, mismatches, and markets that have not yet been disrupted by digital and data-driven platforms, offer many opportunities for this guy. Many B2C opportunities have already materialized, but B2B and public sector opportunities remain largely untapped.
Yet overly complex data infrastructures, siled data, legacy systems, and a lack of real-time information affect many economic sectors, making ecosystem models less viable. New technologies can help overcome this problem, such as intelligent data structures, which allow organizations to exploit data lakes, creating a command and control layer on top, as well as assembling information distributed. Bringing in the right talent can also help.
“Amid uncertainty, businesses across all industries are turning to their data to gain competitive advantage. Organizations are also often unaware of the added value they can bring to their innovation initiatives through the inclusion of data scientists,” says Chris Norton, Managing Director UK & Ireland at InterSystems.
Currently, the ecosystem business model, which is data-driven, presents new opportunities for certain sectors, especially specialized or untapped niches. Yet, as Reeves points out, finding such opportunities requires counterfactual thinking and imagination, and data can also help inform this process.
The concept of business ecosystems is not new. What’s different now is the data empowerment element and the fact that with the right systems in place, ecosystems can be scaled efficiently and quickly. Hence why they are an exciting growth prospect.
