Digital Ecosystems – Because the Customer is Always Right

It is ironic that the business idea that opened my eyes ­to the core of the wave of disruptive change was a lipstick shop. This store was located in a non-assuming corner in Soho, New York, and had no technological marvels or analytics. Rather, their product was very simple: The customer could come in and show a color – any color.

digutal_ecosys

The shop I am referring to would make a lipstick to exactly match that color, with a selection of taste and some other variables. In a way, they tailor the simple product to match the customer's need, right when the customer needs it.

Changing Needs in Every Industry

The essence of the massive, disruptive change we are seeing is not in technology, but in changing customer needs and market realities. Accustomed to the global marketplace, customers want a service that is customized to their needs and delivered at the moment they walk in through the door. This creates challenges and opportunities for companies regardless of their industry, as there is an increasing pressure to retain every customer in both B2B and B2C markets through enhanced, tailored services.  An Avanade Global Survey from 2015 [1] states that 81% of B2B buyers would choose a supplier with consumer-like experience over an equally priced competitor.

Buy or build?

Various methods have been touted as silver bullets to address this change: service design thinking, piloting / prototyping, agile, and lean. All of them are good and valuable tools to improve the speed and impact of company services. These trendy terms however never capture the more strategic question behind the trend: What business should the company focus on? Should we buy or build capabilities to provide the services? Can our company afford to lose a customer, if we tell them that we do not provide the services they ask for?

Age of Ecosystems

It is rather reassuring, that in the age of digital ecosystems, the question of providing or not providing a service is not black and white. Modern companies utilize various methods to jointly market and deliver their services with their suppliers, partners, start-up networks and even customers and competitors. This is especially beneficial for companies dealing with digital and connected products, where the larger spread of the product or service amounts to increased network reach, which, according to Metcalfe’s law, exponentially increases the value of that network.

Platforms and Information

According to Gartner [2] , a digital ecosystem is defined as “an interdependent group of enterprises, people and/or things that share standardized digital platforms for a mutually beneficial purpose”. Platforms are then again defined as “A plug and play business model that allows multiple participants (producers and consumers) to connect with it, interact with each other and create and exchange value” [3] . The main difference between the two is that in ecosystems there are various entities interacting with each other in various ways, whereas a platform is most often formed around the interests of one company.

Here are a few methods (some of which are overlapping) that are leveraged to create or extend ecosystems:

  1. Digital platforms: A company creates a joint, open platform to combine their data assets, resources and customers around a new business and operating model. Best and classical example is Apple, who have managed to build both a physical and digital platform out of their phones.
  2. Embedded ecosystem services: A strategy where the company offers their service through various other (often digital) platforms, without influencing the platforms themselves. An example of this is Spotify, with a range of brands (e.g. Sonos, Ford, Samsung TV) offering them as a built-in service. Also called brand atomization in some texts.
  3. Platform on a platform: Companies can utilize established platforms to create and expand their own platforms. Example of this is e.g. BMC Remedy on the Salesforce.com platform.
  4. Aggregation: By aggregating and enriching partner services and combining them with own products and services a new, unique value proposition is created for the customer
  5. Open Data ecosystem: Making available data that is collected by the company as a main or by-product of regular operations an information driven ecosystem can be created that opens up new revenue and value streams. Good example of this is Finnish railway operator VR, who is sharing train related information and has allowed a set of applications to flourish close to their ecosystem.

While #1 and #2 is focused more on a co-branding activity without deep cooperation across the organization, models #3 - #5 require an open business architecture and a stronger cooperation within the ecosystem to maximize the value for the company and its ecosystem partners.

Planting your own ecosystem

How to get started with building an ecosystem? Here are a few concrete steps to follow:

  1. Find an underused asset in your organization that could be harnessed to create valuable information (An example of this could e.g. be delivery cars driving around the city)
  2. Identify the value of that information and a method of monetization. Make sure to consider also e.g. brand value and long term customer value.
  3. Find potential partners and identify a method for connecting and sustaining them to your ecosystem (contractual partnership, financial benefits, brand visibility, access to new market)
  4. Consider how to address competition from competing services or ecosystems, paying especially attention to GAFA [4]
  5. Ensure your organization is internally capable of delivering the services required by the ecosystem and adjusting rapidly if the needs of the customer or the ecosystem change.
  6. Launch service and enjoy the ride!

The future is defined by the strength of the company ecosystems, not only by the companies themselves. 

Writer of this blog post for Maintworld-magazine is Reko Lehti 

reko_just face (2)

Partner in Taival Advisory Inc, specializing in digital transformation, ecosystems and future business architectures. Reko has previously worked in a security, architecture and strategy leadership role in retail and before that as a management consultant.

 

[1] https://www.avanade.com/~/media/asset/point-of-view/the-new-customer-journey-global-study.pdf

[2] http://www.gartner.com/technology/topics/digital-ecosystems.jsp

[3] http://stephane-castellani.com/everything-you-need-to-know-about-digital-platforms/

[4] GAFA =  Google, Amazon, Facebook and Apple

News | 19.4.2017

Latest articles

Wärtsilä software will enable a new Simulation Centre to meet needs of cruise, ferry and superyacht clients

The technology group Wärtsilä is to supply and configure the software solutions for a new, state-of-the-art, purpose built simulation centre.

R&D | 20.5.2019

Safe chemical storage is essential for safety, health and business prosperity

Many industries use and store dangerous chemicals, and the chemical waste produced. Storing these substances safely is essential to protect workers’ health, the environment, and the public from the effects of potential chemical spills and gas emissions. In this article the European Union information agency for occupational safety and health, EU-OSHA, gives tips on how to keep workers safe and healthy.

HSE | 16.5.2019

Safe and sustainable airport maintenance with tractors

Robotic vacuum cleaners and lawnmowers are already a reality, but can the same idea be applied to a 7-ton machine clearing an airstrip from snow? Valtra and Nokian Tyres partnered up with three other Finnish companies for a joint proof-of-concept project at the European Union’s northernmost airport. 

Applications | 15.5.2019

Maintenance Performance and its Measurements

Maintenance performance can be difficult to measure.  But, measurements drive behavior and it is therefore important to think through what to measure.  The measurement should be designed in order to achieve the following:

Asset Management | 25.4.2019

Implementing RCM? 5 Mistakes You Need to Avoid

If you are considering to employ  RCM analysis  at your facility, it means you have recognized the need for a change in your maintenance strategies. Reliability-centered maintenance is an excellent way to keep your plant or machinery up and running by helping you choose the optimal maintenance strategy for all of your important assets. 

Cmms | 19.3.2019

Save Energy in Steam and Condensate Systems

The oldest paper mill still operating in Germany detects defective steam traps with digital ultrasonic testing technology

Partner Articles | 15.3.2019

Time to Invest in Europe’s Water Infrastructure

THE WATER AND SANITATION sector is an important part of the European economy. It represents more than 500,000 people directly employed in water and sewerage companies, operating thousands of facilities and several million kilometres of networks.

Editorial | 14.3.2019

Maintenance: A Necessary and Important Function in the Future

Euromaintenance 2016 will take place in Athens at the end of May. It is the ideal moment to reflect on maintenance in a European context. Euromaintenance is known as the summit for all involved in maintenance across Europe, it’s the place to be. The conference, with the support of the EFNMS, is the only commercially independent conference covering the topics we deal with in the maintenance world.

EFNMS | 20.5.2016