Creating added value together

In the past decade, discussions surrounding business ecosystems have gained significant traction within management circles. These ecosystems were perceived as a potential catalyst for a transformative shift in the economy. Traditional, isolated industries were expected to give way to interconnected networks of cross-industry partners, whose collective offerings would deliver unparalleled advantages to the end customer.

Today, it is evident that the outcomes have not aligned with our initial expectations. Ecosystems have not emerged as the dominant forces in the economy, overshadowing traditional industries. This perspective is further supported by the assessments provided by market analysts at Gartner. According to their Hype cycle for APIs from 2023, business ecosystems have surpassed the peak of inflated expectations and are now entering the phase known as the "trough of disillusionment".

The current objective is to ascertain the actual conditions that enable business ecosystems to function effectively. It is evident that the potential for companies to generate greater value for end customers in collaboration with external partners has indeed been realized at the peripheries of various industries.

msg advisors, the management advisors of the msg group, have gathered insights from recent years regarding the effective utilization of cross-industry value-added offerings, moving beyond mere hype.

In numerous industries, conventional sales channels are diminishing in significance and are progressively transitioning to digital platforms for the long term. The pandemic has expedited this shift, leading to heightened competition. In this context, organizations that can effectively integrate their offerings with third-party services to enhance customer value are securing a distinct competitive edge. For instance, when an insurance provider offers household contents insurance in conjunction with an alarm system, this can lead to appealing premiums for the customer.

With the initial enthusiasm surrounding large business ecosystems subsiding, the opportunities for such targeted use cases are becoming more apparent. Conversely, the example of big tech ecosystems can often be misleading.

In recent years, several strategists have examined the few prominent ecosystems, such as Apple's in the realm of smartphone applications, and contemplated how they might replicate such models within their own organizations. After all, these role models have demonstrated the potential for substantial growth and impressive profit margins. However, this endeavor can be likened to contemplating how one's own children might advance from youth leagues to the Champions League; it is often neither practical nor feasible.

Moreover, the big tech ecosystems possess distinct advantages and disadvantages that may not be applicable to every network. They are typically structured around a central entity that exerts control over all aspects, much like a spider managing its web. A pertinent example is Amazon's dominance over its marketplace, which facilitates speed and efficiency but also fosters a monopolistic and authoritarian environment. In this scenario, the central orchestrator reaps the most significant rewards, while other participants are relegated to supportive or operational roles. As is common in monopolistic systems, there exists a risk that the controlling entity may stifle fair competition, overlook data sovereignty, or become unresponsive to essential innovations. Regulatory bodies are increasingly recognizing these potential threats. Nevertheless, it is important to note that not all successful business ecosystems need to be organized in a centralized manner.

There are decentralized systems in which all players are considered equal partners. Particularly in the initial stages of ecosystem development, the focus should not be on establishing dominance as a central orchestrator. Because this is a wish that can seldom be fulfilled. This also distracts from the main question of how an existing offering can be combined with an offering from a third party so that more value is being created for joint customers. A well-formulated response to this question is essential for establishing a compelling business case that benefits all three stakeholders, resulting in a win-win-win scenario. A minimum viable ecosystem (MVE) can be formed with just two players and one customer group.

However, in the absence of a central orchestrator, it becomes crucial to determine the infrastructure upon which the ecosystem will operate. The technical and regulatory needs of the players may vary significantly, making it vital to establish a common framework for the ecosystem that transcends organizational requirements. The orientation of the ecosystem is established by a shared objective that all players must agree upon. In our example of an insurance company offering home insurance alongside an alarm system, the collective goal may be to ensure the protection of the home. Additional protection features, such as smoke detectors or safety glass, could be progressively incorporated into this MVE.

But decentralized ecosystems also possess both advantages and disadvantages. The absence of a central controlling entity fosters fair competition for superior services, while the close connection to customers facilitates the free development of innovations. Conversely, such a decentralized framework necessitates greater coordination efforts. It is essential to create a technological environment that promotes the unrestricted flow of data within the ecosystem. To achieve this, rules, standards, and regulations must be established to ensure synchronized processes, which can be time-consuming. To address these challenges, msg advisors have developed a modular system that enables the flexible and efficient establishment of a service-oriented ecosystem.

This pragmatic approach offers decentralized ecosystems the potential for competitive advantages and opportunities for growth for numerous companies.

After the hype, business ecosystems have now become a tangible reality. Rather than attempting to achieve the challenging position of orchestrator within central ecosystems, it is advisable to begin modestly with a decentralized minimum viable ecosystem and expand by incorporating additional services.

The foundation of any thriving ecosystem lies in the market and economic considerations of the business case. What demand arises from the integration of various offerings? It is only after addressing this question that the technical implementation of the combination can proceed.

The msg group is equipped to assist throughout this process, leveraging its unique blend of consulting, technology, and industry expertise. Management consultants from msg advisors pinpoint viable business cases that are both economically advantageous and technologically feasible. Additionally, the IT specialists at msg possess the expertise to transform business ecosystems into data ecosystems, thereby facilitating the creation of greater value across organizational boundaries.