Digital Sovereignty

When organizations join a business ecosystem, they can forge new customer relationships with their partners, innovate business models, and enhance their competitive edge. However, engaging in digital networking can offer not just access to valuable contacts, information, or opportunities, but it may also lead to a dependency that can be challenging to escape. Thus, involvement in such ecosystems necessitates a careful evaluation of the potential benefits and drawbacks, which can vary based on the specific type of ecosystem.

Business ecosystems can generally be divided into two categories: decentralized and centralized. The centralized variant carries a significant risk of creating dependency. A prime example of this is when businesses distribute their products through major retail platforms like Amazon. While these platforms provide participants with access to a broader customer base, they are ultimately controlled by a single dominant entity that dictates the standards for technology, logistics, data management, and cost structures. This control restricts the options available to participants, squeezes their profit margins, and hampers their ability to innovate.

Nevertheless, companies can still find ways to profit within centralized ecosystems. Decisive here is to recognize the dependencies linked to one's own role and carefully consider the risks and potential benefits before getting involved. The key question is when it is justifiable to sacrifice some degree of sovereignty.

In contrast, decentralized ecosystems are designed from the ground up to ensure that all participants have equal standing. A prime example of this is the partnership between insurance companies and providers of value-added services, like smart home technologies or security systems, aimed at creating an appealing comprehensive package for customers while minimizing the risk of loss.

In decentralized ecosystems, collaboration hinges on trust and a common vision, emphasizing interoperability alongside a secure and autonomous data exchange. Following this principle, businesses should

• have the autonomy to choose their own business processes and the technologies they implement.
• ensure the integrity, security, and reliability of both the technological infrastructure and data usage.
• comply with all regulatory requirements.

This approach is vital for fostering informed, independent decision-making and building trust-based cooperation. The idea of digital sovereignty encapsulates these key elements.

Engaging in ecosystems necessitates a comprehensive assessment of your own digital sovereignty. What does this entail?

The concept encompasses three key dimensions: technological sovereignty, operational sovereignty, and data sovereignty.

In the context of engaging in ecosystems, the significance of these pillars varies. Their importance is influenced by the specific role, goal, and context.

Given that many ecosystems depend on data exchange, data sovereignty frequently emerges as the most vital element. Companies involved must ensure that usage rights, access provisions, and protective measures are well-defined. Failing to do so could lead to a loss of control, as well as potential reputational or compliance issues. This is especially relevant when various legal regulations, such as GDPR, are in effect or when processing sensitive customer data.

Additionally, the technological integration with an ecosystem can significantly influence a company, particularly through proprietary interfaces or platforms that complicate or increase costs for future transitions or developments.

As mentioned earlier, maintaining operational sovereignty is crucial in central ecosystems, as companies risk losing the flexibility to shape their processes and actively participate in the ecosystem's evolution.

Digital sovereignty doesn't necessarily mean having complete control over every aspect or handling all responsibilities alone. The key lies in making intentional choices and being flexible enough to adjust them as needed. It is important to recognize that achieving independence in all areas must be weighed against costs and performance. It is unrealistic to optimize everything simultaneously. Therefore, some dependencies can be beneficial or even essential. However, these should be approached thoughtfully and managed effectively.

The issue of digital sovereignty and the willingness to embrace decentralized ecosystems extends beyond the confines of individual companies. In today's political and socio-economic landscape, it has become a matter of perspective and competitiveness. Companies have the opportunity to present a compelling alternative to the prevailing centralized powerhouses from Asia and America, as long as they create solutions that prioritize the autonomy of all stakeholders and adhere to European values and ethical principles. This approach will not only help them gain a competitive edge but also bolster Germany and Europe as attractive business hubs that are prepared for the future.

Various initiatives at both the German and European levels are currently fostering the growth of decentralized ecosystems and enhancing the digital sovereignty of market players. Examples for this are:

• The Mobility data law aims to establish guidelines for how companies will be required to share data related to travel and transportation infrastructure in the future.
• Catena X is a collaborative and decentralized data ecosystem specifically designed for the automotive sector.
• The EU guideline Financial Data Access (FIDA) establishes the groundwork for an open and customer-friendly financial data ecosystem.

In today's landscape, the choice to engage in business ecosystems is no longer optional. Long-term success in business is nearly unattainable without active participation. The key is to establish the conditions for long-term success and competitiveness in a connected economy through digital sovereignty.

While many companies are beginning to explore digital sovereignty, they often do so in a fragmented way. Given the vast potential that ecosystems present, along with the various initiatives promoting their growth and their critical role in enhancing the competitiveness of Germany and Europe, a shift in approach is essential. Companies need to adopt a comprehensive and strategic perspective on digital sovereignty, considering their technological assets, IT and business process, along with their data.

A productive way to initiate this conversation is when companies are actively engaged in ecosystem participation, forming partnerships, or adhering to existing legal frameworks. msg advisors assist you in navigating these challenges within the context of digital sovereignty, helping to develop a holistic view. They can assess the current state of digital sovereignty within the organization, analyze it, and implement targeted optimizations. This is the sole method to harness potential and allow businesses to swiftly adapt to evolving circumstances in the future.