The next focus of this transformation series shifts to the emergence of value ecosystems and their role in driving the Enterprise of 2020. As we look at the Apple ecosystem and offerings like the connected car, mobile commerce, energy efficiency, electric cars, eHealthcare, and energy performance contracts, we can see the lines between industries blurring. Some even question the relevance of Industry constructs in the future. As this phenomenon accelerates, more and more companies must identify the relevant ecosystem(s) that enable their growth strategies. These value ecosystems are complex and relationship-oriented, representing future growth opportunities that are increasingly outside a company’s traditional business.

A company’s relationship portfolio expands as differentiation strategies focus on core strengths and the creation of new value propositions that involve multiple stakeholders. The threat of rapid commoditization drives a company towards excellence in seamlessly swapping partners in and out based on need and performance, and sustaining innovation both inside the organization and within a broader ecosystem. In the future, Cloud-enabled business networks will deliver an ease of engagement never before seen in traditional business-to-business (B2B) collaboration, providing a way to manage this growing ecosystem complexity. The drivers behind this emerging value ecosystem phenomenon are:

• The growth imperative – maturing markets, globalization, rapidly changing technologies, top-line pressure, and emerging markets have put an intense focus on growth. However, future growth opportunities are increasingly outside a company’s traditional business and involve multiple stakeholders to deliver value. In maturing markets, ecosystems will come together to create differentiated solutions that address new needs and drive growth. In emerging markets, companies will require new relationships to capture a share of the 3 billion additional consumers expected to enter the digital economy by 2025; a large percentage of which will reside in these emerging markets. As new models emerge to overcome obstacles and drive growth, sharing costs and risks will become a necessity.

• Traditional Industry boundaries are collapsing – if you look at emerging needs and value propositions, many of them blur the lines between industries. This blurring or collapse is enabled by technology innovation that now allows once distinct Industries to come together as value ecosystems.  Apple is the most talked about example, but the connected car is a great example of multiple industries involved in value creation for the car owner. This method of value creation shifts the dynamic from a vertical (Industry) to a horizontal (ecosystem) view of value creation.

• Rapid shifts in market and business conditions – the pace of business, accelerating innovation cycles, and escalating customer expectations driven by consumerization all put intense pressure on getting value to market quickly. The need for rapid time-to-market and the growing value of bundled offerings across multiple stakeholders intensifies the need for value ecosystems – and a way to manage their effectiveness

• Rapid commoditization and new consumer needs in mature markets – offerings commoditize at an accelerated pace, and consumer needs are changing. This is driving the need for value ecosystems that can enable: differentiation, growth, new distinctive offerings, sharing (information, outcome, cost and risk) with partners, rapid mobilization of stakeholders that can add value, partners to penetrate emerging markets, and expertise sourcing at the time of need

As these drivers push companies to participate in value ecosystems, their growth strategies will change. To support these new strategies, companies will invest in programs that enable ecosystem participation in both mature and emerging markets. Here are some of the tactics that should be part of these programs.

• Resolve the core versus context issue – as described by Geoffrey Moore, author of “Crossing the Chasm”, the core represents processes that amplify competitive advantage. Context is everything else, and is determined by what the enterprise chooses to make core. To drive growth in mature markets, differentiation is critical and context becomes a growing distraction. As more companies focus on their core, the relationship portfolio expands. Resolving the core versus context issue enables a growth strategy focus and contributes to building a relationship strategy that can be leveraged while assessing ecosystem positioning

• Assess and clarify ecosystem positioning – many companies face competition from new market entrants as barriers to entry continue to fall. Others will see value created by ecosystems that their competitors are participating in. A critical discussion should focus on the ecosystem participation question: where in the ecosystem(s) do we play? This post on the Telco Value Ecosystem provides an example of what companies are struggling with. There are many other examples in the areas of smart cities, electric vehicles, and energy efficiency to name a few. If companies fail to see this major shift in value creation, they face growth implications or a loss of revenue to new market entrants or value ecosystems

• Leverage an ecosystem of specialized enterprises and share costs and risks – more companies will find themselves leveraging the capabilities of specialized enterprises. These companies handle the context and/or contribute specialized skills and capabilities that enable value creation. The resulting ecosystem creates differentiated offerings and captures value that could not be reached alone, while allowing for the sharing of costs and risks. A critical step in the program is the identification of those specialized enterprises that contribute to the growth strategy

• Re-invent business models – operating in emerging markets and differentiating in mature markets will require new business models. Business model innovation is a critical part of value ecosystem programs. The use of new models based on cooperation and the sharing of cost and risk will accelerate (e.g. Public-Private partnerships). The ability to think differently and creatively is a critical aspect of business model re-invention. Status-quo thinking is the enemy here, and far too many companies are holding on to the status quo

• Drive towards relationship management, program management, and collaboration excellence – silos and command and control models work against the move towards value ecosystems. The Digital Characteristics described in earlier posts are critical to ensuring success in a value ecosystem world. A growing stakeholder ecosystem requires excellence in relationship management, program management and collaboration. It requires an open and sharing environment that allows the ecosystem to operate effectively

• Deploy holistic systems of engagement to enable the value ecosystem – effectiveness is the driver of ecosystem success and systems of engagement are emerging as the key enabler of effectiveness. As such, companies should deploy holistic systems of engagement that among other things, support the collaboration needs of their stakeholders

• Leverage cloud-enabled business networks – according to Forrester, collaboration is still based on the exchange and mapping of business-to-business (B2B) data between multiple, scattered systems along traditional business partner networks. They envision cloud-enabled business networks that drive collaboration and data sharing in real time on a single cloud platform based on trust relationship models rather than by mapping and exchanging B2B data. This disruptive approach to business networks is based on a collaborative tenancy model that allows a single business object or range of business objects to simply be mapped to multiple tenants. This eliminates the need to map or copy data. As value ecosystems increase collaboration complexity, this disruptive approach will be critical to ecosystem effectiveness. This Report from Forrester describes cloud-enabled business networks in more detail

• Adopt an edge-driven design paradigm and focus on design innovation – to enable effectiveness, value ecosystems should be designed in an Edge-Driven manner.  Focusing from the outside-in ensures that the dependencies within the ecosystem are accounted for and addressed. In addition, design innovation is critical to enabling the effectiveness required for success

• Deploy event-driven service oriented architectures – value ecosystems require extreme agility. Event-driven SOA, also called SOA 2.0, creates this agility by combining service orientation and event processing with technologies such as business process management, business activity monitoring and enterprise service buses

• Orchestrate a customer centric process within a collaborative paradigm – value ecosystems are required to dynamically assemble people, processes and systems to create market value, deliver next generation experiences, and/or effectively manage the activities within the ecosystem. Bringing together stakeholders within an ecosystem to create value requires the ability to orchestrate many moving parts. The core capabilities of a business should be viewed as a collection of business services and orchestrated with the relevant business services from within the ecosystem. A customer-centric and collaborative view is critical

That’s a look at the third enabler. For a review of this transformation series to date, here are the links to each of the prior posts:

Forcing Functions:

• Growth
• Effectiveness and Efficiency
• Differentiation
• Societal Change
• Digital DNA

Enablers:

• Structural Change
• Edge-Driven Design