Changing the game with digital ecosystems

(First of two parts)

With the continuing uncertainty present in the global economy, digital transformation continues to be a business imperative for companies seeking to create long-term value, secure a competitive advantage, address more rapidly evolving consumer expectations and transform in preparation for the period of recovery. The need to physically distance for safety has deepened the need for digital interaction, online consumerism and new technology platforms. This shift in industry dynamics has blurred the boundaries between industries, leading to the emergence of digital ecosystems.

According to the new EY study, Building successful digital ecosystems in Southeast Asia, digital ecosystems are becoming a competitive game-changer. A digital ecosystem is formed through a combination of strategic partnerships and platforms in the form of omnichannel architecture that delivers value to consumers through personalized products and services. By presenting an interconnected set of offerings composed of businesses across different sectors, a digital ecosystem can fulfill consumer needs in one integrated experience.

A digital ecosystem is not just about a partnership or merger and acquisition (M&A) — it is about building a truly integrated network of enterprises that encourages and facilitates the sharing of applications, technology infrastructure and data. The shared elements of a digital ecosystem enhance and complement each other, resulting in improved innovation, trust and digital experiences.

Organizations need to map their roles in a digital ecosystem as well as monetize the digital ecosystem to drive sustainable growth. To create an effective digital ecosystem roadmap and strategy, companies must take three considerations into account before embarking on their digital ecosystem journey. This article will discuss the first two: evaluating the digital ecosystem maturity of the organization and defining the business model.

EVALUATE THE DIGITAL ECOSYSTEM MATURITY OF THE ORGANIZATION
While digital ecosystems present myriad opportunities to all value chain participants, there are also various hurdles that need to be overcome before reaping the benefits of a digital ecosystem. Companies often find it a challenge to choose the appropriate role for them and the path to achieve it. This makes a robust digital ecosystem strategy critical for every organization regardless of where it stands in its digital ecosystem journey.

As part of devising a digital ecosystem strategy, organizations need to understand the different maturity levels to be traversed in the digital ecosystem journey, and assess where they lie on the maturity curve. These are based on the digital capabilities a business has developed and the level of transformational impact it creates. There are three maturity levels to consider: digital ecosystem adaptor, digital ecosystem accelerator, and digital ecosystem attacker.

Most organizations start at the digital ecosystem adaptor level, where the transformation of an organization is at a modular level and is limited to a particular geographical market or business unit. The transformation initiative may be in the form of a pilot program, or the company leveraging partnerships and platforms to create value for its customers.

The next stage is the digital ecosystem accelerator, where the organization scales the transformation to a company and industry level, adding more digital capabilities and creating value from the platform economy. This can disrupt the respective industry of the company as it redefines how business is conducted by being a pioneer.

An organization at the level of a digital ecosystem attacker drives large-scale transformation across multiple industries, leveraging cross-sector collaboration and technology capabilities across various parts of the value chain. The transformation of the organization at this level utilizes multi-platforms, omnichannel plays and super apps, with strategic partnerships across different industries and geographies.

The impact and value brought by an organization into the digital ecosystem broadens from the company level to an ecosystem level as it moves from being an adapter to an attacker. As with any maturity model, organizations at the first stage must transform themselves before transforming their industry and ecosystem in the last stage.

DEFINE THE BUSINESS MODEL
After assessing and determining their own digital ecosystem maturity level, organizations need to identify the business model to leverage as a digital ecosystem participant based on parameters such as the nature of the ecosystem, the scale of industry partnerships and the revenue model.

Businesses that are just starting out on their digital ecosystem journey usually leverage pilot programs to develop a coherent set of digital solutions through partnerships. At the next level, platform-based businesses must look to connect multiple stakeholders across different industries through a marketplace model. One such example of this is ride-sharing apps that expanded into adjacent segments of food delivery and payments. Businesses at the digital ecosystem attacker level will utilize a multi-platform model, which can be transformed into a single source capable of offering products and services from different industries in one seamless, integrated experience.

Businesses can define their business model as a digital ecosystem participant based on three archetypes, each defined by the stages of evolution within a digital ecosystem: the digital ecosystem pilot, platform, and super app or multi-platform.

The digital ecosystem pilot archetype creates a coherent solution by digitalizing product capability with new functionalities through digital partnerships. It is orchestrated by the core firm, internal business units or its incumbents, and requires digital ecosystem adapters to launch.

The platform archetype offers a single platform that seamlessly connects users and is orchestrated by single platform companies. This archetype requires digital ecosystem accelerators to launch.

The super app archetype focuses on integrating several platforms into one service and captures user data from their integrated platform. This archetype is orchestrated by multiplatform companies with large investments or capital and requires digital ecosystem accelerators or attackers to launch.

In the second part of this article, we will discuss the considerations in implementing and mobilizing the ecosystem.

This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinions expressed above are those of the author and do not necessarily represent the views of SGV & Co.

 

Marie Stephanie C. Tan-Hamed is a Strategy and Transactions Partner of SGV & Co.

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