Industry Ecosystems: The New Competitive Advantage
Although industry ecosystems continue to expand as a prominent business strategy in the age of the internet, many are not aware that they have been a prominent topic of business discussions for several decades. In 1993, James Moore, in his award-winning Harvard Business Review article Predators and Prey: A New Ecology of Competition provided an early but highly referenced description of ecosystems writing, “Successful businesses are those that evolve rapidly and effectively. Yet innovative businesses can’t evolve in a vacuum. They must attract resources of all sorts, drawing in capital, partners, suppliers, and customers to create cooperative networks….I suggest that a company be viewed not as a member of a single industry but as part of a business ecosystem that crosses a variety of industries. In a business ecosystem, companies co-evolve capabilities around a new innovation: They work cooperatively and competitively to support new products, satisfy customer needs, and eventually incorporate the next round of innovations.”
This was remarkably insightful given it was almost a decade ahead of the internet age that, in today’s world, distorts the genius of the insight as a table stakes strategy as we approach 2020. Moore recognized that as the pace of innovation accelerated, organizations needed to have a wider view of the market place and leverage simultaneous investments from across a network value chain to fully realize disruptive innovation. The network’s value exceeded the total of the individual nodes and we see that reality continuing as we approach 2020 and beyond.
Accenture, in its white paper Cornerstone of Future Growth: Ecosystems, highlighted that, “The power of the ecosystem is that no single player need own or operate all components of the solution, and that the value the ecosystem generates is larger than the combined value each of the players could contribute individually.” Organizations need to leverage an entire ecosystem to maintain the pace of innovation required to simply survive, let alone disrupt, in today’s digital economy.
At SAP, we believe the “Best Run Companies” are organizations that leverage an Intelligent Enterprise that is specific to their industry and fully leverages the industry ecosystem as they aspire to deliver disruptive products and services. Organizations need an integrated suite of applications that can digest petabytes of data from a multitude of sensors and devices that may or may not be transmitting data from their products or their customers. Further, companies need to leverage machine learning algorithms to identify patterns and/or anomalies in the data and who also continuously learn from each individual interaction to provide real time insights directly to the user in the context of a business process. Industry ecosystems extend an organization’s reach into the extended value chain as they collaborate leverage the capabilities of members of the industry ecosystem to create compelling and disruptive products and services.
For example, SAP, Adobe and Microsoft are leveraging a technology ecosystem to enhance interoperability and data exchange between their applications and platforms — Adobe Experience Cloud and Adobe Experience Platform, Microsoft Dynamics 365, SAP C/4HANA and S/4HANA — through a common data model called the Open Data Initiative. The data model will provide for the use of a common data lake service on Microsoft Azure. This unified data store will allow customers their choice of development tools and applications to build and deploy services.
Further, an industry ecosystem strategy may reach beyond the traditional members of the value chain and could be with companies that are not involved in the industry value chain. For example, Defense industry players leveraged a technology company when Lockhead Martin, US Navy and Microsoft collaborated to leverage Microsoft Xbox gaming technology to replace a $38,000 submarine telescope controller with a $30 xBox controller. This not only helped significantly reduce material costs but it put a familiar device in the hands of its operators that was easier to use. Apple’s iPad devices are used across the Healthcare industry and have transformed how a physician interacts with a patient. Rather than have a complicated scientific discussion regarding a disease state, physicians can now review detailed imaging technologies directly on the iPad while talking to the patient and/or family members. This allows the patients to be more engaged in their care or the care of a family member and have allowed a completely new level of interaction for the Healthcare community.
At SAP, we see the power of the Industry Ecosystem gaining momentum as organizations look to leverage the rapid pace of technological change without having to invest in non-core business processes. The collaborations will continue to transcend traditional industry boundaries as they look to develop new and more innovative products and services. This is a very exciting time and we look forward to the continued acceleration of innovations resulting from the Industry Ecosystem collaborations. Please feel free to provide any comments from your perspective as I would welcome the opportunity to hear how you and your companies are leveraging the industry ecosystems to enable new and disruptive products and solutions.