The Rise of the Ecosystem Economy

With the rise of the Ecosystem Economy, more businesses are able to collaborate in ways that bring better value to the companies and their customers. I want to share with you my views on ecosystems and how your business can make the most of them.

What is the Ecosystem Economy?

Businesses are increasingly looking to collaborate with others to provide better value for their customers. When these partnerships expand into a network of connected businesses, an ecosystem is created.

The Ecosystem Economy is the result of technology improvements, higher user demands and saturated markets that make openness a requirement for success.

In the fintech industry, partnerships have become increasingly popular between incumbents and disruptors to pair innovation with user bases. The emergence of ecosystems will further drive collaboration between businesses inside and outside of the sector, for the benefit of end-users or the end customer.

• What are the benefits and challenges of being part of an ecosystem?
• How should you prepare your business and solution offerings?
• What does an Ecosystem strategy look like?

The Benefits and Challenges

Let’s look at why you may want (or not want) to join an ecosystem.

Benefits include:

• Innovation – By utilising the expertise of other businesses in the ecosystem, you can enhance your product or service.
• Access to new markets – Your product can reach the user bases of the other businesses in the ecosystem, improving your reach and brand awareness.
• Customer experience – Ecosystems are customer-centric and tend to provide more value than a company can independently, meaning happier customers.

Challenges include:

• Security – By opening your doors and systems to partners, security may be at risk.
• Governance – The logistics of working with multiple businesses can be difficult if not governed correctly. You may also be under the command of larger players.
• Regulatory compliance – Particularly in highly regulated industries such as fintech, sharing information or access to users brings regulatory difficulties.

The challenges are not curbing the creation of ecosystems, but are factors to consider ahead of getting involved.

Knowing if your Company should enter an Ecosystem

There are lots of things to consider when looking to join or create an ecosystem. Here are some values you can foster internally to ensure your business is well equipped for collaboration:

• Be customer-centric – The more your business and product develop for the customer needs, the better placed you are to succeed in an ecosystem.
• Practice agility – The collaboration of an ecosystem and the many players involved lead to changing situations.
• Constantly innovate – Ecosystems are great environments for innovation, and demonstrating internal innovation will position you well with others.
• Be tech- and data-led – Technology and market data are the tools used to succeed in an ecosystem, so make sure you use them now.

The Harvard Business Review has put together the five following questions to develop your strategy:

1. Can you help other firms create value?
2. What role should you play?
3. What should the terms for participation be?
4. Can your organisation adapt?
5. How many ecosystems should you manage?

There are lots of examples of successful ecosystems that incorporate a range of different services. There is no real limit to which companies might be involved in an ecosystem, so long as they deliver value and are equipped to handle their involvement.

Building your Ecosystem Strategy

If you’ve chosen to get involved in the Ecosystem Economy, you’ll need a strategy that will help you succeed.

McKinsey & Company have provided some tips for establishing your position within the network:

• Acquaintance with the Ecosystem – Get to know the market, the partnerships and the businesses you’re hoping to work with
• Aligning Aspirations and Competencies – Find out the roles of other businesses and where they align to your own objectives
• Decoding Competitive Differentiators – Looking internally at aspects like your technology, operations, market presence and customer insights, decide what your value proposition in the ecosystem is and how you will establish yourself
• Iterative Strategy Refinement – Given the dynamic nature of an ecosystem, you will need to frequently update your strategy based on internal and external changes

To fully immerse yourself and succeed in an ecosystem with cross-industry players, companies should engage in further strategies to maximise the outcomes of the ecosystem:

• Robust API Strategy – Ensuring the APIs you use, design or distribute are up-to-date and accessible is crucial for maintaining a competitive edge in the ecosystem
• Partnership Building – Set a framework for your partnerships, such as the companies, the contract length, and the type of engagement, to ensure your partnerships are beneficial to you
• Regulatory Compliance – Understanding what you can and can’t provide based on regulations, particularly with financial services, is a great starting point for partnerships and collaboration
• Monetisation – Designing your strategies to best monetise your data, users or insights will set you up for long-term success
• Talent Recruitment – Adapt your internal culture to reflect the changing nature of work and to attract digital talent, while maintaining focus on the benchmarks of other strategies

Engaging in an ecosystem has unlimited potential, but it is important to make sure success starts from within with strong strategies that are able to adapt as the company and ecosystem do.

If you need support creating strategies for your ecosystem, get in touch!