The evolution of strategic advantage has changed from tracks to pipes and now to platforms. In the old old days, the people that made all the real money didn’t own the rail cars or the goods; they owned the tracks those cars traveled on. In the more recent old days, the people that made all the money didn’t own the websites; they owned the pipes that transmitted the data. Now we’re moving to ecosystems where the people that make all the money are going to be the owners of the platforms on which the ecosystems thrive.
Let’s back up and answer three questions: What are ecosystems? Why are they becoming important? How then must you change your strategic approach? Monitor Deloitte’s Global Leader for Corporate Strategy, Jonathan Goodman, walked me through the answers.
What are ecosystems?
Deloitte discusses ecosystems in its most recent Business Trends Report and describes them this way:
Ecosystems are dynamic and co-evolving communities of diverse actors who create new value through increasingly productive and sophisticated models of both collaboration and competition.
The term was coined in the 1930s by British Botanist, Arthur Tinsley who looked at the relationship of actors and species in the plant world. Then, in the 1990s, James Moore applied the term to business and commerce – and especially technology. Most recently, TechCrunch’s Tom Goodwin wrote how the battle is now for the customer interface:
Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most popular media owner, creates no content. Alibaba, the most valuable retailer, has no inventory. And Airbnb, the world’s largest accommodation provider, owns no real estate. Something interesting is happening.
What’s happening is that the growth of ecosystems is poking holes in the old vessels of value.
Why are they becoming important?
As ecosystems evolve and become more influential, the basis for competition is changing.
One consequence:activist investors are pushing corporate leaders to re-think what they should own and what others should own. Their premise is that you should own only what you can manage best. If others can do a better job, the whole ecosystem is better off if you sell the asset to those better owners and you focus on what you do best – whether or not any assets are involved.
As Goodman explains, digitization and massive connectivity have opened the door to all sorts of new models of collaboration, reshaping industries as historical boundaries dissolve.
In many ways, this is outsourcing on steroids. The good news is that the more you outsource and the less physical assets you own, the more leverage and flexibility you have. The bad news is that the more you outsource and the less physical assets you own, the less barriers to entry you create at least initially.Thus speed becomes a critical currency as the first mover rights are massive. It’s going to be hard to catch up with organizations like Amazon, Google, Uber and the like.
How then must you change your strategic approach?
In an age of ecosystems, strategy is still about making and executing wise choices (about aspirations, where to play, how to win, how to configure). What is different is the need to embrace new pressures and uncertainties and to consider new possibilities given the ever-changing conditions.
Forget any lines between collaborators, your own capabilities and competitors. Co-opetition rules. The ecosystem you’re looking at, by definition, blurs the lines between you and your collaborators, between your collaborators and competitors and between you and your competitors. The winners are no longer the ones with defendably superior capabilities alone. Many of the future winners will control or significantly influence the platforms on which everyone else works.
- Accept that however your business is structured today is already out of date. You only exist, can only survive and thrive as part of your ever-evolving ecosystem.
- Give up control of your old-school assets. They are now anchors.
- Focus on building and managing the platform on which your industry’s ecosystem operates – and especially on the digital connections between the various players.