The complexity of supply chains, products, digital experiences and customer expectations and personalisations are now too great for any one organisation to address. Industry ecosystems have now come of age as companies strive to remain nimble enough to be relevant whilst needing to maintain competitive pricing.
What is an Industry Ecosystem?
The idea of a business ecosystem has been around for over 25 years, but we are starting to see the term “Industry Ecosystem” take on more importance in recent times. So what is going on here? We are all aware of the value chain concept, and we have seen advances in so-called “Industry 4.0” methods with the computerisation of manufacturing, but these have mainly focused on internal processes.
In truth, the Industry Ecosystem is a term used to describe the interaction of many pre-existing dynamics in business, from the API economy where organisations can connect to and consume from systems and databases to power much closer working and interactions, through platform business where the companies do little other than glue their stakeholders together, to dedicated “industry clouds” that provide data models, processes and software. The thinking is often based on the idea that if we can understand the needs of our partners then we can fit more effectively into their business models and they will often be able to meet our needs more economically, more speedily and/or more transparently.
At IDC we see this as the next phase of industry ecosystems, based on further sharing of key data;
- Sharing data and insights to ensure security, reduction of fraud, functional safety and security, or new, mission-critical innovations, as well as cross-ecosystem reporting such as for sustainability
- Sharing new applications to enable data and insights, improved operational efficiency, or better customer experience
- Sharing operations and expertise so that organizations can scale up and down their capability and capacity for new products and services to meet market, customer, and consumer needs
What does this mean in practice?
Data and insights sharing is a contentious issue. What data is your “crown jewels”, to be jealously guarded and part of your competitive advantage, and what can be shared with your peers to create better value across your industry? Being honest and objective about where we really add value as a company or organisation can be difficult, but it is a vital conversation for leadership teams to have on a regular basis as the world goes through rapid change.
Regarding applications, I have seen many cases of organisations looking for that new solution that will give them a lead over their competitors. But often the difference between being good and being great is not the software you choose, but how you implement, run and maintain that software. You can use the same software as a competitor, but not many companies really drive full value from that technology. The use of open-source software is an important element in these decisions – wresting control of the technological direction of a sector from self-interested vendors.
As for shared operational capacity, processes and expertise, that is a growing phenomenon in the MaaS (Manufacturing as a Service) world where flexibility is more important than sweating assets. Rapidly-changing customer requirements are persuading manufacturers to outsource their operations to give themselves a chance of being agile enough to respond when their market moves, rather than being lumbered with enormous sunk costs.
The role of the Digital Leader
From a technologist point of view, this is a very interesting proposition. We won’t make the decisions about how and when our industry or our company will migrate towards these ecosystem model, but we can be prepared.
The challenge for the digital leader will be to develop an IT approach and digital strategy that enables ecosystem participation, including open APIs, data sharing, and governance. This will almost certainly require an open and simplified software development approach, with the agility to support a mix of externally sourced code and internal software development, and rapid connection to (and disconnection from!) partner APIs.
The days of laying down monolithic ERPs that set like the cement in your factory floor are almost certainly numbered. Their key assets of solid data models and governance will be important but the ability to abstract the logic and process away in a modular, swappable approach will be invaluable for the future “agile” organisation. There’s nothing new in the idea of building your tech on a layer of APIs, both internal and externally facing, but the alternatives are becoming far less attractive.
Your role is to understand the opportunities for sharing data, processes and expertise in your market, to articulate the opportunities around future business models, to place some of those sacred cows of “how we have always done things” firmly on the list of endangered species.
Depending on your industry, the pressures from customers, and the amount of competition and disruption, this future may be here now or many years away. As always, our challenge is to be informed and aware of how we address this need as and when it arises.
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The IDC European Digital Leadership Community is gathering on the 18th of March in the afternoon to discuss all aspects of:
“Building industry ecosystems: what you need to know and how your peers are using them?”
Would you like to have your say? Come and join knowledgeable professionals and IDC subject matter experts for what promises to be a great session. There is no charge and we meet on different topics every two weeks.
You can sign up at: https://www.linkedin.com/groups/8992748/ or email me at cweston@idc.com