Could data-led business ecosystems rule the world?

The nat­ur­al world is a great inspi­ra­tion for busi­ness. Ecosys­tems, where many dif­fer­ent liv­ing things work togeth­er to pro­duce a thriv­ing enti­ty, are repli­cat­ed in the cor­po­rate world. The vari­ety of goods and ser­vices on which humans depend is increas­ing­ly deliv­ered not just by biol­o­gy but by dynam­ic groups of busi­ness­es work­ing togeth­er. The DNA under­pin­ning this is data.    

Data-led busi­ness ecosys­tems, where a sin­gle source of dig­i­tal infor­ma­tion empow­ers inde­pen­dent eco­nom­ic play­ers to offer ser­vices that are valu­able to cus­tomers, are thriv­ing. Whether it’s Ama­zon or eBay, Airbnb or Aliba­ba, col­lab­o­ra­tion is now a source of com­pet­i­tive advan­tage where data is shared – and it’s not only online mar­ket­places that are flour­ish­ing. 

Last year, more than half of the world’s largest com­pa­nies seri­ous­ly engaged in ecosys­tem busi­ness mod­els, accord­ing to the BCG Hen­der­son Insti­tute, with inno­va­tion in many eco­nom­ic sec­tors. From John Deere to Wal­mart and Maer­sk to Grab, many firms are get­ting in on the action. They are rolling out ecosys­tem mod­els which involve a net­work, linked by flows of data, ser­vices and mon­ey, where the whole func­tions bet­ter than the sum of the parts.    

“Undoubt­ed­ly, dig­i­tal plat­forms, con­nec­tiv­i­ty and data have fuelled the dra­mat­ic rise we’ve seen in the last few years. Suc­cess­ful ecosys­tems can pro­vide access to new capa­bil­i­ties, scale rapid­ly, be very adap­tive, enjoy high asset pro­duc­tiv­i­ty and trans­form entire indus­tries,” explains Mar­tin Reeves, chair­man of the BCG Hen­der­son Insti­tute.

“Suc­cess­ful ecosys­tems also enjoy and exploit the net­work effect where­by the val­ue to both users and sup­pli­ers increas­es, the larg­er the ecosys­tem,” he adds. 

That’s because data-fuelled dig­i­tal plat­forms can offer more to the cus­tomer, such as per­son­alised rec­om­men­da­tions across a broad­er prod­uct range – and at a low­er cost. This has huge­ly expand­ed what’s on offer, break­ing the trade-off between com­plex­i­ty and reach. 

When Chubb offers embed­ded insur­ance via the Grab super app, large tra­di­tion­al play­ers shud­der, while Net­flix mov­ing into video gam­ing moves mar­kets. Why? Because ecosys­tem play­ers have the poten­tial to exploit and dis­rupt whole eco­nom­ic sec­tors at scale. 

As long ago as 2011, Nokia’s chief exec­u­tive said: “Our com­peti­tors aren’t tak­ing our mar­ket share with devices; they are tak­ing our mar­ket share with an entire ecosys­tem!” Stephen Elop’s com­ments echo today. Data on cus­tomers and part­ners is the lifeblood of such strate­gies. 

But the busi­ness ecosys­tem mod­el extends far beyond online shop­ping malls such as Wal­mart Mar­ket­place. It is now being deployed along val­ue chains. John Deere is doing this with its smart-farm­ing ecosys­tem, as it brings togeth­er tech-enabled trac­tors using cloud com­put­ing, field map­ping and data ana­lyt­ics. Maer­sk is focused on inte­grat­ing con­tain­er logis­tics end-to-end, to help cus­tomers’ sup­ply chains by con­nect­ing the dots in trans­port, finance and port ser­vices. Both organ­i­sa­tions realise the pow­er of being infor­ma­tion-based busi­ness­es.

Dependent on a common data platform

Those firms that have suc­ceed­ed with an ecosys­tem mod­el began by rolling out a com­mon data and dig­i­tal plat­form. This is the back­bone, allow­ing oth­er play­ers to con­nect and work togeth­er using a sin­gle source for cus­tomers and sup­ply chains. This also allows syn­er­gies between busi­ness­es. Data fly­wheels also start to gain momen­tum as more infor­ma­tion is gath­ered across the ecosys­tem, inform­ing how, what and when prod­ucts and ser­vices are offered to cus­tomers. 

“Com­pa­nies must, how­ev­er, first eval­u­ate how data can dri­ve busi­ness strat­e­gy. We’re see­ing data lakes become more preva­lent as a means of data stor­age, large­ly because it is easy to run ana­lyt­ics on these lakes and then use it to feed an ecosys­tem of busi­ness tools that take advan­tage of it,” explains Chris­t­ian Ped­er­sen, chief prod­uct offi­cer at IFS. 

And that’s where data-led busi­ness ecosys­tems are dif­fer­ent from mere dig­i­tal plat­forms. Ecosys­tems depend on shared data to inform strate­gies and deci­sion-mak­ing by stake­hold­ers. Their suc­cess is also large­ly depen­dent on how humans inter­pret this data and act on it – the eas­i­er it is to digest, the bet­ter. 

“A key area of focus for busi­ness ecosys­tems is explain­abil­i­ty. There is a per­ceived dif­fi­cul­ty in tak­ing com­plex prob­lems around data and explain­ing it to stake­hold­ers. Today, how­ev­er, we are see­ing new tech­niques like explain­able AI that pro­vides more infor­ma­tion, much faster to peo­ple so that they can make accu­rate deci­sions,” points out Ped­er­sen.   

Not an easy business model

Becom­ing a busi­ness ecosys­tem play­er empow­ered by data isn’t easy. The scale of Meta, Ten­cent, Gojek or Yan­dex is mind-bog­gling. Accord­ing to research by the BCG Hen­der­son Insti­tute, only 15% of the 57 ecosys­tems stud­ied were sus­tain­able in the long run. It’s a jun­gle out there, with a huge rate of attri­tion, while incum­bents that dom­i­nate mar­kets are even less suc­cess­ful than large tech or start­up play­ers.  

“One of the most com­mon mis­takes is to auto­mat­i­cal­ly assume that one has the right to be the orches­tra­tor of an ecosys­tem when most don’t and being a com­ple­men­tor can be a viable and attrac­tive role,” states Reeves.

“Build­ing an ecosys­tem incurs costs and risks. Indus­tries with sig­nif­i­cant cus­tomer fric­tion, such as high inter­me­di­ary costs, delays, mis­match­es and those mar­kets which have not yet been dis­rupt­ed by dig­i­tal and data-led plat­forms pro­vide many such oppor­tu­ni­ties. A lot of B2C oppor­tu­ni­ties have already played out but B2B and pub­lic sec­tor oppor­tu­ni­ties remain large­ly untapped.”

Yet, over­ly com­plex data infra­struc­tures, siloed data, lega­cy sys­tems and a lack of real-time infor­ma­tion plague many eco­nom­ic sec­tors, mak­ing ecosys­tem mod­els less viable. New­er tech­nolo­gies can help to over­come this, such as smart data fab­rics, which allow organ­i­sa­tions to lever­age data lakes, build­ing a lay­er of com­mand and con­trol on top, as well as stitch­ing togeth­er dis­trib­uted infor­ma­tion. Bring­ing in the right tal­ent can also help. 

“Against a back­drop of uncer­tain­ty, busi­ness­es across all sec­tors are look­ing to their data to gain a com­pet­i­tive edge. Organ­i­sa­tions are also often unaware of just how much val­ue can be added to their inno­va­tion ini­tia­tives through the inclu­sion of data spe­cial­ists,” says Chris Nor­ton, man­ag­ing direc­tor for UK and Ire­land at Inter­Sys­tems.

Right now, the ecosys­tem busi­ness mod­el, which is data-led, presents new oppor­tu­ni­ties for cer­tain sec­tors – espe­cial­ly spe­cial­ist or unex­ploit­ed nich­es. Yet find­ing such oppor­tu­ni­ties, as Reeves points out, requires coun­ter­fac­tu­al think­ing and imag­i­na­tion and data can also help inform this process. 

The con­cept of busi­ness ecosys­tems is not new. What is dif­fer­ent now is the data-empow­er­ment ele­ment and that with the right sys­tems in place, ecosys­tems can be scaled effi­cient­ly and at speed. Hence, why they are an excit­ing prospect for growth.