by Ralph Welborn, co-author of “Topple: The End of the Firm-Based Strategy and the Rise of New Models for Explosive Growth“
The past 40 years of corporate strategy have focused primarily on building firm-based competitive advantages to maintain or improve growth. But times and technologies change, as do customer expectations, and organizational responses need to reflect these changes. The things that made many organizations successful up to now no longer apply.
The new competitive landscape is shaped less by firm-specific strategies and more by new business models powered by ecosystem-centric strategies. Industries face a new reality where the economics, customers, technologies and sources of value have shifted from economies of scale to economies of ecosystem engagement. And, the blunt reality is that the explosive growth models of today and tomorrow are ecosystem-centric ones.
The most successful and explosive growth leaders, whether Amazon or Alibaba, Gilead or Google, Microsoft or Martin Marietta Materials, and Tencent or Tesla, all reflect this new competitive reality. These businesses created adaptive responses to changes in the types of value people care about — namely, solving problems or meeting specific needs fromcustomers’ perspectives, based on where they spend their time, energy and resources.
As Dan Wollenberg, former senior vice president at Chase Bank said, “People don’t want checking accounts, credit cards, bank accounts; they want financial security and the ability to purchase what they want and need, when they want and need to do so… We need to learn to shift our focus from how to improve our products and services to what it is customers want to do and how our products and services (and new ones) could help them do that.”
Every organization is now part of a broader business ecosystem that encompasses both related and unrelated industries. If you look at your competitive landscape through the lens of business ecosystems, you begin to discover previously unseen elements, connections and explosive growth opportunities, making visible what previously had been invisible.
Consider how to find your place in the new ecosystem-centric business environment through these strategies:
1. Take an outside-in perspective.
Rather than sticking to the traditional, “We are an X company,” an ecosystem perspective starts with, “The market needs we meet are Y,” independent of the products, services and underlying processes you provide. What is it that your customers want to do, and what are the ecosystems in which they spend their time, money and effort to do it? Decide, then, how you engage in those.
2. Reshape your questions.
Your questions shouldn’t start with, “Should we be part of a business ecosystem?” but with, “Which type of business ecosystem is right for our business?” and then, “How do we engage differently with our customers, stakeholders and markets?” Determine where value is being created — and destroyed — within your ecosystem, and the core capabilities you need to take advantage of them. (It will have little if anything to do with new products or services.)
3. Orchestrate capabilities to serve needs.
Competitive advantage has shifted from seeking market differentiation based on a specific product or service to orchestrating capabilities from a diverse set of actors. Uber and Airbnb are two wildly successful companies who reflect ecosystem-centric business models. Neither owns the capital assets that support their business: modes of transportation or lodging properties. The value of both lies in how they orchestrate different capabilities from the different actors within their ecosystems to address specific customer needs.
4. Find new foundations of value.
New sources of value stretch across traditional industry lines and require the design and execution of new methods that share risks and rewards across a wide range of organizations. Meeting these needs within a business ecosystem typically requires capabilities, products and services beyond what any one particular organization — or even industry — can bring to the table. Value can be derived from a diverse network of providers planting a flag on a specific set of customer needs.
Customers change, markets shift and technologies evolve. This reality changes what people expect and, consequently, where value is created and destroyed. It requires organizations to rethink where and how to play within business ecosystems.
Ralph Welborn has held a variety of leadership positions, including CEO of Imaginatik, where he received the European CEO award in 2016; leader of IBM’s Strategy & Transformation business in the Middle East and Africa; senior vice president of KPMG Consulting; and cofounder of an e-commerce company. His new book with co-author Sajan Pillai,”Topple: The End of the Firm-Based Strategy and the Rise of New Models for Explosive Growth” describes how to look at the competitive landscape through the lens of business ecosystems.