Commenting on the challenge of COVID-19 (coronavirus), Germany’s President Frank-Walter Steinmeier summed up the new reality perfectly: “No single entity covers the medical, economic, and political elements required to produce a vaccine for all”.
The same holds true as manufacturers such as General Motors or Dyson try to overcome the technical, logistical and regulatory hurdles of moving from cars and vacuum cleaners to supplying ventilators in the tens of thousands. As expert as these companies are in their specific fields, they need to collaborate with other companies and individuals to contribute in new and vital ways.
This underlines a crucial point in today’s interconnected economy and society: whether it is keeping their supply chains moving, redeploying their staff to new roles, or pivoting their business models to online sales, companies across the world are recognising the critical nature of collaborators – the quality and depth of ecosystem partners. Innovative responses require access to the capabilities of such an ecosystem of partners, drawing on know-how and capacity in a wide variety of related industries. This is the topic of a new book, Ecosystem Edge, I have co-authored with Arnoud De Meyer of Singapore Management University.
Managers are also learning that while they can’t command and control their ecosystems, they can nudge, incentivise, and lead ecosystem partners to help them achieve their goals. This is true in any situation of high uncertainty, where diverse capabilities and know-how need to be brought together and where the new solution needs to be discovered through innovation and learning. Ecosystem strategies enable you to retake the initiative in the face of these disruptive forces by allowing your company to flexibly harness the new and broader range of partner capabilities necessary to underpin an effective response.
To implement an ecosystem strategy to deal with disruption and uncertainty, you need to do seven things.
Demonstrate that you really believe in the ecosystem and are prepared to invest. This means making tangible commitments to share some of your knowledge and capabilities, and to build the tools that partners will need in order to achieve common, even if uncertain, goals.
Co-opt the right foundation customers, who aren’t necessarily your largest customers. Foundation customers must have a need that existing solutions can’t satisfy, and they must be willing to invest time and resources to co-develop innovative solutions.
Design and share a roadmap for the ecosystem’s development. Partners will only align their investments to help the ecosystem innovate if they know where it is headed. Your roadmap will never be a perfect crystal ball and may evolve, but it needs to have a core that is stable enough to enable partners to invest with confidence.
Communicate the value of joining to potential partners, as you need a compelling value proposition for why partners should join you. This can be everything from spreading the fixed costs of development through to accelerating innovation or being part of a new product or service wave that goes viral.
Shrink the barriers to joining. The obvious first step is to waive any joining fee. But you can go further in making it easy to join by sharing information and developing standardised interfaces between you and your partners, and to help partners establish connections between themselves.
You need to restructure your organisation to interface effectively with external partners. This often means establishing a dedicated partnership team staffed with people who are able to make new types of decisions, such as which knowledge should be shared to promote the health of the ecosystem that has to be kept proprietary to maintain your power and profitability.
Finally, you need to find a way to monetise the ecosystem so it can enhance your bottom line. This means identifying a “keystone” – some activity or key component of the product that you can own and control and on which the ecosystem’s ability to create value for the customers depend. Once you control such a keystone you need to set up “tollgates” to collect revenues from it. These tollgates may take the form of license fees, royalties or transaction fees, sales of value-added services, or the use of data collected from the ecosystem to create new profit streams.
The coronavirus epidemic is a powerful, if cruel, reminder of the potential benefits of unleashing the power of your ecosystem: network economies, faster innovation, and more agility are now well understood. But recognising the upside is a long way from capturing it. To do so requires decisive and sometimes painful changes in your strategy, your own organisation and your approach to partners.