An increasing number of companies are building ecosystems around their activities. But they are not always easy to handle, as Marco Huwiler maintains in a piece for finews.first.

This article has been published on finews.first, a forum for authors specializing in economic and financial topics.

Have home insurers morphed into lifestyle experts? Have energy utilities become tech and climate experts? Does anybody even remember that Amazon was once an online bookseller? Is Apple part bank?

Why does the finance sector work with property platforms, as exemplified by UBS and Moneypark? Why do companies in the pharma sector see themselves increasingly as digital health services providers, as Roche does with mySugr?

It is all because today's thinking is about client needs, and it supersedes siloed delineations of branches, sectors, and products. There is nothing wrong with what is going on. Clients no longer just want the product or the service on offer. Today's clients have a variety of needs at home or on the go. Data and digitalization is becoming increasingly important. As is the ability to think and act inside ecosystems. 

«Digital innovation now often comes about when outside parties cooperate with each other»

An increasing number of companies are emphasizing ecosystems in recognition of the creativity, inventiveness, and value-added potential they offer. It helps the core business to grow when networks and portfolios broaden and deepen, increasing the proportion of revenues and sales from new products and services. Digital innovation now often results when outside parties cooperate with each other. Partnerships create new platforms that allow clients to benefit from a combination of different choices, giving them far more added value.

That is also why traditional companies increasingly work with startups - or sometimes simply buy them out. The reason is simple. The established player has the client data, the startup recognizes the need. A tanker sailing alongside a speedboat combines the best of both worlds, that of a networked mesh of services. Such an approach is not only adaptable to change but creates solutions for different kinds of products, services, and, sometimes, entirely new business models.

«An ecosystem should encompass the entire value chain»

It is not easy to think and act within ecosystems, particularly for smaller companies. Ecosystems are complex. It is challenging to build the right one in order to get the most benefit out of it. A great deal of thought has to go into whether one builds an ecosystem singlehandedly or looks for partners having the necessary skills and expertise that are not on hand.

Building the requisite capabilities internally is hard, time, and cost-intensive. Entering a partnership can often pay off. Managing the complexity is often not a question of internal competence but of the ultimate strategic use of an ecosystem.

A successful ecosystem needs to have clients, suppliers, and employees. Depending on the business model, it might need additional partners, such as scientists or other sources of similar expertise. An ecosystem should encompass the entire value chain. Innovation has to be of use to everyone through the open flow of information, ideas, data, and knowledge.

«CEOs have to let go of top-down structures»

Change is inherent to ecosystems and the entire company has to adapt to them, particularly management. Transparency is needed, particularly related to people and know-how. Ecosystems require new capabilities. Companies are forced to develop, whether through new hires or new partners.

CEOs have to let go of top-down structures in ecosystems as flatter hierarchies are more agile when making decisions with ecosystem partners.

All objectives need to be defined with those same ecosystem partners. What links everyone together is the client and the client's needs, which goes above and beyond each individual company's activities.

The same thing goes for investments. There needs to be a balance between investments and opportunity costs that look both at the potential from current business models and new ones that may be created in the future that ensure long-term success.

«Working in an ecosystem is a challenge»

A few things are important when scaling up and driving new business models. Ambitious targets need to be underpinned by a solid set of metrics that are used to measure the key individuals involved. Currently, non-economic factors are often used up front, which prevents businesses and ecosystems from scaling up effectively.

Working in an ecosystem is a challenge. Taking advantage of the wisdom from a wide variety of sources is difficult, as is orchestrating activity. Different cultures have to meld together and staid hierarchies dismantled.

But still, taking a hard look at the need for them can pay off handsomely. Companies are no longer just competing in the market for clients. Instead, they are increasingly coming up against larger ecosystems.

Marco Huwiler has been Country Managing Director at Accenture Switzerland since early 2020. Before that, he headed the financial services area at the consultancy. He is also a member of the steering committee of digitalswitzerland, a national tech and digital initiative with more than 240 association members and foundation partners. He has a master's degree in economics from the University of Fribourg. He first joined Accenture in 2001.

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