Ecosystem Business Models Are Key to Digital Transformation

Covid-19 has exposed the business models of companies, which are built on the competitive advantages of physical assets, according to GlobalData. Several traditional retailers in the US, for instance, have filed for bankruptcy due to the impact of the pandemic as consumers shift to online shopping. In the wake of such events, failure to embrace digital ecosystem models can prove to be a pitfall of a company's digital strategy.

Many successful business models today are ecosystem players that boast of a top spot in the world's largest companies by market capitalization such as Google, Amazon, Facebook and Apple (GAFA) and China's Alibaba and Tencent. They are using the models as a cornerstone to venture into multiple sectors, generate new revenue streams and accelerate growth.

"Digital ecosystems can help crisis-proof a business by giving access to large networks across sectors without the need for any strengths in physical assets. They typically succeed because different stakeholders such as enterprises, startups, governments, universities, and communities digitally collaborate to fundamentally develop customer-centric solutions that eliminate any friction points across customer journeys," said Kiran Raj, Principal Disruptive Tech Analyst at GlobalData.

"Enterprises can take cues from how the tech leaders have leveraged digital ecosystem models over time. However, the structure of the ecosystem varies by country and region influenced by various factors such as regulations and cultural preferences. This is a reason why the ecosystems of Alibaba and Tencent have not attracted The West albeit quite successful in China," added Raj.

Rakuten enjoys operational resilience with its consumer-focused digital ecosystem connecting multiple B2C and B2B domains. It now offers a myriad services with the license of a fourth mobile operator in Japan, the inclusion of pet insurance, the purchase of a property insurance business, and a retail collaboration with Walmart.

GE's IoT platform Predix is the core of its ecosystem model to tap more data sources and find new customers. It acts as a central data hub to manage the data entirety of various industrial companies regardless of what machines and systems are in use. The platform enables companies to build applications that would encourage them to use GE's increasingly connected machines.

"Beneath the layers, there are various challenges in operating an ecosystem. Interoperability where diverse stakeholders may lack coherency in executing autonomy, sharing of data with partners due to trust issues and customer agreements, and protecting intellectual property against potential rivals in the ecosystem. While building a compelling ecosystem requires time and a series of investments, the time is ripe for enterprises to explore the functional and operational frameworks required to advance on digital ecosystems globally, especially while navigating through the implications of a pandemic like Covid-19," concluded Raj.