When you think of an ecosystem, it’s likely that something from the plant world will spring to mind. But in its just-released Business Trends report, Deloitte Consulting finds that ecosystems are an apt metaphor for the current world of work.
The 108-page report, titled Business Ecosystems Come of Age, suggests that everything that has worked for organizations and leaders in the past–rules, best practices, business models, mind-sets–is being challenged. Everything must evolve to work within an ecosystem.
The concept of business ecosystems isn’t new. Business strategist James Moore took the concept from botany to business in 1993 at the dawn of the Internet age.
It’s easy to see why it’s an apt metaphor: As every bit of information gets digitized and processes throw off data, the global business landscape becomes a more interconnected network. As the report states, “Ecosystems are dynamic and co-evolving communities of diverse actors that create and capture new value through both collaboration and competition.”
The very nature of the ecosystem is to change. Deloitte’s report notes that ecosystems are resilient and enduring, but internally characterized by constant flux. While media, software, retail, and others tend to move towards ever more defined customization, others like technology infrastructure absorb smaller players and create large firms that offer resources, information, and platforms for others. The report suggests there is an ecosystem for every kind of business, from the indie to the multinational.
Boundaries are being smashed across sectors. Customers become active participants. Platforms support new products and services. Access to smart people and more resources speed learning and innovation. And the Internet of Things is estimated to grow to include between 26 billion and 75 billion connected objects (excluding smartphones and tablets) in the next five years. The good news is that as boundaries recede, new opportunities emerge.
But opportunities without strategic management aren’t really opportunities at all. Leaders have to navigate a new set of challenges as ecosystems continue to ebb and flow to leverage them. Chief among them:
Cybersecurity and Data
One of the biggest ecosystems is the Internet, spawning massive amounts of data that need to be captured. Yet maintaining an open, secure, global network is a massive challenge. The number of detected cyberattacks increased by nearly 50% in 2014 to about 120,000 per day.
Hacking incidents erode public trust, while companies are increasingly dependent on data. This creates a tightrope for leaders who see the data they cocreate with customers as a valuable asset.
As much of the work done by entry and low-level workers gets automated, the traditional staffing structure of a pyramid is giving way to an hourglass that emphasizes workers with niche specialties.
An Intuit report estimates that by 2020, more than 60 million Americans will be contingent workers. With long-term employment giving way to contract workers, 87% of executives leading global HR have already changed or plan to change their talent-sourcing strategy to find both contract workers and experienced employees. That includes farming out temporary work through freelance platforms like Odesk and marketing and product development through creative crowdsourcing platforms like Tongal or Quirky.
Just as staff is sourced by casting a wide net, strategies for success are now dependent on both collaboration as well as competition. The report finds that essential capabilities need not necessarily be owned or directly controlled, but often require the creation of new business models and increased agility. As such, more emphasis will be placed on external relationships and big data and analytics.
Thanks to the rise of technology, there are more ways than ever to connect with experts and peers. Such an educated group in turn tasks global business ecosystems with tackling complex phenomena like disease or dwindling resources–something the report refers to as a “wicked opportunity.” Not surprisingly, pursuing solutions for such wicked opportunities takes more than a village.
How to get all the players to take a seat at the table and work towards a shared outcome? Deloitte’s report suggests having central organizers who can “hold the whole” and creating the space for aligned action by others. For example, the Global Alliance for Vaccines and Immunizations (GAVI) increased immunizations in the world’s poorest countries by pooling demand from developing countries for vaccines and matching it with reliable, long-term financing.
The report also points out that there doesn’t have to be one best solution that comes from all these diverse groups coming together. Sometimes, a buckshot approach (that is, an entire portfolio of potential solutions) has the best chance of hitting the goal.
There are other ways leaders are evolving to be more effective within ecosystems.
It’s necessary for leaders to step outside of their sector and have a more holistic vision of problems and solutions. As a result, a whole new breed of leader is emerging. Deloitte found that top business-school talent who previously took their degrees immediately to high-paying fields such as finance or consulting are being supplanted by “hard-charging achievers who are expected to seek ways to marry their business acumen with social impact.”
Leading universities offering more courses in social entrepreneurship, social impact investment, social enterprise management, and social innovation are creating a hybrid talent pool that can operate in both the business and social-sector realms.
The report observes: “Leaders in the coming decades will be “trisector athletes,” capable of engaging, collaborating, and driving outcomes across all realms, and (to use management guru Peter Senge’s term) “system leaders” who can catalyze change across networks where they lack formal control.”
Disruptive technologies and business models not only create new ecosystems, but they also test the boundaries of existing regulatory framworks (hello Lyft and Uber). Instead of relying on traditional regulation, business leaders with an ecosystems perspective find it necessary to self-police. Deloitte’s 2014 Survey on reputational risk found that 87% of responding executives rated reputation risk as more important or much more important than other strategic risks they face.
“There is a greater sense within ecosystems of the interdependence of entities and of the fact that any weak link threatens the success of them all,” the report states. Transparency and tools for keeping reputations in check like the one eBay employs is an example. Social media, too, acts as a system for keeping corporate behavior in line, because any breach can spread virally within minutes.
The best leaders recognize platforms and understand their value for both creator and participants. The most scalable platforms have the value provided by thousands, if not millions, of independent participants who all benefit from specialization and flexibility. Allowing users to to focus on the activities that they do well and leave the rest to others, like Amazon’s merchant platform, also breeds tremendous value for all.
Within the smaller groups that emerge on a platform, deep trust-based relationships can evolve while also encouraging connections to the wider network.
The savvy leader will understand the greatest opportunity on a platform is to find the influence points that captures a larger share of the value created there. Finding them is a matter of recognizing where relationships begin to concentrate. Observing these influence points illuminates signals that can predict future trends and allow leaders to be proactive. The report states: “When you’re in the center of flows, small moves, smartly made, can indeed set very big things into motion.”