2020 // VALUE CREATION IN THE DIGITAL AGE - MONOPOLISATION, NETWORKING OR DOWNFALL! (pt. 2 of 2)

Why German small and medium-sized enterprises (SMEs) must act now and how digital platforms can help!

What does networked value creation in digital ecosystems mean?

In the classical economic context, an ecosystem is understood as the community of all value-creating actors in an industry and their relationship to each other. In the age of digitization, clearly defined industries are blurring and are becoming increasingly dynamic and thus more and more complex.

This development is mainly driven by changing customer requirements and progressive technological and social developments. Customer needs are becoming more unpredictable because they are increasingly individualizing.

Serving them requires tailor-made products and value propositions from new cross-sector product-service systems outside the traditional value chains. Individual companies are less and less able to serve these in an economically scalable way. 

Therefore, the overarching goal of an emerging "digital" ecosystem for value-creating actors is: to overcome complex dynamic challenges in a scalable and efficient way. The mentioned American and Asian companies (see article part 1) have shown that value creation networks built specifically from the user's perspective can successfully serve the needs of all participants.

Who benefits from ecosystems?

By 2025, these new ecosystems are expected to generate 30 percent of global revenues. To date there are numerous examples especially in the B2C segment, while ecosystems in the B2B segment are still in the early stages of development.

And yet indicators of this change can already be seen in almost every industry.

Two examples:

1 Logistics: Over 10.000 companies at various stages of the value chain (producers, traders, transporters and customs) can be networked via a platform to organize the flow of goods efficiently and transparently (US startup Flexport).

Distribution platforms such as the one already mentioned by Kloeckner or Lanxess’s Chemondis orchestrate supplier and demander beyond traditional sector-specific supply chains. The platforms were built up step by step with a 100% focus on the benefits for both suppliers and buyers.

2 Commercial Real Estate and Construction: Approaches are being developed to offer everything from a single source - from financing and acquisition to renovation and furnishing - via intelligent networking of offers within an ecosystem.

Platforms as a starting point for digital ecosystems

Most approaches use the same starting point for building and operating a digital ecosystem:

A digital platform!

"It's about something fundamental: To secure the sustainability of our company in the long run"

Kloeckner CEO Gisbert Rühl is convinced:

"Platforms will become the dominant business model of the 21st century - that was the initial spark for our digitization strategy".

The digital platform connects the ecosystem in the activities of suppliers and consumers based on the appropriate technology.

The platform is the instrument for orchestrating and processing the complex dynamic system of customer needs and suitable offers, because it integrates partners who support the exchange and provide additional services (e.g. suppliers, payment providers, logistics providers) in a value-adding manner. Gradually, the platform links a complete system with complementary products across industries and can thus satisfy a spectrum of customer needs.

The platform operator optimizes further expansion and the interaction between suppliers, customers and other partners.

What do medium-sized businesses need to be successful?

Digital ecosystems, with platforms as an instrument, are becoming an integral part of the corporate landscape. Whether as a central operator, provider, partner or in a hybrid role - for established companies a platform and thus an ecosystem strategy is a prerequisite for being competitive in the future.

The current etventure study shows that many traditional companies are lulling themselves into a (false) sense of security. For many traditional companies, digitization still "only" means higher productivity through the digitization of existing processes.

Innovation and new business models play only a minor role

Only one fifth of the measures in the companies (21 percent) are aimed at developing new digital business fields. This is worrying, because those who stay out of it now risk missing the boat and leave the value creation to others!

In order to future-proof themselves in the age of networked value creation, companies need a strategic platform concept. In other words:

-an assessment of the development of industries and markets

-a deep understanding of potentially relevant ecosystems

-as well as their options for action in them.

What is your own role in the ecosystem?

What synergies and market opportunities can you use for combining the own capabilities and corporate values with customer needs?

Although it seems lucrative to be the central operator, not every company is qualified for this role.

New business fields can also be developed as a partner. Hybrid strategies that pursue both approaches in parallel are also possible. In areas with a very good market position, own ecosystems are developed - in other fields cooperations with third-party platforms are pursued.

Ecosystem mapping can be used to identify potential areas at an early stage. A target vision defines the direction of development. A starting point is usually the own industry, then further services are systematically integrated, which customers would otherwise purchase decentrally.

Making the transition to a digitally controlled business model is not only important to set yourself apart from the competition, it is also vital for survival. This creates the opportunity to survive in the market plus to grow - with the right strategy for positioning within digital ecosystems and the right instruments for implementation.

Snapshot at the etventure CC Platform and Ecosystems offsite (Jan 2020) with the best team to challenge new platform and ecosystem frameworks in practice.

Contact me anytime if you want to have a chat, build or challenge your own platform or ecosystem business!