Ecosystems: How far will you go?

The term 'ecosystem' as a business concept was first introduced by James Moore in 1993 in his HBR article 'Predators and Prey: A New Ecology of Competition'. In this article, we were encouraged to look at companies not as singular vehicles but rather as one element in a connected web of suppliers, regulators, competitors and customers - all operating as a single 'economic community'. This was still a relatively abstract thought back in 1993, when the internet was in its infancy, the Fortune 500 was dominated by automotive and petrochemical companies and unicorns were confined to children's books.

Industry 4.0: This changes everything

Whenever I talk about Industry 4.0, I always try to underline why Industry 4.0 is happening now - rather than in 1993. Really, it's about the price and ability to collect, aggregate and interpret data sensibly and how the two have inversely changed over the past 20 years - price going down, ability going up. The price of an industrial sensor in 2004 was $1.30 and in the year 2020 it is expected to come down to $0.38. Semi-conductors are fast becoming smaller, faster and cheaper to the point they are measured in the range of a single nano meter - and that means the ability to crunch data in increasingly unobtrusive devices is pervasive.

This has led to the emergence of the 'Internet of Everything'. Every consumer device from coffee makers to washing machines can be, and is being, connected - with over 30 billion devices connected to the internet by 2020 according to Gartner. Every industrial asset from machines to trucks to packaging is now spewing terabytes of inter-connected data points. It is not hard to opine that the usefulness of an entire ecosystem of data might be greater than the sum of the individual data points.

To explore more, let's grab some coffee.

The Coffee Ecosystem

Coffee is a common part of a morning routine and through a combination of smart marketing, packaging and product differentiation has transformed itself from a rather drab beverage to a veritable lifestyle choice. Many people now have a coffee maker in their kitchen or workplace - with over 400 million cups of coffee a day consumed in the US alone!

The coffee experience value chain, furthermore, is fascinating. The coffee itself is a seasonal commodity typically grown in developing countries which needs fertilizer, land and labour to be produced and the processing is multi-stage and highly international. Packaging is scrutinized for recycling and consumers come from all income levels and social standing. Sales models combine the bricks and mortar shops with eCommerce to create an ‘experience’.

Coffee machines on the other hand are complex, increasingly connected electronic machines with a web of suppliers across the globe. Warranties, repairs and after-market services come together supported by the latest in smart technologies. Combine machine and capsule and you have complex, interconnected supply chain which reaches into people’s homes and workplaces and something with which they may have multiple interactions a day.

Now, imagine if your machine knew what capsules were being used and when. Imagine if it knew how many times it was cleaned and with what products. Imagine if knew when you went to bed and when you woke up. How powerful would those insights be to create a better consumer experience? Well, this is far from fiction. You can buy these machines from Amazon today. The Smarter Coffee Machine (2nd generation) allows you to access the machine from anywhere in the world from your phone to 'remote brew'! Other machines will automatically order coffee capsules for you based upon a 'safety stock' principle and interface with Alexa to allow you to simply say 'Brew' to get that perfect cup of coffee.

So let’s think beyond the immediate consumer experience and imagine all the additional opportunities that data could bring. Opportunities not necessarily – or always – to the manufacturer of the machine or to the capsules, but to the interconnected ecosystem behind the coffee experience of which you, the customer, are part.

What if competitors could collaborate to drive down the procurement price of raw materials? What if they could undertake joint research and development on common packaging materials? Imagine the improvement in product reliability if companies across the value chain did joint root cause analysis on common component defects. Research and development on next generation capabilities such as nanotechnology and neuroscience could be combined and resulting intellectual property shared.

Going one step further, retail spaces in high rent locations could be shared. Key skills could be leased or crowd sourced between players in the ecosystem. For you, the consumer, each coffee machine, independent of manufacturer, could know your perfect blend simply by face, voice or PIN code entry meaning wherever you went in the world, your perfect cup of coffee could follow. Forget waiting for the postal service to deliver your capsules – your Uber drive is bringing them.

Now think (or dream) more broadly. Those coffee machines interact with you multiple times a day: when you’re tired, when you’re stressed and when you’re socializing. The phrase ‘coffee-corner chats’ has long entered our lexicon as a by-word for knowledge exchange and collaboration. Have you ever been to a business meeting where coffee has not been served? Long business dinners – most will end with an espresso. You leave a biological imprint on the machine when you touch it (or speak to it) and on the cups when you use them. Imagine the power if we could harness even a fraction of that data!

Funnily enough, however, the benefits would unlikely to be seen through improved coffee!

Rather, that data - usually combined with a significant component of artificial intelligence - could be used for a variety of ecosystems which are not based around the coffee experience - from the truly useful to the fundamentally dystopian.

It could inform or improve workplace health and well-being policies by providing early alerts for workplace burnout and depression - but what if that data was used to inform health insurance and even online dating! Biological data collected from discarded cups or fingerprints on machines could map DNA profiles to inform personalized drug development but imagine what else could be personalized! Some research has shown some correlation between coffee choices and personality types. That could be great for online dating and finding your perfect match but if it also meant you were stopped for pre-screening at the airport, likely you'd not be so happy!

Still want that cup of coffee?  

Ecosystems in the digital age

So collaboration is really nothing new. Apple and Fitbit, BMW and Toyota, Sonos and Spotity have all collaborated to bring products to market. Companies do collaborate - with competitors, suppliers and customers. Companies have learned from other industries and increasingly collaborate with competitors especially in highly regulated industries where common challenges exist such as Tobacco and Pharmaceuticals. However the possibility of near-total inter-connectivity is now opening up new opportunities for shared, customer centric value creation beyond those traditional models - and there are limited laws or management principles to be able to call upon for this.

Understanding the ecosystems in which you operate and being able to create a shared statement of value is therefore critical to be able to harness the business opportunities available. And that statement of value may be transitory, or may be limited in scope and that is perfectly acceptable! Value and its definition changes along with your position and role in the ecosystem. Views towards data security and architecture will evolve with attitude to risk and reward tempered by the types of the ecosystem and that statement of shared value. Souring and sharing of talent will evolve with the evolution of robotics, crowd-sourcing and the gig economy. Ethics and attitudes, as we have seen above with the rather dramatic and dystopian possibilities in the coffee experience will need to be re-examined in terms of what is and is not acceptable in terms of value creation.

These factors will drive the ecosystems of 2019 and beyond - which will ultimately be a complex interplay between definitions of value, degrees of trust and a complex interplay between organization, machine and.... ultimately.... you!

I'd be delighted for constructive views on the above. All views my own. Some statistics taken from Gartner and web research.