The Ecosystem Economy

IIN THE BEGINNING, as civilizations grew and became more advanced, work was organized around specialized lines of work. These work sectors, such as the mining, textile, or glass manufacturing industries, have developed their own supply chains, expertise, and proprietary distribution. And this is basically how we think about business today. But that is changing.

McKinsey partners Venkat Atluri and Miklós Dietz shed light on that change The Ecosystem Economy. The boundaries between sectors are dissolving. Sectors such as construction, real estate, automotive manufacturing, financial services, and health care are considered separate categories, each operating in its own areas. Today we see businesses reorganizing “into new, more dynamic configurations, centered not on the way things have always been done, but on the needs of people.”

Businesses form ecosystems by cooperating with each other—by sharing assets, information, and resources—and ultimately create value beyond what could be achieved individually.

The term business ecosystem used in the past to refer to the relationship between an organization and its clients. The ecosystem economy that the authors address here goes deeper than that. More like alliances between organizations that combine steps in a customer’s journey.

Although each step of that journey is accomplished or managed by a different company, the ecosystem unites them into one platform, so that from the customer’s point of view, it’s all one experience, one journey. In other words, if an ecosystem can help consumers with the most difficult step of their journey, they are more likely to trust the broader ecosystem for the rest of their needs.

Tencent, Apple, and Google are all examples of economic ecosystems.

Ecosystems change the world around us. The question is, How can we adapt and participate in this ecosystem economy?

The two questions we need to ask first are: Where do you currently compete? And what do you need to do to change your value proposition? To answer these questions, the authors say, “you need to greatly expand your scope—and shift the nature of your planning. You need to rethink how you define the needs of your customers, your customer base, industry, your proposition, and the competition. The book provides examples of how to start working through this. As you do this, other questions will begin to form, such as, are you yourself who will build the new ecosystem? Will you join someone else’s ecosystem? Or a bit of both?

Then you should change your organization from within. You need to rethink your approach to your organization and operating model, talent, performance management, the underlying culture, and supporting infrastructure.

They boil the lessons of their ecosystem playbook processes and recommendations down to ten principles which I will list here:

Starts with the customer and ends with the customer
Choose your paper wisely
Think and act across platforms, physical and digital
Go all out—get set up right and make the ecosystem a top priority for you and your leadership team
Identify and use control points
Don’t confuse the vendor-customer relationship with the ecosystem
See where you need vertical integration and where you need ecosystems
Always reassess your position
Avoid incrementalism
Put value creation over profit