One of the most common cries for help we hear when working with large organizations is that everything is too complicated. Executives are faced with a myriad of protocols and processes that slow down action and can leave organizations feeling stranded in a fast-moving world.
In response, we cite the example of the Chinese economy, where companies have evolved to operate in ecosystem models. This different approach and mindset disperses complexity and fuels collaboration and creativity.
But how do successful business ecosystems work? Isn’t an ecosystem even more difficult to orchestrate than a fixed structure?
In a recent Thinkers50 panel discussion, as part of the Rendanheyi OpenTalk 2021, I shared ideas on the new frontier of ecosystems with Wharton Emeritus Professor Marshall Meyer and Dr Jeffrey Kuhn, both of whom offered insights into what conditions and mindsets are required for ecosystems to flourish.
There is a growing consensus that the ecosystem structure used so successfully in China represents the future for many organizations around the world that are seeking to reduce complexity and spark collaboration.
Take Haier, the Chinese consumer goods giant. This company works with a huge number of partners and suppliers, but still seems to function with breathtaking fluidity.
If you dive beneath the surface, you discover thousands of microenterprises – an army of small businesses operating in chaotic harmony. Each of these microenterprises is faced with similar challenges: How can we communicate with our partners? How do I source materials?
Digital platforms with shared services are what enables this crowded ecosystem. For example, Haier uses its COSMOPlat platform to coordinate its internal and external interactions, build smart manufacturing solutions and pull in resources. Its HOPE Innovation platform also acts as an open source space for co-creation across its entire network.
Through these platforms, Haier orchestrates its ecosystem of microenterprises, partners, suppliers, and customers in a devolved way that reduces complexity for executives and allows the individual parts to breathe and thrive.
Similarly, insurance company Ping An has built an ecosystem around insurance and financial services that encompasses diverse offerings such as healthcare, wealth management, and even second hand cars and real estate.
To manage this complex network, it launched Ping An Technology – an incubator for shared services technology and digital platforms that glues together its business processes across the group, and between suppliers, partners, and customers.
When we present these examples as role models to follow in the quest to unleash the benefits of ecosystems, some executives dismiss them as something that can only work in China.
But, in fact, organizations around the world are already using business ecosystems to deliver value in their own environments.
Bayer Crop Science is a prime example. This division of the German multinational pharma and life sciences group works across a range of disciplines, from selling seeds and fertilizers, to farmers to partnering with drone makers and training companies.
Sounds complicated? Well, thanks to its farming platform FieldView, Bayer Crop Science has started to replicate the shared services approach of Haier and Ping An. The company is reducing complexity for its suppliers, partners, and customers through digital technology and data analytics.
And for those who think that only multinationals can orchestrate their ecosystems in this way, take the example of Swiss mountaineering equipment firm Mammut. This medium-sized enterprise, operating in a niche market, has convened an ecosystem of partners, partly enabled through its Climbax app, which connects the firm and its customers to a social community, including tourism agencies, routing, and performance tracking.
As these four examples show, creating a layer or platform between you, your partners, suppliers, and customers provides the basic foundation to foster a successful ecosystem.
It doesn’t stop there, of course. To succeed as an ecosystem business, you need to have the right mindset, the right approach to leadership, and the right structure and ingredients for your platforms. I explore this topic further in this MIT Sloan Management Review article, co-authored with my IMD colleagues Howard Yu and Jialu Shan, about embracing microservices and modular thinking.
In an ever-complex world, learning to build and orchestrate a healthy ecosystem of partners, suppliers, and customers will enable your organization to continue to grow and adapt in the face of continuous uncertainty.
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