The best small companies boast ultra-close relationships with their customers. Using ecosystems can allow larger groups to learn from their example.
The best small companies are paragons of speed, agility and customer centricity. Decisions are taken quickly in small, close knit, like-minded groups; bureaucracy is cut to the core. Small size, easy access and close contacts with customers allow for maximum agility.
Some big groups can claim similar attributes. But for most, their biggest bugbear is complexity. Executives find themselves in a bog of protocols and processes that clog up decision making, leaving them feeling stranded in a fast-moving world.
Drucker Forum 2021
Change is possible
How then can larger groups gain some of the magic of their more nimble smaller counterparts – particularly in terms of relationships with customers and other key stakeholders? The example of the Chinese economy – where many big companies have evolved to operate in ecosystem models – shows it can be done.
There is a growing consensus that the ecosystem structure used to such success in China represents the future for many organizations around the world that are seeking to reduce complexity and spark collaboration.
In a recent Thinkers50 panel discussion, as part of the Rendanheyi OpenTalk 2021, I shared ideas on the new frontier of ecosystems with Wharton School Emeritus Professor Marshall Meyer and Dr. Jeffrey Kuhn, who both offered insights into what conditions and mindsets were required for ecosystems to flourish.
Digital platforms act as glue for busy ecosystems
Take Haier, the Chinese consumer goods giant. This is a company that works with a huge number of partners and suppliers, but still seems to function with breath taking fluidity.
If you dive beneath the Haier’s 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 tackle the human imperative. How do we communicate with our partners? How do we source materials?
To enable its crowded ecosystem, Haier uses digital platforms with shared services. The group’s COSMOPlat platform, for example, is harnessed to coordinate internal and external interactions, build smart manufacturing solutions and pull in resources. Meanwhile, Haier’s HOPE Innovation platform acts as an open source space for co-creation across its entire network. Through such platforms, Haier can orchestrate 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.
Not only in China
When we present such examples as role models in the quest to unleash the benefits of ecosystems, some executives dismiss the phenomenon as something applicable only to China.
In fact, organizations elsewhere already use business ecosystems to deliver value in their own environments.
Bayer Crop Science is a division of the German multinational pharma and life sciences group. It works across a range of disciplines, from selling seeds and fertilizers to farmers to partnering with drone makers and training companies.
It’s complicated, but it has a farming platform, FieldView, which has started to replicate the shared services approach of Haier and other Chinese groups. It reduces complexity for its suppliers, partners and customers through digital technology and data analytics. Farmers in particular – even the most modest sub-Saharan smallholder – can gain access to services and technology that would otherwise be far beyond their reach.
Not only multinationals
It’s not only multinationals that can create and co-ordinate such ecosystems. Mammut is a Swiss mountaineering equipment firm. It’s a medium-sized enterprise in a niche market. Yet it 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.
All these, very different, examples demonstrate that creating a layer or platform between themselves, their partners, suppliers and customers provides the basic foundation to foster a successful ecosystem.
A platform isn’t enough, though. 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. This is explored more in this MIT Sloan Management Review article, co-authored with my IMD colleagues Howard Yu and Jialu Shan, about embracing microservices and modular thinking.
An ecosystem business is a series of interdependencies between the ecosystem actors. A successful ecosystem business leverages a digital layer or platform to enable those interdependencies between humans that have varieties of tasks to perform. Whether it is staff in sales and marketing, or financial, legal and R&D functions, ultimately it is a series of interactions between them – and customers – that make the organization tick. Application programming interfaces (APIs) help codify such interactions among people, which in turn minimizes coordination complexity. As a result, traditional business processes can turn into microservices, putting the human at the center of the ecosystem business. A far cry from the all-controlling digital platform business, an ecosystem is organized – through smart digital services – around the human.
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.
About the Author:
Mark J. Greeven is a Chinese speaking Dutch professor of innovation and strategy at IMD Business School and former faculty at China’s leading innovation institute at Zhejiang University. He is one of the founding members of Business Ecosystem Alliance (https://business-ecosystem-alliance.org/about-us/). The Rendanheyi OpenTalk 2021 is held mainly by BEA and HMI (Haier Model Institute). He is the author of Pioneers, Hidden Champions, Changemakers, and Underdogs (MIT Press, 2019) and Business Ecosystems in China (Routledge, 2017).
This article is one in the “shape the debate” series relating to the 13th Global Peter Drucker Forum, under the theme “The Human Imperative” on November 10 + 17 (digital) and 18 + 19 (in person), 2021.