Top companies are betting big on ecosystems

When PwC surveyed more than 2,000 business leaders to find out what sets the highest-performing companies apart from their industry peers, business ecosystems proved a strong differentiator. The top companies in the survey capture an outsized performance premium arising from adherence to a set of 40 management and investment practices. These leading companies are nearly 50% more likely to have a clear ecosystem strategy in place, and better than twice as likely to generate at least 60% of their revenues from ecosystems. For these companies,  the power of ecosystems extends beyond today’s competitive benefits, such as access to new markets; 85% of top performers say that a large share of future revenues will come from the value pools accruing around big societal problems that ecosystems can help address. 

By positioning themselves within powerful cross-industry networks, these companies tap into collective value propositions that can scale more quickly than any one company’s value propositions could on their own. Given the clear ecosystem advantage for winning companies, others would be smart to revisit their own ecosystem plans with urgency. The following actions are a good place to start:

1. Strategize and then focus. Senior executives need to start with a clear-eyed examination of where the company creates unique value and how it contributes to an ecosystem. Once armed with clear ideas around value creation, leadership teams can tease out the implications for the company’s ecosystem model, and choose a role that best fits their situation. That may be as an orchestrator—at the centre of the ecosystem, enabling others to collaborate—but more likely as an ecosystem partner or participant.
2. Address capability gaps through service partnerships. Anticipating—and filling—capability gaps is vital. That’s where there’s an important lesson from top performers: don’t go it alone. Leading companies are more than seven times more likely to use service partners to keep pace with technology changes and to close capability shortfalls in their operating models. Those companies are also 1.2 times more likely to use digital operating models to reduce transaction costs stemming from those partnerships. 
3. Look to the future. By partnering in ecosystems to grapple with long-term environmental, social and governance risks, forward-thinking companies are generating societal benefits even as customers benefit, too. An IOT platform developed by a construction equipment manufacturer in Japan, for example, not only eased a labour shortage in that country, but also helped customers complete building projects with greater efficiency. Similarly, in precision farming, companies have come together to combine remote sensing, IOT-enabled agricultural equipment and other technologies to collectively help their customers use farmland more cost effectively and with less environmental impact.

For leadership teams accustomed to static industry boundaries and traditional forms of competition, ecosystem adoption won’t be easy, but with today’s front-runners poised to widen the lead they already have, sticking with the status quo is a sure way to get left behind.