- Ecosystems are becoming a major strategic priority
- By effectively managing ecosystem business models, companies can outperform rivals
CEOs are embracing ecosystem business models as they adapt to a changing business environment.
A recent study reveals that ecosystems make up on average 13.7 percent of total annual revenues, drive 12.9 percent in cost reduction and generate 13.3 percent in incremental earnings. And high-performing ecosystems do even better.
This edition of The CEO Imperative Series offers fresh insights into the rise of ecosystems as a route to transformational growth.
The rise and rise of ecosystems
A growing number of organizations are generating value from ecosystem business models.
In the 2021 CEO Imperative Study, 71 percent of CEOs say ecosystems are very important to their company’s current success, and 91 percent feel ecosystems have increased business resilience.
Many companies are increasing investment. IBM, an EY ecosystem partner, is investing US$1bn in its hybrid cloud ecosystem. The cloud has dramatically lowered technical and operational barriers, with digital platforms connecting multiple entities through APIs.
Ecosystems are transforming growth
Companies with high-performing ecosystems outperform the market, while those that master ecosystems outperform their peers. High-performing ecosystems, on average, drive 1.5 times the cost reduction, contribute 1.5 times more to annual revenue, and achieve 2.1 times the incremental revenue growth, when compared to low performing ecosystems.
The leaders of high-performing ecosystems are more likely to have higher growth at lower costs, more effective research and development, and achieve better outcomes through the ecosystem than via M&A.
Ecosystem business models bring benefits beyond the organization. More than 85 percent of the executives surveyed believe ecosystems connect large companies with small disruptors and stimulate innovation across value chains and with adjacent industries.
As an example, online retailers are offering customers a more convenient experience by partnering with brick-and-mortar stores, while global technology companies are fueling development through start-up ecosystems.
Steps towards mastering ecosystems
More than 90 percent of organizations with high-performing ecosystems apply at least three of the following actions:
Of course, there will be challenges, such as agreeing common goals and strategy, resolving disputes, gathering the right participants, and achieving data interoperability. These issues should be addressed during the contractual process, with specific KPIs and regular reviews.
Ecosystem relationships and business models are complex. Our study found that 88 percent of CEOs believe the ability to form, lead and manage ecosystems will define successful leadership team – appointing a Chief Ecosystem Officer could help.
Making ecosystems a strategic imperative, and integrating them into the fabric of how organizations create value, can bring enormous rewards.