The full potential for companies that digitally transform is predicted to be $100 trillion by 2025. This astonishing value would be reached through the combination of digital technologies—mobile, cloud, AI, sensors, and analytics, among others. These are accelerating progress exponentially, said the World Economic Forum, but this growth can be realized only if there is collaboration between business, policymakers, and non-governmental organizations.
The crux is in the word “collaboration.” In the past, companies used to build big entry barriers to their businesses; Warren Buffett calls them “moats.” In this way, to be successful, a company has a competitive advantage, allowing it to maintain pricing power (and fat profit margins). That philosophy is changing with the emergence of the ecosystem-based economy, sparked by the likes of Google and Alibaba—which make their living by linking other organizations and people together. The born-digital ecosystem strategy has been to drive a wedge between the producers and their consumers by linking them on one platform—becoming the self-declared aggregator. This has been going on for a long time, but, similar to proverbial frogs in the boiling pot, non-digital companies were concerned, but not yet frightened, about the wedge being driven between them and their customers as they should have been—until now.
Designed Ecosystems
COVID-19 was a wake-up call. Lockdowns cut off traditional sales channels overnight, and finally companies understood the real danger of no longer being in touch with their own customer base because the aggregators were getting all the feedback—the data, the reviews, and the related purchases.
The answer to this is explicitly designed digital ecosystems. Before going into the digital part, a quick word on the explicitly designed ecosystem: A good example is Nestle. After it designed its patented espresso cups, it gave licenses to just a few manufacturers to make and sell the coffee machines to go with them, allowing others to sell the machines and Nestle to sell the coffee (again and again)—a win/win.
If you add “digital” to the explicitly designed ecosystem, the potential for growth is exponential. But there is the danger of defining digital in the narrow sense—in other words, thinking you can just automate and integrate the interactions that are already going on, for example, by using APIs to transform your interactions electronically. The better way is to think of the ecosystem as an advanced infrastructure from production to outlets and beyond. True digital transformation not only automates but turns your infrastructure into an “infostructure.”
What does this mean? In the past, companies focused on the production quality, and, as soon as the product left the shop, the job was done. Now, by using the latest technology—converting your infrastructure to an infostructure—you can learn what your customers do, what your customers’ customers think, and what makes your partners tick. All are deeply connected, so you benefit from the data, the insights, and the relationships.
The Infostructure Journey
The first part of the infostructure journey is to accept that your traditional company will become a software company. By embedding sensors into your products, they will be made smart, IoT-en-abled, and connected—allowing you to stay in touch with the prod-uct throughout its lifecycle. Now, envision the customer’s location as the furthest outpost of your organization—becoming the “edge,” so to speak. In other words, IoT will allow you to grow the customer experience into a connected customer experience.
But no experience stops at the edge—and the true value will come out of how your wider ecosystem partners will use the infostructure. Just imagine what the digital extension of Nestle’s ecosystem would mean. Driving home in my connected Mercedes, my arrival would not only switch on my Nespresso coffee machine but also, through my nest, the heating in the house and the outside lights.
For the latter to stand a chance, it needs to have a solid foundation in B2B integration. This means using not only the latest API integration technology, such as microservice gateways, but also application and service mesh technologies to solve complex interde-pendencies between those continuously evolving relationships.
Drag, Drop, Done
To keep up with the pace of change, these technologies need to move across to the business side, allowing them control through visual drag-and-drop interfaces that create the digital fabric of the ecosystem.
Technology will not be the only hurdle in the new digitally driven ecosystem economy. The approach is inherently more stressful and chaotic than more traditional approaches, and it brings a lot of challenges.
But the prize is clear: exponential growth by tapping into a $100 trillion opportunity. COVID was the wake-up call through which adoption of digitalization leapt ahead by 2 years in the space of 2 months. The boards of traditional industry—from electronics to cars and retailers to oil drillers—now get it. The race is on to become a software-first company in a rich, bespoke, digital ecosystem.