Ecosystems. All companies know what they are, but do all of them know how to get the most out of one? Are ecosystems being worked to their full capacity or are businesses failing to take full advantage of what they have to offer. There is a plethora of ways to maximise value from ecosystems but a true consensus on how to really gather up the benefits still remains somewhat elusive.
In some parts of the world, squirrels outnumber SQRLs and lynx run nearly as fast as Linux, and no such confusion exists. Ecosystems really are everywhere! Streams feeds forests, which shelter the grasslands, which nourish the waterfowl, which in turn forage at the feet of the bison herds. All these intricate connections rely on the same habitat, yet no single system directs the complex interrelationships among the flora and fauna residing there.
The same can be applied to the software business. An ecosystem, such as that launched ten years ago by Apple connecting application developers with consumers, clears fertile ground for participants to collaborate, innovate and trade. Is it any wonder that the world’s five most valuable companies — Apple, Amazon, Google, Microsoft and Facebook — all thrive within robust ecosystems?
Yet few visitors to Apple’s App Store, for example, seek to purchase products developed by the company itself. Instead, they log on to download their favorite song, game, movie or app. While the value it adds is undeniable, Apple nonetheless remains a conduit. A conduit, interestingly, takes its original meaning from the waterways that give life to a habitat. In nature, an ecosystem represents more than the sum of its plants and animals. Its distinct features — climate, terrain, elevation — reinforce the sustaining interactions among its resident species, extending, in an evolutionary sense, the competitive advantage of each.
Digital ecosystems — not only business-to-consumer platforms, such as Apple’s App Store, but also business-to-business marketplaces, such as SAP Ariba — operate much the same way. Though sometimes thought of as merely a network of buyers and sellers connecting to do business, in reality a digital ecosystem entails much more than that. In addition to facilitating commerce, networks should enable trading partners to collaborate on innovations that open new operating models and revenue streams. Participants should be able to transform product design and delivery, align cross-border operations, and drive mutually beneficial business processes. And when surrounded by a robust ecosystem, they can.
Just as in the natural world, an elegantly designed ecosystem in the digital one confers yet another advantage: attractiveness to newcomers. Out in Big Sky country, it’s amazing how the tranquility and abundance of the environment lures visitors —migrating species. When an ecosystem works as intended, whether in the wilds of the forest or the thickets of the digital economy, word gets around. The best flock to join in, and the benefits accrue to existing participants. As the saying goes, there’s strength in numbers. Innovation doesn’t happen in a vacuum.
Whoever said “there is no ‘I’ in team,” was technically correct, but way off the mark. Teams are, after all, collections of individuals. Individuals with different viewpoints and ways of thinking and operating. And when you tap into this diversity, you can open the door to totally new things. Consider Lego. In 2003, the iconic toymaker was on the brink of bankruptcy. To stave it off, the company tried to diversify its business, branching into video games and themes parks. But this only made things worse. Then Lego tapped into a diverse community of parents. And things got better as Lego teams began to understand how kids really play and developed products that appealed to them. Today, Lego is among the most valuable brands in the world.
Apple is another great example of the power the ecosystems can have. Anyone can devise the next ingenious add-on and offer it for sale in the company’s App Store. It’s almost impossible today to find something there isn’t an app for. You can find cheap gas or the nearest Starbucks. You can manage your daily meditation. And what would life today be without Fortnite? Apple alone couldn’t possibly deliver all these innovations on its own with the speed and scale that it can through the App Store. And in launching it, the company has not only paved the way for cool technologies that make our lives more manageable and fun, but democratized entrepreneurship.
Today’s runt of the pack can become tomorrow’s king of the jungle when technology with a few clicks. Will an established tech firm develop the next “killer app” to win over buyers and suppliers? Maybe. But it’s just as plausible it will be the handiwork of the young coders at a high school girls’ STEM club. In software ecosystems, David routinely challenges Goliath and prevails. What’s more, “David” turns out to be Maria or Yvonne or Sally as often as not.
If that sounds disruptive or even disconcerting, just imagine how the other animals felt when wolves — the top of Yellowstone’s food chain — were reintroduced into the park after a 70-year absence. Rather than crowding out other species, though, the wolves have flourished alongside them. In nature as in business, competition benefits the entire ecosystem. Yet unlike Yellowstone, whose vast ecosystem dates back millions of years and whose barriers to entry rarely change, digital networks are relatively new. Anything can happen! Creative disruption guarantees that healthy ecosystems revive and replenish themselves, constantly anew.
Consider the growth of SAP Ariba’s own ecosystem. Our delivery partners, including Accenture, Deloitte and IBM, to name a few, provide invaluable expertise ranging from consulting to implementation to integration. Meanwhile, just this past April, Vertex — the leading provider of tax technology — wrapped its solutions within SAP Ariba through an application programming interface (API). A year earlier, Thomson Reuters introduced its Onesource solution to help companies using SAP Ariba cloud services to calculate and comply with taxes associated with global transactions. By visiting SAP Ariba’s app center, the more than 3.4 million buyers and suppliers connected to the Ariba Network can harness these innovations to simplify the complex process of invoice reconciliation and maximise their existing procedures and investments. And they are rapidly doing so. That’s the power of an ecosystem.
What’s next for ecosystems? In many of our cities, there is constant chatter about overcrowding. But in a cloud-based network, physical space is limitless — and so is the opportunity.
Sean Thompson, SVP and Global Head of Business Development and Ecosystem at SAP Ariba
Image Credit: Toria / Shutterstock