The economy has undergone a number of shifts, most recently from a services economy to an experience economy nearly 20 years ago. Up until now, the name of the game has been to ‘own’. Businesses compete to own customers, experiences and even entire value chains. However, this ‘every man for himself’ mentality is drawing to a close as we approach the next major economic shift.
In the emerging ‘coherence economy’, businesses will end up working together as complementary building blocks within a digital ecosystem, collectively orchestrating personalised experiences for consumers. It requires organisations to avoid defending what is ‘theirs’ and lower the drawbridge to collaborate. Those that aren’t willing to collaborate will get left behind, as they’ll simply not be considered for inclusion in customer journeys. However, those that operate in connected ecosystems will become formidable competitors, able to fulfil demand spikes, cater to long-term needs, and experiment.
Coherence in practise
To illustrate how this could work, let’s follow Alice as she arranges a doctor’s appointment. Normally, Alice would fit her schedule to her doctor’s, find time to leave work for the appointment and sort out when to visit the pharmacy. However, in the emerging coherence economy, Alice’s experience becomes much more streamlined. Alice would simply notify her mobile device that she needs to visit her doctor, and her calendar would be matched with her doctor’s, a video-consultation would be booked in that same day, and her prescription would be brought directly to her via modern-day delivery services—all done automatically without much manual effort. This requires various players and providers along the value chain to make their offerings available to programmatic access, via APIs, so truly coherent -- personalised and just in time -- patient experiences naturally weave together.
Once consumers get used to coherent experiences, there will be no going back – not for consumers and not for providers. The first businesses that create or participate in such coherent experiences will hold competitive advantage initially. However, once consumer expectations shift, this approach will quickly become table stakes for business survival.
The building blocks of success
For businesses to be successful in the new economy, there needs to be an affordable way to deliver personalised experiences at scale and minimal friction between all players. In the industrial revolution, the magic behind mass production was the use of interchangeable parts. When a part failed, you could replace it versus the entire piece of machinery. You could even get parts from various sources.
In today’s digital age, APIs are the new interchangeable parts for our modern machinery of innovation: applications. But unlike physical interchangeable parts, every API call can be made with personalised, just-in-time information, so customer-coherent experiences cost no more than mass-market experiences. The need for economies of scale disappears in the coherence economy—producing a million of something is no longer cheaper than personalising offerings for a million individual consumers. And with over 21,700 open APIs in operation, there’s a critical mass of capabilities to enable cost-effective, compelling personalised experiences in numerous domains.
One company leading the way is Big Bus Tours, which opened up its booking API to allow more than 1,000 partners across 27 countries to search its products, check availability, make and cancel reservations, and generate digital tickets. Big Bus Tours’ applications, and those of its numerous partners, form an application network—a rich, plug and play ecosystem of experiences that can be tailored on the fly—if weather conditions or appetites change, customers can tap into Big Bus Tours’ partner ecosystem to find suitable activities and restaurants along their tour route
The wider transport industry is also moving towards a connected future built upon APIs. In the next five years, connected vehicles will likely serve as digital assistants, navigating traffic and suggesting restaurants and activities on route and based on external factors like the weather and holidays.
A mental roadblock
With the capabilities already widely in place to support this shift, the biggest barrier to the coherence economy isn’t a technological one but one of mindset. Organisations are used to trying to own everything and often compete with each other, whether over customers, experiences or brand image. However, the coherence economy requires just that: coherence and collaboration between different players.
Think of it like a relay race, where all the players are working together towards the same goal and to share the same rewards. It doesn’t make sense to turn up to a relay race as a solo sprinter. To make the most out of this new economy, businesses need to shift their mindset to become ready and willing team players. Businesses who choose to partake will not only survive but reap huge benefits, such as seeing their revenues rise and their brand loyalty grow.
Our economy is at a crossroads and businesses need to choose which turn to take. Do they continue down the route of customer ownership? Or do they embrace the emerging API-driven coherence economy, produce and consume digital building blocks, and lead the way on creating truly delighted customers?
Uri Sarid, CTO, MuleSoft