The word “ecosystem” comes from ecology — the interconnected world of plants, animals, and organisms — but it’s also a concept taking root in the business world.
Business ecosystems are the complex interactions between suppliers, partners, and consumers, Chair and Professor of Information Systems Raghu Santanam. “These ecosystems hold great opportunities for the future, and they also pose many challenges,” he says.
“Many business leaders see tension within their companies between the old and new ways of thinking,” says Santanam, who will be teaching a one-day workshop, “The Future of Work and Digital Innovation,” on Feb. 21, 2018, at ASU’s Tempe campus.
“There’s a growing recognition that if you just keep doing what worked in the past 15 to 20 years, you’ll become irrelevant,” he says. “You must embrace a new way of thinking about platforms. You must look beyond simple products or single points of contact.”
Santanam’s workshop will provide a basic understanding of the foundations and daily life applications of digital platforms and innovations, including artificial intelligence (AI) and machine learning, and mobile and e-commerce platforms.
Santanam says a collaborative business ecosystem provides value in even the simplest ways. To illustrate, he points to an espresso machine in a coffee shop: “Today, an espresso machine can be connected to the internet. So, what should it do? It can send diagnostic information to your maintenance company. It can signal changes that are needed or problems it is having. And analytics can now go through all of this data.”
“If that machine breaks down, revenue is affected for the coffee shop,” he says. “But if you’re going to use the same type of machine in thousands of stores and they all get disrupted, imagine how that multiplies the effect.”
Think of it as being proactive versus reactive, Santanam says. An ecosystem approach is the only way, for example, that innovations like self-driving cars can work. Lyft and Uber have strong incentives to forging partnerships with auto companies to make it a reality.
Prepare for disruption
The advent of robotics, machine learning, and big data analytics is disrupting jobs, industries, and markets. But disruption is not necessarily negative — unless you’re the organization that was caught off-guard, unprepared for digital innovation and transformation.
Disruption, after all, is another way of reinventing and expanding a business ecosystem.
“When Uber and then Lyft arrived, it changed everything,” Santanam says. “Many of us can’t remember the last time we took a taxi cab, even in Phoenix. It’s not just the price, it’s the convenience and other features of the apps.”
Santanam says disruption brings new value when companies combine their data. “Now you see it in the restaurant industry, too, with mom and pop places that did their own deliveries now realizing they need to connect with GrubHub or Uber Eats,” he says. “The disruption brought on by AI and digital platforms will affect from small- and medium-sized businesses to all the way up to global corporations.”
In the retail world, Amazon disrupted the norm when, instead of selling its own products, the company created a platform for others to sell their own products. Sellers using the Amazon platform are now competing around the clock against competitors to offer lower prices and better deals.
Disruption is also happening on mobile apps, he says. “Only the top 300 to 500 apps actually make any money, and a lot of these companies are relying on analytics to drive their sales. They are monitoring search keywords and user engagement to see how their apps are performing in the marketplace.
“Whether you are a restaurant owner, a sophisticated mobile app developer, or a retail company, today you rely more than ever on data and analytics.”
Early adopters, long-term leaders
There are advantages to being an early adapter that embraces digital innovation, but those companies don’t always evolve into long-term industry leaders. The latter requires the ability to adapt, be nimble, and take risks, Santanam says.
Microsoft is an example of both, he says. “Microsoft was there at the beginning of the internet age. Despite early hiccups, today they’re still relevant and doing fine.”
A large company has more resources to build its staying power through trial and error. “Companies like Google and Amazon do it by investing in startups,” Santanam says. “They can buy up smaller startups and take risks to find the ones that actually take off. Meanwhile, startups have to be nimble enough to change their business model as they receive market feedback on their products and services.”
“Ultimately, success is more about timing than being an early adopter,” he says. “But being an early adopter provides benefits that are hard to displace. For example, if you’re trying to replace the Android or iOS platforms today, that’s incredibly hard. However, Android and iOS platforms benefitted from the early incumbent lessons of Blackberry, Palm, and Nokia.”
In Santanam’s course, he teaches participants “how to recognize those platform opportunities because they are harder to displace. And if you have the resources to pursue being an early adopter, you can learn a lot — even if it fails.”