A term that I've heard often used in business is 'ecosystem' but it's an odd term as an ecosystem to me has always been about the communities of various life forms in one place, the physical materials such as water, and the various energy flows originating from the sun or physical environment, recycling of dead material, and other sources.
I suppose that a business ecosystem can be thought of as communities of organisations (suppliers, distributors, customers, etc), instead of life forms, either competing of cooperating over the delivery of a product or service. We can also consider these ecosystems to have a particular niche, a bit like a particular environment i.e. the place.
Beyond traditional IT
IT has traditionally functioned with the core goal of keeping the company running with whatever technology is in place. A big part of that is dedicated to protecting the company's operations, putting security in place to keep out threats.
However, with the advance of technology a vast array of capabilities have emerged, which if harnessed will provide competitive advantage beyond what IT has traditionally offered. Those capabilities have coalesced into several ecosystems.
- Social interaction of users
- Attract as many customers and social interactions as possible
- Social platforms such as Facebook
- Professional social platforms such as LinkedIn
- Share data using standard definitions
- Provision of additional and data analytics based services
- To capture and use external and proprietary data
- Mobile aps
- P&C insurers e.g. driving patterns, use of weather patterns to assess fire risks
- Enable by industry standard software and hardware
- Better and faster IT delivery
- Consumer mobile such as Apple iOS and Google Android
- Enterprise platforms such as SAP ERP, Microsoft Office, Oracle ERP
- Visa / Mastercard payment processing platforms
- Leverage a company's core commerce functionality and value proposition to attract a large number of customers
- Additional capabilities to complete the customer journey and experience can be added to create a network
- Ride sharing platforms such as Uber
- Shopping platforms such as Amazon
- Travel platforms such as Airbnb
- Banks and FinTech players in the value chain e.g. SME apps linked via APIs to the bank
- Integrate multiple companies services to address customer's pain points to make the initial product / service more attractive
- Bundling can be done transparently or explicitly
- Transparent add-ons such as Slack and Amazon Alexa
- Explicit services such as Salesforce.com
Overlapping business ecosystems
A social payment app, for example, may cross several ecosystems. By plugging into these ecosystems, companies can access entire networks, find new customers, and tap into new sources of data. For example a Health insurer may partner with a fitness provider that has its own industry platform, and the two can share the data.
By re-framing IT from an internal collection of information technologies to a broad network of ecosystem technologies (ET) a significant opportunity will allow for work on business priorities and to become a strategic partner.
Understanding ecosystem technologies
ET encapsulates an expanded set of IT capabilities and functions across multiple levels of enablement. ET represents a new set of capabilities as well as the extension of existing ones.
A layered IT
ET can be shaped in three ways:
1. Opening up internal IT to the outside
This approach is about linking internally driven systems and capabilities into external systems. For example, an airline's mobile app extending to a ride hailing app such as Uber, so travelers can order a car upon landing. Or maybe an insurer linking up with an airline to sell travel insurance. It extends the customer’s journey and the company’s relationship with the customer through integration with other service providers.
Integration capabilities to upstream and downstream partners are nothing new. EDI (electronic data interchange) has been in existence for decades. However, those integration points are often static, bilateral, and with a small, pre-selected group of partners such as distributors and suppliers, commonly sent in batch.
The future of integration into external ecosystems will force companies to interact with many more partners covering a broad range of functions, ranging from customer sourcing to social advertising to payment solutions. The low cost of technology and a dynamic start-up environment has led to a massive increase in the rate at which new services are being introduced.
The IT function must follow the ‘Amazon principle’ of making system components available as a service to enable integration with the ecosystem. The interfaces must be open, dynamic, and functional in real time so that they can integrate partners, technologies, and applications on an as-needed basis.
Architecture built on microservices and application programming interfaces (APIs) will allow third parties to easily hook into the new ecosystem. Platform architecture must allow for future upgrades across the ecosystem. An app might allow consumers to pick and choose desired capabilities. And of course, the infrastructure must be robust and secure.
2. Internalising external IT
This seeks to open up internal IT systems so that the business can plug in the external capabilities available in the ecosystem to better serve its own customers, support its own employees, or create new products and capabilities, often offered via SaaS and APIs.
Simple examples could be:
- An insurer that uses Guidewire Claims System, and must also plug it into the company back end, and front end partner systems.
- The integration of a third-party point-of-sale (POS) application into a company’s internal payment systems to simplify a customer’s in-store purchase process.
- The integration of a third-party customer service chat function into a company’s website e.g. Salesforce chat on a company sales or customer help web page.
This approach changes how IT designs and manages its systems. It’s no longer about buying software packages and building bespoke solutions on premise or working with a system integrator to deliver a business solution.
It’s now all about understanding the end-to-end customer experience and how external and already available services can be utilised with internal solutions to offer a complete and unique offering.
3. Modernising IT to scale innovation
The pace of new technologies has become almost impossible to keep up with but many of the new tools have the potential to fundamentally change a company’s business model, though it may not be clear at first.
To guard against being caught unprepared and to adopt a more aggressive competitive posture, companies should begin testing these technologies to be ready to bring them on board as soon as their value is proven and scalable.
While its said to 'stay curious', the natural curiosity that people have that allows them to investigate new tech is often not given the time that it needs to develop. Given time, the curious will spend time "playing" with new technology and begin to see opportunities to use it.
Specific analysts or architects could be tasked as a main part of their role to identify and assess the compatibility of external technologies. Furthermore IT leaders could form partnerships or alliances with vendors and service providers to really understand and evaluate how the technology can be used in their business environment.
Sometimes it will be found that these technologies are immature and cannot scale, and they often leverage services that may not be compatible with companies’ own infrastructure - or at least not without great effort. Therefore it’s important for companies to think through how they enable a smooth integration. If not done correctly, companies will create another spaghetti IT infrastructure.
Getting started with ET
While building ET is complex and based on many interdependencies, focusing on the following six elements gives CIOs, digital leaders, and CEOs a big advantage in getting the most value from it:
1. Rethink the business’ strategy
The way a company chooses to interact with various ecosystems (or create its own ecosystem) depends on:
- its strategy
- the market environment
- level of acceptable risk
The CIO / Digital Lead works as a partner with the CEO to help shape the business strategy by identifying emerging technologies and ecosystems that could disrupt the marketplace. This is a constant exploration in which technology and business strategy are linked.
2. Develop the infrastructure
The integration of technologies requires companies to redesign the next-generation integration architecture and to align with open standards that can be easily adopted by external parties. The master data management will also need to be extended to include third-party data and potential integration with external master data providers.
3. Reinvent customer management processes and structures
When customers call with technical issues, it will be challenging to figure where the fault points are in an ET environment. Is it the company’s systems, a third party’s services, the cloud that houses the service, the network or some combination of the above? This reality will require companies to fundamentally rethink their support processes.
Creating SLAs that clearly define issue resolution and escalation protocols that all parties agree to will be crucial. This should not result in the customer been redirected from one partner to another and another. The issues need to be solves behind the scenes and spare the customer the complexity of navigating the partners’ ecosystems.
4. Define the parameters for cybersecurity, legal, and partnerships
As a result of the extended infrastructure, internal cybersecurity policies and processes will need to include third-party partners and vendors. A new set of security standards should be defined and agreed to that clearly articulates how the integration will take place and what kind of data can be exchanged with whom.
Allowing third parties into an organisation has be tightly controlled. Even giving an email account to be used with specific systems could allow the party to see sensitive emails meant for the rest of the organisation.
Working with a broad range of third parties will raise other legal questions as well. IP, liability, privacy, profit sharing, and regulatory/compliance issues all have the potential to severely impede potential benefits from engaging in the broader ecosystem. Data ownership and customer management in particular will be crucial given the need for companies to access both.
5. Cultivate an “open” mind
IT has traditionally focused on protecting systems and ensuring that they run well but the new digital world demands more active engagement with the outside world to understand competitive threats and sources of value.
6. Invest in new capabilities
As businesses increasingly engage with external ecosystem technologies, full-stack architects and convergence infrastructure engineers are needed who can provide expertise in third-party packaged software, have fluency in multiple best-of-breed technologies, and bring experience integrating multiple technologies.
"Translator" capabilities will also be crucial to bridge the gaps between business goals and technology requirements to be provisioned through the ecosystem. Any new function should be closely worked through with the business to understand how external services can be integrated with products to extend the customer value proposition.
With the advancement of cloud computing and infrastructure as programmable software, infrastructure resources (e.g., networks, servers, storage, applications and services) can now be rapidly provisioned. It requires DevOps (the integration of development and operations) and cloud engineers, who have the experience to navigate a rapidly changing cloud computing ecosystem and program software, as well as data scientists, automation engineers, and enterprise architects.
Integrating a company’s IT with third-party capabilities creates opportunities to capture substantial new sources of value. But until IT expands to become ET, the vast majority of those opportunities will remain out of reach.