The Ecosystem Economy blog post was originally posted in the Jakamo Official Blog on 17 November 2017.
The latest years in innovation research have emphasised the role of ecosystems as platforms for new business opportunities. In management literature, ecosystems may be seen as a new concept on a continuum of networked economies – ecosystems are complex networks in which buyers and suppliers interact in various operations and levels, not only making commercial transactions. Ecosystem economy also provides opportunities for start-ups. McKinsey&Company recently published an excellent article on how to make the most of the ecosystem economy. The article points out some important findings I’d like to elaborate a bit further.
Transaction and partner management
Firstly, business relationships in the ecosystem economy (and ecosystems themselves) evolve so quickly that traditional management approaches and methods no longer fit for purpose. Therefore leading companies actively seek to find new ways to manage partners and transactions, the article states. I completely agree. In a rapidly changing business environment, real-time information and transparency in business relationships can create a significant competitive advantage for the entire ecosystem. Novel management methods based on facts easily outperform traditional ones, where information is not only scattered but also out of date.
Information transparency in the relationship
Secondly, the article claims that many partnerships underperform because they don’t have the right management infrastructure in place. This might be right. Modern business relationships have multiple layers where different operations interact simultaneously. Management is by no means an extra layer above all other operations but embedded in all interaction between buyer and supplier. Nevertheless, I claim that the main reason why many partnerships underperform is the inefficient use of information and lack of transparency in the relationship. Company-specific IT systems and the use of emails as a primary tool for interaction are the main reasons for the inefficiency.
Ecosystem economy and relationship-management (ERM)
Thirdly, according to the article, companies need to invest in building an ecosystem relationship-management (ERM) capability with dedicated staff. ERM teams are needed to handle every-day routines between partners. I partly agree. An organised structure is indeed needed. ERM teams should represent all layers in the relationship structure. By no means should an ERM team be built merely with HQ staff, but with professionals who daily operate and interact with partners. I also claim that ERM should be supported with an adequate IT system to make most out of the investment in relationship management.
Finally, the article points out that negotiations and other forms of interaction in the ecosystem require new solutions such as workflow tools and supplier collaboration platforms. I couldn’t agree more. So far, most of the solutions (e.g. supplier extranets) represent old-school approaches where company-specific IT systems are stabbed and tailored to meet the needs of the networked economy. The fact is they rarely do. Most often used workflow apps ease the discussion but the fail to fit in the actual business processes.
The manufacturing industry has been at the forefront of building and managing complex supply chains. The customers and suppliers are linked with several business processes e.g. orders, order confirmations, claims, engineering changes, continuous improvement, and innovations. McKinsey&Company have succeeded in describing management in ecosystems economy, yet they could have discussed the requirements for the digital supply chain in more detail.
Therefore, I dare to look around and find the missing link in the ecosystem economy.