Businesses predominantly grow in one of two ways, either organically, focused on internal resources, or through mergers and acquisitions. There is a third way, which some call ‘leveraged growth’ – leveraging the resources and creativity of other people.
We think this is a new discipline for businesses, and we’re calling it Digital Ecosystem Management.
The World Economic Forum said in January this year that we are in the midst of the fourth industrial revolution. Ecosystems are colliding and creating incredible market opportunities. The internet of everything is creating trillions of dollars of potential value, for those who manage to engage with it.
At the same time however, this creates huge challenges for business. As Einstein once said, "We can't solve problems by using the same kind of thinking we used when we created them."
The people who are ‘winning’ in this new era are the digital natives – major corporations like Google, Apple, Amazon, Alibaba and Microsoft, as well as start-ups like Uber and AirBnB.
These are called ‘platform businesses’. They’ve created digital platforms that facilitate multiple transactions and interactions between multiple producers and consumers. They proactively curate their ‘ecosystems’ and continually mine data to optimize their operations.
We ran an event in London recently with The Center for Global Enterprise, a leading think tank, which reported that 40% of the world’s top 30 brands and 70% of the USD 1B+ start-up ‘Unicorns’ now run on this business model. Collectively their market value is now over USD 4 trillion.
Such platforms can be used to catalyse innovation and deliver new forms of value to customers, exploiting the all-powerful network effect. "It’s not just about economies of scale but economies of scope," explained Professor Annabelle Gawer (LinkedIn, @AnnabelleGawer), Professor of Digital Economy at Surrey Business School.
But despite European companies being strong in many sectors, only 4% of the value generated by platforms comes from European businesses (the US and China dominate). “You can see how far behind Europe is,” said Dr Peter Evans (LinkedIn, @The_C_G_E) from The Center for Global Enterprise.
To help Europe catch up, and enterprises in general compete in the platform economy, a new discipline is needed – Digital Ecosystem Management. See the events summary in this video:
The Rise of "Digital Platforms": Opportunities and Threats for UK and European businesses