Insights

Please Reboot, Part 2: Your Ecosystem is a Lie

Trent Mayberry and Stephen Coller

This is the second article in the Please Reboot series. Check out part one to dig into why your digital transformation strategy is compromised.

A cursory search of current LinkedIn job titles reveals: Global Head, ISV Platform & Ecosystem; SVP Ecosystem Success; Innovation Ecosystem Builder and Regional Ecosystem Lead. Google trends indicate that ecosystems are getting a lot of attention, but most discussions focus on mega-companies like Amazon and a handful of Chinese state-run firms. We would posit that the model we seek to emulate ought to be less extractive, less exclusive and therefore more replicable.

There’s a lot of talk, but not much concrete reality. In a time of indefinite transformation, “ecosystems” are the new “organization.” Everybody seems to have one, which probably means that no one actually does. Not fully. Not yet.

This overnight rebranding from organization to ecosystem reveals a few things about the current state of Digital Transformation (DT) and organizational evolution more generally.

1. A disruption is coming. New business titles are cropping up, designed to convey the impression of something more than just a re-branded Partner Channel.
2. Digital ecosystems are occupying peoples’ minds. After all, Nature put the brakes on our current business model, so perhaps it’s time for more organic designs.
3. Most people fundamentally misunderstand ecosystems — they believe that they can be managed and mapped onto existing systems.
4. Examples are limited for current digital ecosystems. But they are not the only or best path to take — ecosystems can and should be achieved without relying on state sponsorship, data privacy violations or near-monopoly power.

DIGITAL ECOSYSTEMS REQUIRE A NEW APPROACH

To capitalize on the opportunity of this disruption, we need to understand just what ecosystems are, why they’re essential and how to enable them.

Ecosystems work by design, not edict.

Ecosystems, simply put, are comprised of autonomous entities whose interactions resolve into new and more sustainable energy structures.

These natural ecosystems cannot be “managed” or “designed” in the traditional sense. Their ultimate “purpose” is a function of emergence, enabled by effects selected by the system itself. By their very nature, they are “unmanageable”. Ecosystems are emergent and self-regulating. To maintain their structure, they rely on a mix of enriched signals, autonomous action, network effects and feedback loops. Command and control don’t feature. It’s less about hoarding stocks, and more about encouraging flows.1

In an ecosystem paradigm, it is effective self-organization that drives success. When it comes to their design, digital ecosystems follow what Danny Hillis has brilliantly described as “entangled” design principles, in which a more biomimetic form follows improved functioning.2 Reliant upon hyper-connectivity, and a more intelligent form of services fabric, digital ecosystems are network-centric, and not enterprise-centric. For those digital architects among you, that last sentence is important.

Ecosystems are worth the effort.

This does not mean that ecosystems are functionally unattainable. In fact, they are perhaps our best chance at a more resilient economy and local community.

Ecosystems are worth pursuing and promise exponential wealth creation, just so long as we are prepared to overturn the habits and frameworks that we have been reinforcing for the past 350 years.

In fact, organizations face increasingly complex, unpredictable, uncertain challenges that require digital ecosystems, in order to “harness the dynamics that underlie the complex and diverse adaptations of living organisms.”3 Combatting issues like economic recovery, health and climate change will require vast amounts of experimentation and individual initiative across an organization and between organizations.

HOW TO CREATE THE CONDITIONS FOR AN ECOSYSTEM

The organizational implications of this are profound and far-reaching. For now, we believe the very notion of management and its purpose should be thoroughly reexamined.

It’s time to focus our attention on how we create the conditions for effective digital ecosystems to emerge. We argue for three key elements:

1. Purpose
2. Agility
3. Interoperability.

Condition 1: Purpose

Your ecosystem’s guiding star.

In our first piece in this series, Your Digital Transformation Strategy is Compromised, we listed purpose and values as the primary factor that distinguishes transformation from modernization. We assert that the majority of DT efforts are in fact modernizations with makeup, because most transformations do not:

1. Make clear how a company’s founding purpose and values will be reinforced digitally and the benefits we can expect from the behaviors
2. thereby enabled
3. Address the role that information access and trustworthy collaboration plays in that process

Similarly, ecosystems cannot function without addressing the two factors above. Purpose must be the north star of your ecosystem. It’s how you get people working together towards the same common goal.

Take a credit union, for example.

Their purpose: member-first and in the business of serving the greater good. This purpose is commendable — but it’s not tied to clear, measurable effects.

What is that “greater good,” how does a union enable services that promote it? How can it be measured? How can a union’s members, suppliers and banking partners help contribute to that “greater good”? After all, they each have a role to play in fulfilling that vision.

Most credit unions were investing in tools like omni-channel from a unilateral perspective before COVID. Now, unions must think more bi-laterally and leverage these investments to enable every entity in their network to better fulfill customer needs at the moment of truth. This means being hyper-aware of context and tracking the status or “health” of the ecosystem at each touchpoint.

Condition 2: Agility

“The road to Agility is paved with information.”4

To be agile enough to create ecosystems, leadership must abandon pre-existing notions of authority, control and ownership. This is very hard to do. After all, those pre-existing ideas in many cases were honed over decades of thoughtful career management. Rewiring with kids is easy, with adults harder, with business leaders harder still.

Agile organizations depend upon the ability of individual members and organizational entities to get the information that they require to ensure needs get fulfilled faster and more responsibly. This means reimagining the organization’s role, repositioning it as a network in which access to capital and data insights lead to dramatically greater value potential.

Centralization limits us.

As COVID is demonstrating, our industrial methods of command and control are insufficiently agile because of their over-reliance on centralization. Centralization as a mode of organizing works well in very specific scenarios where market and customer dynamics are relatively fixed and therefore accommodate a multi-year staged approach.

Traditional business planning is antithetical to how we need to operate in an Information Age. Centralization limits access to information and constrains individual behavior — great if you’re focused on control and centralizing benefits, not so great if the ecosystem works better when benefits are more evenly distributed.

Condition 3: Interoperability Interoperability is driven by data and technology.

True interoperability in a digital system enables a network to respond to orders of magnitude faster in the community data. Organizations must evolve into nodes in a broader ecosystem that are dynamically reconfigurable, based on those signals.

This translates into platforms capable of supporting peer-to-peer relationships and human-human, machine-human and, increasingly, machine-machine information exchanges that transcend individual organizations. This is not the pervasive system or architecture pattern we use today.

Today, our notion of interoperability is based on the idea that we can specify the information exchanges, collaboration and technologies we need in advance — which is hugely misleading, and resists change.

Data Sharing

In an effective ecosystem, both processes and people benefit from access to everyone and everything else. The organization needs to be able to learn from the ways in which groups are working so that it can facilitate better-quality collaborations.

Thanks to the additional level of specialization and interoperability that ecosystems afford, organizations will be able to consider paring back investment in traditional, non-core business functions. For example, how does Ikea’s finance department change if La Caixa, a leading European financial group, is a strategic partner in accomplishing its goal of carbon negativity?

Technological Requirements

The technical challenges of this ideal state are numerous but will be overcome by the right ecosystem. To participate in an ecosystem, companies will have to be able to plug into each other to share insights, collaborate on service delivery and learn collectively from their effects.

This requires accelerated investment in common data models like Microsoft’s Open Manufacturing Platform or the EU’s Open Markets Group, as well as Safe APIs — our current inability to shake hands physically only ups the ante on how we shake hands digitally.

The encouraging news is that all the capabilities we need are already in an alpha or beta stage of development. Our team, for one, is busily working with these tools, including:

• Secure handshakes using “safer” APIs that express a collaborator’s data-handling policies
• Self-organization using Circles of Trust
• Secure modes of multi-party collaboration
• Scalable robust encryption
• Dynamic ontologies that adapt to domain composition and entity relationships
• The fusion of signals with micro-services and event-based workflow
• “Intelligent” (AI/ML mediated) service fabric
• Framework and routines to measure ecosystem “health” incl. algorithmic assurance

Assess Your “Ecosystem”

With these conditions in mind, it’s time to self-asses. Do you have a partner channel or an ecosystem? Score yourself on a scale of 1-5, where 1 is “not at all” and 5 is “completely.”

1. Do you share a singular purpose or just components?
2. Is the partner’s behavior integral to your brand experience?
3. Are you frequently exchanging data about customer needs and their fulfillment status?
4. Are they crucial to one or more of your digital feedback loops?
5. Are they part of your internal decision making and workflow?
6. How integrated are they into your own DevOps cycles?
7. Do you share the same supply chain?

If you scored a 14 or below, you’re more honest than most. If you scored 15 to 25, please reach out — you’re ahead of the curve and we’d love to hear about your experience. If you scored above 25, take the quiz again.

PROGRESSING TOWARD DIGITAL ECOSYSTEMS

“Local resilience will be prized over global efficiency”

Digital ecosystems are not easy, but they are key to future business success; all future companies will either maintain or play a role in one. One more jump in the degree of labor specialization brought on by new technology will require it.

Ecosystems require:

• Measurable purpose and demonstrable values that are expressed through a distributed fulfillment of needs, and
• A level of agility and interoperability among partners that organizations may be struggling to achieve on their own.

The opportunities that accrue from turning your organization into an ecosystem are too prominent and beneficial to delay further investigation and investment. As Mark Carney wrote in a recent piece in the Economist describing a post-COVID world:

“Local resilience will be prized over global efficiency… In this crisis, we know we need to act as an interdependent community, not independent individuals, so the values of economic dynamism and efficiency have been joined by those of solidarity, fairness, responsibility and compassion.”5

It’s hard to achieve this unless you are enabling people to help each other in the furtherance of some common purpose — i.e. operating in an ecosystem.

We hope that this article will create a spark and help us all to start a more earnest and thoughtful conversation about what a digital ecosystem is, its principle attributes and the technologies that will enable them. We intend to help by publishing a third and final piece to this series that steps beyond re-framing transformation and ecosystems and into execution. As part of that, we will also spotlight some of the organizations we anticipate blazing a trail in this critical new category as either participants or principle enablers.

On that note, and in closing, we appreciate the warm reception of our first article. We are grateful for your feedback and welcome your perspective. Our particular thanks go to John Clippinger of MIT Media Lab for reminding us about Danny Hillis’ amazing thinking in this space, and also to Associate Professor Charlotte Lee of the Department of Human Centered Design & Engineering at the University of Washington for encouraging us to consider systems biology. We won’t build a better world after COVID if we don’t build on each other’s thinking.

1. ‘Flows, Fragility and Friction’, John Hagel, Edge Perspectives, October 26, 2016.
2. ‘The Enlightenment is Dead, Long Live the Age of Entanglement’, Danny Hillis, MIT Press, February 22, 2016.
3. ‘Biology of Applied Digital Ecosystems’, G. Briscoe, S. Sadedin, G. Paperin, October 28, 2008.
4. ‘Power to the Edge: Command and Control in the Information Age’, David S. Alberts and Richard E. Hayes. CCRP Publication Series; June, 2003.
5. ‘How the Economy must yield to human values’, Mark Carney for the Economist, Friday, April 17 2020.

View our first article in the series here

Read Part 1