Ecosystem Innovation Playbook

We note three key shifts in the competitive landscape:

(1) Shift from serving customers to empowering ecosystem stakeholders.

(2) Shift from competing on resource ownership (supply-side) to competing on ecosystem participation (demand-side).

(3) Shift from managing internal processes to orchestrating ecosystem interactions.

Ecosystem innovation requires strategizing across a modular value stack to identify future business model positions. 

Aggregators aggregate consumer demand by building engagement through consumer-facing services. They leverage this control over consumer engagement (and data) to mediate interactions between consumers and third party producers. Aggregators typically benefit from low marginal costs of serving consumers which allows them to build consumer engagement at scale. As ownership of consumer engagement becomes more scarce in a digital world, aggregators act as gatekeepers of market access for producers looking to interact with consumers.

Integrators manage interactions between production and consumption ecosystems through the use of APIs. On the supply/production side, an integrator aggregates product provisioning APIs across the production ecosystem, and on the demand/consumption side, it integrates across distribution environments (websites, apps, and other digital services) in the consumption ecosystem. Integrators provide an opportunity to bundle multiple services from the production ecosystem and drive efficiencies by acting as a one-stop’ distribution point’ across an increasingly modular and diverse ecosystem. 

Infrastructures provide core production infrastructure, standards, information services, and data assets to inform, coordinate, and support production activities that firms engage in. Infrastructures coordinate the activities of ecosystem firms across a core production process, towards a common production output.

Capabilities are business capabilities, focused on the performance of specific functions, that may be licensed to third party ecosystem actors, and may be embedded into aggregators, integrators, and/or infrastructures. For instance, a financial services aggregator may leverage an external identity management capability while a healthcare infrastructure may leverage a healthcare diagnostic AI capability.

To strategize across the stack, firms must follow a four-step approach to ecosystem design:

• • Determine current positions across the value stack where they continue to play and current positions they abandon because of impending commoditization.
  • Select future positions that provide competitive advantage which they wish to migrate to, and map out build-partner-buy options to aid that migration.
  • With this portfolio of future positions across the stack, identify factors that reinforce value and defensibility across these future positions by developing business models that integrate multiple positions.
  • Develop a reliable, self-learning mechanism to continuously monitor competitor moves, particularly moves by non-traditional competitors moving in adjacent stack positions.

Firms may work across a spectrum of four choices while participating in modular ecosystems.

• Pursue horizontal dominance at the aggregator, infrastructure, or integrator layers.
• Collaborate with other incumbents to gain scale at one of these three layers.
• Develop a portfolio of capabilities and embed yourself across the ecosystem.
• Produce and/or distribute at scale.