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In brief

Contents

1. Big potential

In brief
In depth
- 2. Big moves
- 3. Start here
In conclusion

1. Big potential

Participating in ecosystems allows organizations to reach new customers by complementing (or even replacing) traditional value chains with environments in which companies work with multiple partners in different ways to create value. The resulting opportunities can be big.

How big? PwC analysis suggests that, in the automotive industry alone, as the industry electrifies and encompasses more technology and data, its ecosystem revenues could more than double by 2030. Along the way it will transform the industry.

In brief

1. Big potential

2. Big moves

3. Start here

In depth

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Seizing the potential of ecosystems will require new ways of working, and thinking. A useful way to imagine the potential is to think in an ecosystem-centric way—not B2C or B2B, but E2H: ecosystem to humans. This requires a considerable mindset shift from the traditional, self-centered view (in which leaders ask, “How can my company create the most value?”) to a more collective view of, “How can we create the most value together?” Similarly, companies will need to get comfortable looking harder at what customers really want and need—and not just at the products and services the company might sell them.

The model shown below, created by the German firm Ecosystemizer, reimagines the traditional view of the global economy—as a collection of industries and sectors—into a taxonomy more directly focused on human needs. Researchers with PwC Germany, together with Ecosystemizer, enriched this framework by modeling the growth potential of the ten life areas it depicts, effectively transferring economic data from the traditional industry view to this new one. Note: what’s shown is not a prediction of how big we think these ten areas will be in 2030 (or how much business value will be realized) but rather how big they could become if companies were to widely adopt ecosystem models.

Change your mind

Dive deeper:
Change the game, change the world

Portrait by Noli Novak

—Michael G. Jacobides, Professor of Strategy, London Business School

[Companies] often make poor decisions about which role they should play. Too often, they assume they should be in the driver’s seat as an ecosystem orchestrator but underestimate the time and resources needed. Or they focus on building a solution that is feasible but not desirable to either customers or partners. In their blithe expectation that everyone will flock to their solutions, they confuse ecosystems with egosystems.”

Choose your role carefully

Read the article

2. Big moves

If you think you’ve got loads of time to sort out your ecosystem plans, think again. Top-performing companies are already partnering up and creating value. New research from PwC Global Advisory finds that companies in the top 20% by profit margin and revenue growth (adjusted for industry differences) have clear ecosystem strategies and already generate sizable revenues from them—with plans to do more:

In a “winner-takes-most” economy, catching up is never easy—especially for companies that have barely started exploring ecosystems. And that could be a sizable group, according to the PwC’s latest Global CEO Survey.

Neste has since established similar partnerships with other organizations, including the Dallas–Fort Worth airport in Texas, where the company recycles about 32,000 pounds (14,515kg) of used cooking oil a month into sustainable aviation fuel.

Choosing the role you’ll play is vital. As you explore options, remember that giving back can be profitable, and focus on the value you’ll create for partners, customers, and the ecosystem itself—not just the value you’ll extract.

Creating value in ecosystems starts with introspection. Leaders need to ask, How do we create value for customers? Where could products or services from other companies complement this? What ecosystems should we join? Could a partnership achieve something we can’t accomplish alone?

For example, Neste, a Finland-based oil refiner and marketer, pushed into renewable fuels. It formed a high-profile partnership with McDonald’s and built an ecosystem around it: one company collects used cooking oil from McDonald’s; another transports it to Neste, which processes it into diesel fuel that’s sold on to a trucking company partner.

3. Start here

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Check out The Leadership Agenda for more sharp, actionable insights from PwC curated to help global leaders build trust and deliver sustained outcomes

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Further reading: Go deeper on ecosystems and trust

Companies that change the game can change the world

More issues

Ecosystem models are changing what it means to create value, helping companies achieve better business outcomes than they could on their own. Ecosystems also act as force-multipliers, harnessing technologies and capabilities in ways that could help solve some of society’s biggest problems. C-suite leaders who haven’t embarked on their ecosystem journey should scan the landscape for potential partners with complementary capabilities, and start building trust with those partners—because soon enough, going it alone may not be enough to win.

—George Bernard Shaw

Progress is impossible without change; and those who cannot change their minds cannot change anything.”

In conclusion

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Neste, an oil refiner, partnered with McDonald’s to create an ecosystem around collecting used cooking oil to make sustainable fuels. At the Dallas–Fort Worth airport, the company recycles about 32,000 pounds of used cooking oil a month.

How to thrive in the ecosystem economy

PwC’s 2023 Trust Survey

Next in auto: Automotive
industry trends

Seven imperatives for moving beyond digital

Tapping ecosystems to power performance

Nonetheless, there are actions that companies can take now to start preparing for a more ecosystem-centric business environment. Let’s look at those next.

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More issues
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April 2023

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Illustrations by Aad Goudappel

Ecosystems hold huge business potential, and represent a promising way to tackle big societal problems. Let’s start getting ecosystems right.

Construction equipment maker Komatsu created an open platform that suppliers and construction companies use to make job sites smarter and safer. Now, for example, site data gathered by drones is fed to automated bulldozers, helping them complete work in half the time.

Ask: Which skills do we bring? Which capabilities do we need from the ecosystem?

Get capable

Sharing builds trust. Being generous in ecosystems (by providing resources to partners) seems to generate more competitive advantage than just taking resources from them.

Ask: What motivates partners to want to work with us?

Build trust

As any school-aged child knows, ecosystems are places in nature where living things—plants, animals, microorganisms—work together with the environment, and everything plays its part to help the whole. Sure there’s competition. Creatures eat one another all the time in gruesome (and highly streamable) ways. Nevertheless, the ecosystem thrives.

And at the world’s peril. Why? Collaborative ecosystems offer the best (and perhaps only) way to tackle complex, far-reaching challenges such as climate change. In this issue of strategy+business, we look at how top-performing companies approach ecosystems, and suggest ways that other companies can start emulating them—to do better, together.

Ultimately, the biggest opportunity from working in ecosystems is that you can address major societal problems such as global health and climate change while creating immense business value. These challenges are exponential because they’re characterized by feedback loops that—if uncontested—create vicious circles (climate change, for instance, increases food insecurity, which in turn harms health, which exacerbates poverty). Happily, PwC research finds the means of tackling big problems—namely, new business models and new technologies—are exponential too. And an exponential approach to solving problems can change the game, for business and society.

Change the world

Tell me more about game changers

Dive deeper:
Tapping ecosystems to power performance

Look hard for the value

Dive deeper:
The CEO’s ESG dilemma

Know your capabilities

Because ecosystems allow companies to access the complementary capabilities of partners, it’s critical to understand your own capabilities, what you can develop yourself, and which skills you’ll need from the ecosystem.

Getting the scoop on dirt

More give, less take

Heavy construction equipment maker Komatsu introduced a line of high-tech construction machinery in 2013. Thanks to GPS, digital mapping, sensors, and internet-of-things connections, the new machines were highly efficient. Indeed, too efficient.

Worksite productivity wasn’t increasing as much as anticipated, in part because of process bottlenecks. At one highway job site, the Komatsu machines removed dirt faster than the on-site construction companies could haul it away. Moreover, the construction firms couldn’t accurately forecast how much dirt they’d be removing.

In response, Komatsu created a “smart construction” division to develop solutions that would help customers make construction sites safer and more productive. Komatsu drew on capabilities from an array of companies to offer solutions like using drones for high-resolution surveying, and ultimately provided a way to connect all the people and companies involved in the construction and production tasks digitally via Landlog, an open platform. Now, for example, drones can complete a survey of a typical construction site in four to six hours, down from two weeks, and Landlog integrates the data gathered by the drones to program automated bulldozers. Customers report completing jobs in half the time required by traditional approaches, saving money and reducing pressure on overstretched construction workers.

Sundar Subramanian
US and Mexico Leader of Strategy&,
Principal, PwC US

Peter Gassmann
Global Leader of Strategy&, PwC’s strategy consulting business,
Partner, PwC Germany

Axel Deniz
Corporate Development & Innovation,
Director, PwC Germany

Varya Davidson
Energy Transition Leader, ESG Strategy and Transformation,
Partner, PwC Australia

Kunal Arora
Strategy&,
Director, PwC US

As in a marriage, trust between partners is fundamental. Trusting your ecosystem partners requires a profound understanding of what motivates them and why they operate as they do. Microsoft, for example, created its One Commercial Partner unit to better understand the needs of its partners and simplify engagement with them. Some companies co-locate teams with ecosystem partners to build understanding.

Dive deeper:
Seven imperatives for moving beyond digital

Build trust

Extending trust to ecosystem partners is vital, but that’s not the only trust challenge you face. PwC’s 2023 Trust Survey finds that business executives tend to significantly overestimate how much consumers trust them. And even more pressing for leaders are trust gaps inside the organization.

Another way to instill trust in an ecosystem? Be generous. A team at the Macquarie Business School in Australia surveyed 800 managers working in ecosystems in innovation hubs in Sydney and Silicon Valley and found that generous systems—in which partners share information and resources more openly—appear to generate more competitive advantage (measured by degrees of innovativeness, efficiency, quality, and responsiveness) than those in less generous systems. How? Generosity builds trust and helps lower transactions costs, which improves the ecosystem as a whole.

The team’s analysis suggests that being generous—or giving resources to ecosystem partners—accounted for more than twice the variance in competitive advantage versus just taking resources from business partners.

Are you as trusted as you think?

Remember: a successful ecosystem play requires your organization to do new things, take risks, and even partner with organizations that you otherwise compete with. That’s just not going to be possible if your people don’t trust one another—or you.

The upshot? Bridging trust deficits inside the company starts when leaders walk the talk on culture—modeling collaboration and other behaviors they say are important. Here again, start by getting a clear-eyed fix on your own starting point. Pay special attention to what lower-level employees are saying, as PwC research suggests that the higher up in the organization you are, the more likely you are to think things are rosy.

A recent PwC culture survey found 79% of C-suite and board respondents agreed or strongly agreed that what they say about their culture aligns with the way people act every day in their organization—but only 58% of frontline workers said the same.

Dive deeper:
To build trust with employees, be consistent

Lang Davison
Managing Director, Global Thought Leadership in PwC Global Advisory

Dive deeper:
The power of generosity in ecosystems

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Explore the podcast series from strategy+business, which convenes a global community of solvers to tackle the world’s most important problems

Like what you’ve heard?

EXPLORE

Check out The Leadership Agenda for more sharp, actionable insights from PwC curated to help global leaders build trust and deliver sustained outcomes

Want even more leadership insights?

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Like what you’ve seen?

April 2023

strategy+business | Ecosystems

1. Big potential

In brief

In depth

2. Big moves

3. Start here

In conclusion

Look hard for the value

Know your capabilities

Build trust

Are you as trusted as you think?

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1. Big potential

In brief

In depth

2. Big moves

3. Start here

In conclusion

Look hard for the value

Know your capabilities

Build trust

Are you as trusted as you think?

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