When people buy a car these days, they often acquire – besides a way to get around – a total package that includes a vehicle, service and products from other companies. For example, they can use Amazon’s virtual assistant AI technology Alexa built right into the car to find out sports results, they can control their smart home app from the car, or they can organise their onward journey by train or by rental bike. As BMW puts it, “The focus is on the customer and their expectations of modern mobility.”
Toyota no longer describes itself as an automaker and now specifically calls itself a mobility service provider, and Volkswagen has even set itself the goal of developing “the largest digital ecosystem in the automotive industry”. The concept of the digital ecosystem is based on the theory of the business ecosystem published by American management scientist James F. Moore in 1993. Today people understand an ecosystem to mean “a partnership with internal and primarily also external partners which has the objective of accelerating digitisation of the business model,” according to Thomas Heinatz, Managing Director at Accenture, a consulting firm. The essential aspect is the familiar platform principle followed by online giants like Amazon and Alibaba, where products and services from different suppliers and providers are bundled on one platform. The current cross-sectoral discussion of and research into digital ecosystems are closely related to societal and technological upheaval. Digitisation is calling conventional business models into question, what the new generation wants from the places where it lives and works is being fundamentally transformed, and climate change is imposing challenges on every company that takes a long-term view.
The critical nature of these changes is clearly shown by a study on digital ecosystems (“Radically rethink your strategy: How digital B2B ecosystems can help traditional manufacturers create and protect value”) co-authored by Jürgen Meffert, a senior partner at McKinsey. “We’ve seen how Amazon, Alibaba and other tech giants have penetrated the B2C sector over the past ten years,” he observes. “Now something very similar is happening in the B2B sector: technology firms are making massive investments in the B2B business, thereby attacking established market participants.”
Many players like to maintain control over their own knowledge and are unwilling to share it. That impedes the development of ecosystems.
Meffert explains the challenge by describing the machinery industry, where value creation is shifting from the actual product in the direction of service, as he puts it. “In the machinery industry, for example, only 30 percent of revenue comes from machines and systems,” he explains. Most profit results from the aftersales and consumables business – and the attackers are eyeing precisely this part. Players in the world of finance are also waking up, notes Jana Ebner, an expert who works as Consulting Manager – Digital Business for the consultant TME. “More banks are entering into partnerships and increasingly adopting the digital ecosystem approach,” she says. Ebner also attributes the efforts to serious competition from fintechs and providers of financial services operating outside the industry. “That’s why a bank must become more relevant again, which it will succeed in doing when it offers an all-round service.”
And the real estate industry? “It must also be aware that once a tech giant has it in its sights, trouble won’t be far behind,” foretells Jürgen Meffert. Nonetheless, digital ecosystems are still a rarity in the real estate sector. Union Investment is among the pioneers in this area. The investment management company launched its digital ecosystem project in 2018, which successfully completed the preliminary study in November 2019 and will implement the first specific applications this year. “The digital integration of partners will enable us to provide better, more future-oriented solutions to the challenges users face in view of the trends from new work and interconnection,” says Jens Wilhelm, Member of the Management Board at Union Asset Management Holding AG. “When developing the platform economy we certainly also kept a close eye on the potential offered by additional revenue sources – such as common services.”
Urban districts as the nucleus for digital ecosystems
Asset managers like Union Investment that focus on real estate have several aces up their sleeve, as clearly shown by a comparison with the financial sector. Consultant Jana Ebner explains that a bank has two advantages when establishing a digital ecosystem: “It enjoys the confidence of its clients and it holds key information about its clients.”
Real estate companies enjoy both of those advantages, along with another one: their relationship with urban districts. In any event, Jens Wilhelm is also convinced that “urban districts as places of urban density and social interaction with a strong individual identity and many different players and uses are predestined for interconnection and cooperation.”
Initial experience at the hotel and office complex Emporio in Hamburg and at the Seestern office district in Düsseldorf have shown that digital platforms are particularly promising in an urban microcosm, according to Wilhelm. “Many players such as tenants and property and facility managers, as well as tradesmen, parcel delivery people, suppliers and other service providers move around in this cosmos,” he observes. That offers the opportunity to distribute many different products to customers which will make their work easier and at the same time opens the door to additional income for platform operators. The actual wants and needs of tenants are of course always in the forefront.
The digital integration of partners will enable us to provide better, more future-oriented solutions.
A cross-sectoral view is advisable when determining the criteria for successfully establishing a digital ecosystem. The consulting firm Accenture Strategy therefore asked companies all over the world that see themselves as ecosystem champions for their recommendations. “Our studies have shown that there are three factors for success: exchanging data, recruiting talent and developing a common value creation platform,” says Thomas Heinatz of Accenture. He emphasizes that the willingness to cooperate is vital. “Many players like to maintain control over their own knowledge and are unwilling to share it,” he notes critically. “That impedes the development of ecosystems.” The important thing, adds Jana Ebner of TME, is to proceed carefully when choosing a partner. “The minute a partner is discredited,” she explains, “that will affect the entire ecosystem.” Ebner also emphasises the importance of data: “Whoever has the data in a digital ecosystem has the power.”
In any event, digital ecosystems hold immense economic potential. The Accenture study estimates that potential to be €87 billion worldwide over the next ten years. Even if the amount is difficult to verify, one thing is clear to Jens Wilhelm of Union Investment: “Whether in the areas of mobility, security or energy management – the real estate industry must seek alliances with other industries. The digital ecosystem offers precisely those connections and creates solid solutions for our clients beyond our own horizon.”
By Christian Hunziker