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Ongoing disruption has made it increasingly difficult for many companies to sustain high levels of growth. In PwC’s June 2024 Pulse Survey, 76% of the executives responding say that the average company in their industry will be out of business a decade from now unless it changes its current business model.
Across sectors, our clients face numerous headwinds that can cast doubt on their long-term sustainability.
The ecosystem opportunity
Persistent barriers to growth are pushing companies to embrace business model reinvention, radically transforming how they create, deliver and capture value. This strategy fundamentally changes how a business makes money, serves customers and/or provides new products or services.
Business ecosystem: Collaborative networks of organizations that collectively create and share value. By working together, they can innovate at a higher level and deliver more expansive offerings.
Business model reinvention presents opportunities to collaborate and drive outsized returns
PwC conducted a Ways to Play analysis of leading technology, media and telecom businesses and classified these businesses according to several profitability, growth and investment metrics. On average, we found that ecosystem drivers achieve 50% to 60% margins compared to the 30% to 35% margins with traditional product-led companies. There’s an opportunity to lift the bottom line by embracing ecosystems, but capturing the opportunity requires sustained focus and investment — and an appetite for risk. Ecosystems enable access to untapped segments of the market, drive increased consumer loyalty, increase business agility and provide pathways to value by unlocking new commercial opportunities.
In contrast to traditional partnership models that are primarily transactional, business ecosystems cultivate a deeper level of interdependence. The success of the ecosystem relies on the collective contributions and collaboration of its participants. By embracing this interdependence, businesses can harness the ecosystem’s power to drive innovation, create value and seize new opportunities.
Some players, we call them "independents," will likely opt out of participating in business ecosystems, choosing to operate without investing in a business network due to factors like niche focus, regulatory challenges, closed innovation or desire to maintain full control of their value chain.
Ecosystems require a willingness to prioritize long-term sustainability over short-term gains and to actively engage in building strong relationships and trust among ecosystem participants. Through collaboration, organizations can help unlock the full potential of the ecosystem and achieve collective success.
Ecosystem value streams
The value generated within a thriving business ecosystem is compounded. Small initial successes can quickly grow over time as the size of the network increases, partnership synergies are realized and competitive momentum takes hold. For the individual business, engaging in ecosystems can present many benefits.
What it means for you: Defining your ecosystem play
Your role: How should I engage?
Ecosystems are becoming a pillar of modern commerce. Businesses should make deliberate decisions on how (or if) they engage in business ecosystems. This may require solidifying and committing to your business strategy, assessing the relationships among various players, identifying gaps, recognizing opportunities to connect and collaborate, and developing a strong focus on attracting new value creation opportunities.
PwC has defined a set of activities in alignment with two core ecosystem Ways to Play. These activities represent the high-level strategy for engaging in ecosystems. A well-defined way to play is broad enough to allow flexibility and growth but narrow enough to focus strategy and decision making. These two archetypes — orchestrator and participant — involve different core competencies and capabilities to extract meaningful value from the network.
The role of the orchestrator
Orchestrator: A dynamic entity that plays a pivotal role in shaping and managing the comprehensive ecosystem. The orchestrator takes charge of developing, owning and managing the platform foundational to the network of ecosystem players.
The orchestrator platform is the basis from which offerings and services across the ecosystem are built. In addition to platform management, the orchestrator governs the diverse range of “participants” who contribute to the ecosystem, including control of access rights. By effectively coordinating and harmonizing these players, the orchestrator enables the smooth functioning and success of the ecosystem environment. We have identified a few key characteristics of the successful ecosystem orchestrator.
The orchestrator’s right to win
The orchestrator is set to benefit significantly from the collective value of the ecosystem, and industry leading companies may aspire to effectively pursue orchestration as their path into ecosystems. However, we expect that a relatively narrow selection of organizations is fully equipped to embrace this role. Orchestration requires a significant and sustained level of financial resources. It also requires strong in-house talent across a diverse set of capabilities, a well-managed partner network, and, most importantly, the right to orchestrate due to a strong ability to influence the direction and behavior of the ecosystem.
The success of an ecosystem hinges on the presence of competent and confident orchestrators. Premature attempts to orchestrate without the necessary expertise and experience can lead to new competitive threads, reputational damage and wasting of valuable resources.
The role of the participant
Participant: The ecosystem participant extracts value by integrating their offerings into an existing ecosystem. They pay "rent" to play in that ecosystem but gain access to customers, technologies and partnerships that were previously unavailable to them.
We have identified a few key characteristics of the successful ecosystem participant.
The ecosystems imperative
The interconnectedness of the world has brought about a fundamental shift in how companies navigate growth and fortify their businesses. It’s undeniable that ecosystems are emerging as a powerful avenue for achieving success in various areas, including customer acquisition, portfolio expansion, brand loyalty and shareholder value.
While ecosystem engagement may vary, the ecosystem economy will significantly impact traditional ways of doing business. Embracing business ecosystems is a powerful way to stay competitive, relevant and resilient. By actively participating in and embracing the opportunities presented by the ecosystem network, a business can unlock new areas for growth, collaboration and innovation — all with a lower barrier to entry.
But joining an ecosystem requires careful planning, investment in differentiating capabilities and resources, and a willingness to embrace change. In return, the ecosystem economy will pave the way for long-term success and resilience in an increasingly connected world.
Geared for unstoppable reinvention: We have a framework to help companies through their journey: strategy, structure, solutions and sustain.
Ready to learn more about the ecosystem play?
Reach out to our team
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