Scalability and resilience through ecosystem building - The era of platform ecosystems

Effective ecosystem strategies can deliver valuable near-term benefits and generate long-term growth and resilience. Leaders are finding significant benefits already.

In fact, while the term "ecosystem strategy" is relatively recent, strategically and consistently building cross-sector, customer-centric integrated value propositions through strategic alliances has a long history. Today, it's mainstream: for most companies across most sectors, ecosystem building is a critical pathway to growth and resilience.

That's not to suggest ecosystems—interconnected sets of services through which users can fulfil various cross-sectoral needs in one integrated experience—are easy to build. For example, the analysis below by McKinsey & Co shows that just 10 to 15% of incumbents manage to generate truly distinctive non-core revenue from their ecosystem efforts. But the opportunity in getting it right is significant.

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Our experience shows that ecosystem building offers tangible near- and long-term benefits and scalability.

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Platform ecosystems – B2B marketplaces

Platform ecosystems, such as B2B marketplaces, are a specific type of digital ecosystem that revolves around a central platform connecting multiple organisations and facilitating transactions, interactions, and collaborations among them. These ecosystems are designed to bring together buyers and sellers, often within a specific industry or sector, to exchange goods, services, or information.

In a B2B marketplace ecosystem, the platform acts as an intermediary, providing a digital space where businesses can discover, connect, and engage with each other. These ecosystem platforms typically offer various features and tools to support the buying and selling process, such as product catalogues, search and filtering capabilities, transaction management, secure payment systems, and sometimes additional value-added services like logistics or financing.

Why are they important?

• Centralised Platform: The ecosystem revolves around a centralised platform that serves as a hub for participants. It provides a common infrastructure and standardised processes, making it easier for organisations to connect and transact.
• Multiple Participants: B2B marketplace ecosystems involve multiple participants, including buyers, sellers, suppliers, distributors, and sometimes even complementary service providers. The platform brings together these entities, expanding businesses’ reach.
• Increased Efficiency: By leveraging the platform, organisations can streamline their procurement and sales processes. It’s singular nature allows them to efficiently discover and evaluate products or services, negotiate terms, place orders, and track transactions, resulting in time and cost savings.
• Wider Market Access: B2B marketplaces provide businesses with access to a broader customer or supplier base beyond their traditional networks. This expanded reach can open up new growth opportunities and foster increased competition, leading to improved pricing and quality.
• Enhanced Transparency: The platform facilitates transparency in transactions by providing information about products, pricing, seller ratings, and customer reviews. This transparency builds trust and reduces information asymmetry, enabling informed decision-making for participants.
• Collaboration and Innovation: B2B marketplaces often foster collaboration and innovation within the ecosystem. Businesses can connect with partners, explore new ideas, and even co-create solutions or services, driving mutual growth and innovation.
• Data Insights: The platform generates valuable data about transactions, customer behaviour, and market trends. By analysing this data, businesses can gain insights into their performance, customer preferences, and market dynamics, enabling them to make data-driven decisions and optimise their strategies.

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Platform ecosystems to achieve business success – Understanding the strategy to build resilience.

Platform ecosystems, such as B2B marketplaces, offer businesses opportunities for growth and resilience by providing access to a larger customer base, improving efficiency, fostering collaboration, offering market insights, mitigating risks, and enabling agility in response to market dynamics. By participating in these ecosystems, businesses can enhance their competitiveness and adaptability in an increasingly digital and interconnected business landscape. However, in order to achieve success, it’s important to understand the strategy behind these platforms and their development.

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Long-term: How ecosystem strategies build resilience

Building a digital ecosystem is a reliable approach to achieving long-term success and creating value, mainly through two main ways:

• Diversification into new value pools. Platform ecosystems can unlock significant new revenue streams from outside an incumbent's core operations and secondary opportunities, including data monetisation. They can also catalyse new capabilities in an organisation, such as modernising the technology stack, creating cutting-edge data and analytics capabilities, or enhancing partnership management capabilities for the future. For example, , Christie's selected NovaFori to build highly reliable and scalable auction house software that would permit Christie's to conduct multiple and simultaneous online auctions globally, in multiple languages and currencies. Before the partnership with NovaFori, Christie's prestigious auctions needed an online presence or mechanism to expand their buyer segment. Working together with NovaFori allowed them to explore a new world of buyers without geographical restrictions. The solution also offered the chance to create a mid-segment market for mid-value auctions, allowing Christie's to maximise their offerings and savings.
• Improvement in valuation multiples. The other effect is on an incumbent's valuation, given that ecosystem efforts put the organisation on a growth trajectory that may not be possible within the primary industry or that may even position the incumbent more like a platform player.

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Near-term: How platform ecosystems enhance customer value and accelerate growth

Although platform ecosystems are often considered long-term strategies, they can also significantly impact businesses in the short term by addressing important customer needs.

• Accelerated customer acquisition. Companies can deploy ecosystem strategies to acquire new customers across new segments, such as improving the customer value proposition by adding complementary products and services, enhancing digital channels, forming a strategic customer acquisition partnership, or simply enhancing their presence on others' platforms.
• Enhanced customer loyalty. Ecosystem strategies can rapidly and significantly enhance customer loyalty, or "stickiness." This is driven by improving the digital customer experience, bundling services and products from across sectors into integrated customer journeys, and offering higher-frequency touchpoint services within existing ones. For example, NovaFori deployed its recommendation engine to the CarNext B2B marketplace. The engine first recommends vehicles based on previous buyer behaviour. The recommendation is then refined based on user actions on the platform, such as bids, substitutions and won lots, resulting in tailored recommendations boosting trade volumes. These value propositions helped build deeper customer relationships and more frequent customer engagement through new digital-service offerings.
• Richer customer insights. By broadening the proposition and improving the experience, ecosystem moves can generate richer customer data to act on—especially in areas where it can be complemented with additional third-party data. The value it can potentially drive cuts across multiple use cases, including personalisation to improve the customer experience; cross-selling and up-selling to increase the share of wallet; and even operational improvements across product planning, logistics, and customer service.

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How to overcome implementation challenges

While the benefits of platform ecosystems are increasingly evident to organisations across sectors, building successful ones can be complex.

How can businesses and organisations avoid failure during the process? While we've done extensive work on outlining the recipe for successful ecosystem efforts, in our experience, there are six crucial steps for avoiding failure:

• Assess which sectors are complementary to play in. It is critical to deeply consider which platform ecosystems are the most attractive, examining value pools and matching opportunities with the company's core assets and growth ambition. Significant value can be generated early with the right initial use cases in prioritised sectors, charting a path to delivering on the broader end-state vision.
• Focus on value for the customer from the start. Aim for a significant quantum leap in customer experience and true value delivered. Test your thinking with real customers early on. By prioritising product features over understanding customers' underlying needs, businesses risk creating a fragmented and unsatisfactory experience.
• Find the right partners. Find partners who share the company's principles and handle customers similarly. In economic downturns, selecting the right technology provider to build your ecosystem platform has never been more important- as a result of the recent vertiginous increase in selling platform ecosystems and services available. At NovaFori, we adopt a collaborative and hands-on approach, combining our technical expertise with your industry knowledge and business requirements to design the right digital ecosystem for you.
• Strike a balance when governing your ecosystem. Depending on an organisation's innovation culture, its capabilities, and the strategic ambition of the initiative, companies need to provide enough independence for the new entity to move rapidly but within the right guardrails to ensure enough connections to build on core strengths.
• Integrate data across your ecosystem for clear business use cases. Leverage the data that can be collected through ecosystem initiatives and partners. These can reinforce existing operations or become the foundation for new value propositions. At NovaFori, we connect our ecosystem platforms with the technologies our clients are already using or would like to integrate to match their expectations.

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During economic downturns, organisations often prioritise short-term goals. However, investing in ecosystem building can lead to both immediate and long-term benefits. With a global economy projected to reach $100 trillion by the end of the decade and a receptive consumer market, it's important to take action now.

At NovaFori, we are bridging the gap between business & technology through digital transformation, helping you create the ecosystem platform that is right for your needs and helping you scale and be resilient.

Talk to our experts for more information.

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