ANearly more than a year of COVID-19 impacting the global economy, organizations around the world are still struggling to move towards a more sustainable digital strategy. A central theme for this goal is the Ecosystem Game, which describes how a platform can help acquire new customers more effectively while enabling and incentivizing them to continue to transact within said platform. form.

Organizations quickly realize that it’s not enough to just onboard a new customer – they also need to think about how to organically encourage consistent transactional behavior on the part of customers to create continued dependence on the organization and its system. This can help protect organizations from losing their customer base to competitors. Therefore, it is imperative to adopt an ecosystem strategy to increase customers’ “adhesion” to a platform.

There are three types of ecosystems for businesses to consider.

Closed loop. A closed-loop ecosystem only allows an organization and its subsidiaries to participate in offering products and services to its customers. This type of ecosystem is usually in response to a fierce competitive landscape.

Open loop. An open-loop ecosystem allows a company to collaborate more and more not only with its partners, but also with other competitors in the space. The motivation behind a company’s interest in keeping a platform open is that it can still participate in transactions that it typically wouldn’t have done through platform fees and other payments.

Hybrid. A hybrid ecosystem takes components from the previous two types of ecosystems, allowing most players in the space to participate and the organization to have an “unfair advantage” over certain product and service offerings.

An increasing number of organizations are competing in the digital world. They are faced with an inherent question: are they creating features and products themselves, or are they partnering with other businesses to maximize their online presence? Each option comes with its own set of advantages and disadvantages.

Building a new platform could prove to be capital intensive, but it would allow an organization to capture end-to-end customer value. On the other hand, integrating the products and services of other companies into the ecosystem via a purely partnership model helps the organization to be more flexible with its resources. This model means, however, that the organization will have to forgo a certain amount of income in the form of commissions or fees. Some organizations have also adopted a hybrid model in which they themselves build certain verticals (or customer niches) and then partner with others to fill in the gaps.

For example, some local delivery service providers do this effectively by creating their own grocery markets and integrating other providers, thus creating a balance of competition and collaboration within their respective platforms.

Ecosystems are primarily established in order to efficiently meet customer demands as much as possible. This prompts organizations to focus on digital delivery not only of products and services, but a solid customer experience journey as well. Therefore, it allows organizations to consolidate their leadership position in the market or help the chasing pack make inroads to close the gap from the dominant incumbent. For example, startups like Grab and Uber started operating solely in the ridesharing space, but then established other verticals like food delivery to capture a bigger slice of the digital services pie. In the B2B segment, banks are expanding their digital presence by going beyond simple lending to provide enabling services to small and medium-sized businesses. By helping these companies grow their businesses, banks create additional demand for bank loan products.

As more and more organizations seek to create digital ecosystems, they face a significant challenge: how to capture maximum value and how to deliver a strong customer journey. Digital ecosystems are great tools for increasing customer value, but sometimes they come at the expense of the customer experience. The challenge for any organization seeking to establish or develop its digital ecosystem would be to find a balance between sustainably providing a range of products and services on its platform while facilitating the use of its customers. An additional layer of gamification of certain tasks to provide additional rewards can also increase the level of complexity of the ecosystem. Providing such functionality and maintaining a clear and precise user interface can be essential, especially in hyper-competitive industries such as e-commerce and finance. In order for customers to “buy into” a platform, it is imperative that the platform be both simplistic and engaging – a difficult task, but not impossible, for any platform owner.

During the pandemic, the desire and need for a robust digital ecosystem has grown at an accelerating rate. As platform owners enter new verticals, the propensity to compete with incumbents increases. The ever-changing competitive landscape between different platforms will prove to be an interesting watch. Only time will tell who wins.

This article is for general information only and does not replace professional advice when the facts and circumstances warrant. The views and opinions expressed above are those of the author and do not necessarily represent the views of SGV & Co.

Akhil Hemrajani is Senior Consulting Director of SGV & Co.

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