Leaders often lack the experience or capacity needed to design, implement and manage ecosystems.
Digital ecosystems offer insurers the opportunity to increase profitability by increasing revenues, pushing into new markets and accelerating innovation while increasing the quality of their engagement with customers.
Insurers such as AXA, Chubb, Discovery and Ping An have already started collaborating with a mix of business partners to calculate comprehensive ecosystems. Almost 60 percent of the insurance managers we investigated report that their companies are taking measures to participate in ecosystems.
But the early performance of many ecosystems, within a wide range of industries, has been disappointing. Initial revenue has often breached expectations. Our research shows that only 12 percent of companies, from large industries worldwide, generate an annual revenue growth of 5 percent or more from their ecosystems.
Question: What income growth growth do you target / have you achieved on average for initiatives using ecosystems?
What are the reasons for this underperformance? The main reason is that managers often do not have the experience or capacity they need to design, implement and manage high-performance ecosystems. They often struggle to define an effective business strategy, to adapt their organization's operating models, or to successfully collaborate with ecosystem partners. Approximately 84 percent of the leaders we investigated stated that ecosystems are an important part of their interruption strategy. But fewer than half of these managers could, for example, balance their current business requirements with their need to explore new opportunities.
Ecosystems will not succeed unless managers adopt new approaches to business and broaden their thinking on how their organizations can create value. They need to expand their business strategies and grow their organizations by using digital platforms as springboards to become more comprehensive ecosystem companies. It is critical that managers appreciate, for example, how the functions and goals of platform companies differ from the activities of ecosystems.
Platform companies create value by letting many different parties share information in interconnected digital platforms. These platforms include technology architectures and control frameworks, as well as services and applications. They ensure a quick exchange of information by following open standards and supporting development tools such as API (application programming interface). Almost 80 percent of senior executives report that their organizations use digital platforms to share information or capacity across different companies.
Ecosystem operations collaborate with partners from different industry sectors over an ecosystem based on many interconnected digital platforms, delivering a variety of products, services and experiences. They usually create value by offering customers highly customized "results", such as access to secure transportation, memorable recreational experiences or peaceful home management services rather than specific individual products such as motor vehicles, aircraft or burglary alarms. More than 80 percent of the leaders we investigated believe that the ecosystems will allow their organization to grow in ways that are not otherwise possible.
In my next blog post, I further discuss why insurance companies should start shifting focus from digital platforms that encourage data sharing on more comprehensive collaborative ecosystems. Until then, take a look at these links. I think you find them useful.
The cornerstone of future growth: Ecosystem.
Ecosystem Power Games: In addition to platforms.