January 29, 2016
Ecosystem models paving way for “Platform Economy”—Accenture Technology Vision 2016
By: Mike Sutcliff

Companies across industries are identifying new opportunities to gain competitive advantage by creating compelling experiences for their customers.  One change in business strategy enabling these improved customer experiences is to leverage platforms combining capabilities from multiple players in an ecosystem model.  Successful platforms generate incremental value as each new user and each new service is introduced into the platform.

Nest started with a single product based on a relatively simple technology solution to create a better experience for home owners interested in managing their heating and air conditioning systems to improve comfort and reduce cost.  Nest then leveraged this product to form a new technology platform for connected devices in the Internet of Things to enable new homeowner experiences.  Most importantly, they signed partnerships with approximately 50 leading brands such as Mercedes Benz, Whirlpool, LG, Logitech, Yale, Skybell, Petnet and Philips to leverage the investments and capabilities of others.  This business innovation is creating a dynamic platform which becomes more compelling to individual users as each new partner added to the mix.  

Expanding with ecosystems

This ecosystem approach to generating new experiences has applicability in many industries.  We see the future of financial services moving from the boundaries of the branch networks and call centers to a new world where services are integrated into the point of need for customers as they live their daily lives.  The same can be true for health care as the industry focuses on preventative medicine, healthy living choices, and proactive care for those patients most at risk of various disease patterns.  The ecosystem approach is already well documented by technology companies such as Amazon and its network of small to medium business partners leveraging the platform to deliver products.  We see the same approach as Uber partners with others to provide delivery of food, seasonal products such as flu vaccines and a variety of point of need products which can leverage their incremental distribution economics.

It’s time to start thinking about how your company might be impacted by eco-system combinations. Have you considered who will develop and own the platforms impacting your industry and how your company will be positioned to participate?  Will your industry be disrupted as customers adopt a new platform from an adjacent industry? 

New options for value creation

Your answers to these questions will determine how successful your company will be in the digital economy. That’s because the combination of advancing capability and rapidly falling costs associated with compute, storage, communications, devices, and sensors is changing the economics of competition.  New technology platforms can now easily be created with relatively low investment to support the new platform-based business models and customer experiences.  This is a major point of inflection enabling rapid changes in competitive advantage for the companies with a vision for the future.  Its an exciting opportunity to think about how your company will be able to create new customer experiences in the future.

This platform approach to competition is not limited to companies who think of themselves as technology product or services providers.  Businesses across all industries are developing technology-enabled platforms to capture new growth opportunities.  Kaiser Permanente is moving into digital health. Schneider Electric is connecting smart cities, buildings and homes through the Industrial Internet of Things (IIoT). The Bank of New York Mellon is expanding its financial services offerings with a new U.S. Government Securities Clearing platform powered by innovative technology capabilities to significantly enhance the overall user experience.  As these examples show, momentum is picking up swiftly, which is why Accenture believes “non-techology firms will leverage technology platforms to become the business model innovation giants” within three to five years.

As these companies flex their growing digital capabilities—from digital strategy to design and delivery—they will be using their platform-based business models to fundamentally change how they do business (see Figure 1). This is where the story gets really interesting. The platform ecosystems being built around these new business models are driving macroeconomic change on a global scale. These ecosystems are essentially becoming the foundation for new value creation in the digital economy.

This tidal wave of expansion—from platforms to ecosystems to full-scale economic change—is the focus of the “Platform Economy” trend—one of five digital technology and business trends in Accenture Technology Vision 2016.

Using platforms, digital businesses are expanding from one-way to two-way value creation

Figure 1: Using platforms, digital businesses are expanding from one-way to two-way value creation

Companies  at the front edge of the digital services wave are designing and optimizing platform ecosystems designed to scale exponentially and drive an economic shift from supply-side to demand-side economies of scale. Using the demand-side model, these companies can create value by tapping into resources and capacity that they don’t have to own. For this reason, Accenture thinks that within three to five years, market cap valuations will be largely based on the power of ecosystems and digital assets, including the network effect of platform interactions and control of key digital technologies such as algorithms and APIs.

This is a good time to pause and consider your company’s platform strategy. Whether you ‘own’ a platform ecosystem or plug into another company’s platform, every digital business will need a platform strategy. It will be the only way to protect the profitability of the core business from new forms of platform-driven competition.

How will your digital business participate in the Platform Economy?

To learn more about this year’s Accenture Technology Vision, I invite you to read the chapter highlights, check out a range of informative at-a-glance visuals, view our videos and slideshares, and keep checking this blog for more discussion of these trends.

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