Bottling agility: Transformation through ecosystems
February 09, 2022
We have all likely read plenty of articles about agility and resiliency and why having a flexible operating model is crucial for preparing for a force majeure that would upend the way business is done. It was a thought exercise that became a reality with the advent of COVID-19. Now, two years into the pandemic, competitive weaknesses have been revealed, as have competitive strengths. No surprise then that Accenture research reveals that agility and market responsiveness are amongst the top three priorities for Boards of Directors.1
Here is one striking example I came across: A household cleaner that was launched right before the pandemic: a sanitizing spray. If it sounds mundane, its sales figures were anything but. That the pandemic drove a surge in sales of disinfectant spray is not surprising. What’s remarkable about the new product is how it was brought to market in the first place. The consumer products giant behind it was known for its meticulous planning and complex approval structures.
This time they took a different, more nimble approach, taking advantage of the company’s new operating model that reduced internal bureaucracy, streamlined approvals, and created a state of “perpetual preparedness.” The result: the product was rolled out a year faster than their traditional approach.
Crucial ingredients for achieving this preparedness: knowing the consumer, looking ahead, localized decision making and—most importantly—ecosystems. The technology behind the product wasn’t even created by the parent company, but by a third-party ecosystem partner. In fact, without the increased supply chain agility provided by this partnership, the company would never have been able to exploit the surge in demand driven by the pandemic.
33% of executives expect to increase their reliance on external partners to help them deliver on their strategic imperatives
An inability to respond quickly to changing market conditions and customer habits has proved a challenge for many organizations throughout the COVID-19 crisis. Over 40% of executives we surveyed lacked confidence in the effectiveness of their organizations’ systems and processes to help them respond to the pandemic.2 And strikingly, over 74% of executives we surveyed said that they needed to rethink their operating model in light of COVID-19 driven market disruption.
One thing is clear: Corporate bureaucracy stifles agility. (Just to define terms briefly: By “bureaucracy” I mean unnecessary hierarchies, corporate politics, and complicated layers of approvals that impede democratized and empowered decision making.) Operating models are often too big and too slow to be effective in responding to cataclysmic market and competitive changes. Instead of turbo-charging performance, the organizational weight acts as a drag on innovation and growth.
So, is there a way of bottling (forgive the pun) a state of perpetual preparedness? The answer is, there are many ways, but for this blog post, I’m going to focus on ecosystems. The importance of ecosystems in the current environment is highlighted by the fact that over a third of executives expect to increase their reliance on external partners to help them deliver on their strategic imperatives.3
Here are three ways they can juice operating models:
The power of ecosystems to drive innovation and growth has become increasingly recognized: 90% of C-suite executives we spoke to consider building an ecosystem business model important for their company as they attempt to navigate the disruption caused by the pandemic and seek new avenues for future growth.4
77% of ‘Future Ready’ organizations, a small core of companies that have achieved nearly twice the efficiency and three times the profitability of their peers, expect to scale their ecosystems over the next three years to support their growth strategies.
Ecosystem plays deliver transformative experiences: the sanitizing spray is one example among legions. By leveraging ecosystem partners, companies can drive innovation beyond the limitations of their legacy strengths. Perhaps the most striking examples of partnership can be found in COVID-19 vaccine development: Oxford and AstraZeneca demonstrated the collaborative power of academia joining forces with industry. The partnership between U.S. pharmaceutical Pfizer and German biotech BioNTech is another example of an industry ecosystem driving innovation at speeds previously thought impossible.
Looking forward, how can ecosystem partners strengthen resiliency? Accessing ecosystems can enable companies to swap or even replace suppliers and reduces over-reliance on core capabilities that hobbled the speed of many during the early days of COVID-19.
I have a couple of examples: One microchip manufacturer introduced new suppliers based on early news of COVID-19, to build a surplus inventory that has helped mitigate disruption. Uber’s ecosystem play—Uber Eats—gave them the resiliency to thrive during the pandemic despite a steep decline in their core ride-sharing business. Revenue from grocery deliveries and take-outs more than doubled to $7 billion.
Leveraging ecosystem partners to overcome internal hurdles enables organizations to adapt at greater speed to changing customer and market needs—creating what has been termed as an ‘ecosystem advantage’. Ecosystem wide resilience can be as important as a company’s own internal strength. Yet only 25% of organizations we surveyed scaled the integration of ecosystem partners into their systems, processes and strategies.
Turning to a trusted network of partners and alliances can help improve market responsiveness by accessing the customers, capabilities, talent and ideas needed to respond to new customer preferences, new technologies, emerging competitive threats and regulatory changes. Since the pandemic, I’ve seen businesses using their ecosystems to quickly access new routes to customers. A perfect example of this of course, the restaurant business. Although still severely impacted by coronavirus restrictions, delivery and collection services proved a lifeline.
90% of C-suite executives consider building an ecosystem business model important for their company as they attempt to navigate the disruption caused by the pandemic and seek new avenues for future growth
Many of the companies that have successfully staved off the worst of the pandemic have leaned on partners to weather the storm. Maybe there’s a message in the bottle of household cleaner that other companies should take to heart: Ecosystems are critical to organizational agility and resilience. Perhaps more importantly, they have enabled companies to take advantage of unexpected opportunities even in a pandemic.
This blog was originally published on February 8, 2021, and was updated with new information on February 9, 2022.