There’s no single pathway to success in the digital future
CEOs make significant investments in digital transformation but these efforts often fail because of a lack of focus on the customer.
Creating value through ecosystems
Creating value through ecosystems
How can companies deliver sustained growth in a fast-changing digital world?
To achieve this goal, companies big and small are applying IT solutions all across their organizations in order to future-proof their businesses from both current and emerging challenges. Yet all too often this approach fails to deliver—largely because it does not focus on the customer. While evolving technology such as apps and AI is enabling rich and integrated customer experiences, a closer engagement with consumer behavior patterns suggests that there’s no single pathway to the digital future.
That’s why more and more companies are adopting a different innovation approach. They are opting for what I call an “ecosystem growth strategy” of both digital and non-digital components, because although the world is becoming digital first, being exclusively digital is not enough. An ecosystem therefore might also include new product offerings, partnerships in adjacent categories, or daring retail concepts—both online and brick and mortar. It could also entail coordinating a digital platform and in-person services, entering new and previously untapped market segments and channels, or deploying new business models.
Companies as diverse as LEGO and Nike are already moving in this direction—and thereby driving business impact. LEGO’s first push into films with a 3D animated movie, for example, earned the company $229 million in profits and helped increase overall revenue by 25 percent. Since 2018, Nike enjoyed a 54 percent spike in direct-to-consumer sales after enrolling more than 150 million members in its NikePlus loyalty program, which gives members access to personalized and limited-edition products and also unlocks a vending machine at select Nike stores that dispenses an array of special merchandise.
Our strategic design firm worked with Gatorade to leverage its iconic sports beverages and expertise in sports science into an ecosystem that now includes customized athletic equipment, personalized sports nutrition, and service partnerships with a leading athlete management system. Launching this spring: a wearable diagnostic “sweat patch” that captures and analyzes perspiration data to generate individualized sports-fuel recommendations.
The key to building any successful ecosystem is utilizing a consumer-centric approach. In a marketplace wherein competition for consumer attention is fierce and there are way too many choices—consider the millions of songs on Spotify that have never been played or downloaded—forging deep relationships with customers through meaningful touchpoints is more essential than ever.
The first step in building an ecosystem is to identify a company’s core strengths, brand truths, and competitive advantages. Look at market and macro-economic trends too, along with consumer behavior patterns, and set up a consumer-experience experiment to see which concepts have relevance and resonate with users.
Second, think beyond digital-only solutions. Explore a wide range of potential ecosystem ingredients, and then imagine how those different components might come together to create distinct and viable new products and services. You may be surprised by what you come up with—some of it might even seem far-fetched. But the exercise will set the stage for developing a pilot to test and iterate the idea.
Pilots are a critical component in creating an ecosystem—to both assess value propositions and optimize business models as you gain confidence to scale commercially. And by publicizing pilots and garnering media attention, you can accelerate innovation, gain credibility with customers, and perhaps even intimidate competitors. Gatorade, for instance, tested its ideas with both student and pro-sports athletes, including the Brazilian national soccer team.
Finally, to win executive-level support and sponsorship, reframe how to measure return on innovation investment by looking across the business holistically. Underscore how even a small investment in ecosystem growth can increase revenue and consumer engagement, accelerate product development and IT capabilities, modernize organizational structures, and lead to new or continued market leadership.
Using Gatorade as an example, with more than 50 professional teams using its ecosystem products and services, the brand has been able to boost equipment sales and perception as an innovator, as well as broaden its earned media reach. A new e-commerce revenue stream was created. And within the organization, an ecosystem team evolved to launching initiatives at the convergence of digitally enabled products and services.
This success tells us is that while it’s a given the future is digital, the products, services and experiences that will resonate most with digital-era consumers must also be engaging and integrated on multiple levels. To get there, use a consumer-centric approach to determine what works best, based on the brand’s strengths and assets and market dynamics. This will provide a roadmap to build an ecosystem of complementary offerings that creates value at every point of interaction—both now, and in the years to come.
About Tucker Fort