The ability to create a digital ecosystem is critical to digital transformation success. Your success is your network reach. In “Why Become a Digital Business?” I discussed how digital businesses drive value for clients and how they “have shifted to focus externally on their client’s perspective rather than their internal offerings and processes alone”. This led me to think about digital ecosystems and how businesses have created them, how they create them now, and how they will be created in the future.
“No Business Is An Island”
When focusing on the client’s perspective we may find scenarios where the client requires specifically what we are providing, or we may find other scenarios where the client needs what we provide in conjunction with offerings from other businesses. In either case, no business is an island. Let’s look at an example of each kind:
- A shopper in a retail store (or on the web/mobile app) wants to buy a present for a child for the holidays. They know the child wants the new “hot” toy doll that just came out. The retail store sells the doll to the consumer.
- A car buyer is shopping for a new car. They research the options and decide on the car they would like to purchase, they purchase the car from an auto dealership including financing and obtaining/changing their insurance coverage.
The second example clearly shows an ecosystem scenario where the auto dealership might provide the full customer perspective of not only selling a car, but also including the loan origination and insurance as part of the solution. But, did you also catch the part of the ecosystem related to researching the car options? Also, once researched, finding which dealership has the car in stock, coming to a purchasing agreement, and scheduling a visit for a test drive should all be part of the full customer perspective.
The first example seems much simpler. Only one business, the retailer, is involved, right? Well, maybe not. If you have experienced the “hot toy” issue around the holidays you know that knowing what the child wants and obtaining it are not the same thing. So, the full customer perspective is being able to buy the toy without running to 10 different locations to do so. Also, how did the toy get to the store (or delivered to the buyer’s home)? There is a full supply chain and delivery scenario with manufacturers, distributors, and logistics in the mix. Keeping hot toys in stock is not a simple task!
Historical Digital Ecosystems
Historically we did not call it a digital ecosystem, it was simply “partnering”. Businesses established a relationship including financial arrangements and technical integration to establish partnerships between companies. Following the business arrangements, an IT organization exposed selected interfaces for the new partner to use. The secure access, visible scope, and technical on-boarding was a multi-week effort to supply the interface to the partner IT organization, explain the parameters, test, and ensure the integration was implemented successfully. Considering the time and effort involved in each partner on-boarding the number of partners was usually limited.
Creating a Digital Ecosystem Today
Two significant areas of partnering needed improvement to enable today’s best practice digital ecosystems:
- Who should be in our digital ecosystem?
We have selected types of partners who already provide benefit to our business. So, one thought is to on-board more of the same type. This is fine, but perhaps should not be the end of the ecosystem search.
As stated earlier, digital business is about the client’s perspective. So, starting from this position try to think about other businesses that clients use that also need what you provide. I called this the “business next door” when I discussed the business driver for reaching new clients.
Some examples include:
– When someone is planning to relocate they may need a mortgage loan, insurance, furniture, school enrollment, changing a driver’s license, etc.
– When someone is planning a vacation, besides the obvious travel linkage, they may need climate appropriate clothing.
– When someone has a baby, there are many opportunities – clothing/baby toys, healthcare, food/nutrition, investments for education, insurance, etc.
Identifying your businesses next door provides you with the target market for your digital ecosystem. What actions are indicators of opportunities for your business?
- How can we on-board them quickly with less effort – i.e. digitally?
The answer is Partner APIs. Once we have identified a target ecosystem community, we need to identify the interfaces to externalize to do business together. In some ways this is like the traditional partnering done in the past. But, instead of one at a time partner on-boarding we pre-build and pre-test the interfaces as Business APIs with the necessary security, documentation, and simplicity such that the partner IT organization can consume the APIs without the lengthy hand-holding process. Once the business relationship discussion is completed, the partner IT organization is provided access to the API Developer Portal where the appropriate APIs are available and they can perform self-service on-boarding.With this improvement our ability to create a digital ecosystem is tremendously improved. Our ability to partner is less about the technical barriers of implementation and more about defining mutually beneficial financial relationships.One last thought before I leave this topic – Analytics. Be sure to pay attention to your digital ecosystem business. Using your API analytics can help you determine which partners are driving successful interactions and which may need more assistance or perhaps not be worth further interactions.
Creating a Digital Ecosystem in the Future
Disclaimer: in this section I am predicting the future, so rely on this at your own risk. My track record at picking winning lottery numbers is not great.
There are still a few items that are getting in the way of digital ecosystems. I believe the future of digital ecosystems will improve both the business and technical aspects of on-boarding.
For technical on boarding, the issue is that each business is defining their own API interfaces. As a potential partner I do not want to deal with different API formats from each potential partner of the same type. I previously wrote about industry standards and regulatory requirements, and still believe that this is going to happen across all industries over time. It is already happening in many industries and geographies. Businesses are not going to differentiate their value by having a better API, they are going to differentiate as they do today by having better market offerings. Until API standards are defined in your industry the best option (in addition to working on API standards) is to provide the simplest, easiest to use APIs. In the long run these APIs should become the industry standards or worst case will be easily mapped into any future standard.
Today we establish business relationships with each individual partner which is a lengthy process. We need this process to vet the other party and ensure we are comfortable with them as a business partner. Can we make this more dynamic? Can we digitalize the business relationship creation? This question is about trust and who is on the other side of the API. The fear is that an unscrupulous business might on-board themselves to our APIs or us to their APIs if they are not first vetted. The answer here is a “platform”. This could be part of the industry standards organization or it could be a trusted third party that does the vetting process. The platform provider vets the participants in the ecosystem and the platform endorsement provides the vetting process necessary to validate the potential partner. Many businesses I meet want to be “platform” providers. This is of course a significant control point and so a very desirable position. Dominant players in an industry may become platform providers for their own ecosystem. In most cases the desired outcome will be an independent entity for ecosystem participant verification.
To understand more about IBM’s thoughts on Digital Transformation and the API Economy visit the IBM API Economy website. IBM API Connect is IBM’s complete foundation to Create, Secure, Manage, Test, and Monitor APIs. You can find more information about IBM API Connect at the API Connect website. And you can also experience a trial version of API Connect.
If you have questions, please let me know. Connect with me through comments here or via twitter @Arglick to continue the discussion.