Nine of the ten most valuable companies on earth are ecosystem companies. These are companies like Alphabet and Apple, which cut across industries and create value through a complex network of interconnected businesses. Ecosystems are a fundamental change in how value is created—so very different from the world where all companies operated in well-defined industries. And this shift to ecosystems is only going to accelerate. By 2030, ecosystems will play a major role in almost every aspect of global economy, driving around $80 trillion in annual revenue—a third of total global revenue.

COVID-19 accelerated this trend. That’s because the fundamentals of ecosystems are so customer friendly. They provide a single door into a world of services, kind of the way a smartphone is a simple device with lots of complexity behind it. Technology has made this possible. Ecosystems feature interconnected sets of services that allow users to address a variety of cross-sectoral needs in one integrated experience. Thanks to digital technologies, companies don’t have to content themselves with offerings limited by their industry’s traditional borders. Instead, they can try to serve customers along their entire journey, often by partnering with other companies in the ecosystem.

During the pandemic, this suited customers who preferred ordering things digitally to shopping at physical locations, especially older generations. They jumped online like never before. So, industries where older people traditionally drive a bigger part of the value, like wealth management or home care, had to leapfrog to digital ecosystems.

And guess what? It turns out that some incumbent companies, including telcos and banks, proved to be pretty good at shifting their business models and embracing ecosystems. They figured out how to apply their real strengths in an ecosystem economy. The pandemic didn’t just prompt the feeling of, “Oh, boy, we have to do this.” It also brought the feeling that, “We can do it.”

I don’t think every company must become an ecosystem platform. But every board, whether their companies are B2B or B2C, needs to understand how ecosystems are reshaping their current sector. Often, boards are good at tracking sparkly new technologies, like blockchain, IoT, and the metaverse. But they need to look below these enabling technologies and see that they are likely no longer competing within their industry for market share but in a broader, multitrillion-dollar ecosystem for customer ownership. That means different KPIs, different competitors. Competitors from the past can be your collaborators. Collaborators from the past can be your competitors.

The way the rules have changed is earth-shattering. It’s one thing to say in basketball, “Hey, we are changing the rules. From now on, there are no three-pointers.” That’s just a technology change. Shifting to an ecosystem is like saying, “Actually, we’re not going to use a basket anymore. It’s going to be a goal. There will be four teams, not two, and by the way, you can use your legs. The winner won’t be the team that gets the most points but the team that blocks more shots. The opponents will change every quarter. And by the way, the whole thing is now happening in VR!”

That’s the scale of the change. And that means companies must rethink the very concept of strategy. They must move from strategy in certainty to strategy under constant uncertainty, which is a huge challenge. They need to be far more entrepreneurial. They need to accept far more failures. They need to fail fast and then try again. They need to run multiple parallel value propositions and ideas and assume that not all of them will work out. They must take more of a portfolio-management approach to strategy. Participating in ecosystems can also change the very management structure and decision-making process of companies.

These are hard things to do. But this is business the way customers want it. Ecosystems are here to stay, and while the biggest winners are customers, there is huge upside for companies. You can reach a lot more customers a lot faster. Acquiring customers is cheaper than ever. And if you do it right, and figure out the rules sooner than later, you can be the gateway to serve more customers more successfully than you ever have. It can create stock market recognition which in turn can further accelerate change. It could be the biggest business opportunity of our lifetime. 

ABOUT THE AUTHOR

Miklós Dietz is a senior partner in McKinsey’s Vancouver office.

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