Moving beyond the traditional industry silos – are we ready for the new ecosystems?
Blog: Capgemini CTO Blog
The term “ecosystem” was introduced originally by Arthur Tansley to describe a community of organisms interacting by competing, collaborating, and co-evolving in order to survive and thrive.
This concept was then adopted by James Moore, who in a Harvard Business Review article[1] likened companies operating in an increasingly interconnected world to a community of organisms similarly interacting in order to thrive by competing, collaborating, and co-evolving. Moore presented the idea that companies should not be viewed as a single firm within an industry, but rather as a part of a business ecosystem that spans traditional industry boundaries.
In one of my first strategy projects, we looked at the insurance ecosystem and the value of investing up and downstream along the value chain. The earlier models of business ecosystems have been around for years – decades even. In insurance, for example, the general insurance companies partnered with or owned roadside assistance programs to support customers as part of their value-added service offering. Then, it progressed into “what if we could invest into the front end and proactively influence our customer behavior?” In so doing, insurers could reduce the number of claims and charge more targeted premiums and reward customers that have a better claims history or less risky lifestyles. One such entrant in the New Zealand market did just that several years ago – Youi Insurance. They launched a huge marketing campaign claiming tailored pricing, depending on whether you drove short or long distances, kept your car locked up at night, or parked on the street, etc. Health insurance, of course, offers similar adjustments – do you smoke, how much do you drink, or exercise? A good example in the UK is Vitality Health, which has partnered with gyms to offer members 50% off and then further reward customers with movie tickets if they meet certain health targets.
Today, we are witnessing the fourth Industrial Revolution. Our technological advances will fundamentally alter the way we live, work, and relate to each other. The scale, breath, speed, and complexity of transformation is unlike anything we have experienced before – and this is what makes it so interesting!
Industry boundaries are blurring and dissolving rapidly, facilitating the creation of new value while redefining the art of the possible. With technological advancement and the rate at which they are occurring, this is allowing traditional boundaries to become porous. With the ever-increasing interconnectedness, it has become difficult to see where one stops and the other begins. There are a lot of interdependencies, as I am sure my PMO colleagues would love to tell me.
I have spent the last two years, since moving to the UK, working in the Utilities sector. I have been fortunate to be exposed to some of the organizations that are at the forefront of thinking about some of the big industry challenges – battery storage, electric vehicles, and decarbonization. While each business thinks about the future and strategy within its own silo, who’s thinking about the whole change? This got me thinking about the ecosystem changes I see as part of my everyday life, and then a flashback to The Jetsons (an ‘old’ 1960s ABC TV series set in the future) – bear with me.
We are witnessing enormous rapid advancements in autonomous and electrified vehicles, challenging our traditional, internal combustion engine-powered fleet. We have also seen Uber disrupt the traditional taxi model and companies, such as Zip Cars, uncover and flourish in an un-serviced market segment, allowing customer to rent vehicles in the city, by the hour. So where I am I going with this? Look into the future with me. Imagine that you don’t own a personal car. Imagine that you are a subscriber to a new service which allows you to call a vehicle on demand to meet your specific needs at the time (e.g. today you are going into work so you order a Volkswagen Golf, but tomorrow you are off to the Alps for your family ski vacation so you need extra luggage space to get everything to the airport so a Volkswagen Tiguan would be better). Your pre-ordered autonomous VW Golf pulls up outside your house at exactly 8:00 AM and you clear your emails on your way into the office and walk into your first meeting at 8:30 AM. The possibilities are endless, but think about the amount of change that will be required not only to the automotive industry but to connected industries within the transport ecosystem to enable this to become a plausible reality.
- Car manufacturers
- Need to perfect and continue to innovate autonomous vehicle technology
- Do they facilitate this transport ecosystem, or will the likes of Uber or others do it?
- Which model mix will be required if individuals no longer own personal cars?
- Does the fleet become more standardized and modular (e.g. do I pay extra for heated seats in the winter)?
- National infrastructure
- Street parking may no longer be required – what impact does this have on urban planning?
- How is public transport impacted?
- Carparks in cities may become redundant spaces.
- Insurance
- What is the actuarial science behind insuring an autonomous vehicle fleet?
- Individuals may no longer require car insurance – is there another insurance product required to cover accidental damages?
- Government
- Theoretically, there will be fewer parking fines – which for most councils is a good source of income.
- Potentially, will fewer road traffic police be required assuming pre-programmed autonomous vehicle will be automatically compliant with all the traffic rules?
- Service industry
- Would gas stations become a thing of the past?
- Would fast food drive-thrus still be relevant?
Amazing, isn’t it? And these are just a few of the examples out there. All these impacts have subsequent domino effects. You also then start to question how quickly this could eventuate, what conditions would be required to make this model a success, and what happens to the future of our workforce?
To conclude, the world around us is changing at an unprecedented rate, supported by rapid advancements in technology and interconnectedness. I hope you agree that it is fascinating to ponder what will tomorrow’s industries may look like in an interconnected, digitally enabled world.
Some organizations have started to future-proof their business and are proactively seeking to be disruptive themselves or within their ecosystem to remain relevant in this ever-changing world. At Capgemini Invent, we work with our clients to help them break through their current state equilibrium, distill the complexity and then derive the right solution for their evolved business and operating model opportunities and challenges.
[1] James F. Moore, “Predators and prey: A new ecology of competition,” Harvard Business Review, May 1993.
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