Understanding ecosystems | Deloitte Australia | Audit, Assurance and Advisory has been added to your bookmarks.
What Boards need to know
The term ecosystem is moving front and centre stage as a key issue for Boards to consider – acting as a driving force behind the way in which businesses operate and decide on strategy, planning and next steps.
During Deloitte’ Board Effectiveness1 conversation series, Australia’s most senior and experienced audit committee and boards, were pretty clear – the time to engage with an ecosystem is right now.
“The world is smaller…there are fewer boundaries, so you really need to understand your ecosystem.”
By “seeking to understand ecosystem risks beyond traditional stakeholders and extending this to employees, suppliers, the environment and wider communities can build brand loyalty and organisational resilience through difficult market conditions."2
So what do we mean by the term ecosystem? Well, “we’re familiar with ecosystems in the natural world—communities of living organisms interacting with each other and their shared environment, competing and collaborating simultaneously, creating and sharing resources, and adapting together in the face of inevitable external disruptions.”3
When it comes to the business context, these same ideas around ecosystems take on the form of a broader group of stakeholders that are increasingly connected – locally and globally. An ecosystem surrounds a business and is made up of multiple layers and stakeholders, who can all respond quickly and in greater numbers through digital channels.
A seat at the decision making table
We live in a world of rapid movement, communication and overflowing information. From an ecosystem perspective, the rapid speed at which ecosystems can respond means that brand risk and stakeholder expectations are top priority. The way in which businesses continue to connect, communicate and respond to client concerns and issues is changing rapidly.
It’s critical that Boards are completely aware of all their stakeholders end-to-end. By having a strong understanding and appreciation of the complex fabric of the ecosystem, they can plan, prepare and mitigate any issues that arise.
The increasingly important role of ecosystems means that “many Boards are applying a much wider lens to their decisions and risk assessments”4– especially since “ecosystems are dynamic and co-evolving communities of diverse actors who create and capture new value through increasingly sophisticated models of both collaboration and competition.”5
Ecosystem expertise and outcomes
The dynamics of an ecosystem offers an interesting insight into how change is the only constant. With stakeholders, issues and landscapes continuously evolving, it is important for businesses and Boards to remain close to their ecosystems to understand the overall sentiment being expressed.
What’s also emerging is that value is becoming a concept that is much broader than just shareholder return. It can be seen that consumers, customers, clients and the community are more discerning of the products they purchase each day.
The overall values, ethics and principles of the organisation that manufactures, markets and sells the product, services or solutions is being critical in decision making and forms the fabric on which reputation and credibility can be flourish or fail.
Brands are now being built and cultivated on values – rather than just what they represent from a commercial, profit or shareholder return perspective.
The benefits of ecosystems
Ecosystems bring to life the words of Aristotle hat “the whole is greater than the sum of its parts” and the diversity of elements can often paint a powerful picture of collaboration, shared insights and vision.
Some other key benefits include:
- “First, ecosystems enable and encourage the participation of a diverse range of (large and small) organisations, and often individuals, who together can create, scale, and serve markets beyond the capabilities of any single organisation.
- Second, participating actors interact and co-create in increasingly sophisticated ways that would historically have been hard to formally coordinate in a “top-down” manner, by deploying technologies and tools of connectivity and collaboration that are still proliferating and disseminating.
- Third, participants—often including customers—are bonded by some combination of shared interests, purpose, and values which incents them to collectively nurture, sustain, and protect the ecosystem as a shared “commons.”6
Five ecosystem insights for every Board
What is clearly evident is that “the rise of business ecosystems is fundamentally altering the key success factors for leading organisations, forcing them to think and act very differently regarding their strategies, business models, leadership, core capabilities, value creation and capture systems, and organisational models”7 – meaning that Boards need engage with their ecosystems, right now.
Five key points for Boards to keep in mind are:
- The lens of a Board is now far-reaching and it needs to take into account a diversity of stakeholders, employees, suppliers, the environment and wider communities. These components of the ecosystem can build brand loyalty, trust and organisational resilience
- It’s important to develop trust-based relationships with policy makers to educate them on the impact of policy on businesses and, ultimately, value
- Building valuable, open relationships across multiple stakeholder groups can build brand trust and organisational resilience
- By engaging with your ecosystem, Boards can develop a positive relationship with these stakeholders who can in turn give businesses the buffer they need to weather storms and navigate uncertainty
- Boards should not underestimate the ecosystem’s expectation for transparency and good practice – especially in the current landscape of increased scrutiny and instantaneous communication channels.
What insights have you uncovered from your ecosystems?
1. Board Effectiveness – Deloitte’s September 2016 report, Courage in the boardroom: winning in uncertain times. Accessed at: https://www2.deloitte.com/au/en/pages/audit/articles/board-effectiveness-september-2016.html
3. Thriving in a world of business ecosystems, Deloitte University Press, 2015, p 3. Accessed at: https://www2.deloitte.com/content/dam/Deloitte/us/Documents/strategy/us-cons-business-ecosystems-overview-booklet-041615.pdf
4. Board Effectiveness – Deloitte’s September 2016 report, Courage in the boardroom: winning in uncertain times. Accessed at: https://www2.deloitte.com/au/en/pages/audit/articles/board-effectiveness-september-2016.html
5. Business ecosystems come of age, Part of the business trends series, Deloitte University Press, 2015, p 5. Accessed at: https://dupress.deloitte.com/dup-us-en/focus/business-trends/2015.html
7. Ibid, p 11.