Traditional standalone tech systems are giving way to ecosystems, in which collaboration unlocks new value for businesses and consumers. Now, as markets continue to evolve and businesses face modern challenges, business ecosystems are developing the strategies to keep up. The key for companies is determining when to collaborate and when to compete.
“The same trends that have guided the history of business ecosystems look to continue and, consequently, business ecosystems look set to expand both in breadth and uses,” says Michael Mousdale, senior project manager at complete asset finance platform provider Alfa. “There seems to be a correlation between successful companies today and their ability to build successful ecosystems.”
The rise of the ecosystem
“Industries with inherent complexity and a wide range of associated data are seeing a large transformation today,” says Mousdale.
In 2019, the World Economic Forum said that digital technology could allow companies to go far beyond designing products, services or customer experiences; it would allow the redesigning of industries, leveraging digital technologies to create ‘business ecosystems’.
“Business ecosystems are just as susceptible to evolutionary pressures as biological ecosystems, and so failure to embrace technology and the ecosystems it enables, in both creating value and increasing efficiencies, could be a costly misstep,” says Mousdale.
In a traditional solution with a single provider, change can be costly and slow. Integrating many participants enables unprecedented flexibility, allowing businesses to pivot, scale and make incremental improvements to optimise their solutions.
Business ecosystems can foster new functionalities, which are transforming customer experience. “The value of data, as well as the surge in smartphone dependency and expanded technical hardware, has driven a new wave of products and services and the ecosystem development of them,” Mousdale explains. “For example, Delta Airlines and Lyft have partnered to allow customers to earn miles of Lyft rides, and Lyft is able to use linked Delta data to promote airport rides.”
Within the auto and equipment finance industry, marketplace ecosystems like ViSN from Digital Innk connect fleet companies and drivers.
Ecosystems in action
New specialist solution providers are providing advanced technological capabilities as platform solutions.
Finance companies have access to huge amounts of detailed and structured data, which lends itself to machine learning. Joint venture Alfa iQ helps companies leverage this data, extract trends and convert them into predictions. In partnership with distributed data science platform Bitfount, Alfa uses cutting-edge, privacy preserving techniques to allow machine learning and artificial intelligence functionalities across multiple datasets without requiring the transfer of raw data. This allows Alfa iQ use data from multiple customers without compromising security. With machine learning, the more data, the more accurate the model.
This solution has potential applications throughout the asset finance industry, such as credit and risk analysis. For example, machine learning models can be trained on historic data to predict the probability of future payment defaults. Compared to traditional techniques involving scorecards, this is a far less laborious and more accurate solution.
The future of ecosystems
Companies considering how well an ecosystem model will meet their needs should take into account challenges surrounding company culture, costs and control of suppliers, as well as meeting regulatory requirements and bringing employees onboard.
One of their main challenges is knowing when to compete and when to collaborate. “Understanding when to compete and collaborate is driven by the core product strategy for a vendor,” says Mousdale. “Key considerations when asking this question should include hardware requirements, research and expertise, sale channels, market conditions and time to market”.
Alfa considers current trends, working with customer enterprise architecture and system integrator teams, and refines potential partners, to reduce the burdens on businesses. “Alfa Systems is often the beating heart of an asset finance company,” Mousdale explains. “This is backed by a strong track record in multiple markets, making us a platform which can develop faster and avoid the need for exclusivity, giving our clients the most flexibility when designing their ecosystem.”
Businesses looking to embrace future growth and spearhead technological developments should take note of the evolution of business ecosystems. “I think we may see a subtle shift in how companies perceive ecosystems, given the value they have added already,” predicts Mousdale. “Instead of the ecosystem following the business strategy, we may see more ecosystem-driven business strategy.”
To find out more about how business ecosystems can drive growth, download the whitepaper below.