Julian Kawohl is a professor of Strategic Management at the University of Applied Sciences in Berlin (HTW Berlin) and co-founder of Ecosystemizer, a knowledge and advisory platform for business ecosystems. He was formerly head of Group Strategy at the insurance company AXA in Germany. Kawohl, a scheduled speaker at at The NWTK Summit 23 in Barcelona May 18-19, recently spoke to The Innovator about his management book Ecosystemize Your Business, which includes frameworks, concepts and a process to help traditional businesses move to platform and ecosystem business models.
Q: Why should traditional companies consider adopting platform and ecosystem business models?
JK: A colleague and I interviewed more than 1000 executives in the last six years to help companies understand how you can find structure and procedures to ‘ecosystemize’ your business if you are not Google or Amazon. The main driver for a move towards ecosystems is we see a blurring of industries. It is not just about competition from technology companies and startups, incumbents are also, together with partners, extending their portfolios into new areas. That is why there is a need for action by traditional companies. They are being attacked on their home turf. It is also an opportunity because the assets you have as an incumbent bring something to the ecosystem party. If you can control an ecosystem like Apple or Amazon, great, but today if want to be more niche you can be. We have several initiatives in Germany, including a mobility platform, that were built by several industry players to bring their knowledge together. Your business could be an orchestrator but sometimes it doesn’t make sense and it is better to be a part of an ecosystem. You need to take a decision and be very clear.
Q: What are some of the key takeaways of your book?
JK: When I started working on it there was no book about business ecosystems with management concepts and frameworks that would help traditional businesses approach the topic from the very beginning. It was a pain point for C-levels. As a former head of strategy, I know how strategists think and what they need, so I drill it down for them. The book is in four parts. The first part discusses why business ecosystems are important, the next part is about how to find a strategy, the design section discusses how to move from topic to use case to business model and how to decide who are the partners and how the transactions will flow. And finally, I discuss how to set up an ecosystem operating model for the use case implementation and transform the entire organization. The whole company needs to be ecosystem ready. Large traditional companies are still mainly product driven. They do a tremendous job on R&D and have a process to develop products and roll them out to regional markets but today, with the digital component, companies need to be more open minded about integrated offerings across company boundaries. It is a question of mindset. Most companies are not ready. If you are a corporate CEO, often you are not a risk taker; you are conditioned by traditional markets screenings and strategies. You generally do not rise to C-level positions by being entrepreneurial. Your DNA and mindset are to optimize the business so the first reaction I get is ‘show me the successes in my industry sector so then I can adopt it.’ What they don’t understand is that by then it is often too late. I need to convince them that they will lose more if they don’t do anything.
Q: What are some of the biggest mistakes companies make when adopting platform-based ecosystem business models?
JK: Firstly, not finding the right starting point and scope. Businesses need to look at what is already there and what they can bring to the table. They need to consider whether an ecosystem business model really makes sense; whether their organization really needs to create the ecosystem itself and be the orchestrator or whether it is better to launch an ecosystem jointly with partners or simply become part of one.
Secondly, organizations need to be ready, and it is not just about money. The top reason companies give for why they can’t adopt a platform-based ecosystem business model is that everyone is already overloaded with work. This can be a bottleneck so you may have to consider doing it externally – i.e. hiring outside people to develop a minimally viable ecosystem approach.
Thirdly, in the middle-to-the-long run, success will depend on cultural change and transformation. If businesses adopt a platform-based ecosystem business model but not the DNA and digital transformation that goes with it even if you have one and two solved you won’t be successful. To have a chance of doing this sustainably you need the right resources, piloting, and implementation and to make the organization ready culturally with all the aspects that implies, including establishing relevant KPIs.
Q: What advice do you have for traditional companies that want to embrace platform-based ecosystem business models?
JK: Think more holistically and be willing to be more customer-centric. PingAn, a Chinese conglomerate whose holdings mainly deal with insurance, banking, and financial services, is using a platform business model to move into all relevant life areas of its customers. Automakers are also starting to look at the entire customer journey and how to make more connections with their customers’ lives. One example is energy. If you have an electric vehicle and you will charge it at home maybe you need photo voltaics on your roof and a heat pump for your home so a combined offering in the form of a green energy package could make sense. This is an example of ecosystem thinking on a smaller scale.
It is important to not always look at big examples. Rather than come into this with an expectation of creating a new Google, think about how you can extend your business with more integration options. German car makers are starting to think this way. Over the last 10 years there was a real switch away from trying to be the technological market leader to ecosystem thinking and the integration of experiences from other life areas beyond mobility such as health (i.e. a checkup of your current mental and physical condition) or entertainment (i.e. gaming) in the car. It means being more open-minded, integrating solutions from new players and accepting you can’t do everything on your own.
What we found out in our research that is you need to get rid of traditional B2B and B2C thinking and instead embrace E to H: Ecosystem to Human. This is fundamental. Companies need to become more human-centric and target broader problems in collaboration with others in an ecosystem. If you are just a supplier and not focused on enabling the holistic experiences that more and more OEMs are designing for their customers, you risk being out of the game one day.
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