Every large and ambitious company today should be trying to figure out how to become a destination for its customers.
In summer 2015, MIT Sloan Management Review published our article “Thriving in an Increasingly Digital Ecosystem,” which introduced four business models for the digital era. We argued that given the amount of turmoil digital disruption is causing, it’s time for companies to evaluate these threats and opportunities and start creating new business options.
We identified four ways that companies can operate:
- Suppliers, such as insurance agents, which are typically in the value chain of another powerful company;
- Omnichannel businesses, such as large retailers and banks, which provide customers access to products across multiple channels, combining physical and digital;
- Ecosystem drivers, such as Amazon.com Inc. and Tencent Holdings Ltd.’s WeChat, which become destinations for more and more of their customers’ needs by offering complementary or sometimes competing services; and
- Modular producers, such as PayPal Holdings Inc., which provide plug-and-play products or services that can adapt to a variety of ecosystems.
Much has happened between since we began our research in 2012, and it’s time to update.
We have collected new data and completed new case studies that help us understand that it’s no longer about how companies can thrive, but rather how they must reinvent to survive — because that’s the key issue today.
How the Competitive Landscape Has Evolved
Three findings dominate our new research:
In the past five years, we have seen a consolidation — a Darwinian shaking out — of ecosystem drivers and modular producers. Back in 2013, over half of the ecosystem drivers we identified in our survey were small enterprises, often startups, trying to create a blockbuster business. The successful ones — which rely on having great platforms — have grown rapidly, while the others failed and often disappeared (or were acquired). As a result, the number of companies embracing these two business models has decreased markedly. From 2013 to 2017, companies that were predominantly ecosystem drivers fell from 20% to 9%, and modular producers fell from 18% to 8% (from 998 companies across two surveys).
More companies have embraced an omnichannel business strategy. Omnichannel businesses are more focused on meeting customers’ life event needs, but statistically we saw relatively few omnichannel businesses that were really great at customer engagement. It’s a big challenge to take a business designed for the physical world, add a digital channel, and make the new customer experience seamless.