11436 SSO

Digital Ecosystems: Opening Up, Everywhere

Chet Kapoor
Jan 06, 2014

The concept of the digital ecosystem has become so powerful that it’s spreading to some unexpected places.

Here’s what’s been happening: IT’s focus is shifting, from inwards to outwards, from within the enterprise to a much broader ecosystem. Businesses are finding tremendous advantage in opening up their data to innovative developers outside of their companies and enabling them to create new experiences for customers.

This has been going on for some time now, and has happened in obvious places. Netflix, for example, was transformed from a video rental service to a content streaming platform because of its decision to open its application programming interface (API) to outside developers and partners. This enabled it to project its content across hundreds of different devices, cemented its position as a market leader, and helped it topple established companies like Blockbuster.

An example that might be a bit more surprising is Walgreens, a 114-year-old drugstore chain, the largest in the U.S. with over 8,000 brick-and-mortar locations. The company has seen great success by opening its data to developers to create innovative apps, which have done things like enabling customers to print their smartphone pictures in Walgreens stores, or refill prescriptions from a mobile device. And it’s transforming the way this century-old company thinks about its business.

But what’s really new is how the ecosystem philosophy is spreading to industries that had been resistant to it, where the structures of businesses or the uniqueness of the vertical created roadblocks.

The auto industry is a great example. Who would have thought that cars would become the center of new ecosystems that included manufacturers, dealers, customers, suppliers, and developers? Or that giants like GM and Ford would encourage outside developers to use their data to create apps for their automobiles?

The car, in fact, is a dream platform for apps—it’s been called “the world’s biggest smartphone” just for that reason (that analogy will become even more accurate this year, when GM is set to start embedding cellular chips in its cars to connect directly to AT&T’s network).

Carmakers’ vision goes beyond linking your phone’s music app to your car stereo. Take Ford’s AppLink, which provides developers with Android and iOS software development kits. Or GM’s API plans: the company has said it will give the developer community access to engine, vehicle, and even OnStar telematics data to enable the creation of new apps for car owners.

We’re seeing similar developments in the heavily regulated healthcare industry, which is populated with large, vertically integrated companies that have proprietary and complex IT systems. Fragmentation and a lack of coordination between caregivers has been a consistent problem in healthcare; consider that the average Medicare patient has five providers.

Some of the largest companies in this industry are starting to move in the ecosystem direction. Kaiser Permanente signaled this new attitude this past summer when it invited third-party developers to build apps based upon public facility and location information. Others are starting to build apps to monitor people’s activity, weight, blood pressure, and medication intake in ways that enable doctors and patients to better understand and improve health.

And new API technologies now can make electronic health records interoperable, opening up the possibility for developers to securely create apps for patients and caregivers that function seamlessly across disparate providers.

Of course there are still hurdles that could slow ecosystem growth in these industries. For cars, there’s a risk of hacking that goes along with enabling remote access to the functions of a vehicle. There’s also the risk of distracting the driver. In health care, protecting patient privacy and security has always been a big concern; it’s a major reason the data collected and the systems that collect them have been closed off to outside ecosystems.

But the benefits of “opening up”—and the risks of not doing so—are too big for any industry to ignore, no matter how challenging the move toward the ecosystem model might be.

In a survey of 200 executives at large companies ($500M or more in annual revenue) across more than 36 industries, we found that digital capabilities, including employing APIs and apps, are almost universally seen as relevant to business results.

With proof that opening up—creating a community where companies, partners, developers, and customers draw value from each other—really does pay, the number of digital ecosystem wallflowers, regardless of their industry, will continue to get smaller and smaller. Those who act first will move further and faster toward securing market leadership.


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