By: Omar Valdez-de-Leon

Digital technologies are transforming industries, with virtually no exception. Cars are becoming computers on wheels, products are turning into (digital) services; cities are connecting trash cans and monitoring water quality remotely. And communications services is no different. In fact, it is a sector that is undergoing a fundamental and complex transformation. From virtualization of networks through to the digitalization of customer experience to new opportunities to create and deliver new digital services.

Change goes beyond computerization and connectivity. It is more fundamental. Digitalization is transforming how value chains are organized. In fact, it is moving away from value chains as we have known them hitherto to the emergence of digital ecosystems.

What is a digital ecosystem?

With the advent of digitalization, the principles that drove the development of vertically-integrated organizations no longer apply. Digital technologies have reduced transaction costs (this is the cost of sourcing products or services through third parties), making it more practical and cost-efficient to work with partners instead of trying to do everything in-house. And not only more practical, but the only way to keep pace with the degree of innovation enabled by digital technologies.

Importantly though, an ecosystem is more than a set of arms-length partnerships. It is a network of independent contributors who interact closely to create mutual value. This creates interdependency among partners in the ecosystem. This means all partners share the same fate – individual partners will only be successful if the ecosystem is.

The importance of digital ecosystems

What this means is that organizations will always be part of a digital ecosystem. This ultimately makes ecosystems the competitive unit – and that the battle will be between these ecosystems, not between individual companies. Also, there will not be a single but many interlinked ecosystems - an ecosystem of ecosystems as it were.

This complex dynamic presents a challenge for organizations trying to figure out a digital strategy.

How can service providers develop a digital ecosystem?

Moving to an ecosystem mindset is difficult. It involves a different approach and, more concretely, an entire new set of processes and skills. There is, however, a systematic way to approach the challenge. As described below, there is a set of key elements and enablers for developing digital ecosystems.

Figure A - Key elements and enablers for developing digital ecosystems

As shown in Figure A, there are three main elements that make up a successful digital ecosystem: these are a platform, the market expectation and the network effects.