Integration: the secret to digital ecosystem success
Digital ecosystems do not exist in isolation. Rather they are an amalgam of tools and services that combine to provide ease, convenience and cost saving to the customer. Yet the key to success in digital ecosystems is the integration of these elements into a tightly unified product.
Boston Consultancy Group (BCG) of the management of this integration in terms of ‘orchestrators’ and ‘complementors’. The orchestrators are the architects of the digital ecosystem; the complementors are the partner services.
BCG has established a four step programme for orchestrators to optimise for integration: grow, improve, control, monetise.
The four-step programme to digital ecosystem integration success
Step one: grow the platform
Growth comes in two forms. One is the expansion in the number of complementors. The other is growth in the user base, or adding customers.
Using network effects – an amplification caused by adding new members, improving content and product offering from new complementors – leads to a virtuous circle with theoretically exponential growth. That growth is compounded once the critical mass acts as an effective barrier to new market entrants.
Orchestrators can deploy pricing strategies based on discounting or subsidisation and adopt ‘smart’ marketing to attract hyper relevant customers and complementors. They can also expand into adjacent complementary markets.
Step two: improve the platform
While a digital ecosystem must be technologically sound, it should also use technology to respond to the needs of its users and complementors.
Benchmarking platform quality for functionality and services can act as a platform for adding features and functions.
It’s important to settle on an open or closed structure. Closed structures favour highly specialised, uniquely reliable complementors. Cisco runs a smart mining platform for which complementors are tightly vetted owing to the inherent dangers associated with poor quality data.
An open approach relies on scaling up customers and complementors in order to maximise benefit to either or both. A food delivery platform has in its best interest a wide customer base and large selection of restaurants. This approach is more likely to drive rapid innovation, and maximises opportunities to use machine learning to enhance recommendation engines and drive future innovation strategy.
Step three: control the platform
Customers and complementors are fickle and BCG recommends minimising ‘multihoming’, whereby customers and complementors are faced with platform choice. An example is ride hailing apps, where the customer can choose based on price and proximity, and the driver can also inhabit multiple platforms to maximise profitability. The result of this phenomenon is a race to the bottom against competitors in the same market. To reduce multihoming, orchestrators can enter exclusivity arrangements or incentivise loyalty.
Orchestrators should also own the value chain, and dissuade customers and complementors from entering private arrangements after the introductions have been made. BCG cites Airbnb as an example: it offers insurance and other protections to hosts that would be unprotected in a direct transaction.
Step four: maximise ecosystem monetisation
The orchestrator has the most to gain from a successful digital ecosystem, but also the most to lose. It is crucial that they maximise ecosystem monetisation.
BCG recommends increasing fees when complementors would incur costs by going elsewhere (Apple’s App Store has been able to drive rates up faster than rival Android because developers see better returns from its loyal, high spending users).
It also suggests encouraging competition among competing complementors to drive quality and render the platform more attractive to consumers, or to compete directly with them, adding their share of the revenue to the bottom line.
Cross-selling and upselling to existing users – deployed with care – can also be effective. Historically, as much as 35 percent of Amazon sales are generated via highly relevant recommendations.
Integration is crucial to the success of digital ecosystems. The orchestrator who can master the four steps above should be able to develop a magnetic proposition.
Amazon test new technology to improve employee safety
At the Amazon Robotics and Advanced Technology labs in Boston, and Northern Italy, team members are testing and developing new technologies in order to help to make employees’ jobs safer, these include technologies that help move carts and packages through Amazon facilities.
Recently the safety of Amazon's warehouses has drawn scrutiny. On June 1, the Washington Post's Jay Greene and Chris Alcantara published findings from an analysis of Occupational Safety and Health Administration data showing Amazon's serious injury rates are nearly double those at other companies' facilities.
A spokesperson from Amazon said the company spent more than $1 billion last year on safety measures, and hired more than 6,200 employees to a group dedicated to workplace health and safety.
One innovation being tested by Amazon, which is in early development, is the use of motion-capture technology to assess the movement of volunteer employees in a lab setting. These employees perform tasks that are common in many Amazon facilities, such as the movement of totes, which carry products through robotic fulfillment centers.
The motion-capture software enables Amazon scientists and researchers to more accurately compare data captured in a lab environment to industry standards rather than other modelling tools traditionally used by ergonomists.
“With this data, visualisations, and employee feedback, we are looking to identify relatively simple changes that can make a big impact,” said Kevin Keck, worldwide director of Advanced Technology at Amazon. “Something as simple as changing the position of handles on totes may help lower the risk of injuries to our employees at a massive scale.”
Autonomous Robots creating new paths to safety
In order to reduce the need for employees to reach up or bend down when retrieving items, Amazon is testing a new workstation system called “Ernie.” According to the company Ernie takes totes off of a robotic shelf and uses a robotic arm to deliver it to employees, so they can remain in a more comfortable and stable position.
“We’re known for being passionate about innovating for customers, but being able to innovate with robotics for our employees is something that gives me an extra kick of motivation each day,” said Keck. “The innovation with a robot like Ernie is interesting because while it doesn’t make the process go any faster, we’re optimistic, based on our testing, it can make our facilities safer for employees.”
“Bert” is one of Amazon’s first Autonomous Mobile Robots (AMRs), and is being tested to autonomously navigate through facilities with Amazon-developed advanced safety, perception, and navigation technology. In the future, it is thought that an employee would be able to summon Bert to carry items across a facility.
‘Scooter’ and ‘Kermit’ are two other robots that also operate autonomously, and are both transport cars. The carts are used to carry empty totes and packages through our facilities.
In a blog post the company said: ‘By having Autonomously Guided Carts (AGCs) like Scooter and Kermit perform physical tasks, we believe we can make our facilities safer and enable our employees to focus on jobs that require their critical thinking skills. In addition, using an AGC like Scooter to pull carts through our facilities reduces the risk of strains on our employees, or even collisions. We currently plan to deploy Scooter to at least one Amazon facility this year.’
Amazon began using robotics in its facilities in 2012, and since then they have added more than 1 million jobs worldwide while simultaneously deploying 350,000 mobile drive unit robots.
“The role robotics and advanced technology can play in not only innovating for customers, but helping make our facilities safer, is a massive motivation for me and my team,” said Keck. “The health and safety of our employees is our number one priority. By listening to them, innovating on their behalf, and driving new technologies into our facilities over the coming months and years, I’m confident we’ll make a big contribution to our goal of reducing recordable incidents by 50% by 2025.”