In Tennessee, in September 1916, Clarence Saunders founded his revolutionary new style of grocery store – Piggly Wiggly.
Until this time, customers presented their shopping orders to clerks who gathered goods from shelves and packed them. Realising the inefficiency and expense of this, Clarence’s solution transformed the entire industry. In his store, you picked your own products, and filled your own basket by selecting items from open shelves, by yourself!
Of course, the supermarket experience isn’t so novel these days. In fact, we expect instant access to relevant and associated products/services personalised to our requirements. We also expect these across both physical and digital channels.
Cue the emergence of business ecosystems.
Achieving more together
Today, no major industry is untouched by the rise of business ecosystems. In these dynamic groups, independent economic players work together to deliver solutions they couldn’t achieve on their own.
“A business ecosystem is a purposeful business arrangement between two or more entities to create and share in collective value for a common set of customers. Every business ecosystem has participants, and at least one member acts as the orchestrator of the participants.” EY
67% of insurance industry leaders believe current business models will have changed beyond recognition within the next five years and that ecosystems will be the primary agent of change. Accenture
Being a part of a business ecosystem provides mechanisms to leverage technology, achieve excellence in research and business competence, and compete effectively against other companies.
What makes a successful ecosystem?
According to EY, companies increasingly favour the ‘partner’ option in the “build, buy, partner” decision framework. Not only does it help keep up with the rapid pace of change, demand for innovation and democratisation of capital, but building solutions from scratch is time-consuming and costly.
To find a viable ecosystem opportunity, you need to examine the customer journey and identify unmet needs and unfulfilled desires that are too big or complex to be solved by one company alone.
Ecosystem’s position companies more favourably to drive innovation and capital efficiency to create customer value. They also bring multiple brands together to strengthen a united value proposition.
What’s more, ecosystems recognise that the members must work with and around each other to keep the system stable. Many successful ecosystems have pivoted multiple times and in unexpected ways. As such, adaptability is one of their major strengths.
Five reasons to be part of an ecosystem*
1 Expand market access. Open new sales channels for existing products/services.
2 Strengthen the core business. Partner with companies that have products/services which add value to your core offering.
3 Protect the core business. Use the strength of the ecosystem to defend against threats from other ecosystems.
4 Access new revenue pools. Partners can provide a gateway into adjacent markets.
5 Launch new ventures. These can be a useful source of learning, financial returns or diversification
Examples of successful ecosystems
• Industry-specific platforms allowing companies to run their business and manage transactions from a single portal (used by retailers, restaurants and SMEs).
• Integrated software solutions connecting buyers with suppliers and combining ordering, invoicing, payment and reconciliation into a streamlined end-to-end process.
• Integrated platforms supporting entire consumer journeys, such as guiding people through the homebuying process or making it easier to manage medical appointments.
In practice: Allianz X
Allianz X is the digital investments arm of Allianz Group, one of the world’s largest insurance and asset management companies.
It invests in digital frontrunners within ecosystems relevant to insurance and asset management. In its portfolio of companies, over two-thirds rely on ecosystem business models.
Allianz X focuses on insurtech and fintech scale-ups with great growth potential and business models that complement Allianz companies.
• They connect, facilitate, collaborate and leverage.
• They create win-win scenarios for its partners and portfolio.
• They build platforms and maximise technology.
Opportunities for the strata insurance supply chain
The evolutionary development of ecosystems can’t be predicted. It’s an emergent process influenced by factors including competition, regulation, evolving customer needs, company resources, underutilised assets and risk appetite.
We posed the question “Where to for the strata insurance market – 2023 and beyond” in the summer edition of Inside Strata. Could it be that the Availability and Affordability crisis gripping strata insurance is a sign of imbalance in our ecosystem?
There are many opportunities for us to collaborate, partner and cooperate to realise greater efficiencies in customer experience. We could provide access to faster and more insurer quote options via a contestable platform supported by all strata insurers, for example. Or we could better use underwriting and claims data through shared data links to reduce frictional costs and enhance customer choices and overall experience.
As the late Clayton Christensen pointed out in his ‘Jobs to be done’ framework, “customers are solution agnostic”. When a better solution to their problem appears, they move. For businesses, this increasingly means, adapt or die, disrupt or be disrupted.
*Boston Consulting Group