Successful ecosystem requires culture change

Traditional IT suppliers with central systems and systems of record of customers, employees, citizens or invoices will take on a central role in the digital ecosystem. To be consistently relevant, a culture change is needed in those organizations. Van Alstyne and Parker describe it in Harvard Business Review, "Management needs to understand the ecosystem and actively engage in partner management. They need to learn how to motivate people they don't know to share ideas that have not come from within the organization."

Fear of cannibalism

Traditionally, organizations have feared partners who take away revenue that they could realize themselves. Even their own solutions that replace traditional systems and generate less revenue are rejected for fear of cannibalization in the short term. This cultural mindset is disastrous for the long term. Sustainable relevance does not come from turnover, but from the added value that the organization delivers to the market. Long-term financial results are a consequence of relevance.

Van Alstyne en Parker: "To set up a good digital ecosystem, it has to be interesting for partners to link to your solutions. Otherwise, it's like organizing a party where nobody shows up. You make the difference by how you invite, welcome and support partners in connecting to your solutions. The mindset of management needs to change from controlling to supporting and from including to rewarding. One rule is important: create more value for your partner than you take, only then will they keep coming."

Microsoft

Microsoft is an organization that went through this change after Satya Nadella's arrival in 2014. Nadella: "The playing field has changed dramatically, new and surprising partnerships were needed to remain relevant.”

So Microsoft has embraced Open Source, runs competitor operating systems on the Azure Cloud, and in mid-2021 reduced Marketplace fees from 20% of revenue generated to 3%. Microsoft's crucial change was a culture shift, with Nadella saying in the fall of 2020, "For me, the C of CEO stands for Culture. It determines the success of any organization. Our culture underlies every decision we make at Microsoft. Strengthening that culture is my most important job as CEO. It's not enough to have a good product. You have to have a growth culture to be successful with future top products as well. That is defined by a culture that encourages people to think beyond today and tomorrow.”

Major changes

Van Alstyne en Parker: “A transition to an open, approachable player in the digital ecosystem of the future requires major changes. Probably at the start competencies and skills are lacking among management and employees to make the change happen. Adoption of new technology alone is not enough. Perverse incentives and incentives that focus on short-term turnover in remuneration and appraisal must be cleaned up. Employees must be encouraged to learn and grow and be outward-looking. Because organizations that remain inward focused will remain externally irrelevant.