Traditional industry supply chains focus on the efficient movement of physical goods. They are typically linear and often siloed. As companies shift focus from products to outcomes, these models will become liabilities. New digital entrants will increasingly disrupt established structures and relationships by bringing the power of software, the speed and scale of the Internet and nimble business models. To compete effectively, incumbent companies will need to shift their business practices and begin thinking in terms of ecosystems.    

Developing the technology and related capabilities to deliver business outcomes is a challenging task. Few companies, even the world’s largest ones, are in a position to own emerging digital value chains. That is why ecosystems are critical to the success of the outcome economy. Since delivering outcomes often demands problem-solving above the level of an individual product or solution, companies must work together to meet the needs of customers. The other advantage an ecosystem provides is speed. Since digital markets evolve at a much faster rate than physical industries, being part of an ecosystem allows participating companies to specialize in their core competencies and work together to quickly adapt to changes in external environments.

Industrial Internet is the core of this digital economy. Its adoption and resulting predicting capability will drive the new growth paradigm for every business.

Natarajan Chandrasekaran “Chandra”,
Chief Executive Officer and Managing Director, Tata Consultancy Services

Digital lighting is one industry leading this transition to ecosystems. For example, Philips has developed smart LED bulbs and wireless switches powered by kinetic energy, and is now creating an ecosystem of partners to provide a wide variety of digital lighting solutions. It has partnered with design studios WertelOberfell and Strand+Hvass to co-create 3D-printed luminaires, with carpet manufacturer Desso to develop light-transmitting carpets and with AliCloud, a Chinese cloud services and wireless service provider, to support smart lighting control systems. Meanwhile, industry consortiums, such as the Connected Lighting Alliance, are bringing together lighting, electronics and controls companies to promote open standards and global growth for interoperable wireless lighting solutions.²⁵

One hallmark of a mature ecosystem is the presence and wide acceptance of anchor software platforms, which connect and align all parties to achieve desired outcome by providing rules, structures and incentives. A platform can collect and analyse data from all participants, including customers and ensure that outcomes commitments are met. In time, the top-tier platforms will comprise extended networks of innovators, including software developers, start-ups, customers, partners, suppliers and competitors turned “co-opetitors,” which collectively amplify the value creation opportunities for all participants, and solve problems and apportion liability if one or more parts of the system fail.        

Across many industries, the battle to become the dominant Industrial Internet platform is already underway. In healthcare, for example, Qualcomm Life is currently leading the connected health market with the 2net platform. The picture for industrial markets is still murky. The exceptions are GE and Siemens. Both have been investing heavily in building out their software platforms, initially supporting only their own business units and brands of equipment, but slowly expanding to include others. For example, GE recently announced it will make its Predix platform available to third parties beginning in 2015 to develop custom apps and create innovation within the ecosystem. ²⁶ Oil and gas is still lagging behind, and no clear platform favourite has emerged yet. Given the growing importance of software platforms, most large equipment manufacturers are expected to attempt to build or maintain their own platforms, though third parties will emerge to help make such platforms work together.    

In sum, the outcome economy is transforming how companies create value for customers and how they compete. To be successful, companies will need to have a clear strategy on how they want to participate in emerging industry platforms and ecosystems. There are a number of possible lead and supporting roles: platform owner, data supplier, service aggregator and so on. Many factors influence these choices as well, including the businesses’ existing market positions, IT capabilities, risk tolerance and internal cultures. Because the Industrial Internet market is still in its early stage, and will evolve significantly in upcoming years, organizations must be ready to adapt in response to constant change.