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In this episode of the EY Think Ecosystem podcast, the speakers discuss how ecosystems have emerged as paramount players shaping how value is perceived and generated in business.
This episode of the EY Think Ecosystem podcast, hosted by Brian May, EY Americas Alliances and Managed Services Leader, delves into the transformative potential of technology ecosystems in shaping business value and innovation. With insights from Ted Schadler, Forrester Vice President and Principal Analyst, and Laura Atkinson, EY UK and Ireland Alliance and Ecosystem Leader, the discussion navigates the evolution of software ecosystems, the significant impact of generative AI (GenAI) and the strategic importance of ecosystems in today's digital landscape.Â
The conversation highlights how ecosystems enable rapid, efficient responses to market opportunities through collaboration, leveraging core competencies and harnessing the power of generative AI. It also addresses the practical challenges of orchestrating ecosystems, the critical role of leadership in ecosystem strategy and the potential of AI to transform software development and business operations.Â
This episode offers a comprehensive overview of the complexities and opportunities presented by modern technology ecosystems, emphasizing the need for strategic partnership, agility and innovation in driving sustainable business growth.
Key takeaways:
Understanding the role of technology ecosystems in driving business innovation is a foundational step on the path to unlocking their value.
Generative AI represents enormous potential for facilitating ecosystems and business operations.
Leadership and strategic orchestration have the power to make or break an ecosystem, and choosing the right partners with a clear, unified definition of success is crucial.
For your convenience, a full text transcript of this podcast is also available.
Announcer
Welcome to the EY Think Ecosystem podcast, a series exploring the intersection of technology, collaboration and innovation. In each episode, we orchestrate insights, stories and perspectives from across the EY Partner Ecosystem, our client base and leadership team, to address the important issues and challenges of today.
Brian May
I'm your host, Brian May, EY America's Alliances and Managed Services Leader. In this episode, we will discuss how, in the ever-evolving landscape of modern technology, ecosystems have emerged as paramount players, shaping how value is perceived and generated in business. From the first steps of software ecosystems in the days of giants like Microsoft and SAP, to the monumental ecosystem shifts triggered by cutting edge, horizontal technologies at scale, this area is ripe for opportunity, brimming with innovations and new challenges. We will explore the proliferation of API driven services years ago to the disruptive wave brought about by AI and full cloud-based business adoption. We'll also touch on the impact Gen AI will have on ecosystems and ecosystem models, not just on what's truly happening on the ground, but the ambitions and strategies which will be the future reality, beyond the hype. The world of ecosystems isn't just about technology and its implications. It's about strategy, people, partnerships and the many perspectives that coalesce to shape the narrative. Every entity and every business has the potential of building its own ecosystem. Before I introduce my guests, please remember, conversations during EY podcasts should not be relied upon as accounting, tax, legal, investment or other professional advice. Listeners must consult their own advisors.
May
I'm very excited to introduce our guests today. Joining us from Cambridge, Massachusetts is Ted Schadler, Forrester Vice President and Principal Analyst.
Ted Schadler
Hi Brian, it's great to be here today with you.
May
Great, Ted. And joining us from London is my colleague, Laura Atkinson, EY UK and Ireland Alliance and Ecosystem leader.
Laura Atkinson
Hi Brian. Hi Ted. Really looking forward to our conversation.
May
Now, there are so many ways to tackle this subject. Let's kick off by asking, how do you see modern technology enabling a stronger focus on ecosystems to drive business outcomes? Ted, maybe you can kick us off.
Schadler
In your intro, you talked about how the old days of API driven business and certainly that laid a lot of groundwork for what's going on today. Anytime you're using technology to connect companies together, you're creating an opportunity for innovation, for co-creation and for a real extension of each business. Today, with these ecosystems, technology ecosystems fundamentally, but also business ecosystems, we have this tremendous ability to really get a lot of leverage in what we're good at while relying on and working with partners to create the value and deliver the value that we need. It's critical to our success as a business, but then it's not our core competency, it's somebody else's core competency. The ability to see that and do it and structure a business around those resources is really the art of business today.
May
Maybe for our audience, you could give us an example of how you see that shaping up today?
Schadler
If we look at these horizontal infrastructures from hyper scalers as an example, that's a lot of computing infrastructure. So, it allows me as a business to spin up a new application, to maybe enter a new market or address a direct customer need through a better customer experience in a new area that I haven't before, to do that quickly, to build that, enable that application, that capacity very quickly. And so, it's the ability to turn on the extension of your business through those partners, the power that lies in that is your ability to adapt, respond and to directly address the opportunities that the market presents, either from customers, from your own ability or perhaps in response to regulatory or competitive pressure. So, it's this ability to orchestrate, if you like, those resources that is what is very practical in the modern era, that was incredibly hard to do, even just a few years ago, a decade ago and so that's the game changer here.
May
I'm glad you brought up the concept of speed because I think that with these ecosystems and the use of each other's core competencies, just the speed and pace in which businesses can achieve value or achieve particular outcome is much faster today than it ever has been in the past and so it's a common theme that we're seeing across our ecosystem work today. Laura, why have ecosystems become so crucial in today's business landscape? What's driving that?
Atkinson
It's a great question Brian. I would say, given my job, I think ecosystems have always been very crucial, but I do think that there has been a real step change in the perceived value and importance of ecosystems in the last few years and just how critical they are to drive that successful and sustainable growth. Last year, EY commissioned a study of CEOs and our clients, the CEO Imperative study and its relationship to ecosystems, and actually, what we found as a result of that study was 88%, so the vast majority of the CEOs that we surveyed, they thought that that ability to form, lead and manage ecosystems is going to be the thing that defines successful leadership teams. So, we're seeing that recognition of that importance at all levels in the business, and now I really think that the high-performing ecosystems are perceived as the key to that rapid, successful digital transformation that Ted was just talking about. My final point here is that what I do think we're seeing is a whole load of maturity in the ecosystem around proactive collaboration together to solve client challenges that I don't think was there five or ten years ago. I think with all of those factors combined, it's not hard to see why successful ecosystems are so important.
May
That's an astounding number in terms of recognition of the value of ecosystems, yet it's highly variable across the business landscape as to how mature each organization's ecosystem work has become. Ted, in your experience, are 50% of businesses getting this right?
Schadler
Laura, to your point about advancing maturity and the variability of that maturity, I think between companies within a single company and across different sectors, there is a lot of variation and a lot of differences. The kinds of sectors that are very heavily digital dependent historically are more mature. They're more ready to take advantage of these technology ecosystems, in fact, to build core ecosystems that allow them to create that leverage I talked about a few minutes ago. Whereas industries that may have used technology for a portion of their business, and historically, that would have been industries like in manufacturing, for example, that technology was more the operating technology to build the actual stuff they were building, and less the information or data technologies that allowed them to operate efficiently. That was yesteryear in those companies, but they haven't always adopted the habit or the ability or the skill set or the leadership down at those technical and integration and implementation layers in order to move as quickly as they now need to. And so, when you look at a raw number, it will vary by sector and kind of depends on which metric you choose. Through Forrester's kind of traditional view here, we do a lot of research. We'd look at high performance in a number of areas but when we chart those against the readiness or the maturity, we see about half the market being advanced or moving quickly, and we see about half the market learning and now having to adapt very rapidly, there's always a portion of the market that will never move or will move very slowly in some sectors. Well, sometimes for very good reasons, right around compliance and regulation and protection, so I want to be clear there are a lot of reasons for that. But the one that we see that's most interesting to really examine right now is where you didn't use to think that it or information technology or technology ecosystems was core to your business and now you do. So, playing catch-up has been a big opportunity and requirement for more traditional companies.
May
As we talked about in the opening there, technology and becoming a technology-oriented organization is important, but that takes people, and that takes leadership and a strategy associated with that. What are the challenges that organizations are facing to evolve those aspects of what we're talking about, Ted?
Schadler
Well, I mean, clearly, you want to have enough savvy internally and skills internally, and that starts with leadership to know what the right thing to do is, so without that, you really are in trouble. There's a lot of external hiring to do that. When it comes to staffing and really implementing the strategy and then operating against that strategy, that's where you need a lot of people with skills, and sometimes those skills are much better done in partnership with others, and a lot of times that expertise to know what to do and how to do it lies outside the firm. So, working with third parties does become an important source of ideas, talent and implementation, and it's quite universal. I will say, I know we're having a conversation here as part of an EY podcast, but a lot of providers of various kinds are coming together to do this. It's really also in, for example, the hyper scalers or the large cloud software providers' interest to have that ability to advise and be part of that strategic formulation and that implementation as well. So, it is not an outsourcing relationship of any kind; it is a deeply embedded and integrated ability. You want to have enough internally, but you also want to take full advantage of trusted partners. That makes the partnerships incredibly important to ecosystem success.
May
Yeah, that collaboration is critical, and we see that in our business with our clients every day, so that's an outstanding point there. Laura, we've agreed that ecosystem choices are important and the strategy associated with that. How do you see CIOs making their strategic ecosystem choices today?
Atkinson
It's such a great topic this, because we spend quite a lot of time talking to our clients about how they should do this and the process they should go through, and I think that this kind of traditional notion of one to one partnering has evolved into this concept of ecosystems and ecosystem business models and it sounds quite a trivial kind of thing to just label it differently, but actually the label doesn't sound that different but the approach and the planning and the strategy required moving away from these kind of multiple silos of RFPs with your ecosystem to thinking about how you get all of these organizations working together for you is really difficult, and I also think something we hear more and more clients tell us today is that they want their ecosystem to get their act together amongst themselves, and they don't want to have to drive all of that by themselves, and I was hearing from one CTO of a really large retailer who was saying he's absolutely fed up of having 8, 9, 10 bilateral conversations to do the same one thing that his boss is asking him to do, and he's saying, "Why do I have to do all this thinking? Why do I have to do all this heavy lifting? You in the ecosystem, you need to talk amongst yourselves and plan and strategize amongst yourselves, and come to me when you've done that." And I think it's great that our clients are being a bit more demanding of the ecosystem like that and get them working harder for them, and I think on the flip side is that as a CIO, as well as placing good demand on your ecosystem, it's also really important to get this kind of balanced portfolio. So, how do you amplify your largest global relationships? That's really important. But how do you make sure you're nurturing the innovators? How do you make sure you're not missing out on that kind of next wave, those really niche, incredibly innovative providers? And I think getting that balance right is hard because you want to make sure you're getting access to as much diversity of thought into your ecosystem as possible.
Schadler
You raised some incredibly important points, and Brian, I hope you'll help us unpack them. I want to sort of just zero in on one of them, though, here, which is the need to have a set of core ecosystems to support the fundamental building blocks of your business. But that creates that modern ecosystem, that platform, if you like, to execute, and then being able to both spot the innovators and make sure you are building capacity to bring that in, and right now, there are lots of examples of that from emerging technology, but also, as you say, to balance the portfolio of the core and then the innovator around that, that portfolio ability is quite sophisticated, it takes a very different mindset that has to really start at the top with the CEO in the sense of empowerment, because if we leave it down to the project budgets, down to the departmental or business unit or in market budgets, we get chaos. We don't get that coherence that's needed. This is why maybe I'm speaking a little out of school here, but I believe it's critical in this transition to modern ecosystems that there is a designated executive CIO that is part of the CEO's team, that is able to be that representative of the strategy and the board to implement this ecosystem strategy, but also to make sure that there's consistency in managing the portfolio of providers and partners, to answer exactly the point you just brought up, Laura.
Atkinson
I completely agree. I think that where we've seen organizations execute successfully, they have had somebody on the board who is accountable for that one individual, as opposed to a disparate collection of individuals, and I think just to kind of build on that. I think the other thing that is absolutely crucial is that there are some properly agreed on score-carded metrics as to what good looks like in terms of the impact of that ecosystem on the business. I think a lot of organizations either don't have that, either by accident or a purpose or because it's hard to think about what those metrics should look like, but if you have them and you can measure the impact of your ecosystem, then you're far more likely to be successful in terms of it supporting the outcomes that you want to drive.
May
I think the interesting thing you've both touched on here is these are business challenges that are cross-functional. We're talking about solving bigger problems or bigger challenges for our clients in our commercial companies that are not trying to do something within function but cross functional, and that means taking this up a level in terms of the strategy, the oversight, the decision making, even to the top of the C suite, as you've described it, Ted, so I think that's interesting in that the only way to solve some of these larger business challenges is through an ecosystem model and orchestrating all of these potential point solutions into something that stitches end-to-end to provide real business value for our clients as well as our client's customers. I want our audience to understand that because if we're thinking about ecosystems of old or the one-to-point solution model, I think this is very different from what we're trying to solve today. One question then, Ted, is if corporate clients want to orchestrate these ecosystems on their own, or are they looking for third parties that you talked about before to help orchestrate elements of this prior to ever entering into their organization?
Schadler
So, the answer is yes, absolutely, people need help orchestrating those ecosystems because nobody has a layer of capacity that they build and maintain as a core function in their enterprise to do that. What they need though, is leverage in the model. So, they need to be able to have designated responsible parties internally that will roll up into a corporate strategy for getting the most out of ecosystems. That's where these goals and these objectives, metrics, Laura, that you mentioned, are so important for charting the responsibilities and what success looks like, and then down in those ecosystems, and there may be a handful of them, when you think about how companies operate, they absolutely are a place where we want to bring in expertise and sometimes a responsible contracting authority if you like, sometimes a provider will on their own paper make something like this happen, but in any case, to build the structures of agreement and roadmapping and very practical things around problem identification and challenge resolution and structuring the program in a way that how success and response evolves as we learn that takes a lot of professional work, whether that's internal or external. Increasingly we see the role of some strategic third-party suppliers as vital to that, to be deeply embedded in the organization in order to achieve the result. Bringing together, creating the structures around which these ecosystem partners come together, work together, make decisions and then operate effectively to achieve the result for the common client, for you, dear enterprise.
May
So, you touched on some of the strategic challenges that orchestrating an ecosystem can help organizations overcome. What are some more pragmatic or practical challenges that exist in businesses today that are keeping them from applying the theory down to creating true business value?
Schadler
Yeah, I mean, I think everybody can scratch a current job or role or experience and find a burning platform behind it where there was failure and perhaps an opportunity to do it differently. Without naming names, because that's not something I can do here in my role in the podcast, when you think about, for example, a large-scale transformation in a go-to-market channel. For example in the food and beverage industry, there are multiple channels, through large retail, through global distribution, but then also through, for example, mom-and-pop shops and smaller retail outlets, well, how do you overhaul your go-to-market, meaning your loading of the trucks and your staffing of the trucks and the trucks driving around and the responsibilities there and then proving that the value lies in that, the way the new ecosystem works and the business results and the training of the drivers and the whole nine yards. It's a very complex set of activities. And so very practically, we need a whole bunch of tech providers, we need a whole bunch of internal stakeholders across operations and manufacturing and field service and marketing and sales to come together in order to achieve that result. And so that level of complexity is very common in any large-scale change where there's a deep reliance on an ecosystem. Getting very specific, we will certainly want to encourage, as Forrester, all of our clients to be thinking about do they have the ability to do this internally, do they have the agreements across stakeholders, do they have the ability to command the resources in the third parties, technology and services, frankly, to come together on a schedule, to dynamically road mapping and working together, and to achieve that, that's a very complex activity where there is very often a lead orchestrator, where there is a third party professional service provider that can see the bigger picture, build the internal and external mechanisms of success and then drive the buggy, if you like, across the desert.
Atkinson
And just to build on that, I think you're absolutely right in terms of needing that orchestrator within the firm. A lot of our clients really, or a lot of businesses, they really do require that, because that whole ecosystem piece is strategically difficult, it's technically difficult, it's commercially difficult, it's operationally difficult, and it's a contractual nightmare to get right if you're going to get all of these multiple parties working together for you to achieve your outcome. Also our clients, even if they already have the right, in inverted commas, ecosystem in place, how do they know they've unlocked all the value from that that's there already? They might want to go and create some value, but there might also be a load of hidden value in there that they're just not exploiting at the moment, and that's where I think third parties or other perspectives can really help identify and unlock that for them, because it's really hard for clients to uncover that themselves, especially when organizationally, nine times out of ten, all of their different technology practices are sitting in very, very different parts of the business, and they don't often all get in the same room together to scratch their heads and think, oh, how are we going to move this forward together? We've held in the UK, we've convened ecosystems for clients together in the same room, and the clients loved it because they've gone, this is the first time all these people have been here together working for me as a single unit to solve my two or three really big problems, and that's not easy, actually, in fact, it's really difficult but the benefits to the client or to the organization of doing that are absolutely profound.
May
Let's shift gears a bit. You can't have a podcast today without talking about generative AI. It's buzzing in the industry, of course, but how can businesses transition from the hype curve to practical applications of AI in their ecosystems? What are we seeing?
Schadler
Obviously, it's a very hot topic at Forrester. We have about 40 analysts looking at the impact of generative AI, very tactically, practically and pragmatically, as well as what the trend lines are for the near term, say, the next five years, as well as over the longer term. The impact of this technology is ubiquitous. It shows up everywhere as an opportunity to optimize, create automation and higher productivity, refine, and then, over time, radically transform how companies operate, how they serve customers, and really where their revenue sources are found and generated. Putting that aside for a moment here to get quite practical, when it comes to ecosystems, it is very important to note that there's a massive battle going on right now amongst the tech providers as to who's going to own the language models and how they're going to be deployed. I've done quite a bit of work here because I'm actually a software insights analytics guy by nature, already to understand the trade-off, for example, of having a language model that's a general purpose one like the ones we hear about all the time, versus one that's very specialized to a specific domain, such as you might use in a business application for supply chain planning or for sales optimization, or for personalization. So there's a real battle as to who's going to own those models within the ecosystems, and then your job as a harnesser of the ecosystem value will be to recognize that in order to get the value from the generative AI, you're going to have to ask yourself, ask your orchestrator partner and ask the technology partners, where is this intelligence going to live? What does it cost me to access it, to build it, to operate it as it scales? Who controls those boundaries of security? Who controls the IP that's embedded in these models? It makes it a much more complicated and also much higher opportunity than we ever saw before, and that was not so clear beyond machine learning, which was critical just a year ago and it's becoming very, very clear today that we have to get partners in a room together with our full team, including our compliance and security and legal teams, to go, okay folks, we got to sort this out now because we're not going to roll something out that we can't then reel back in because it's unsafe or because it's not helping us economically achieve our objectives. So it got harder.
May
Yeah, in all of our survey work, we agree 100% with the opportunity that you've described to change business and to change the way organizations operate, but the safety, the answers to those big questions you talked about, Ted, are really holding corporations back from deploying this at scale to achieve those value propositions. Laura, what are you seeing?
Atkinson
I completely agree with everything you've both said. I think that is the challenge for the technology providers of Gen AI. How do we get our clients to stop playing with this stuff in pockets around the business and deploy at scale for the really big bang transformation work? And that is where the ecosystem is going to come in and be very helpful there, especially from, as you say, from an advisory perspective, guardrail perspective. From a risk, compliance and audit perspective, and all of those good things, because you'll have a whole load of tech vendors telling clients all the things they could do with the technology, and then you will have some people that need to be the guardians of it, talking about what they should do with the technology, and those are two really different conversations. I think you're right, Brian, this kind of, what's our worst-case scenario and how do we mitigate for that is holding some clients back, but I also think we've got clients being held back with actually, I just need to get my use cases in order, like where am I going to start, and how am I going to do this? And we've got some clients who are saying, okay, let's apply Gen AI to a whole department, my marketing department as an example, right? I am going to rip this part of my business apart. I'm going to put it back together again, possibly with less people, but with a ton of AI in it. Or we've got clients saying, actually, I'm going to apply AI to this one process and I'm going to apply it to a process in my business and then roll that out to another thousand processes. So, it kind of depends on the two sides of the capital T, and I think we're seeing clients approach this very differently. But I completely agree; I do think it gives a huge opportunity and actually a level of responsibility to the ecosystem to help our clients navigate this well because it's a ton of unchartered waters, isn't it? We don't know what the outcome and the impact will be 12 to 24 months from now for a lot of use cases and the application. So, it's a really exciting time because there's just opportunity everywhere.
Schadler
Laura, I think you nailed it here, and I will say, I have this conversation with my colleagues at Forrester and with our clients all the time is they want to paint the ground picture, and I want to start with the practical application. It's a little bit like the mobile days. I mean, this is going to be much bigger than mobile as an impact, but everybody had a little something going on, and then companies said, okay, we're going to have a strategy to engage customers and employees on these mobile devices. I think we need to bring those lessons that we learned in those days to this very practical prioritization, risk-managed, not risk-avoided. You can't avoid all risks, but risk-mitigated and then-managed approaches to deploying these applications start with those use cases; it starts with those applications. If there's no impact or if employees reject it, okay, let's learn that quick because there's no need to roll it out if no one's going to use it.
May
Ted, you focus on technology insights as a business; we haven't talked about AI and its role in changing software development. It will transform the landscape of technology developers. Give us some predictions in that space.
Schadler
Yeah, I actually recently interviewed 15 of the largest service providers of all kinds, consulting tech service providers and some agencies, to really ask this question very explicitly, and everybody pointed to the automation of repeatable work, which includes software development, the entire lifecycle. They pointed to things like document summarization and document creation in these repeatable areas, but also in other tech-centric roles, and so the point being here is that they are investing in bringing the capacity and the ability and the language models, the knowledge models, the domain models to do that, and already they're seeing 40, 50% lifts in productivity across the software development lifecycle. We project it could be much higher than that, and what that means practically is that if all you did for a job was code, you probably are going to have to get really clever really quickly to use the new tooling afforded by generative AI so you can double, triple, quadruple your output because that's how you will maintain your job as a software developer. If you look at the firm level, I'm just using the software as an example here, there is a strategic commitment you have to make to building this automation, making sure that it's safe, reliable in the code that it creates, and then looking at the implications for your staffing, your training, your hiring, your partnering in order to be able to achieve that. It is a radical potential shift in the way that industry operates that will percolate across every industry.
May
Right, and have significant impacts, to Laura's earlier point, on how these ecosystems have to come together. So, as we wrap up, to everyone, what is the key lesson and takeaway from today's conversation that you want the audience to focus on here?
Schadler
I'm going to make it really easy from my perspective; I like to be a simple thinker as much as I can be. I always adhere to that. But in this case, this is going to be about core competency, adjacent competency, non-core competency. As a firm you've got to be developing and building on your core competency. Your core competency probably doesn't lie in all the stuff your ecosystem partners are doing; you're to rely on them to do that. So, the core context goes back decades to this analysis. If it's critical to operating your business, you have to decide what you need to own and what you're going to partner to get, and that's where ecosystems play a critical role. That's one. Plus, Brian, you've made this clear, that ecosystem allows you to move quickly to develop your core competency further. That's number two. And number three, the ability to do that at scale requires this layer of operating capability that you will have internally and you will partner to get, to make sure that you get the full value out of those ecosystems. Those are dramatic changes to how leaders operate businesses today.
Atkinson
Brian for me, if I reflect on all this conversation, I absolutely believe that a successful ecosystem can deliver incredible outcomes for the business within which it operates. I passionately believe that, which is why I love the job that I do, but it's not easy and it's not a five minute fix either. I think building a really successful, high-performance ecosystem takes time, it takes trust, it takes transparency and regular open communication. It requires clients to share their goals and their ambition and their challenges in a very open and trusting way with the ecosystem partners that they have chosen, and I think that's the key kind of message that I would like to leave our audience with is you have to work at this and you have to build it, and the more trust you can engender with your ecosystem, the more honest you can be with each other about the goals and where you're trying to kind of strive to, the more successful you'll be.
May
I agree 100% with both of you, and as organizations focus on their core competencies, Ted, and they build trust and direction and strategy that Laura described. My takeaway is that it takes leadership, and that takes significant leadership direction for organizations to be able to move from their current operating approach and models, all the way down to how they procure services and technology, to taking a direction that's different, that allows you to collaborate, that allows you to focus on core competency and allow others to bring to the table those other elements to drive business outcomes and business value for our customers. You have to get your organization and all of its people all of its functions moving in a direction that's quite different than some of the business models that we've seen in the past, and that is not easy as we've talked about, but for those that do it well, they will reap the rewards of business value and customer experience, value that is being created today. So thank you for your thoughts, Ted, Laura, your invaluable insights. It's clear that as technology continues to evolve with GenAI and other things that we can't predict, understanding and adapting to ecosystems will be crucial for businesses to thrive now and in the future.
Atkinson
It's a great conversation, Brian. Thanks for including me in it.
Schadler
Brilliant discussion. Thank you so much.
May
Before we go, I will say the views of third parties set out in this podcast are not necessarily the views of the global EY organization nor its member firms. Moreover, they should be seen in the context of the time in which they were made. I'm Brian May. I hope you enjoyed today's discussion and hope you'll join us again soon for the next edition of the EY Think Ecosystem podcast.
