The Future Lies within Digital Ecosystems

In digital ecosystems, products and services change and merge, drawing on one another’s experiences to create a superior one. Rather than rely on rigid supply chains, the world is moving towards a model focused on demand

by Valerio Alessandroni

Industry 4.0 and digitization are often perceived merely as technological concepts aimed at increasing efficiency and reducing costs. Many companies still underestimate the huge impact on the market of innovative business models and their integration in superior digital ecosystems: in the future, the winners in digitization will not be the best products but the strongest ecosystems. For many years, companies used business models which were supply-oriented, designing their products and services to maximize profits and trying to respond by these means to customers’ demands. Sales occurred through an ecosystem made up of trade partners, keeping the entire value chain under control. With this in mind, companies therefore concentrated on optimizing the supply chain.

The limits of the traditional ecosystem
This type of ecosystem is by mow showing all its limitations, because it relies largely on the company’s resources and makes it difficult to innovate or expand a product or a service with new features. Generally speaking, product and service options are not very flexible and the client is subject to a rigid supply chain.
Other problems stemming from a traditional systems are order backlogs (orders on demand are not envisaged), inefficacy of production programs, which do not succeed in dealing immediately with any unforeseen events, and low flexibility, because the adjustment of a production program requires high costs or efforts.
Finally, these obsolete models are limited in their capability of keeping up a relationship with clients: car manufacturers rarely see a client after selling the vehicle, while loyalty cards in food stores help companies in creating interesting special offers for purchasers, but this relationship ends at the checkout.

New technological platforms and added value online services
The digital ecosystems bring about deep changes in the traditional model. Rather than a linear process between supplier and customer, as was the case in the past, companies may use new technological platforms and added value online services to create value even for the entire supply chain, providing companies with many ways of improving their service proposals. It also allows indirect interaction with clients in many different phases of their everyday life.
Digital ecosystems may be considered as a network on which different technologies rest. At the highest level they are made up of companies, persons, data, processes and things which are connected by the shared use of digital platforms to encourage cooperation and provide useful results to all persons concerned. The idea is to provide a collection of flexible services which may move and adapt rapidly to the company’s continuously evolving requirements.

Exchange of data and shared services thanks to digital platforms
New ecosystems are enabled by several entwined technologies, from cloud computing to social platforms, IoT and mobiles, and by all that the flexible use of resources, the creation of specialized and collaborative interaction canals, success to the most varied application and service platforms. For them to take off, new ICT skills are needed. Therefore, in digital ecosystems new products and services are created leveraging on digital platforms which allow to exchange data and share services. According to analysts, by 2020 85% of leading companies will have strong digital platforms or will be inserted in contexts where these can be shared. Digital ecosystems also provide companies with greater value in the form of client data. A food store may now access a large amount of additional information, gathered by others and made available in aggregated and anonymous form. It may also use these data in its analyses to obtain new information on he decisions taken by clients.

Will new services replace entire product groups?
Thanks to digital ecosystems, rather than rely on rigid supply chains which do not necessarily satisfy the demands of clients, the world is moving towards a model centered on demand. Clients served by these digital ecosystems want their products and services immediately, in the correct forms and quantities. Companies which do not keep up to date will face serious problems.
This shift could destroy entire product groups, replacing them with new services. Over the next few years, mobility as a service will begin to replace the sales of vehicles because it will allow clients to book the car they need by means of a digital service on their smartphones.
Rather than pay tens of thousands of euros for a car which remains stationary for 90% of the time, they will be able to order any car whenever they want. To face this change, the automotive industry will be forced to shift to a model centered on demand rather than a supply oriented model.

The future of organizations
To conclude, on one side we have traditional organizations characterized by rigid IT systems, built to comply with the supply chains or their applications, which use hierarchical business and management processes with limited information exchange.
On the other hand digital organizations use scalable IT systems based on the cloud, mobile devices, big data and collaboration, they use end-to-end processes based on collaboration and on real-time KPI, they favour social interaction with employees, clients and partners and use information in every possible way. This is a radical change. Will schools and universities manage to adapt to these new requirements? The answer is affirmative but with some reservations. There is a widespread misunderstanding: are we sure that digitization means Industry 4.0? As we just saw, digitization (which is evident, for instance, in digital ecosystems) is the mere replacement of conventional technologies or methods with ICT-based technologies. Or, it is the introduction of ICT technologies to carry out new types of operations. For instance, if a company memorizes its documents in paper archives, with digitization it can file and manage the documents themselves electronically. Being described by files, the documents may be exchanged easily by the company’s different departments or by the company and its suppliers and clients, the public administration and so forth.

A new 4.0 way of thinking
New technologies allow to digitize every part of the production cycle and every part of the company and its functions. For this purpose, the market offers new industrial controllers, new fieldbus technologies, new software and so on, all of which may be integrated with one another. This on the other hand was already possible twenty years ago, when the term Industry 4.0 had not been invented yet. However, if these technologies were sufficient to turn a company into an “Industry 4.0” concern, all companies could reach this aim and outrun competition. It would be sufficient to purchase some new technology such as the cloud, artificial intelligence, Industrial Ethernet and so on.
Unfortunately this is not the case. If a company is not efficient or if it uses an obsolete business model, new technologies are no use. Industry 4.0 is much more. It is a matter of innovation new business models, a new approach to work and workers and many other aspects. A new way of thinking which may be understood on the field more than in a classroom.