Stephen Gold

David Beckoff

Vice President, Product Development & Insights, Manufacturers Alliance

“Ecosystem” has been trending in business strategy and operations since at least the 1990s. The term has gained recent currency with digitalization and new applications to explain participation in complex global webs for manufacturing’s technology advancements, value chains, customers, and even talent.

Unlike biological ecosystems — which too often get mentioned for their destruction or imbalance only, such as climate change effects — business ecosystems are regularly invoked to describe a “1+1 = 3” dynamic in value creation. Although some businesses acting as hubs at the center of networks can exploit customers, suppliers, and producers, most ecosystem participation is about building connections for mutual benefits in innovation and growth.

Last year, the Manufacturers Alliance for Productivity and Innovation (MAPI) embarked on collaborative research with Deloitte to define and quantify the value of the ecosystem in digital manufacturing. What does it mean to apply an “ecosystem approach” in practice and what is its significance?

Smart factories

A new era of digitally enabled manufacturing capabilities stands to unlock industry productivity gains. Still, MAPI’s prior research in 2019 found that only half of executives surveyed reported adopting even one specific “smart factory” initiative, or use case for digital manufacturing, in their footprint. (Smart initiatives include digital innovations for quality sensing and detecting, factory asset intelligence, energy management, and more.) One hallmark of those ahead of the adoption curve was their higher level of collaboration inside and outside the company. In short, an ecosystem approach.

Despite the acceleration of all things digital during the pandemic, the MAPI and Deloitte study from mid-2020 confirmed a gulf in digital maturity from over 850 executives at large global manufacturing companies. Executives reported widespread investment in all major smart factory initiatives evaluated, but only a small fraction reported fully operationalizing them in the production environment.

Why the execution gap? We compared companies that first prioritized in-house development efforts, reaching out to partners as needed, to those that turned first to partners’ capabilities and observed two main findings:

Companies that led with an external orientation by tapping partner capabilities went further and faster in accelerating digital transformation. They were twice as likely to be fully “operational” in applying use cases than counterparts more internally focused.
Leading respondents who described their companies as formalizing an ecosystem approach outperformed peers on key metrics: doubling performance levels in areas such as speed to market for new products, capacity for innovation, digital maturity, and operating efficiency.

Catching on

We observe a steep maturity curve in ecosystem adoption: 73 percent of manufacturers acknowledge external partners as their top contributors to digital manufacturing progress, but only 16 percent report building a full-fledged ecosystem, that is, more than strategic partnership alone.

Far from tapping a simple collection of their partners and vendors, companies with an ecosystem approach are deliberate in bringing entities together in meaningful, measurable ways to solve shared challenges and meet shared objectives. They unlock a cumulative “network effect” and display some distinguishing features: building real-time connectivity, facilitating holistic decision-making, accelerating time to value as with strategic sourcing, creating “always-on” agility to adjust to changing conditions, and leveraging turnkey solutions.

Among the diverse players in the expansive production ecosystem, the top five most valued contributors for digital manufacturing were:

IT software vendors
“Smart manufacturing” technology providers
Operation technology vendors
Physical automation/robotics vendors
Professional services firms

Ecosystems raise significant management challenges for advancing digitalization, not the least of which is complexity in coordination, data/IP protection and cybersecurity, and demand for workforce skills and capabilities. But leading companies are increasingly solving them to accelerate digital manufacturing.

As the industry soon embarks on next-generation connectivity solutions on the factory floor with technologies such as 5G, other MAPI research reveals high expectations for vibrant ecosystems. IT executives say they will rely a fair amount, if not a great deal, on not only in-house teams but the force multiplier from telecoms, technology vendors, IT/OT vendors, and professional services, among others. The ecosystem approach will drive sustainable manufacturing innovation and productivity for years to come.