EY report: Digital ecosystem participation is new game-changer

  • Collaborative consumption, sharing economy underpin digital ecosystems
  • Digital ecosystem play driving up collaboration, partnerships and M&As

EY report: Digital ecosystem participation is new game-changer

A new EY study, Building Successful Digital Ecosystems in Southeast Asia, highlights that with digital transformation being a business imperative, participating in digital ecosystems is a game-changer that can create long-term value and competitive advantage.

The report reveals that collaborative consumption and the sharing economy have been on the rise in Southeast Asia, driven by the region’s average internet penetration of 63% and a growing tech-savvy middle-class population that is rapidly moving up the socio-economic ladder. This is paving the way for sharing models across different sectors such as mobility, travel and hospitality and real estate. 

EY report: Digital ecosystem participation is new game-changerAccording to Liew Nam Soon (pic, left), EY Asean Regional Managing Partner: “Consumer-focused digital ecosystems are forming across Southeast Asia to deliver value at unprecedented speed and scale, in response to industry digital disruptions and accelerated by the pandemic. There is rapid growth of startups and digital natives. Some of the leading digital natives in Southeast Asia are transforming into super digital platforms, by delivering interconnected services through an integrated experience – from ride-hailing, food delivery, grocery, logistics, through health, lifestyle and financial services. Today’s consumers expect speed, responsiveness and access with a hyper-personalized experience. Digital ecosystems help companies create value through revenue growth, gain new market access, decrease customer acquisition costs, and ultimately strengthen and retain customer relationships.”

As a result, the super apps are attracting the attention of investors, having witnessed investments worth US$43 billion between 2016 and 2019. Further, the growing digital ecosystems in Southeast Asia has the potential to generate revenue opportunities of US$23 billion by 2025, from about US$4 billion in 2019 (“Rise of the ASEAN Super Apps”, Morgan Stanley, June 2020).


Digital ecosystem play driving up collaboration, partnerships and M&As

Recognizing the opportunities in the digital ecosystem, traditional market players are leveraging partnerships and strategic alliances to share resources, data and capabilities to create digital ecosystems to compete with digital natives.

Between 2016 and 2020, Southeast Asia witnessed technology transactions worth a total of US$408.5 billion. Mobile applications, cloud computing, artificial intelligence, big data and analytics, blockchain and Internet of Things (IoT) were the technology areas that saw the most investments.

Joongshik Wang (pic, right), EY-Parthenon Asean Leader says: “Being part of a digital ecosystem allows businesses to leverage the network effect to create a competitive advantage. However, to do so, companies must get their digital transformation strategy andEY report: Digital ecosystem participation is new game-changer capabilities right. The question is whether they should design or join a digital ecosystem, and there are three strategic choices that businesses can undertake: buy, build or partner.

“While the established, traditional firms – given their large user base, reach and capital assets – are well-placed to orchestrate a digital ecosystem, they are often outpaced by the emerging digital natives that are ahead in digital adoption. Most traditional firms have been focusing on their core business and may be hesitant to build a platform-based business due to legacy systems and corporate culture. Thus, traditional firms are turning to collaborating with e-commerce and last-mile platforms to offer digitalized, streamlined and omnichannel experiences to their customers.”


Three key considerations in navigating digital ecosystems

The EY report highlights the areas that organizations should consider when navigating digital ecosystems:

  • Evaluate the organization’s digital ecosystem (DE) maturity: The three maturity levels are: DE adaptor, where the transformation is at a modular level and limited to a particular business unit or geographic market; DE accelerator, where the organization scales the transformation to a company and industry level; and DE attacker, where the organization drives large-scale transformation across multiple industries through cross-sector collaborations and leverage technology capabilities across different parts of the value chain.
  • Define the business model: Based on different parameters, such as the nature of the ecosystem (e.g., open or closed), the scale of industry partnerships and the revenue model, the organization defines the business model it will undertake as a DE participant.
  • Implement the ecosystem: Once an organization has identified a DE opportunity, they need to follow a step-wise process to design an ecosystem. This includes identifying the most suitable role to undertake (i.e., be a DE orchestrator, partner or enabler); the nature of the ecosystem, product market fit and monetization model; and the key enablers of the DE before defining the evolution roadmap. DE orchestrators must also consider how they will mobilize the DE – whether through building, buying (M&A or investment) or partnering (joint venture, alliance or strategic contract).  

Liew concludes: “Digital interactions in both B2B and B2C activities are expected to stay and gain ground even after the pandemic, and enterprises in Southeast Asia will be seeking to transform their business digitally to drive profitable growth as well as work with partners to provide solutions leveraging technology to address value gaps. A partnership model can provide significant momentum for their digital transformation journeys. Importantly, companies must be clear of their strategic objectives, whether it is to achieve core business growth, enter a new market segment through new or digital offerings, to optimize operations or a combination. This will help them chart their roles in a digital ecosystem effectively.”

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