If you are an ecosystem orchestrator does that mean you are on the hook for everything but have control of nothing?

What has the automotive industry got in common with financial services? Look at the evolution of the manufacturing process. Not the assembly line, although Ford’s introduction of the moving assembly line in 1913 was transformative. Look instead at the evolution of production. Consider the way manufacturers used to produce nearly every component of their vehicles in-house – from engines and transmissions to fuel tanks and interior trims. Today, circa 85% of the parts are sourced from external suppliers and the car is assembled by the car company. Assembled rather than manufactured from the raw materials up. As cars become ever more technology-driven rather than engineering-driven this shift to assembling components made by others will likely accelerate.

What’s has this got to do with banking? Today’s banks create financial products and seek to embed them in customers’ lives – in essence they seek to assemble experiences (from a financial services perspective). To do this they combine components from a range of ‘suppliers’ and frequently need to deliver their products via channels and contexts that are largely outside their control. Who does the customer blame when the bank’s debit card doesn’t work at the retailer’s point of sale device? Mostly the bank. Ecosystems are perhaps a better way to describe this environment. We explored the concept of ecosystems in more detail in our article "If ecosystems in banking are the answer, what is the question?".

Ecosystems – more trouble than they are worth?

Clearly ecosystems can cause complications, but they offer significant benefits, including enhanced customer experiences, streamlined processes, and cost efficiencies. They enable banks to leverage the strengths of various partners to deliver a broader range of more innovative products and superior services. By integrating diverse capabilities, banks can provide a more holistic and seamless experience to their customers, which is increasingly important in today's competitive market.

Challenges of orchestration

While ecosystems are beneficial, orchestrating them effectively is challenging. The orchestrator must ensure seamless integration and coordination among diverse partners, each with their own systems and processes. This requires a high level of collaboration and communication to ensure that all parts of the ecosystem work together harmoniously. To make matters more complex banks will engage with multiple ecosystems, some of which they create, while others are established at local, regional, or national levels, or mandated by regulators. In the future these ecosystems will be fluid, constantly forming, changing, and evolving. Participants may be replaced rapidly, requiring banks to be exceptionally nimble and agile. Technology will play a crucial role in enabling this agility, allowing banks to quickly adapt to changes and maintain seamless operations.

Choosing the right technology platforms and partners is crucial in this context. Banks need to invest in flexible, scalable, and secure technology solutions that can integrate seamlessly with various ecosystem partners. The right technology can facilitate better data sharing, enhance collaboration, and improve overall efficiency. Additionally, selecting partners who share the same vision and commitment to innovation can significantly impact the success of the ecosystem.

Blurring lines between partners and competitors

In some cases, banks will cooperate with ecosystem partners, while in others, they may be competing with them – co-opetition? The line between partner and competitor will often be blurry and changeable, adding another layer of complexity to ecosystem management. This dynamic environment requires banks to be strategic in their partnerships, balancing collaboration and competition to maximize value.

The accountability dilemma

One of the main concerns for COOs and other customer focused teams is the accountability that comes with being the face of the ecosystem. Customers expect the orchestrator to resolve issues, even when the problems originate from partner components. This lack of direct control can lead to significant operational risks. For example, if a third-party service fails, customers will still hold the bank responsible for the disruption, even though the bank may have limited ability to directly address the issue.

Customer centricity: The ultimate advantage

Banks and other financial institutions have spent decades establishing a trusted-party relationship with their customers, who do, after all, entrust banks with their finances. They can use this connection, this customer centricity, as a source of competitive advantage. Indeed, many would say that delivering customer delight is the only true source of long-term advantage. As Jeff Bezos, CEO of Amazon, famously said, "We see our customers as invited guests to a party, and we are the hosts. It's our job every day to make every important aspect of the customer experience a little bit better". This principle is crucial for banks aiming to retain and attract customers in a competitive market. If banks cannot give their customers what they want, they will go to someone who can. Conversely, they are extremely well positioned, they deep brand recognition, excellent mindshare and vast data sources provide an excellent launchpad for the customer centricity enabled by ecosystems.

Mitigating risks

Ecosystems make risk mitigation even more important than ever. Several strategies can be employed:

• Robust governance framework: Establishing clear roles, responsibilities, and accountability mechanisms for all ecosystem partners. This ensures that everyone knows their part and can be held accountable for their performance.
• Strong partnerships: Building strong, trust-based relationships with partners to ensure alignment and cooperation. Trust is crucial for effective collaboration and problem-solving.
• Proactive risk management: Implementing proactive risk management practices to identify and address potential issues before they impact customers. This includes regular monitoring and contingency planning.
• Transparent communication: Maintaining transparent communication with customers about the ecosystem structure and the role of each partner. This helps manage customer expectations and builds trust.
• Strategic intent: Maintaining a clear-eyed focus on the core competencies of the bank, knowing which areas of opportunity the bank should expand into and which it should stay away from are crucial to success.

Seizing opportunities

Despite the challenges, the opportunities that ecosystems present are significant. By effectively managing these ecosystems, COOs can drive innovation, improve service delivery, and achieve operational excellence. Ecosystems enable banks to offer a broader range of services, tap into new markets, and respond more quickly to changing customer needs.

Furthermore, ecosystems can foster a culture of continuous improvement and agility within the bank. By collaborating with diverse partners, banks can stay ahead of industry trends, adopt best practices, and leverage cutting-edge technologies. This proactive approach not only enhances the bank's competitive edge but also ensures that it remains resilient and adaptable in a rapidly evolving market. Choosing the right technology platforms that support these goals is essential. Platforms that offer flexibility, scalability, and robust security features will enable banks to integrate new partners quickly and efficiently, ensuring that they can capitalize on emerging opportunities without compromising on service quality.

Conclusion

Just as the automotive industry has evolved from manufacturing every component in-house to assembling vehicles from a network of specialized suppliers, banks must adapt to the complexities of ecosystems. Regardless of who creates the ecosystem, banks should consider themselves in the role of ecosystem orchestrator. While being an orchestrator comes with its set of challenges, with the right strategies and frameworks in place, senior operations leaders can navigate these complexities to deliver exceptional value to customers and drive the future of banking. By focusing on customer centricity, leveraging technology, and building strong partnerships, banks can turn the challenges of ecosystem management into opportunities for growth and innovation. Ultimately, the key to success lies in embracing the dynamic nature of ecosystems and continuously striving to exceed customer expectations.