Male and female hikers climbing up a cliff

The ecosystem era is here. Are you ready?

Build it yourself and fall behind. Build it with others and go further, faster together. 


In brief

  • Ecosystems are collaborative business models that can outperform competitive ones.
  • Asia-Pacific business leaders are adapting to a complex and dynamic risk landscape, and they understand that more value can be uncovered in partnerships than in isolation.
  • Leveraging ecosystem-driven technology solutions is already helping companies in the region to embrace AI, adopt cloud computing and elevate risk management.

Almost three quarters (71%) of CEOs, according to the latest EY CEO Outlook Pulse Survey, plan to either accelerate or maintain their rate of digital transformation over the next 12 months.

This digital transformation is occurring as business leaders also grapple with an increasingly complex interplay of geopolitical conflict, cyberthreats, macroeconomic and market volatility, regulatory risk and ESG imperatives.

The rapid pace of change and the relentless demand for innovation make it harder and harder for businesses to keep up. It is impossible to have all the skills, creativity and knowledge within any one organization.

Asia-Pacific business leaders know this, which is why they are embracing the ecosystem opportunity. 

EY has identified seven distinct types of ecosystem business models, each with its own go-to-market, risk sharing and commercial characteristics. These range from marketplaces, where all brands can be present, to the “scaling” ecosystems favored by airlines, where individual players offer extended benefits to their customers through partnering.

 

We’ve also found that not all ecosystems are equal. High-performing ecosystems deliver, on average, 1.5 times the cost reduction of low-performing ecosystems. They also generate 2.1 times the incremental revenue growth.

 

EY teams work with an ecosystem of alliance partners, including Microsoft, SAP, and ServiceNow, to provide the right technology to help our clients create long-term value and transform at speed and scale.

 

Let’s look at three different ways that ecosystems add value.

 

Generative AI opens doors to business transformation

More than a third (37%) of Asia-Pacific CEOs are already actively investing in AI-driven innovation, and more than half (52%) have plans to do so within the next 12 months, according to the EY CEO Outlook Pulse Survey.

Asia-Pacific CEOs see AI as a “game changer” that drives business efficiencies and innovation, and 68% believe that job losses from AI will be counterbalanced with new roles and career opportunities.

EY has recently harnessed Microsoft Cloud and Azure OpenAI technologies to develop the EY Intelligent Payroll Chatbot. This tool analyzes individual payslips in the context of regulatory compliance and company policies to answer granular questions and generate personalized explanations for employees. Initial results from the chatbot pilot suggest a 93% first-time answer ratio.

 

Another powerful application of AI has laid the foundations for a higher education ecosystem. After the overnight pivot to online learning during the pandemic, many universities realized they were missing the digital spine needed to deliver a consistent experience to students. The EY Learning Lab tool uses generative AI to sift through existing content – from videos to blogs to quizzes to lecture notes – making corrections, filling in learning gaps, and creating new resources. The application is built on top of Microsoft technology and provides a rich, tailored, and consistent student experience.

 

Seven in 10 Asia-Pacific CEOs say AI can be a force for good – and EY agrees, which is why we’ve launched a new campaign showcasing the diversity of EY people, skills, technology, AI and, importantly, ecosystems.

Cloud computing shows why the sky’s the limit

EY teams are also leveraging ecosystems to help our clients build strong business cases to take advantage of cloud technology.

Historically, businesses big and small stored their data and software on their own hard drives, servers, and systems. However, the surge in cloud computing is enabling these companies to migrate their applications, infrastructure, and data to cut costs, enhance security, boost resilience, innovate, and scale up their operations.

Take just one example. On 31 December 2027, SAP will stop providing mainstream maintenance for its legacy Business Suite 7 product.1 This may be several years away, but it means that tens of thousands of corporations must now move away from monolithic, on-premises legacy systems to cloud-based digital platforms. What they’ll get is the flexibility of frequent releases and rapid access to improved features and functions.

EY and SAP teams have built an ecosystem to help our clients transform with certainty at speed and scale by moving to SAPs S/4HANA cloud solutions. Leveraging SAP’s Business Technology Platform (BTP) integration and extension suite delivers the capabilities EY clients need to differentiate and positions them to innovate faster and disrupt other businesses.

What will this look like?

One obvious area is sustainability, where government regulation, consumer expectations and corporate leadership are evolving at lightspeed. We know around four in 10 (41%) Asia-Pacific CEOs have placed sustainability at the forefront of their capital allocation strategies. But we also know ESG disclosures by Asia-Pacific companies are falling short of the information investors need to make informed decisions.

Meeting investor expectations and regulatory standards will require new technical capabilities to disclose greenhouse gas information. While this is a rapidly evolving space, SAP has announced that its investments in green ledger and new transactional carbon accounting capabilities will only be available to cloud customers.

This is just one example of why businesses will remain frozen in time unless they make the choice to move to the cloud. Yes, they can make slow, costly bespoke adjustments to their on-premises systems. But they can’t take advantage of the millions of dollars that cloud providers invest into their platform each year, nor tap into the talents of tens of thousands of developers responding to real-world business challenges across every sector of the global economy. Put this way, the power of ecosystems is crystal clear.

Responding to risks with clarity and confidence

Companies today navigate a complex landscape with risks at every turn.

When we asked CEOs across Asia-Pacific what risks would influence their business’ performance over the next 12 months, five factors stood out for having either a “very significant” or “significant” impact: geopolitical conflict (62% of CEOs); digital disruption and cyberthreats (57%); macroeconomic and market volatility (56%); regulatory risks (55%); and ESG imperatives (54%).

It is no surprise, then, that six in 10 respondents to the latest EY Global Board Risk Survey told us their current risk management frameworks were insufficient to manage emerging and evolving risks.

 

Despite the complexity of the risk landscape, risk is often managed across individual business lines, with poor visibility of the complete picture and a lack of skilled resources leading to imperfect decision-making.

 

An ecosystem approach can help companies examine risk from every angle. EY teams work with ServiceNow’s cloud-based software platform to apply machine learning, leverage data and automate workflows to help businesses scale.

 

We are seeing companies with mostly manual processes move from pen and paper to a single source of truth. Spreadsheets and siloes are replaced with a unified platform that continuously monitors risks and responds in real-time. And because the solution is modular, those at a less mature stage can start with a small deployment.

 

One EY client moved from a very manual operation reliant on spreadsheets and multi-systems to ServiceNow’s single integrated third-party risk management platform. The firm was able to expand its coverage of risk beyond the basics to include cybersecurity, privacy, modern slavery, workplace health and safety, operations, and resilience. In doing so, this firm increased its third-party risk assessments by 300%.

 

As the risk landscape expands, the response should not be to hire more risk and compliance people to undertake manual work. We have the tools – and, indeed, the ecosystems – to do the heavy lifting while human talent focuses on higher order tasks: strategizing and scenario planning, engaging with stakeholders, and providing the ethical considerations and contextual understanding to make decisions with clarity and confidence.

How do you choose which ecosystem is right for you?

  1. Start with your sense of purpose: If your goal is to deliver a specific outcome – for example, to reduce backend costs – then your ecosystem should be built around the parties that can deliver efficiency at the lowest risk to avoid future debt and regret. But if you are looking to transform your front office function, a potentially entirely different ecosystem will be in play.
  2. Avoid the supplier mentality: We see it all the time, where tech contracts are sent out to tender, and business leaders confuse a supplier with an ecosystem. But using a supplier as a commodity to achieve an outcome is not an ecosystem. Creating new value together is the name of the game.
  3. Keep up with the market opportunity: Don’t set and forget your strategy. The market, and therefore your opportunity, is always evolving. It’s important to consider changing needs and use your ecosystem to maximize your flexibility in response.
  4. Invest in your technology talent: All companies are scrambling to source the right tech skills, but when you enter an ecosystem, you must ensure your IT team is up to the task. This means adopting a multi-faceted talent attraction and retention strategy to ensure you can connect the dots between your aspirations and actual ecosystem outcomes.
  5. Act fast: The pace of change is accelerating so rapidly that time is a scarce commodity. Work out what you are trying to achieve and then act on it – and fast. You don’t have a moment to wait.

Summary

As the ecosystem era evolves, there is a clear opportunity for business leaders to refresh their talent strategy and appoint a chief ecosystem officer — a person at the highest level in the organization who can champion ecosystems as an enterprise-wide growth and value-creation strategy.

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