How digital business

ecosystems drive
efficiency and
innovation in a new era
Table of Contents

Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Developing business partnerships

to power innovation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

The technology imperative . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Building better digital ecosystems . . . . . . . . . . . . . . . . . . . . 11

How digital business ecosystems pay off. . . . . . . . . . . . . . 14

Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

2 | How digital business ecosystems drive efficiency and innovation in a new era
Introduction
Productivity, efficiency, and cost control—always core goals for
CIOs—have become even more critical as organizations navigate the
current economic uncertainty.

CIOs face unprecedented pressure to meet competing needs,

operating under both time and funding constraints. They must lead
the IT function to develop and improve products and services even as
budgets tighten; shift operations to respond to market demands in
real time while minimizing risk; increase industry partnerships
without giving competitors an edge; and maintain business as usual
despite rapidly evolving threats. How well they rise to this challenge
will matter to more than just the next earnings statement—it could
determine the company’s future in the new era.

Digital business ecosystems will play a major role in helping

executives balance these needs while also positioning organizations Digital business
for future growth. Oxford Economics worked with Google Cloud to
survey 1,000 CIOs around the world and in seven industries about the
ecosystems
ways they partner with other organizations to meet business goals— encompass working
and about the technologies they rely on to make those partnerships
relationships
productive and valuable.
facilitated by
Our survey data was collected in January and February 2020, largely modern, cloud-first
before the uncertainty that has followed. Even then, the CIOs in our
survey saw their complex, deepening networks of partners and
digital technologies,
suppliers as critical to everything from efficiency to customer such as APIs.
satisfaction and growth. Now normal operations have been disrupted
with astonishing speed, and weathering the storm will require
organizations to effectively control, secure, and leverage their
partnerships. The results of this research illuminate the tactics CIOs
must use to survive and thrive in the new era.

3 | How digital business ecosystems drive efficiency and innovation in a new era
 What is a digital business ecosystem?

Digital business ecosystems encompass working individuals and organizations (such as suppliers,
relationships facilitated by modern, cloud-first digital third-party providers, customers, developers,
technologies. Application programming interfaces regulators, or even competitors). These partnerships
(APIs)—the mechanisms that let software talk to might include retailers allowing developers to build
other software and enable developers to modularly apps and services that support an omnichannel
recompose data and functionality for new uses—are experience, healthcare organizations sharing
at the center of this process. research, or logistics companies making location
and shipping applications available to others across
• APIs are the means of exchanging data, the supply chain.
functionality, and value across the digital
ecosystem in the modern economy. Such networks recall the complex interrelationships
of natural ecosystems: they are meant to be
• API management platforms are used to control, adaptive, sustainable, and mutually beneficial to all
secure, analyze, and leverage these API parties involved. However, while species cannot
exchanges to achieve growth, accelerate consciously evolve in natural ecosystems,
innovation, and develop new business models. participants in digital business ecosystems have
significant agency to manage, compose, and refine
Digital business ecosystems can be made up entirely their interactions with other parties, allowing them to
of internal parties (such as various functions within respond to changing external conditions and support
an organization) or can expand to include external business value.

The survey results tell a clear story: business relationships are growing stronger,
more diverse, and increasingly widespread as companies work across internal,
partner, industry, and public-sector ecosystems. These business relationships are
aimed at both increasing the efficiency of daily operations and pursuing more
strategic goals—everything from automating processes and improving employee
productivity to providing market intelligence, each of which in turn can support
business growth by distributing innovation efforts across a broader network. Yet
our research shows that even as business relationships deepen and become more
integrated, many CIOs are not yet participating in true digital business ecosystems,
which use advanced technologies and processes to share and analyze data,
collaborate with developers, measure performance, and support growth.

4 | How digital business ecosystems drive efficiency and innovation in a new era
One group of survey respondents—we call them Digital Business
Ecosystem Leaders—is ahead of their peers in creating strong,
innovation-focused business partnerships. These organizations are
defined by their connected, collaborative relationships with key
business partners, and their strategies are paying off. They are more
likely to report a flexible and adaptable supply chain (70% of
Leaders are highly effective in this area; only 40% of others rate Visit the research hub to
themselves as highly effective), a strong understanding of market keep learning about how
conditions (39% vs. 20%), and stronger customer relationships (50% developing digital business
vs. 40%)—traits that should support both the ability to respond to ecosystems can drive
operational disruptions in real time and long-term cost efficiency innovation and efficiency in
and growth. a new era, and take a
deeper dive into country
The fast-evolving business landscape presents meaningful and even and industry insights.
existential challenges to organizations around the world and across
industries. As businesses look for ways to thrive in the new normal,
CIOs need to refocus partnerships to ensure business continuity,
meet changing customer needs in real time, maximize efficiency,
remain competitive, and address big-picture problems. This report
considers some ways CIOs are fostering business relationships that
support innovation and resilience, today and in the years ahead.

5 | How digital business ecosystems drive efficiency and innovation in a new era
Developing business partnerships
to power innovation
Successful digital business ecosystems support innovation at scale not just by facilitating rapid
data-sharing, but by allowing external partners and customers to develop applications and ideas
on an enterprise’s behalf. Think of manufacturers shifting operations to meet current demands of
the healthcare industry, or individual developers building apps and data trackers that allow
organizations to adjust their operational strategies in real time. For the one-fifth of survey
respondents using APIs at scale, this may be an easier feat: accessing a broader network of
partners and developers—each with their own technology infrastructure and resources to
leverage—tends to increase the speed, usefulness, and diversity of innovation projects.

Ultimately, the CIOs in our survey expect this innovation to drive more than just the creation of
new products and services. It is also meant to support core business needs like efficiency,
resilience, and business continuity. In fact, CIOs in our survey are most likely to cite increasing
operational efficiency as their primary goal for innovation (40%), well ahead of other ambitions,
like becoming an industry leader (20%), improving employee engagement (16%), keeping up
with competitors (14%), and solving big-picture issues (10%). (This may be due in part to the
fact that there is an order of operations to digital transformation, with efficiency and
productivity often the primary goals.)

Fig. 1: Efficiency is a core goal of innovation Solve big-picture issues

Q: Which of the following best defines your (e.g., climate change, human rights,
organization’s core goal for digital innovation? health and safety)
Respondents could select one option. 10%
Base = 1,000 Keep up with competitors
14%
Increase operational
efficiency
40%

16%
Improve employee
engagement and productivity
20%

Be an industry leader

6 | How digital business ecosystems drive efficiency and innovation in a new era
Partnerships, already critical to driving efficiency, may become even Fig. 2: Business relationships
more important as organizations think creatively to navigate an are on the rise
environment marked by supply chain, workforce, and other Q: How has the number of your
operational disruptions. Roughly half of CIOs report an uptick in the organization’s close working
number of their close working relationships over the past three years, relationships changed over the
and nearly two-thirds (63%) expect the number to increase over the past three years? How do you
next three years; relationships with technology providers, partners expect this number to change
and suppliers, customers, developers, and industry peers all have over the next three years?
seen substantial growth. Base = 1,000

The nature of business relationships is changing, too. They are

becoming deeper as transactional interactions mature into ongoing,
strategic partnerships designed to be mutually beneficial—which 51%
should ultimately support the development of true digital business report an increase in
ecosystems. Ticketmaster Entertainment Inc., the California-based the number of close
ticket sales and distribution giant, provides its wide range of media, working relationships
entertainment, and retail partners with access to the company’s over the past
three years
platform, ultimately generating more demand and boosting sales.1
Similarly, manufacturers can work with logistics providers or retailers
to track shipments in real time, allowing them to mitigate potential
disruptions and quickly respond to customer demands; health
insurers can use medical data from multiple sources to better
understand patient behaviors and risks.

CIOs in our sample expect business relationships to become even

63%
expect an increase
closer over the coming years. While 19% of CIOs say their business in the number of close
partnerships three years ago were only transactional (meaning working relationships
they did not share information or collaborate beyond what was over the next
required), just 9% say the seame is true today—and almost none three years
expect their business relationships to remain at this surface level
in three years’ time.

1 https://cloud.google.com/blog/products/api-management/understanding-digital-transformation-two-key-principles

7 | How digital business ecosystems drive efficiency and innovation in a new era
 Stronger partnerships lead to enhanced innovation, which may in turn be critical to efficiency
and resilience. Over half (52%) of CIOs who describe their relationships as integrated (the
highest state on our scale) today say their business relationships greatly enhance innovation,
while CIOs with more basic relationships are much less likely to see this boost to innovation
(see Fig. 3). And those integrated relationships should, if functioning correctly, be mutually
beneficial for all involved.

Fig. 3: Integrated relationships support innovation

Q: In general, to what extent do your external business relationships enhance digital innovation at your organization?
"To a great extent" responses (shown by the reported nature of relationships with key business partners)
Base = 1,000

Transactional: Conduct business together, but do

not share information or collaborate beyond what
is required by the terms of each specific contract
13%
Depth of relationships with
key business partners

Cooperative: Participate in limited information-

sharing and work together as needed for
specific projects
10%
Collaborative: Regularly share data to create
products and services and share substantial 21%
resources and information as needed

Integrated: Continual, close collaboration for the

mutual benefit of all in the network 52%
Percentage reporting that their business relationships
support digital innovation "to a great extent"

Companies across industries report increases in the number of close working business
relationships, with banking respondents in our sample somewhat more likely than those in
other industries to report a slight or substantial increase (58%). This could be due to a need
to integrate with other platforms to meet consumer demands for convenience and speed, or
to comply with regulations like the EU’s Payment Services Directive, which mandates tighter
security for transactions and increased partnerships between banks and third-party
payment-services providers. The way sectors focus on partnerships does vary, with some
further ahead of others in integrating with developers and using APIs. These differences
across industries may evolve as their needs change in response to operational disruptions
and economic uncertainty.

8 | How digital business ecosystems drive efficiency and innovation in a new era
The technology imperative APIs are seen as
The ability to share data and ideas in real time, collaborate virtually,
more critical to
and move quickly to meet changing business goals is more successful business
important than ever. The consequences of falling behind or losing partnerships than
out on valuable idea-sharing could be dire for businesses, hindering
both short-term problem-solving and long-term growth. any other factor we
asked about. Over
Digital tools and processes are integral to these efforts, with APIs
perhaps most critical of all. CIOs in our survey rank APIs as critical to
half of CIOs say APIs
their business ecosystems, with 51% citing them as important or very are important to
important to making their partnerships and ecosystems productive and relationships with
valuable. Over half say APIs are important to their organization’s
relationships with developers (55%) and customers (51%). When developers (55%)
combined with AI or machine learning, API-enabled digital business and customers (51%).
ecosystems are expected to power data collection (53%), automation
(51%), and process efficiency (49%), among other objectives—all of which
can support business continuity and adaptability in an uncertain era.

Fig. 4: AI is expected to boost API ecosystems

Q: How do you expect AI/machine learning to influence the execution of API ecosystem strategies?
"Meaningful influence" and "transformative influence" responses
Base = 1,000

53% 51% 49% 44%

We will be able to
We will be able We will have lt will increase the
collect higher
to automate more efficient business we do
quality data from
operations processes with key clients
our APls

43% 43% 41% 41%

We will be able to
We will be able to
make more value lt will help us find Our cybersecurity
collect a greater
out of the data we new revenue will be more
volume of data from
collect from streams rigorous
our APls
our APls

9 | How digital business ecosystems drive efficiency and innovation in a new era
The use of APIs has been linked to stronger revenue growth, higher profitability, and better
performance at a lower cost, as they reduce barriers to innovation for a wider network of
individuals and organizations. Even in 2016, a study from Boston University researchers
suggested that the use of APIs increased annual net income by $250,000 or more.2

It is perhaps unsurprising, then, that many respondents in our sample who have adopted APIs
are ahead of their peers who have not, in several key areas. Nearly one-quarter (22%) say they
are well ahead of competitors in terms of digital innovation, compared with 2% of those who
have not adopted APIs. CIOs from companies that have adopted APIs also are more likely to
describe their relationships with key partners as collaborative or integrated—and to say their
relationships drive goals like agility (42% vs. 19%), market intelligence (48% vs. 25%), ability to
automate operations (53% vs. 26%), and employee productivity (49% vs. 33%).

Yet API strategies still have some maturing to do. Despite citing APIs as critical to their
business partnerships, fewer than one-quarter have a central management platform in place,
and a full 28% use APIs but have no system for managing them. This means that many do not
have the infrastructure needed to effectively distribute, control, secure, monitor, analyze, or
monetize the performance of their APIs. Beyond the potential impact on efficiency and
revenue, these weak points in control and security could put ecosystem partners at risk of
exposing valuable data or failing to comply with critical regulations.

Digital Business Ecosystem Leaders are more likely than others to have API gateways (63%
Leaders vs. 35% others) or centralized platforms (34% Leaders vs. 22% others) in place—and
the vast majority expect to have central management platforms in place within three years
(82% Leaders vs. 41% others). That may help explain why they are ahead in other areas as
well, such as data-sharing (56% of Leaders rate themselves “highly effective” in this area vs.
35% of others).

Some industries are further ahead in adopting APIs and API management platforms.
Telecommunications (26%) and Media & Entertainment (29%)—two of the industries in our
survey that tend to have the strongest partnerships—are more likely than other sectors to say
APIs are in use at scale. The same industries are more likely to say APIs are important to
their relationships with developers, which could be a cause or an effect of their higher
investment levels. Despite uneven progress in adopting APIs and API management
platforms, leaders across industries expect these tools to be a focus in the coming years.

2 https://www.cio.com/article/3138511/how-api-adoption-can-boosts-annual-profits.html

10 | How digital business ecosystems drive efficiency and innovation in a new era
Building better digital ecosystems
Turning regular business partnerships into digital business ecosystems takes more than
technology. Organizations must adjust processes to fit the new digital business environment,
and help employees learn to work in unfamiliar ways or through new budget and time
challenges. For example, CIOs may need to promote transparency and collaboration by
modeling those behaviors themselves, providing incentives, or adjusting ways of working.

Many of the CIOs we surveyed say their organization has a well-developed approach to
business partnerships—44% describe their working relationships as collaborative, regularly
sharing data to create products and services and sharing substantial resources and
information as needed. However, respondents’ reported enterprise-wide behaviors suggest
that more could be done to adjust processes. For example, fewer than one-third have
increased transparency for partners (31%) or shared data with partners (27%) to support
innovation, and just 26% have integrated design thinking to make technology more accessible
across the organization.

Fig. 5: Process improvements are needed

Q: Which of the following steps have you taken to update your organization’s workflows to support digital innovation?
Respondents could select all that apply.
Base = 1,000
Facilitated collaboration within our business 34%
Motivated employees to develop and implement new ideas 34%
Increased the application of data to business strategy 33%
Invested in employee training on relevant digital technologies 32%
Launched new digital experiences for customers 32%
Increased level of collaboration with business partners 31%
Increased transparency into our business for developers, partners,
employees, and customers
31%
Invested in new technologies to reduce time spent on menial tasks 31%
Received data from other members of the ecosystem 28%
Shared our data with other members of the ecosystem 27%
Changed organizational structure 26%

11 | How digital business ecosystems drive efficiency and innovation in a new era
Digital Business Ecosystem Leaders are more effective at sharing data and establishing trust
with others in their network, including by increasing transparency into their business for
partners (38% vs. 30%).

Among many organizations, customer-facing processes could use improvement. Just 32% of
CIOs say they have launched digital experiences for customers—which would make it easier
to serve customers during an operational disruption—and only 26% have used design thinking
to make technology more accessible across the organization. After years of discussing
buzzwordy concepts like co-creation, organizations must start following through and
collaborating with partners to develop more advanced digital business ecosystems.

Fig. 6: Digital Business Ecosystem Leaders are more effective in managing business relationships
Q: How effective is your organization in the following areas related to supporting and sustaining business relationships
and ecosystems? “Highly effective” responses
Base = 94 Ecosystem Leaders; 906 others Leaders Others

Establishing strong securiity 77%

practices with all partners 42%

56%
Data-sharing
35%

Establishing strong partnerships 54%

between IT and business functions 38%

Using Application Programming 54%

Interfaces (APls) 39%

Communicating and collaborating 53%

with all stakeholders 41%

Defining the benefits of 53%

partnerships to all stakeholders 30%

Including a diverse range of 51%

participants 38%

50%
Measuring performance
35%

12 | How digital business ecosystems drive efficiency and innovation in a new era
The right technology may positively influence behaviors like data-
sharing and transparency, which in turn could lead to innovation and The right technology
better-functioning technology—creating a virtuous circle that
supports growth and resilience across the digital business
may positively
ecosystem. influence behaviors
like data-sharing and
API management platforms, for example, could make it easier to
provide user-friendly experiences to customers and partners, securely transparency, which
share data and information, and measure the performance of specific in turn could lead to
applications or processes. They also can increase efficiency and
productivity for developers by providing them with portals and other
innovation and
self-service resources that allow API owners to retain control and better-functioning
security while providing maximum visibility into processes and
technology—creating
information.
a virtuous circle that
That may be why more than half of the CIOs we surveyed say APIs supports growth and
are critical to partnerships with developers (55%) and customers
(51%), relationships that are increasingly seen as important to
resilience across the
innovation. Furthermore, companies that have adopted APIs are digital business
ahead of the curve in areas related to business processes that
ecosystem.
support innovation—and report stronger results from their efforts.

13 | How digital business ecosystems drive efficiency and innovation in a new era
How digital business ecosystems pay off
Strong business partnerships can equip companies with the agility and resilience needed to
survive and prosper in an uncertain era. CIOs we surveyed say their relationships already are
substantially or highly important to support automated operations (50%), innovation (50%),
and agility (39%), with major jumps expected over the next three years.

As organizations adjust processes and introduce new technologies to better support business
partnerships, digital business ecosystems should become even more valuable. For example,
roughly half say AI and machine learning will have a meaningful or transformative influence on
their ability to automate operations (51%) or support process efficiency (49%). These benefits
should only increase as organizations expand their network of partners to include others with
AI and machine learning capabilities, as digital business ecosystem members can build on
and profit from each other’s innovation and technology platforms.

Fig. 7: Digital business ecosystems support business value

Q: To what extent do your business relationships and ecosystems support the following business goals today? In three years?
“Substantially” and “Highly important” responses
Base = 1,000 Today In three years

52%
Customer satisfaction and engagement
74%
51%
Brand reputation
71%
50%
Ability to automate operations
67%
50%
Successful innovation
71%
47%
Employee productivity
66%
46%
Market intelligence
68%
43%
Competitiveness
67%
43%
Access to new markets
67%
41%
Financial performance
74%
39%
Agility
65%
33%
Rapid innovation
72%

14 | How digital business ecosystems drive efficiency and innovation in a new era
The rewards of digital business ecosystems go beyond
efficiency—they also are critical to positioning for longer- Defining digital business
term growth and expansion. Take Magazine Luiza, the ecosystem leadership
$4.5 bn Brazilian retailer, which built digital relationships
with a wide range of partners and suppliers to quickly Our survey sample includes a subset
scale up its primarily brick-and-mortar operations into a of CIOs from companies that are
substantial e-commerce business. The digital platform further ahead than their peers in terms
also allows the company to move quickly to meet of developing partnerships for
customer demand and provide in-store employees with innovation. Roughly 10% of
tools to speed up the sales process. Since its expansion, it respondents (n=94) qualify for this
has recorded substantial year-over-year growth in elite group—we call them Digital
e-commerce sales, an increasingly critical metric in this Business Ecosystem Leaders.
new era.3
These organizations:
Our most advanced group of respondents, the Digital
Business Ecosystem Leaders, report more mature
• Say their external business
business relationships, and they are getting greater value relationships enhance digital
in return. Digital Business Ecosystem Leaders outperform innovation to a great extent
their competitors and may be better equipped to handle
both operational disruptions and economic uncertainty.
• Report that key business
These leaders: partnerships are fully connected
and collaborative, and that they
• Report stronger customer satisfaction rates. 96% say actively manage relationships
their brand is perceived better than others in their across their business ecosystem
industry, vs. 41% of others

• Describe their relationships with

• Experience stronger revenue growth. Leaders report key business partners as
6.7% average annual revenue growth over the past integrated, meaning they have
three years, vs. 4.9% of others continual, close collaboration for
the mutual benefit of all in the
• Are more effective in a range of areas related to network
resilience and risk mitigation. They report stronger
performance in terms of supply chain flexibility,
readiness for regulation, and understanding of market
conditions, among other areas.

3 https://cloud.google.com/customers/magazine-luiza

15 | How digital business ecosystems drive efficiency and innovation in a new era
Fig. 8: Digital Business Ecosystem Leaders stand out where it counts
Q: How would you rate your organization’s effectiveness in the following areas? “Highly
effective” responses shown

Digital Business Ecosystem Leaders Others

20%
28%
40% 40%
70%
39%
45%
50%

Supply chain flexibility Relationships with Readiness for Understanding market

customers regulation conditions

16 | How digital business ecosystems drive efficiency and innovation in a new era
Conclusion
The most pressing issues are solved when individuals and groups with different
perspectives and capabilities share expertise and ideas. Think of health
researchers, physicians, and wearable-tech users combining data and insights
to improve health outcomes; of technology and finance companies collaborating
to offer new fintech services based on needs made clear by real consumer
trends; and of banking and insurance firms adjusting third-party partnerships to
meet evolving customer needs in a period of economic uncertainty.

How can CIOs create strong digital business ecosystems powered by APIs to
meet the challenges of the moment while supporting efficiency, agility, and
sustained growth?
Visit the research hub to
1. Think beyond traditional partnerships. Develop relationships with developers, keep learning about how
third-party partners, and even industry competitors. developing digital business
ecosystems can drive
2. Increase transparency to deepen business relationships. Promote secure innovation and efficiency in
data-sharing and visibility into ways of working within your digital business a new era, and take a
ecosystem to support greater trust, easier and more reliable information- deeper dive into country
sharing, faster innovation, and new revenue streams for all involved. and industry insights.

3. Prioritize customer satisfaction. Think of your customers as part of your

ecosystem and organize relationships with business outcomes in mind.

4. Have the right technology infrastructure in place. Introduce tools to

streamline and standardize processes—including artificial intelligence and
effective API management—within your organization and with external
partners.

5. Upgrade processes to reduce innovation roadblocks. Reassess the risks and

rewards of various partnerships to understand where data-sharing and
collaboration across ecosystems will provide you and your partners the most
value—and change your restrictions accordingly.

17 | How digital business ecosystems drive efficiency and innovation in a new era
 About the research

Oxford Economics was commissioned by Google and Entertainment, Telecommunications, and Retail).
Cloud to conduct a survey of 1,000 CIOs. The survey All respondents come from organizations with over
was conducted between January 2020 and March $2 billion in revenue; roughly one-quarter come from
2020 via a CATI (computer-assisted telephone organizations with over $20 billion in revenue.
interviewing) methodology.
In addition to this quantitative survey, Oxford
Respondents come from the US (35%), Canada (5%), Economics is conducting three in-depth interviews
France (10%), Germany (10%), Spain (5%), the UK with CIOs within the countries and industries
(10%), Australia (15%), and Singapore (10%). They surveyed. These conversations will shed light on the
represent seven industries (17% each from Banking topics covered in this report and will be published in
and Insurance, Healthcare, Manufacturing, Media materials to be released later in 2020.

5%

Canada 10%

United Kingdom

10%

France 10%

5% Germany
35% 10%
Spain
United States Singapore

15%

Australia

18 | How digital business ecosystems drive efficiency and innovation in a new era

Disruptive Disruptors x Digital Business (3DXs) VIETNAM MARKET RESEARCH x MARKET REPORT COMMUNITY