Does Sourcing Matter in Digital Ecosystems?

In my previous article, Digital Ecosystems – Why Large Companies Have an Advantage in the Digital Future, I discussed how organizations need to leverage partnerships and ecosystems to drive greater outcomes in their digital transformations.  Developing ecosystems of suppliers and partners are more complex than traditional business and IT partnerships, but they are a necessity to achieve an optimal digital transformation.  This is due to the velocity of change, increased risks, diverse value propositions, external market influences, and other factors.

Traditional Technology Norms vs. New Digital Characteristics

Some of these other factors are driven by the differences between traditional technology norms versus new digital characteristics:

Traditional Technology Norms New Digital Characteristic
Defined Market/Industry External Market and Industry Considerations
Few Major Players Multiple Vendor Landscape Including Startups
Defined Scope Variable/Changing Scope
Siloed Solutions Integrated Solutions with Overlap
Longer Term Outlook Short Term and Flexible Outlook
Cost Plus Trade + Value
Fixed Price or T&M Investment as a Service or Flexible Pricing
Internal Facing External Facing
Protected IP & Data Shared IP and Data
Internal Exposure Immediate External Exposure

To address digital disruption, many organizations are looking at significant changes in their operating models to jumpstart their digital journey, improve digital innovation cycle times, build relevant skills and capabilities and work in an agile manner.  Within these new digital operating models, the ability to source and develop partnerships and ecosystems is a key role required to effectively achieve, maintain and improve digital transformation outcomes.

Creating a Digital Category Manager Role

A Digital Category Manager would be responsible for:

  1. Assessing internal and external capabilities and assets
  2. Developing partner and ecosystem strategies and plans based on current and future digital needs
  3. Identifying, engaging and sourcing potential partners and solutions
  4. Assisting with aligning solutions and requirements across partners and ecosystems
  5. Developing and managing agreements and contracts
  6. Managing performance and improvements throughout the lifecycle
  7. Analyzing market and industry trends to incorporate into current and future partnerships

Many organizations incorporate Direct Material Category Managers to improve NPI cycle times, improve material costs, secure supply chains, improve product quality and improve vendor relationships.  With the potential customer and business exposure, solution variability, speed requirements and dependence on ecosystems, there is also a need for a Digital Category Manager to develop partnerships and ecosystems for any digital initiative.  Counter to many sourcing categories, the primary value of this role is not on lowering costs but achieving the outcome in an efficient and effective manner across multiple partners, balancing risk and speed to market.

In addition to building internal capabilities, organizations will also increase their reliance on external (third-party) advisors to address skill and capacity gaps, data, and market requirements, to effectively manage the velocity, flexibility, risks, and change required for developing digital partnerships and ecosystems.

External (Third-party) Advice can Include:

  • Identifying targets from traditional-to-startups to non-traditional industries
  • Appraising a value proposition from currency-to-data to intellectual property exchange
  • Assessing changes in government regulation
  • Evaluating the risks of a solution, service or partnership
  • Pinpointing current and future requirements
  • Determining the present and future scope of agreements
  • Identifying and evaluating agreement terms and conditions
  • Providing market relevant benchmarks and frameworks

The additional value an external third-party advisor can provide insights into other vendor investments or an assessment of current agreements to expand to digital needs.  Third-party services to assist with digital category management will not only be required as a one-time event but as an ongoing service to manage the fast-paced and changing market, regulations and inevitable transforming value proposition.

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