B2B hardware, services and equipment players have been trying to create ecosystems for quite some time, but the track record has been abysmal. It’s logical to assume that B2B companies will eventually learn how to build data-driven ecosystems that generate high-margin recurring-revenue businesses and create distinct competitive advantages, but why do B2B ecosystem development efforts fail? Our consulting work and related analysis point to five basic requirements. Succeeding at one or two of these requirements, but not all five, may get some players to first base, but getting to second, third and home base is where real value is created for customers and a sustaining ecosystem is established.

Software and digital technologies are displacing physical hardware and replacing labor-intensive services in nearly every market and application imaginable, and it shows no signs of slowing down. The traditional differences between so-called high technology companies and the remaining product and service businesses that utilize the innovations that tech-focused developers provide is fading away. In one form or another, every company is becoming a technology developer which is forcing businesses to re-think how they approach growth.

Harbor Research coined the term “Smart Systems” in the early 2000s to describe the emergence of a new generation of complex adaptive systems that are trying to break away from traditional computing and telecom paradigms. As the cyber-physical world continues to dovetail with IoT, machine learning and artificial intelligence, Smart Systems will enable previously unimagined capabilities. The question is whether business leadership really understands the new dynamics driving value and are ready to grasp its potential.