Proposition 1: Ensure that your initiative to build an ecosystem is credible to your partners
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Thomson Reuters (now Refinitiv) had first tried to make a go of the Eikon on its own but failed. Only when it opened its development system, provided tools to help its partners connect easily, and joined networks such as ODI, did potential partners start believing that it was serious about building an ecosystem, enabling it to gain traction.
Perhaps surprisingly, we found that building credibility as an ecosystem leader is more difficult for an incumbent than it would be for a start-up. Therefore, the case of Thomson Reuters is an interesting example on how an incumbent can create the credibility that it is needed to start an ecosystem to innovate in the emerging fintech industry.
(This Data Business Unit of Thomson Reuters was spun off in 2018 as Refinitiv and bought by London Stock Exchange in August 2019)
The merger of the Thomson Group and Reuters in 2008 created the world’s largest news and financial information company. Its revenues came close to $12 billion that year, and continued to grow, fuelled largely by acquisitions. Revenues peaked in 2012 at $13.1 billion, and then began to gradually decline, falling to $12.2 billion in 2015. In July 2016, Thomson Reuters sold its Science and Intellectual Property business, so that it could focus on its core areas of information services for Finance and Risk, Tax and Accounting, Legal, and Reuters. Its main competitors in that business were other newsgathering organisations and providers of business information and intelligence, such as Bloomberg and Dow Jones.
Earlier on in 2011, in an initiative to compete with Bloomberg’s terminals, Thomson Reuters had launched Eikon, replacing its existing desktop offering. Like Bloomberg’s terminals, Eikon provided investment professionals with market data, financial information, analysis and messaging tools. But despite Thomson Reuters’ marketing efforts, Bloomberg remained, by far, the market leader. By late 2013, Bloomberg had 315,000 subscribers or 57% of the market compared to 190,000 for Thomson’s Eikon, or 34% of the market. Thomson Reuters’ leadership identified lack of innovation as its key challenge to winning market share. To address this issue, the company took several steps, such as shifting funding from acquisitions to innovation, establishing new performance metrics, and creating ways for ‘intrapreneurs’ (internal entrepreneurs) to share ideas. But Bloomberg steadily surged ahead, generating $8.8 billion in revenues in 2015 from its terminals and data feeds, outpacing Thomson’s $6.5 billion. It was clear that Thomson was not on track to achieve its ambition of becoming the market leader.
This painful experience prompted Thomson Reuters’ management to take note of the rise of fintech. Fintech heralded the creation of fundamentally new business models, if not a new industry, that would require capabilities and knowledge way beyond what Thomson Reuters had access to internally. It came to believe that partnerships with external partners would be central to its efforts to promote innovation, particularly at the intersection of regulation, business, and technology.
The core desktop segment, served by its Eikon product, was one area where Thomson Reuters sought to capitalise on third-party partnerships to create new value for customers. As far back as 2012, Bloomberg had created an open applications portal to enable complementary, third party applications to be accessed through its terminals.
To catch up and kick-start its own applications ecosystem, Thomson Reuters launched the Eikon applications studio (App Studio) in late 2015. The logic was clear: it needed partners to innovate. But as a latecomer who had first tried to go it alone, it had to convince potential partners that it was now serious about catalysing the development of its ecosystem. Thomson Reuters took a four-pronged approach to this challenge.
One, its communications emphasised that App Studio would enable partners to benefit by integrating their software deeply into its Eikon product. Its message was that: “App Studio, Eikon’s third party development suite, enables clients and vendors to embed their applications, content and workflows into Thomson Reuters’ Eikon, creating an integrated end-to-end solution. This open approach allows users to benefit from access to financial apps created by third party developers globally, built directly into Thomson Reuters’ Eikon.”
Two, it opened its development system, providing a software development kit and application programming interfaces (APIs) to make it easy for partners to join its ecosystem and link directly into the Eikon user experience.
Three, to further enhance its credibility, Thomson Reuters committed to the Open Data Initiative (ODI), a London-based non-profit organisation, it had joined in 2014. ODI, as the name implies, promotes efforts to make more data open, so anyone can access, use and share it. Together, Thomson Reuters and ODI published a series of white papers in 2015 and 2016 that defined best practices and processes on data identifiers and ways to manage data so that it could break out of the many silos that exist within and between organizations. Thomson Reuters and the ODI argued that data should be “shareable by default,” i.e. data should be structured, and managed, in ways that facilitated accessibility and interoperability to maximise the value that could be extracted from it.
Four, Thomson Reuters emphasised to potential partners that it already had a track record in developing open ecosystems, citing its successful partnership with Stanford’s Centre for Legal Informatics, Federal court recorders, third-party data providers, and law firms.
Thomson Reuters had first tried to make a go of the Eikon on its own but failed. Only when it opened its development system, provided tools to help its partners connect easily, and joined networks such as ODI, did potential partners start believing that it was serious about building an ecosystem, enabling it to gain traction.
The lesson from Thomson Reuters’ experience is clear. It is not enough simply to announce your intention to build an ecosystem. As ecosystem leader, you must make a credible commitment to not only working with partners, but also letting the ecosystem evolve in ways that you may not be able to control. And the claim that you want to build an ecosystem must be backed by tangible commitments to share some of your knowledge and capabilities, and to build the tools that partners will need in order to achieve common, even if uncertain, goals. We started by saying that potential partners often impose a higher burden of proof on large companies before being convinced that they are serious about developing a vibrant and flexible ecosystem. This is because large, established players usually have a history of tightly controlling their supply chains. They often inadvertently reinforce this perception of a bias in favour of command and control through attempts to get their ecosystem up and running by offering contracts to potential partners or opting to acquire partners rather than collaborating with them. Smaller companies generally have an easier time establishing credibility around the plans for an ecosystem. Going back to two of our other cases studies, ARM (Williamson et al 2009) and Alibaba (Williamson and Wang, 2014), we saw a different pattern. Both were startups when they launched their ecosystem. Their obvious lack of resources made it easier to convince partners that they wanted to embrace the concept of an ecosystem even if it would not be fully under their control.
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