How using digital ecosystems can transform an incumbent business
Mark Greeven with Oliver Pabst
Climb a mountain, ski a backwoods trail, or just go on a hike, and the chances are Switzerland’s Mammut will be with you. Founded as a ropemaker in 1862, the manufacturer of assorted outdoor equipment and apparel has in recent years diversified and globalized far beyond its humble origins.
By international standards, however, Mammut is everything but what its oversized name suggests. With sales of more than 260 million CHF ($283 million) the company is among the top ten in a very fragmented market. The group has fewer than 1,000 employees, stretched across Europe, China, Japan and North America. The target consumer group of the brand is also not exactly mass market, although with much deeper loyalties. The high-quality products and unique brand experiences of the international premium brand are highly appreciated by mountain sports fans around the world.
Mammut’s relatively small size and limited resources (until its sale in April 2021 to Telemos Capital, a London private equity house, the company was for years part of Conzzeta, a Swiss mini-conglomerate) have urged the company to explore cost effective and innovative ways to boost business and improve profitability. Brand identity and consumer loyalty were strong. Significant interconnections also existed with other businesses. But there was massive potential for more.
Under Oliver Pabst, chief executive for the past five years and himself a keen outdoor sportsman, Mammut turned to building digital ecosystems to overcome some of its problems. It has struck close strong partnerships and, in line with the main challenge across the outdoor goods sector, striven to reduce the environmental footprint of its products and processes. It offers a casebook study, in miniature, of how companies, irrespective of their size or sector, can gain competitive advantage by exploiting digital ecosystems, despite the apparent dominance of technology giants like Amazon and Alibaba.
Putting the consumer first
Mammut’s story starts with the consumer. Pabst knew he could build on a proud tradition and rock-solid brand loyalty. His freedom of action was enhanced by the fact that, rather than being kept on a very tight leash by some corporate giant, it was left pretty much to itself by its parent. Its range had moved from ropes to outdoor equipment and apparel, including backpacks alongside trousers and jackets, and was valued by buyers as rugged and reliable – essential qualities in building and maintaining trust in outdoor pursuits that contain an element of risk, meaning dependence on kit and outfitting is paramount.
Pabst saw the significant potential for synergies through working with other companies catering for outdoor sports lovers. That went beyond just sturdy footwear or warm, windproof jackets. ‘There’s a whole range of complex needs that our consumer wants. Thinking in an ecosystem, where we can leverage multiple complementary items, offer services or other products, actually becomes a very natural extension of what we already do,’ says Pabst. ‘
‘I believe we cannot build and create the future as an organization alone. So, it is about creating the future together between us and sets of complementors.’
The value of digital ecosystems
‘We understand the product we’re offering is part of the solution, but not everything,’ he adds. ‘That is the whole power of ecosystems. If we organize ourselves as an ecosystem, perhaps even orchestrate one, we might succeed in making the consumer happier by offering more items and services that are relevant. At the same time, we will learn more about this consumer; not only how mountain enthusiasts uses our ropes or backpacks, but also when and where he or she is climbing, what locations are really cool because they always show up in pictures, and what kind of training needs such consumers might have. The ecosystem not only satisfies the consumer. It also lets us discreetly learn ever more about that consumer and get ever closer.’
That same strategy, of course, is viable across the business spectrum: think of healthcare, where companies focus on medicines, solutions or bills, but where there may be many other things the patient needs or thinks about. Or take agriculture: a company may today just sell seeds. But its customer - the farmer - may care most about producing the best crops. Hence scope to provide additional training, rather than just peddling seeds. Such examples show that, when combined, ecosystems can be very powerful tools. They provide a digitally enabled way of allowing groups of interdependent businesses and organizations to link their customer offerings. And they provide feedback. Together, that can create significant competitive advantages for those willing to try.
But while often acknowledged in boardrooms and among top management, barriers can exist when it comes to implementing a digital ecosystem. Six questions invariably arise:
- Around what will the company build its ecosystem?
- Who in the organization should lead and be responsible for the initiative?
- What are the pressing customer needs to be addressed? (something only answerable by actually talking to the customer).
- With which external partners should one collaborate to raise value? In other words, is it better to seek out new partners, or do more with existing ones?
- How can you learn in a smart way about your customer? After all, any ecosystem must also allow you to capture insights.
- And finally, and most common: where to launch the initiative? Should it be global, or a very specific experiment limited to one location? Does it involve just one product or division, or a much broader range of goods?
A mammoth journey
Mammut’s experience covers all this ground. Planning and developing its digital ecosystem has been a corollary of the company’s diversification from its original core products. ‘We are moving from above the treeline to around the tree line to below the tree,’ explains Pabst via a highly visual image of how it has ‘descended’ from catering to mountaineers and skiers to, most recently, urban wear. ‘That’s why we call it an urban expedition - a pretty accessible and broad range.’
All is built around a redefined sense of purpose. Mammut’s goal is ‘to create a world moved by mountains’. What that means is that a love of mountains - their majesty and scenery – and the various pursuits that can be followed there, and the outdoors in general, are Mammut’s mantra.
The message covers both internal operations and co-creating with others. To work, and to inspire staff to come up with new ideas, Pabst’s ‘purpose journey’ has been shared widely and internalised across the company. ‘You need a mindset that is inclusive and super curious. Because when you start a journey, you very often don’t know where it will end,’ he observes.
Consistency and authenticity require the same message to apply in every partnership. ‘It rules for complementary products, offers and services, and for co-creation with others. It’s an ecosystem because we not only offer our core products, but more. We even offer mountain experiences, through our Alpine School.’ The key consideration throughout is that everything adheres to the ‘moved by mountains’ dictum.
Mammut acknowledges there is an element of risk because an ineradicable feature of building ecosystems is uncertainty. Companies do not know for sure at the start that their plan will work for their consumers. A further peril lies in the fact that they are going beyond the boundaries of their own organization by working with partners, which naturally have their own purpose, interests, and ways of thinking.
‘Even if you ask your consumer and you build every single insight from your consumer, at the very beginning, you don’t know what is really super relevant and what a consumer is really ready to pay for – partly because you’re bringing together new things. That’s why I think, it must be a driven by an open, and inclusive mindset,’ says Pabst.
That means any initiating group within the company must be comfortable with the plan, the company’s own sense of purpose, and be willing to accept mistakes along the way. ‘We tried out a lot of things that didn’t work,’ admits Pabst. Fortunately, most endeavors went well. Three examples of mobilizing external partners stand out.
Discovering and mobilizing three key partners for mammut’s ecosystem
Take FATMAP – a start-up producer ‘of the best digitized mapping material you can get’, according to Pabst. Mammut integrated and later invested in FATMAP’s products, which allow a ski tourer or climber to prepare for a trip by checking the itinerary, assessing the time required and accessing the vast additional quantities of information available via the digital map. The software even allows users to share their outdoor adventures. ‘It has been quite successful, allowing Mammut to share consumer insights and better understand its consumers,’ he says.
The same applies to Mammut’s digital ecosystem collaboration with Strava, one of the biggest communities globally for biking, running, and, to a lesser extent, swimming. The idea was to combine ideas from ‘vertical’ sports (like Mammut’s) with those of a more ‘horizontal’ nature. It ended up becoming a close collaboration. It began with a local adventure challenge. After lockdown, Mammut invited its consumers, and Strava asked its members, to participate in a local adventure challenge. In the end, the initiative engaged more than 300,000 people in Mammut’s key European markets. In total, people cycled some 1.6 million kilometres. That included two young female cyclists, who alone covered some 800-900 kilometres. The entire initiative, which produced an astonishing reach of more than 35 million through social media, was only possible by bringing Strava into Mammut’s ecosystem.
The development of Climbax – the world’s first climbing tracker is another good example of Mammut’s unique approach to ecosystem creation. A very talented software developer, himself a passionate climber, brought to Mammut the idea of developing the backend AI and App to track vertical movement. Existing trackers measured only horizontal displacement. Here too, joining forces allowed Mammut to launch a ground-breaking product of particular value to its consumers – the 2021 ISPO Gold Winner for the best global product in Outdoor Equipment. But the ecosystem building did not focus exclusively on business opportunities and the power of new technologies. As a matter of fact, after a handful of years experimenting with building an ecosystem, the organization started to embrace ecosystems as a mindset. And that has led them to venture in unknown, but important, waters.
How an ecosystem mindset drove mammut into sustainability
Driven partly by its consumers’ concerns, and in no small measure by its own staff, Mammut has also tried to develop its social and philanthropic activities – naturally, in a way compatible with its core business. ClimbAID, for example, was founded in 2016 by a young man who travelled to Lebanon to help children affected by civil war develop an interest in climbing, boosting the motivation and self-confidence of such disadvantaged youngsters along the way.
Mammut joined and supported the scheme, both in Lebanon and, latterly, in Switzerland, where it invites refugees to climb indoors and outdoors with company staff. ‘We see a clear need to support these people and help them integrate in our society,’ says Pabst. Much of the motivation to become more active on social inclusion came from staff and consumers. ‘At the same time, we get very positive feedback internally from our people and from our consumers as well. We even send members of our team here to support the initiative in Lebanon now.’
Social engagement has also been pursued through Together for Glaciers, an initiative that forms part of the worldwide Protect Our Winters movement. Designed to protect ancient glaciers from the ravages of climate change and global warming, the scheme involves various forms of engagement and targets precisely Mammut’s own consumer group.
Pabst describes the growth of Mammut’s greater social engagement as the symbiosis of two factors. ‘One is our mindset to be curious, open, and innovation driven, so by definition looking for new business models.’ The second was the influence of business academics illustrating the benefits of digital ecosystems.
Are there any limits to the types of collaboration, or the size of potential partners? Could such ventures include, say, universities just as well as corporates? ‘I think conceptually there are no limits when it comes to execution,’ says Pabst. The key constraint is culture and the need for a good fit, he argues. ‘The cultural element to it is extremely important.’
Mergers and acquisitions can contribute to a company’s range of partnerships, but are not essential, Pabst believes. That is partly because of the great potential for exploiting and deepening existing partnerships. ‘I don’t have a yes or a no. I think it is very much driven by opportunities. We invested in FATMAP. By contrast, Strava was too expensive to invest in. You have to look at it from your own strengths and what you can add and how much you can drive, So, ultimately, I believe in collaboration and partly in M&A.’
Academic research into the subject reflects roughly the same divide. Many organizations regard ecosystems only in terms of investing in new ventures and finding new partners. Much evidence suggests that can be helpful, especially for companies with deep enough pockets. But in many cases a company already has plentiful partners to explore complementarities with.
Thinking big but starting small
Mammut’s experience shows how a venture can start with a very few dedicated people. By going through and launching initiatives, ever more members of staff, and eventually the entire organization, become engaged. ‘Thinking big, but starting small, has been a key lesson about ecosystems for Mammut. We managed to bring a lot of people on board, with a digital mindset, a data driven mindset, even founders or co-founders of start-ups, and a lot of people working in a digital environment, because it’s a prerequisite, from my point of view, to understand the extent to which a digital mindset supports building an ecosystem,’ reflects Pabst.
‘So now people understand what it means to have the core–whether it’s our products or services – and to have complementary offers. I wouldn’t say it falls into place, but you bring it together. The bigger challenge is to bring the glue to it – meaning data points and how to digitize it and share it. And here we are struggling for a lot of reasons – digital infrastructure, resources and regulatory constraints. But I think we are on a good track.’
Mammut’s approach recognizes the scope to work with other brands – including direct competitors – where there is identifiable mutual advantage. Pabst sees no conceptual limitation to, for instance, working with Patagonia (a particularly eco-conscious outdoor goods brand) on cross brand activism. He is already linked to many counterparts via an European industry group, the EOG. ‘If you really want to make a change, if you want to get to a better place, if we are taking care of all of planet, it’s only possible by doing it together. This is why Mammut started the Together for Glaciers movement. There’s no chance trying to work on your own here in terms of reducing your CO2 footprint; it’s impossible. You need to enlarge that approach. And that’s why we have to cooperate and collaborate. Building digital enabled ecosystems is not only possible but imperative.’
The case of Mammut shows the power of ecosystems beyond the digital platforms and large technology incumbents. Medium-sized, product-based businesses, like the century-old Swiss Mammut, can leverage digital ecosystems to transform their business. But, implementing business ecosystems is not without challenges. Our research and experience suggest four major pitfalls to avoid:
Pitfall 1: Building an ecosystem around everything. Mammut was, for example, conscious from the start of the need to build its initiative around a clear anchor – in its case, climbing. Although the ecosystem as a concept has few boundaries, implementing it for an incumbent business it has to be rooted in a strong core business, rather than spreading the organization thin around a multitude of exciting opportunities.
Pitfall 2: Start only when the whole organization is on board. As we have seen with Mammut, ecosystem building starts small, inside the organization with a group of enthusiasts, and the support of the CEO. It takes time for the rest of the organization to get used to the idea of building business across traditional business boundaries, with external partners. Instead of waiting or doing large scale cultural transformations, get started and prove that the ecosystem mindset leads to tangible results.
Pitfall 3: Scouting mostly for new partners to build the ecosystem. Pabst also recognized the potential in working with existing partners, rather than wasting too much time searching for new ones. Moreover, with a strong digital instinct, he was acutely aware of the need to bind together the various parts of Mammut’s budding network – ideally through shared digital services.
Pitfall 4: Start big with a global launch. Mammut recognized the need to start small. It began its shift into digital ecosystems modestly and on a limited basis, rather than launching big global initiatives that can easily lose traction.
Mark Greeven is a professor of innovation and strategy at IMD Business School in Switzerland and Singapore.
Oliver Pabst is the CEO of the iconic and pioneering Mammut SWISS 1862 mountaineering brand.