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In an effort to structure the largely uncharted arena of business ecosystem leadership challenges we identified twelve key issues executives need to be aware of.
They represent, in no particular order, the essence of the numerous inputs we received from expert conversations, a mini think-tank, and the results of a global survey we conducted in 2019 at the Center for the Future of Organization at the Drucker School of Management (CFFO). Together, they constitute key elements of a topical agenda for leaders who want to build the capabilities it takes to navigate the complexity of this challenging new ball game.
We summarized the 12 issues in a previous LinkedIn article in which we also suggest a working definition of the meanwhile ambiguous buzzword “ecosystem”. The descriptions of the individual issues are deliberately short; they are only meant to map the agenda and stimulate conversation.
To make the reads not too long, and to allow for more differentiated feedback and comments on the individual items, we present them in four instalments. This one looks at Understanding Network Dynamics, Ecosystem Strategy, and the art of Boundary Management.
1 Understanding Network Dynamics
Gaining an in-depth understanding of the interconnected position and the interdependencies within the ecosystem that informs a company’s activities in this space
Organizations – like every social entity – are always in interdependent relationships with stakeholders of their relevant environment. As such, they are part of an informal ecosystem that they co-constitute, no matter if they are aware of it or not.
Without a strategic and organizational ecosystem perspective, companies tend to see themselves as the center of the universe, which does not allow them to see the bigger interconnected picture.
They focus on the rationale of their own (sub)system only, usually via bilateral transactions structured in linear value chains, disregarding the opportunities that come with an active management of the interdependencies among the actors that constitute a business ecosystem.
To thrive in the complex world of networked value creation, leaders need a new type of strategic-organizational thinking that is based on a decentered perspective, i.e. an in-depth understanding of their interconnected position within the broader ecosystem that informs their actions.
They need to make sure that their organizations develop and nurture mechanisms that allow them to (1) actively sense the larger context that they act in and (2) respond accordingly to the shifting dynamics of the system.
This requires operating models that formalize these dynamics for the benefit of the entire ecosystem. To achieve this, such models must be structured as collaborative horizontal networks of carefully selected value co-creators, with institutionalized inter-organizational support mechanisms (such as rules, policies, incentives, etc.) to make their workings transparent, “manageable” and “developable” for all involved stakeholders.
It is more art than a science to shape network dynamics without suffocating them through too much formalization or unilateral power. Especially challenged are large and complex organizations that have a hard time to let go of a command-and-control paradigm, and who are suffering from a bureaucratic culture that slows them down and makes them unattractive for nimble, more agile players who thrive on flexibility and speed.
Research on the formalization of an ecosystem support infrastructure and the related productive/destructive dynamics is in its infancy. It’s an area of inquiry that deserves further attention.
2 Ecosystem Strategy
Understanding the value contribution of each player and finding a unique spot in the system that cannot be made redundant
Ecosystem strategies require a thorough understanding of the value contribution of each major stakeholder and their synergetic interplay. This understanding is a key requisite for leveraging the tangible and intangible assets within the system and developing a role that truly contributes and captures value.
A sound strategy does not necessarily have to be limited to achieving an orchestrating role; more often than not, players are left with contributing roles – roles that may be critical for the value creation of the system but do not come with coordinating powers.
Sylvie Ouziel, CEO of Allianz Assistance – part of the world’s largest insurance company – eloquently pointed out:
“Everybody wants to dominate the ecosystem, everybody wants to be the spider in the net. Every Uber, every Daimler – and Google, of course, and Amazon, who are everything to everybody – want to be the central business partner. The challenge is to find our right spot in those ecosystems. Trying to lead doesn’t always make sense. Even economically it often doesn’t make sense. You need to be indispensable in a way. You need to find your spot where nobody is going to be better than you, and you can’t be made redundant”.
Finding this spot can be difficult, particularly in traditionally structured businesses, who tend to have an inside-out perspective and perceive themselves as the center of the universe in most of their relationships. To move from an “ego-system” to an “eco-system” state of mind is not easy.
Traditional operating models are based on bilateral, linear, primarily vertical relationships; an ecosystem, on the other hand, is a mainly horizontally networked meta-organization that requires a different, humbler lens.
The challenge of ecosystem strategizing gets exacerbated by the fuzziness and dynamic reconfiguration of industry boundaries, which has accelerated with the digitalization of products and services. Answers to the key strategic question “which industry am I in?“, which were not easy to answer in the first place, have become even more difficult, as lenses can shift quickly depending on which ecosystem I join.
For example, membership in the complex “mobility” ecosystem means significant shifts of identity for the traditional automotive industry. As a senior executive from a major global manufacturer bluntly put it:
“We may soon find ourselves on the fringe as ‘dumb hardware provider’ instead of calling the shots as the orchestrator of a complex supplier universe.”
3 Boundary Management
Assessing and managing the degree of openness that is appropriate in the various external relationship contexts; leveraging productive friction
Business ecosystem leadership requires emphatic cross-boundary collaboration; after all, joint value creation lies at the heart of the ecosystem concept – especially when it comes to leveraging technology partnerships and customer relations.
The former has become indispensable in light of the ubiquitous digitalization of products and services; the latter is not only the raison d’etre of any business but also the ultimate source of market insights that inform innovation.
As we discussed in one of our recent research papers about Digital Transformation Challenges, effective boundary management is a key success factor for networked organizations; on a very fundamental level, boundaries are the places where differences meet, creating the productive friction that fuels innovation and change.
To be successful, boundary management must strike a delicate balance between protecting the identity and integrity of the participating parties and transcending existing identities in the interest of the larger collaborative system.
Assessing the degree of openness that is appropriate in the various external relationship contexts is one of the most daunting strategic challenges of business ecosystem leadership. What IP should be shared, what needs to be protected? Who “owns” the product if it was developed in a co-creation process?
Too much openness threatens the identity, security, and/or profitability of the individual players, too little openness inhibits the realization of synergies and the harvesting of the ecosystem’s potential.
There is no easy solution for this inherent conflict that happens at every boundary. Cross-boundary collaboration is a learning and development process, both in terms of getting to know the partners’ technical and organizational capabilities as well as developing trust and a joint history of success and failure.
This article is part of a series about Organizing for Business Ecosystem Leadership. It is based on a recent research project conducted by the Center for the Future of Organization at the Drucker School of Management at Claremont Graduate University (CFFO).
If you would like to get immediate access to the entire study, you may download an electronic copy of the report here or get it as a physical booklet or Kindle version here.
To deepen our understanding of the subject, CFFO plans to launch a global dialogue and action platform on topics related to business ecosystem leadership. If you are interested to receive an invitation to the platform, contact email@example.com.
Thanks for reading! We look forward to your comments and contributions to the conversation.
Previous articles of this series:
1 | Organizing for Business Ecosystem Leadership (Introduction and Overview)
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