The past 40 years of corporate strategy have focused primarily on building firm-based competitive advantages to maintain or improve growth. But technologies advance. Markets shift. Customer expectations change. All have organizational implications on where to focus and how to execute. The capabilities (skill-sets, behavioral patterns and assets) that made many organizations successful up to now no longer apply.
The new competitive landscape is shaped less by firm-specific strategies and more by new business models powered by ecosystem-centric strategies. Industries face a new reality in which the economics, customers, technologies and sources of value have shifted from economies of scale to economies of ecosystem engagement. And, the blunt reality is that the explosive growth models of today and tomorrow are ecosystem-centric ones.
A changed competitive world requires a new strategic question: “Where is value being created — and destroyed — in the ecosystem in which you’re engaged, and what do you do about it?” This question has profound implications on where you focus for sources of growth, and how you figure out what new capabilities are critical to capturing new sources of value.
Asking and answering this new strategic questions is what the most successful and explosive growth leaders today have done, whether Amazon or Alibaba, Gilead or Google, Microsoft or Martin Marietta Materials, Tencent or Tesla.
An ecosystem lens sheds light on new ways to engage customers, markets and stakeholders. As Dan Wollenberg, former senior vice president at Chase Bank said, “People don’t want checking accounts, credit cards, bank accounts; they want financial security and the ability to purchase what they want and need, when they want and need to do so… We need to learn to shift our focus from how to improve our products and services to what it is customers want to do and how our products and services (and new ones) could help them do that.”
How do you start along this journey? Consider how to find your place in the new ecosystem-centric business environment through this four-step strategy:
1. Ask new, strategic questions. The reality of a changed competitive environment means a key question isn’t, “Should we be part of a business ecosystem?” but rather, “Which type of business ecosystem is right for our business and what role do we perform within it?” This initial question leads to examining further what makes up your ecosystem, what capabilities are critical to capturing new opportunities, what role you play within the ecosystem and how you orchestrate the capabilities to do so.
2. Plant a flag on the problem to own. Explosive growth companies don’t push products. Rather, they own a problem, meet a specific customer need and/or tackle specific friction. Just think about any and all explosive growth companies and ask yourself: What’s the “problem” they own, the need they meet and/or the friction they overcome? Products and services are merely “in service” to meeting that problem. Rather than sticking to the traditional, “We’re an X company,” an ecosystem perspective starts with, “The market needs we meet are Y” independent of the products, services and underlying processes you provide. What is it that your customers want to do, and what are the ecosystems in which they spend their time, money and effort to do it? Decide, then, how you engage in those.
3. Double-down on the new foundations of value that owning a problem clarifies. Clarifying where you want to plant your competitive flag identifies the type of value you need to deliver to own the problem, which in turn makes it wonderfully clear the capabilities (whether skill-sets or technologies) needed to deliver on them. Here’s the thing: We may not always know what specific technologies (or new competitors) will impact our business. We do, however, know that they will impact how we deliver value over time. There’s always a decay-rate or half-life of the relevance of our capabilities — resulting from new technologies, market shifts and changing customer expectations. This is why it becomes so critical to clarify the problem to own, the new foundations of value to deliver on them, and the new capabilities to execute them. And here it gets wonderfully interesting.
New sources of value stretch across traditional industry lines and require the design and execution of new methods that share risks and rewards across a wide range of organizations. Meeting these needs within a business ecosystem typically requires capabilities, products and services beyond what any one particular organization — or even industry — can bring to the table. This requires the ability to orchestrate capabilities from different firms to deliver new sources of value in new ways.
4. Orchestrating capabilities to serve needs. Competitive advantage has shifted from seeking market differentiation based on a specific product or service, to orchestrating capabilities from a diverse set of actors. Look at the known growth monsters of today, and look at your competitors — irrespective of size and geography — from the vantage point of these four strategies, particularly this last one. We’d hazard to suggest that underlying many of them rests a new source of competitive advantage — namely, of how to orchestrate resources from different actors within an ecosystem to address specific customer needs.
A changed competitive landscape requires new ways to figure out where to focus and how to execute. Lessons can be learned from explosive growth leaders of today — relevant lessons to build upon for every sized organization, everywhere, if only you know where to take the steps to execute and capture new sources of value in new ways.
Authors bio: Ralph Welborn has held a variety of leadership positions, including CEO of Imaginatik, where he received the European CEO award in 2016; leader of IBM’s Strategy & Transformation business in the Middle East and Africa; senior vice president of KPMG Consulting; and co-founder of an e-commerce company. Sajan Pillai is the CEO of UST Global, leading the company’s founding team of 20 in 1999 to more than 18,000 employees in 21 countries today. He advises national leaders around the globe on digital and technology issues. Their new book, Topple– The End of the Firm-Based Strategy and Rise of New Models for Explosive Growth (Greenleaf Book Group Press, May 29, 2018) describes how to look at the competitive landscape through the lens of business ecosystems. Learn more at www.topplebook.com, or contact ralph.topplebook@gmail.com.