What would force us to change or radically adjust our existing business trajectory? Can we afford to take another period of uncertainty, what are the risks? Does it make sense to alter our existing Business Models?
At some time it is absolutely right for the C-level to ask! It cuts to the core of the Innovator’s Dilemma applied to organizational transformation.
A terrific book, an Innovation foundational one, was “The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail,” first published in 1997. It is most probably the best-known work of the Harvard professor and businessman Clayton Christensen. It describes how large incumbent companies lose market share by listening to their customers and providing what appears to be the highest-value products, but new companies that serve low-value customers with poorly developed technology can improve that technology incrementally until it is good enough to quickly take market share from established business (source Wikipedia). Todays it is so different, anyone can take market share through applying technology thoughtfully.
This concept today faces far more “dilemmas” that can be more widely applied as the “disruptor” has even more “disrupting tools” at their disposal as they search and connect all the “dots” of opportunity that those incumbants will struggle to adopt though legacy or speed of market reaction. “Higher value” needs to be replaced with “Greatest Connecting Value”.
The issue today is we are in an increasingly distruptive world where Ecosystems in design and thinking are dominating, yet Leaders still hold back from address evolutionary change from “siloed models” to “collaborative models”, Why?
Here’s why, despite the compelling “why not?”, many organizations don’t take the ecosystem journey, it is simply simply hard work full of uncertainties and are they incentived to pursue a more “distruptive” model? Often they think why not let someone else handle that later “down the line”, as my job within the C-Level board is to maximise what we have, I get rewarded and compensated for that and not open ourselves up to undue risk or transformation until we need too. Fair enough but it can be (incrementally) different to enable a “learning organization” to emerge. Think of Ecosystems in design and thinking as a learning journey.
I get that but Ecosystem thinking and design is just NOT betting the house all in one go, it is a slow, thoughtful journey of experiement, learning and adjustments
Otherwise you are faced with so many questions that simply stop us. Yet what can we learn by planing these into a journey where you build to resolve these?
Addressing the Ecosystem Dilemma
Recognizing the “ecosystem dilemma’s” that need to be faced and (progressively” overcome:
- Complexity and Ambiguity:
- There is no Ecosystem Blueprint: There’s no single “ecosystem playbook.” Each one is unique, highly complex, and dynamic. This ambiguity makes it hard for traditionally structured organizations, which thrive on clear roadmaps and predictable outcomes, to get started.
- Uncertain Short-Term ROI: While the long-term value can be immense, quantifying the direct, short-term ROI of investing in trust, shared infrastructure, or partner enablement is difficult. Quarterly earnings cycles and executive tenures often prioritize immediate, measurable gains. Can we pilot, experiment and caeve out “given” parts of the business that do need refreshing or challenging in new collaborative ways?
- Defining Success: How do you measure “ecosystem health”? It goes beyond simple revenue and often involves metrics like partner engagement, co-innovation velocity, or network density, which aren’t standard KPIs. Start simply with a few basic KPI’s and then broaden these to cover a growing need to monitor and accelerate any experiment into a larger scales that has different business impact.
- Resource Intensity, Understanding and Time Horizon:
- Significant Upfront Investment: Building a robust platform, developing APIs, establishing governance, hiring new talent (ecosystem managers, partnership strategists) – this all requires substantial financial and human capital investment before tangible returns are seen.
- They can be built for limited funds and “measured” awareness- see this post “A Guide for Ecosystem Business Model Building for Mid-Sized Firms” and this one “A Comprehensive Guide Recommending Business Ecosystems for Mid-Sized Firms“
- Long Time to Value: Ecosystems take years, often a decade or more, to fully mature and deliver their full network effects. This clashes with short-term strategic planning cycles and the pressure for quick wins.
- Opportunity Cost: Investing in a long-term ecosystem strategy often means diverting resources from existing, proven (though perhaps stagnating) revenue streams, which is a difficult choice for profitable companies.
- Deep Organizational and Cultural Barriers by overcoming these progressivly:
- “Not Invented Here” Syndrome: A strong internal bias against external collaboration. Many organizations believe they must own and control every aspect of value creation.
- Siloed Thinking: Traditional organizational structures (functional silos, P&L ownership) are antithetical to ecosystem thinking, which demands cross-functional collaboration and shared value creation across internal and external boundaries.
- Fear of Loss of Control: This is profound. Leaders genuinely worry about diluting their brand, losing direct control over customer relationships, intellectual property, and revenue streams to external partners. This perceived loss of sovereignty is a powerful inhibitor.
- Risk Aversion: Ecosystems involve venturing into uncharted territory, dealing with external entities with potentially misaligned incentives, and navigating complex legal and ethical landscapes. Many organizations prefer predictable, lower-risk growth paths.
- Incentive Misalignment: Internal compensation, promotion, and recognition structures are often not designed to reward employees for fostering external collaboration or for value created through partners rather than directly.
- Talent Gaps: A severe shortage of leaders and practitioners with the specific skills needed to design, launch, and scale ecosystems (e.g., platform strategists, API product managers, ecosystem legal experts).
- Leadership and Vision Gaps:
- Lack of Strategic Vision: Not all C-level executives fully grasp the fundamental shift required or truly believe in the ecosystem model as the future. They might view it as a “nice-to-have” or a trendy buzzword rather than a core strategic imperative for survival and growth.
- Short-Term Pressure: Publicly traded companies face intense pressure from shareholders and analysts to deliver quarterly results, making it difficult to justify long-term, complex investments that don’t show immediate returns.
- Difficulty in Building Trust (Externally): Establishing trust with potential partners, especially when there’s an element of co-opetition, is a significant soft skill challenge that requires strong, empathetic, and patient leadership.
- Regulatory & Antitrust Concerns: As ecosystems grow, they can attract the scrutiny of regulators concerned about market dominance or anti-competitive practices, adding another layer of risk and complexity.
In essence, while the ultimate rewards of the ecosystem journey are massive, (view Apple, Salesforce, Alibaba, Siemens and many others), the barriers are equally serious to overcome and needs the (total) commitment of the board in vision, mission and operationalizing this. It demands a profound, often uncomfortable, shift in mindset, governance, and operations that many established organizations find incredibly difficult to undertake, especially when their current (though perhaps diminishing) business model is still generating profits.
It’s the classic innovator’s dilemma on an organizational scale of a new ecosystem level: the choice between optimizing the existing (but potentially sunsetting, isolatated) businesses, or investing heavily in a new, uncertain model that promises exponential future growth.
Many choose the comfort of the known, until competitive pressures make the choice unavoidable. The right path is to explore, experient and take “measured” risks that you gain a new learning path and recognition of what is achievable equipped with the right minset, advisory and mentoring advice
Lets chat to find out your appropriate pathway