“Water! Build your organizations so that they move like water.”

This advice from Haier’s Chairman Emeritus, Zhang Ruimin, began a search for useful guidance for treating ecosystem engagement as a strategic asset for the future. Ecosystems are an ageless phenomenon, newly rediscovered for commercial purposes, by James F. Moore, in 1993. Once multi-geographic trade began, the ancient world was held together by interwoven threads of economic activity. As these linkages became more reliable, ecosystems bloomed.[1] Today, ecosystems are emerging as a central part of moving into an ever-complex future, but they are still too new to our understanding to establish “rules” for ecosystem engagement. Nonetheless, we are seeing useful observations reflecting lessons learned, that begin to form the basis for thinking more analytically about how to design and engage with effective ecosystems.

• Ecosystems are about optimism, exploration, and growth. Dr. Moore emphasized the power of optimism when he observed that “Haier looks at its employees and rather than seeing fixed costs, sees unlimited possibilities, instead.” This is exactly the spirit of optimism that powers a growth-mindset throughout an entire ecosystem; it’s opportunities, not constraints, and then crafting relationships to act on them, that characterize successful ecosystem mindsets.

• Ecosystems are not value-chains. Although they might appear to be related, almost everything about ecosystems differs from value-chains. Value-chains are fashioned for command and control. Ecosystems are more suitable for pursuing unforeseen opportunities. Value-chains have “tiers” with expected outcomes; in effective ecosystems, everyone has unlimited options, and opportunities. Value-chains are closed; ecosystems are open. Julian Birkinshaw, recognizing that more ecosystem members are more valuable than fewer, has suggested that, for fashioning ecosystems, protective moats (barriers to entry) should be exchanged for more open “turnstyles.”

• Ecosystems are inherently non-linear.  Not only are ecosystems unlike value-chains, they are non-linear. Alan Moore’s book No Straight Lines has emphasized the power of not imposing predetermined outcomes upon a community of potential co-creators. The whole idea of ecosystems is to break-out of the tyrannical linear constraints of value-chains.

• Ecosystems should be centerless. Every ecosystem has a distribution of members, whose  attributes, including size, brand, access to resources, future-orientation, daring and other such indicators of organizational predisposition, help us anticipate the value a member potentially brings, and some hints regarding its likely behaviors. It is easier for bigger members to act as if they have more power, but in the ideas game, size is not necessarily associated with idea fecundity, and the more that any one member assumes a greater say in how the ecosystem works, the less likely the ecosystem will be to benefit. Indeed, the more centered an ecosystem is around one member, the more likely it is to devolve into a value-chain for that member.

• Leverage points are easy to identify, but the correct actions should take a system-wide perspective, rather than an isolated nodal (or client) perspective Centerless systems, however, does not mean that there are no leverage points for effecting change. These, within a complex system, are “those places where a small shift in one thing can produce big changes in everything.” Donella Meadows, who has studied systems at all levels of complexity, argues that the most effective leverage point, in any system, is “The mindset or paradigm out of which the system — its goals, power structure, rules, its culture — arises.” This means dispensing with trying to fix a node, and focusing, instead, on trying to understand the whole pattern of relationships that characterize a particular ecosystem, and its underlying logic and beliefs. Ironically, this often results in recognizing that what seems naturally intuitive from the perspective of any particular node, is often sub-optimal from the perspective of the system as a whole.

• Temporaryiness. Ecosystems should also be considered temporary, or always in flux; engaging in temporary liaisons as the relationships with customers change. More than five decades ago, Warren G. Bennis and Philip E. Slater alerted us to the imminent arrival of The Temporary Society: “adaptive, rapidly changing temporary systems…. groups of relative strangers with diverse professional skills…. Arranged on an organic rather than mechanical model, they will evolve in response to a problem, rather than to programed expectations.[2]” What they saw in the future, is our present, and expresses a need for spontaneity in organizational direction; not random, but purposeful searching for the next most promising opportunity. 

• Successful co-creation requires that there be a sharing of the outcomes, as well as the inputs. Unlike the provision of products or services, participation in the creation of new ideas comes with the expectation of full commitment of time, effort and brainpower. The ecosystem projects, that Haier’s microenterprises are partners in, establish the shares of future outcomes that will be distributed, so that opportunity becomes a magnet that draws members in, and binds them together.

• Ecosystems are often hidden in plain site; invisible, and thus less effective than they could be. The irony is that ecosystems are already all around us, and have been always. Most ecosystems emerge organically; remain informal, invisible, yet reliable; and take on a life of their own as new needs and capabilities arise. This is what Moore spoke about in his seminal article on business ecosystems, when he wrote “A business ecosystem, like its biological counterpart, gradually moves from a random collection of elements to a more structured community.”  Our work on the Esports ecosystem in the Greater Copenhagen region[3], revealed an existing ecosystem that was already functioning, but was unheralded. Organizations bonded, and unbonded, as their individual situations changed. It was unlikely that anyone involved actually thought of it as an ecosystem, and It was operating as a network so far from Pareto optimality, that there was no inducement to adopt an ecosystem-mindset. As a result, it undoubtedly underperformed for most of its participants. Our belief was that the simple act of recognition of the bonds that were taken for granted, could only improve the linkages and understanding between the participants.

• Networks-within-networks, “many-to-many,” arrangements could be the real promise of ecosystems. Temporary, centerless ecosystems increase the possibility of groups of members coming together, even briefly, to address the needs of a potential client base.  Such “many-to-many combinations were described in 2001, by computer scientist David P. Reed, who argued, that the value of ecosystems with group forming networks (GFNs) increases exponentially in proportion to 2ⁿ, where n equals the total number of members. Reed envisioned “.. customers band[ing] together to request customized products and services from suppliers, and they can help suppliers organize alliances to create new products and services.” This GFN behavior can already be seen in Haier’s Internet of Food, and Internet of Clothing.

• Focus on the links, not the nodes.  The formation of GFNs suggests a degree of fluidity in brand-allegiance, employment and group formation and dissolution to allow such spontaneity. In ecosystems characterized by an increased reliance upon autonomous, microenterprises, that generate their own income, a recognition of higher-order outcomes and beliefs has become evident, to the extent that what happens in any one connected unit is not as important as the linkages between units.  Zhang Ruimin, when asked what will be Haier’s key assets twenty years from now, responded “our relationships.”

• The health of an ecosystem is measured by the opportunities for all that result from their collaboration.  With any biological ecosystem, the health of the entire system matters more than any one member, keeping in mind that all members are linked to each other, directly or indirectly, by the contributions that they make to the system as a whole. The overall health of a business system should be associated with the overall opportunities that ecosystem membership provides for all. James F. Moore concluded his article on ecosystems with the sobering thought that “From an ecological perspective, it matters not which particular ecosystems stay alive; rather, it’s only essential that competition among them is fierce and fair—and that the fittest survive.”

• Being like water Ecosystems are different enough from traditional business practices that it makes little sense to believe that present-day organizations, or leadership mindsets, are well-prepared for them. Zhang Ruimin’s suggested “being like water” serves as a useful metaphor for designing organizations that can function effectively, and opportunistically, in ecosystems that are open enough to celebrate co-creation. Simone Cicero, of Boundaryless realizes that organizations that function in a traditional and linear, two-dimension, world, might not be at all suitable for the three-dimensional possibilities of ecosystem involvement. He argues for building ecosystem-enabled enterprises that are better-suited for the opportunities and faster-paced cadence of embracing ecosystem partners. This is not for the faint-hearted, but is essential for the major shift in management that ecosystems require and deserve.

[1] Amitav Ghosh” In An Antique Land, brings to life how ecosystems worked in linking 12^th Century East-Asia to the Egyptian world.

[2] Warren G. Bennis and Philip E. Slater, The Temporary Society, New York: Harper-Colophon Books, 1968.

[3] Anouk Lavoie and Bill Fischer, “How Copenhagen launched an Esports ecosystem,” IMD Case IMD-7-2102.

About the author:

Bill Fischer is a long-term member of the Drucker Forum community. He is a Professor Emeritus of Innovation Management, at IMD, and a Senior Lecturer at MIT’s Sloan School of Management. Bill has a long-term consulting relationship with the Haier organization.

What is leadership, if not strategy and culture; setting the direction to which the organization must move, and instilling behaviors that will provide the best chance of making the journey? Successful leaders pay attention to the world around them, and then navigate whatever challenges appear; this is strategy. They assemble the talent needed, and then mold a community around it; this is culture.

Outside-in or Inside-out?

Done well, strategy is built outside-in. Culture, all too often, however, is inevitably inside-out. Whenever we reorganize, bring in a new IT system, when we change our measurement systems, or the values we espouse, we are making managerial choices that are designed to affect the way we behave. And, as a result, shape our culture. All of these managerial choices are typically made deep inside the firm; away from customers, partners, rivals, and often, most of the team, as well. This becomes culture by decree; inside-out, with only grudging acknowledgement of outside issues.

Disconnect by default

No wonder, we never get it right. Strategy and Culture, which should be joined at the hip, are, more often than not separated at birth. When we strive for “alignment”, insisting that each unit behave in the same internal way, we exacerbate the separation between ourselves and our customers, or users. This is even more the case when an organization is an active participant in one or more ecosystems, and when that participation takes the form of many different independent partnerships.

The past can no longer inform the future

In the past, in a world where S-curves were longer, industry boundaries impermeable, and customer experience expectations more accommodating, we could get away with such disconnects. This is no longer possible. Increasingly, we are witnessing bold experimentation among respected organizations, trying to get closer to their customers and unleashing latent entrepreneurial energies that exist within their workforce. Almost always, this results in some form of radical unorganizing², greater managerial autonomy and distributed leadership.

Paul Michelman, then editor-in-chief of Sloan Management Review, anticipated this³, and worried what it meant for strategic alignment: in “an era of entrepreneurship, distributed leadership, and the continual reorganization of people and resources, …. there is reason to question culture’s role. Our relationships to institutions will become increasingly defined by the activity in which we are engaged at any given time. We will come to view ourselves as “affiliates” more than “employees”.” To which he added: “In this world, we will no longer prize alignment; we will prize realignment. Such an environment benefits from clear and universal rules of engagement. It does not benefit from habits that are distinctive to one group of people — which is the essence of organizational culture.”

From employees to free-agents

In fact, the defunctionalizing of many organizations, in an effort to get closer to their customers, was the first step in realizing Michelman’s concerns; and was followed, quickly, by the advent of the gig economy. Both of these events have turned many once-employees into true entrepreneurs, and shredded much of whatever was left of organizational loyalty in the process.

Beliefs not behaviors

In the case of Haier, perhaps the most extreme example of unorganizing, many different microenterprise cultures have arisen, but surprisingly with little apparent feeling of culture loss, or loyalty. Despite all of the reorganizing into many small, autonomous, microenterprises, there is still very much a Haier culture, but it is a culture based on shared beliefs, rather than shared behaviors. Recently, at Haier’s General Electric Appliances, one long-time GEA executive, suggested that the biggest lesson for him was the repetitive nature of what he now saw throughout the organization: you look at the group level, and there is the pursuit of great customer experience, and entrepreneurship; then you look at the microenterprises, and you see exactly the same thing; and, then, you look at the individuals within the microenterprises and you see, once again, the same thing. He used the term “fractals⁴” to describe the replication of GEA’s core beliefs at each level; that is where the alignment is, around guiding principles, not common behaviors

Common principles drive common beliefs

Danah Zohar, in her new book, Zero Distance⁵, which uses quantum physics to explain Haier’s organizational logic, also points to the importance of guiding principles: “a sense of purpose permeates every person, activity, service and product in a company…. It is the “sea” upon which all boats sail, with their compasses pointing to true North.” James F. Moore, whose work led to the idea of business ecosystems, has observed that “Haier looks at its employees, customers and suppliers and gazes on unlimited capabilities, and boundaryless possibilities.”⁶ Just think of what cultural choices can be made with guiding beliefs such as these.

A reliance on common guiding principles to instill common beliefs requires a high degree of trust within the entire workforce.  Beliefs are based on trust. Contrast that with organizations  where behaviors created by systems and controls, as these are based on discipline and mistrust.

Look carefully at the organizations who are held up as models of greater autonomy and ecosystem engagement. Organizations such as: Haier, Morningstar, Buurtzorg, Fujitsu Europe, Bosch PowerTools, General Electric Appliances, and VkusVill.  They are all experimenting with smaller, more autonomous units, and a widespread distribution of leadership responsibility. Then, look closer. In the background, it is guiding principles that ensure that these organizations are not out of control. Despite their immense variety in products and customers, there is a common thread of beliefs regarding customers, employees and partners, and an expanded expectation in what each is capable of, which allow these organizations to run at different speeds, in different directions, without being in disarray.

Rethinking purpose and values

Guiding principles are a powerful attractive force that holds communities together as their members pursue wildly different objectives. Their adoption argues, persuasively, that much of what we regard as core to organizational cultural alignment, similar behaviors and similiar systems, moving all parts of an organization in the same direction, and at the same speed, is no longer a useful aspiration.

Instead, we should be rethinking purpose and values, as a fundamental statement of beliefs. This is particularly important in preparation for larger ecosystemic transformations in the future; restoring the human imperative as the prime organizational asset for navigating uncertainties; not so much as mimicked behaviors, but as shared beliefs, rather than shared systems or shared processes.

Footnotes :

[1] This title was generously suggested by Nick Hixson

[2] “Unorganizing” is a term coined by Sogeti, a Capgemini firm: hpps://www.sogeti.com/explore/newsroom/the-unorganization-new-research-on disruption-from-sogetilabs/

[3] Paul Michelman, “The End of Corporate Culture As We Know It,” Sloan Management Review, Summer 2017.

[4] Common behaviors taking place within the greater Copenhagen Esports ecosystem were also noticed at the “individual, team, SBU, firm and global levels,” and described by Anouk Lavoie as “fractal-like.” Anouk Lavoie and Bill Fischer, “How Copenhagen launched an Esports ecosystem,” IMD Case IMD-7-2102, 2019.

[5] Danah Zohar, Zero Distance: Management in the Quantum Age, forthcoming, London: Palgrave MacMilian.

[6] James F.Moore, comments made at Haier’s OpenTalk 2020 forum, October 2020.

About the Author:

Bill Fischer is Professor of Innovation Management, at IMD business school. He coauthored the book “Reinventing Giants” which describes Haier’s évolution as an innovative organization and he and Simone Cicero have been working with Haier developing the story of  Haier’s emergence as an ecosystem participant. He was inducted into the Thinkers50 Hall of Fame in 2019.

This article is one in the “shape the debate” series relating to the 13th Global Peter Drucker Forum, under the theme “The Human Imperative” on November 10 + 17 (digital) and 18 + 19 (in person), 2021.
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Moderator
Julia Kirby Senior Editor, Harvard University Press

Speakers
David Weinberger Senior researcher, Harvard’s Klein Center for Internet & Society
Miriam Meckel Founding publisher of ada, the platform for digital life and the economy of the future, at Handelsblatt Media Group
Charles Édouard Bouée Founder and Managing Partner, Alpha Intelligence Capital; former CEO, Roland Berger
Alex Adamopoulos Chief Executive Officer, Emerging Limited

Commentary in italics

Drucker Forum 2020

This article is one in the “shape the debate” series relating to the fully digital 12th Global Peter Drucker Forum, under the theme “Leadership Everywhere” on October 28, 29 & 30, 2020.
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Imagine a world where it is acknowledged that unknown unknowns  are the primary triggers of economic and social change; where literally everything is recognized to be an “accident” (in the statistical sense of having a finite probability of occurring); where humans and machines coexist on teams where work has a high-knowledge content, immersed in unprecedented volumes of data; and where organizational and contextual complexity can only become more complex.

Think of this: not “uncertains”, but “unknowns,” and not just one of them, but many; clearly the panel is raising the stakes here in the unknown, it hard to be well-prepared for anything that happens, so familiarity is no longer something that we can rely upon. Think of what this means for expertise, know-how, assumptions and predictions. This is a highly nuanced description of what work in the future could look like: torrents of high-knowledge content, with complexity not only taken for granted, but accelerating; how well-suited are our present organizations, or leadership styles, for such a situation?

 What would leadership look like?  What would working in such organizations feel like? Would we insist that social interaction requires maintaining such leadership attributes as empathy, humility and presence? How important would it be that leadership’s possesses Emotional Intelligence? How would decision-making change; would it be better informed, more analytical, faster? 

This depiction, offered by our panelists, is fast becoming our world today, and provides a daunting challenge to us as leaders, followers and the shapers of leadership practice. In fact, two-thirds of our session’s participants saw such changes already being a part of the reality of today’s leadership challenge at the opening of our panel’s discussion, and were comfortable advising that leaders “should be checking analytics on a daily basis.”

This is a sobering call to ask “how analytical is present-day decision-making?” Does it even come close to the data-intensive decision-making that our audience envisions? Do we even have the data? Can the organization in its present form even respond to such decision-making?  

Even more reassuring was that none of our participants suggested that this be done “rarely.”  Fortunately, our panelists were not only creative in their portrayal of what could, left untended, be seen as a dystopian future, but they were equally inspired in their suggestions as to how leadership could be reimagined to adapt to these new requirements.

Recommendations for reimagining leadership involved changing both the prevailing metaphor for organizational design, and the metaphor for workers as well. Acting on the comment that “If you believe that human conversation is the greatest form of intelligence ——, then you need a culture that is open to all sorts of digression.”

I am a big fan of conversations as the engines that move ideas, but I have to confess that I’ve never thought of them as the “greatest form of human intelligence, but now that this panel raised it, I am in agreement. And digression as a source of organizational advantage; wow!!  Now, how to operationalize this?

 Not surprisingly the session threw the traditional pyramid over for the more appropriate network metaphor, and followed-up with a bevy of other recommendations, including:

• Thrive in a world of unknown unknowns, by adopting unanticipation as a replacement for conventional strategy; 

Unanticipation” is a stunning term. It means consciously conceding that in the unknown it is futile to pretend that we know what we are doing in advance, and so we need to rethink how we go about appraising our competitive environment and responding to it .

• Adopt the network as an organizing approach to get more and better ideas to respond to as a way of operationalizing unanticipation, promoting distributed decision-making, within the context of a supportive infrastructure; 

• Don’t insist on rules, instead follow the e-gamers’ willingness to allow users to change the rules, but capture and understand those changes; 

Why not “crowd source” rules on the fly, as the situation changes? After all, we all perceive the world differently, shouldn’t we be including such different perspectives in our setting of decision parameters?

• Treat each network member as a sensor of weak signals of impending change (remember that in a world of unknown unknowns, you might not even be able to know what signals you are looking for);

There is probably nothing novel in employing sensors as a metaphor for how a network might function, but it is precise enough to begin to think about how that role would be played out, and how those signals would be distributed to the rest of the network.

• Welcome distractions, insist that your network remain open, inclusive and;

 How would I change my day, and my team’s talents, if distractions were welcome?

• Don’t wait for the environment to explain to you what change might look like, be   experimental in the ways that you search out possible paths into the future. This was illustrated by the employment of minimal viable representations as pretotypes that allow us to interpret weak signals in a more tangible fashion, to move faster and be more daring in searching out the future; 

• Use all of these initiatives to bring more data into the leadership space, and prepare leaders for dealing with such an inflow; 

• Encourage conscious and explicit probabilistic thinking among those in leadership positions; 

• Curate serendipity, it is simply too important to be left to chance. Create conversational networks and experimentation that raise the odds of such unplanned opportunities;

• Prize leadership curiosity over predictability;

 Name three CEOs for whom “curiosity” is an apt descriptor? What would a curious leader, or organization, look like, act like?

• And, above all, make sure to cultivate organizational and leadership mindsets and structure to maximize the likelihood of adapting gracefully to continuous surprise .

I added “gracefully” as an adverb, because it’s not just about responding, but responding with grace.  And, that most likely means sharing the response actions with a larger group of people in a synchronized fashion, while all the while believing that anything that happens is an accident!

About the Author:
Bill Fischer is Professor of Innovation Management, at IMD, Lausanne, Switzerland.

This article is one in the “shape the debate” series relating to the fully digital 12th Global Peter Drucker Forum, under the theme “Leadership Everywhere” on October 28, 29 & 30, 2020.
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Bill Fischer: Can we rely on knowledge or do we need learning in a crisis?

After a hundred years, we are once again fighting a global viral war that is seemingly everywhere and ever voracious. As with the Spanish Flu pandemic, once again we’ve been found wanting in our response, and deficient in our leadership. What’s worked, social distancing and hand-washing, were relatively simple techniques born decades ago. Where we have failed has been in simple leadership skills such as inspiration, vision, curiosity, inclusiveness and imagination. In the worst situations, formal leaders have proved unaware, failed to listen to advice, lacked confidence and decisiveness, and all too often abdicated their leadership roles. This was not leadership at its finest, and we have paid a heavy price in unnecessary lives lost and impact on all our lives. What is even more alarming is that covid-19 is not likely to be the last of the potentially catastrophic challenges that we will face over the next few decades. It is clearly a wake-up call to reassess leadership from top to bottom.

Drucker Forum 2020

This article is one in the “shape the debate” series relating to the fully digital 12th Global Peter Drucker Forum, under the theme “Leadership Everywhere” on October 28, 29 & 30, 2020.
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Interrelated themes

Two key interrelated themes run through the current Covid-19 crisis that must be addressed if leadership is to have credibility in the future. The first is recognizing that learning is more important than knowing. The reservoir of knowledge, so often taken for granted, is actually contextually-dependent, and perishable in crisis situations. The second theme is that innovation, change in general, is a profoundly social phenomenon. Technologies are not enough. It is people who need to be inspired to participate in the often inconvenient struggle against catastrophic environmental challenges.

Learning, not knowing

In a crisis, learning becomes more important than knowing, particularly because what we know may have lost its relevance as a result of the crisis.

Openness, an awareness of new ideas, and a willingness to quickly experiment with them, is something that Peter Drucker recognized in his work on The Effective Executive, when he reminded us that we are all “knowledge workers” and are expected to replenish the working knowledge capital of our organizations as effectively as we managed traditional working capital. Scalable learning is to crises as scalable efficiencies were to profit-harvesting in mature, slow-moving industries. Only scalable learning is much faster in cadence and does not have the benefit of an established learning infrastructure as is in most large, complex organizations.

Learning is social

Making all of this work remains an intensely social phenomenon. Small, autonomous, fast-moving teams, close to the action appears to be the organizational form most appropriate for the improvised choices that are so often necessary. But this only works if leadership roles are shared from the top. Emergence will replace directedness in shaping the organizational structure, and Strategy will fade in importance. Both will defer to tactics which are faster moving and more experimental. We also envision organizational boundaries blurring and ecosystems flourishing in the pursuit of collaborative learning. All of these things are vital to effective responses in the unknown, but all of these require a rethinking of conventional leadership practices.

About the Author:
Bill Fischer is Professor of Innovation Management, at IMD, Lausanne, Switzerland.

This article is one in the “shape the debate” series relating to the fully digital 12th Global Peter Drucker Forum, under the theme “Leadership Everywhere” on October 28, 29 & 30, 2020.
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In the first blog we discussed where we might find ecosystems and the issues of leading in this type of environment. Now we show examples and explore challenges in new ways of thinking.

Putting Darwin in the Strategists’ Seat

Management currently means to lead and direct, and strategy is choosing the direction. But in ecosystems, where diverse members tend to have value-objectives that are different to one another, any effort at organization, much less direction, alarms the community. Ecosystems work best when they maximize chance idea-collisions based upon first-hand knowledge of market dynamics, and where both entities might come out better off as a result. Any suspicion that one partner is trying to control such interactions almost immediately destroys the trust that is key to such co-creation.

Drucker Forum 2019

This article is one in the “shape the debate” series relating to the 11th Global Peter Drucker Forum, under the theme “The Power of Ecosystems” taking place on November 21 & 22, 2019 in Vienna, Austria.
#GPDF19 #ecosystems

Haier expects its employees to be entrepreneurs and has made it easy for them to start-up new ventures, launching many new bets into an unknown future. By requiring employees fund most or all of the venture, Haier has done this at a relatively low risk. These bets raise Haier’s chances to be in the right future places, at the right time, because they are placing many bets and allowing market receptivity to replace strategic direction. The result is that Haier is now venturing into areas of clothes cleaning, such as shoes and exotic fibers, never thought of before, but which represent attractive new laundering opportunities.

Reliance on chance is the very anthesis of strategic decision-making, yet it is eminently suitable when there is little good logic or data on which to base strategies. There is little integrity in such strategies where the future is unknown, and small bets represent a useful way to explore the future, while reducing risks. However this takes control out of leadership’s hands at the very moment when stakeholders look more to leadership, making ecosystems a difficult sell.

Innovating Organizational Platforms

Placing many bets works only if the rest of the organization is able to respond. Platforms are needed for this; organizational bridges between the chaotic world of the external ecosystem, and the regulated internal world within a large organization. Haier is building such platforms around common market affinities; there are platforms for: Biomedical endeavors, Laundering, Food, the Smart Home and others. These platforms share lessons-learned, coordinate solution- and experience-creating activities of disparate free-wheeling microenterprises and provide a selection of shared services, such as branding, legal, HR, etc. They are the enablers of ecosystem participation, and deserve more attention than they currently receive. Without platforms, microenterprises might be unable to execute the new ideas that they are exposed to.

The challenge of moving from emphasizing holding to sharing power

Earlier, when the linearity of value chains was considered an advantage, there was a belief that governance was important if they were to achieve maximum potential.

Power was often the privilege of the largest organizations, but if novelty is prized over reliability, any form of centrality is suspect as a distorting field. How can we argue that legacy assets endows the holder with increased insight in a completely different future? In addition, there is an inherent “what’s in it for us?” question that needs to be addressed in any ecosystem invitation, if it is to be successful in unleashing co-creation.

The Journey Still To Come

Ecosystems will undoubtedly play a bigger role in the continuing growth j of most firms, not because they wish it, but because they will need access to assets and capabilities that are not presently available to them. The real reason for developing ecosystem engagement is to unleash creativity that has for too long been constrained by a traditional linear view. Because of their unpredictability and their spontaneity, ecosystems offer a greater idea yield from the assembled brains than traditional approaches. This journey is not for the faint-hearted. Rather than building portfolios, the challenge is to abjure a reliance on strategy and power, and to, instead, invite others to come onto your organizational platforms and contribute their dreams, all of which requires a willingness to lose traditional managerial control.

About the authors:

Bill Fischer is Professor of Innovation Management, at IMD business school. He coauthored the book “Reinventing Giants” which describes Haier’s évolution as an innovative organization and he and Simone Cicero have been working with Haier developing the story of  Haier’s emergence as an ecosystem participant. He was inducted into the Thinkers50 Hall of Fame in 2019.

Simone Cicero is a designer and facilitator, speaker and entrepreneur, with a special focus on open business models, both in software and in hardware.
Simone created the first completely open source methodology for the design of Platforms and Ecosystems, The Platform Design Toolkit, that has contributed a new design domain emerging.

This article is one in the Drucker Forum “shape the debate” series relating to the 11th Global Peter Drucker Forum, under the theme “The Power of Ecosystems”, taking place on November 21-22, 2019 in Vienna, Austria #GPDF19 #ecosystems

Value-chains have been a mainstay of organizational strategy; they are designed for reliability, and a well-run value-chain will inevitably reduce operational surprise, but they are also linear and therefore slow and limited in how they respond to a fast changing environment. Ecosystems however, with many possible partners self-defining how they might interact, are better suited for novelty than for routine, and can be perfect when new ideas or experimentation are required.

Drucker Forum 2019

This article is one in the “shape the debate” series relating to the 11th Global Peter Drucker Forum, under the theme “The Power of Ecosystems” taking place on November 21 & 22, 2019 in Vienna, Austria.
#GPDF19 #ecosystems

As we move into a future characterized by hyper-connectivity, there will be an unprecedented opportunity for the sorts of innovative spontaneity that ecosystems excel at to become a competitive differentiator; but they need leadership to think differently regarding strategy and organizational boundaries.

Our work with ecosystem pioneers offers guidance to those managers who will face these choices in the near future, and we highlight some especially intriguing scenarios.

Ecosystems are not new in organizational discussions. The richness of their randomness in promoting sustained vitality in biological communities is well-established, and their possible application to economic activity might provide new forms of expertise in the face of ever-demanding customer expectations, without adding to the balance sheet.

Ecosystem potential is often hiding in plain sight

Many of the ecosystems we are working with were already in place, without being recognized for the potential that they offered to generate ideas. The traditional process-linearity and role-sequentiality of value-chain thinking acts as a limiting factor in envisioning possible sorts of partnering.

One European tier three commodity supplier for the automobile industry has told us that they are stereotyped by the efficiency with which they play their current role. There is no thought given to what they could add in customer experience innovation, and the invitation to redefine their role never comes. This is a testimony to limited imaginations without tangible evidence of ecosystem possibility. But In Copenhagen, concern over a lack of software design talent was the catalyst that led to public recognition of an already existing, but latent, local ecosystem that was already exceling. Once recognized, it was much easier for stakeholders to invest in its future development, but the recognition was the essential first step. Leadership imagination is an essential ingredient in such situations, but former head of GE’s business innovations, Beth Comstock, has argued recently that that the ability to “imagine forward” is not as abundant as we might have hoped.

We see ecosystems in nature but our leadership imagination does not inherently make the leap to business as they require a light touch on the strategy wheel allowing generosity in the way in which that value is distributed among partners.

In our next blog, we explore the challenges this produces for existing management thinking, and how that might be changed.

About the authors:

Bill Fischer is Professor of Innovation Management, at IMD business school. He coauthored the book “Reinventing Giants” which describes Haier’s évolution as an innovative organization and he and Simone Cicero have been working with Haier developing the story of  Haier’s emergence as an ecosystem participant. He was inducted into the Thinkers50 Hall of Fame in 2019.

Simone Cicero is a designer and facilitator, speaker and entrepreneur, with a special focus on open business models, both in software and in hardware.
Simone created the first completely open source methodology for the design of Platforms and Ecosystems, The Platform Design Toolkit, that has contributed a new design domain emerging.

This article is one in the Drucker Forum “shape the debate” series relating to the 11th Global Peter Drucker Forum, under the theme “The Power of Ecosystems”, taking place on November 21-22, 2019 in Vienna, Austria #GPDF19 #ecosystems

For some industries in the West, this question will appear somewhat ridiculous. The American textile and apparel industries, for example, will tell you that the evidence is found in the blood on the floor – their blood, on what used to be their floor. Similarly, American and European metals industries and wind-turbine and solar panel producers will echo that. But despite all the pain that they have experienced, they are wrong. Far from being disruptive, in these industries, Chinese players have done little that has been different from the practices that they found when they entered them.  What the Chinese competitors did was merely to lower costs and lower prices, benefitting from the so-called “China price.” They were “displacers”, not “disrupters.”  Is it realistic to assume that this will continue to be the pattern for the future?

The difference between displacement – outperforming existing market incumbents at their own game, and disruption – changing the game, is a strategically important one, no matter that the pain felt might be similar. There is good reason to believe that, to date, China has been more of a displacer than a disrupter. That should be good news for Western interests because displacement can be combatted in various well-known ways including process improvements and government trade actions.  Moreover, cost advantages tend to be temporary sources of competitiveness.  Actual disruption, on the other hand, is a much more profound challenge, and one that calls for a real transformation of the challenged incumbent firms; something, as the Chinese and we have found out, that is considerably harder to achieve.

The catch is that most of our ideas of innovation are technology based, but what if we rethought these impressions by broadening our definition of “innovation” to that of “offerings”, or, better yet “customer experience”? Then, China’s innovative potential shifts significantly. Xiaomi’s phones, which are technically not disruptive, suddenly become vehicles for changing the cadence of relating to customers, as they come to appreciate Xiaomi’s weekly updating of its OS; this type of sustained behavior can be highly disruptive! Haier’s organizational reinventions allowed it to accelerate the time to market for its Tianzun advanced household heater/air conditioner/air purifier; again, a potentially disruptive advantage in what is otherwise a slow-moving industry. All of these are real innovations, despite not being technical, and all of them speak to disrupting business as usual, rather than a mere lower cost model.  In fact, it is possible to interpret the departure of BMW’s core electric-vehicle design team, along with that of two Tesla executives, to Future Mobility Company, as talent looking for a chance ignite a critical disruption in the EV industry. Such is the attraction of the sort of business model disruption we are sensing in China today.

What is so ironic about the current situation regarding China’s innovation trajectory is that we in the West have for so long prided ourselves on our business acumen and customer centricity, while stereotyping Chinese competition as being simply “low cost.” As a result, our technology focus when we speak about innovation consigns China to the less intimidating role of displacer rather than a disruptor. But, if we recognize innovation as being more about things such as customer experience and less about technology, then China’s challenge becomes considerably more disruptive than we have previously given it credit for, making China a much more formidable competitor in the future.

At a recent conference on “China’s Role in the Global Innovation System,” at Duke Kunshan University,  we saw some early glances at China’s disruptive possibility, punctuated by BGI’s [formerly Bejing Genomics Institute]  President Mr Wang Jian,  who claimed that the genomic research powerhouse is truly a “rule-breaker,”.  Similarly, sophisticated M&A and incubator activities by established players from both the public and private sectors all attest to a quickening of the pace of China’s innovation.

However, disruption may not yet be the norm, and innovation may not be the break-out source of economic growth that many envision for China in the immediate future. The major barrier to be overcome is more likely entrepreneurial rather than technical. Chinese entrepreneurs, whom we spoke with, presented a picture of their innovation scene that appeared to be anything but disruptive.  Was entrepreneurial innovation happening in China? Yes! Without a doubt, there was tremendous innovative activity taking place! But, Chinese entrepreneurs, we were told, were too short-term oriented to create truly disruptive change; and the country’s cumbersome state-owned enterprises were too slow.  Some even stated that China’s insistence on domestic standards was resulting in less ambitious innovation; the education system was not supporting appropriate talent development, and there was a general lack of trust throughout the innovation ecosphere. All in all, the impression was far less disruptive than the popular press, Western or Chinese, has been portraying. China was still accelerating through innovation most often along an existing S-curve in nearly every case, not creating new ones.

What we also heard were sentiments such as “China’s core innovation strength remains dependent upon manufacturing-based activities, or where the quest for short-term profits prevailed there was no meaningful innovation.”  It was admitted that “made for China,” rather than “made for the world,” was often easier, cheaper & more profitable than pursuing truly disruptive changes. We were told that returning young Chinese scientists also avoided new challenges, preferring, instead, to  “continue their advisor’s work.”

In fact, despite the really disruptive accomplishments of BGI, the overarching message from most experiences were best captured by entrepreneurial drone-maker Ehang’s Derick Xiong, who sheepishly admitted that: “I worry that most Chinese firms are not doing real R&D.  They are only doing application. It is possible that in 10-15 years, China could once again be well behind.”

There is no surprise here. In almost every industry, China’s innovation has been along existing S-curves rather than creating new ones; displacement much more than disruption, as long as the S-curves are seen as technology trajectories, as is traditionally the case.  Nonetheless, there are enough suggestions of business model disruption appearing on the China scene that it is highly conceivable that we soon might be entering a period of two-speed change: continued displacement by ever more competitive Chinese firms, and occasional disruptive business model innovation appearing in less familiar sectors of the Chinese economy, powered by emerging entrepreneurs.   These emerging formulas for disruptive success are not easily identifiable, though it is evident they will more likely be the product of significant firm-level behavioral discontinuities than evolving out of the prevailing status quo in the bulk of China’s industries.

[This is a longer version of the blog that appeared in HBR]

About the authors:

Bill Fischer is Professor of Innovation Management at IMD, Lausanne, Switzerland. He is the former Executive President and Dean of the China-Europe International Business School (CEIBS) in Shanghai, and a co-author of Reinventing Giants, a study of business model and organizational culture reinvention at Haier.

Denis Simon is Executive Vice Chancellor of Duke Kunshan University.  He is the co-author (with Cong CAO）of China’s Emerging Technological Edge, which looks at the supply, demand and utilization of high end talent in China

Far-fetched, you think? Well, in fact, the what if is no longer speculative; it is here already. Talk to people in such professional service industries as: private banking, auditing, consulting, even engineering, and you begin to hear concerns about the commoditization of professional knowledge. A consulting civil engineer [the field in which I was first educated, and still find so deliciously complex] admitted to me that much of what you need to know in that field is on line, and that their corporate clients were a new breed who didn’t so much want what he and his colleagues already knew (since that was easily available), as what they didn’t know. Increasingly, tax preparation is being automated, and even auditing is going the way of algorithmic review and big data “sweeps” instead of sampling. Artificial intelligence is writing content that you reading [not this!], and Jancis Robinson, the wine expert and writer, recently wrote that she has “gone from being a unique provider of information to having to fight for attention.” Increasingly, expertise, and the role of “the expert” is losing the respect that for years had earned it premiums in any market where uncertainty was present and complex knowledge valued. Along with it, we are shedding our reverence for “expert evaluation,” resigning our regard for our Michelin guides and casting our lot with the peer-generated TripAdvisors and Yelps of the world.

In fact, as if in a perfect storm, not only is the character of expertise changing, but at the same time, new client needs, and new clients, are emerging and the potential for new delivery of expertise content is also changing in fundamental ways. Firms are fearful of being vulnerable to an unknown [not uncertain] future; and at the same time, conditioned by living in an internet world, they expect instant knowledge responses at reasonable prices. Expertise providers are finding that the models that they have long-relied upon [e.g., the familiar five forces model] are losing some of their potency, as they are based upon assumed knowledge that is increasingly difficult to determine [What industry are we in? Who are our competitors? What are our core-competencies?]. Finally, in a world where advancement is being driven more by experimentation than by reliance upon experts, and where the need for advice has moved from episodic to continuous, the entire delivery model for expertise is also being reinvented, leaving an entire expert value-chain from classical university education, post-graduate professional certification, to continuous education, in disarray:

If expertise is over, or at least no longer commanding its traditional premium in the marketplace, and if the old ways of conveying expertise are also in upheaval, what then do experts have to offer? An answer might be found in David W. Maister et.al.’s trust equation for the professional service firm:

If trustworthiness is the coin of the realm for becoming a trusted business advisor, and if Maister and his colleagues are correct in describing the factors that determine trustworthiness, then it would appear that while Credibility is being commoditized via popular access to expertise and artificial intelligence, Reliability may actually be raised by the reduced variance associated with AI, but at the same time it becomes attribute which is presumably available to all, leaving Intimacy and Self-Orientation as the two remaining variables that are independent of algorithmic thinking and ubiquitous availability. They must be exactly what Richard Straub, President and founder of the Peter Drucker Society Europe, had in mind when we he observed:

Being human is consciously to bring judgment, intuition, creativity, empathy and values into play. In business, it is the domain of entrepreneurial thinking and innovation, of weighing decisions, of collaboration and trust – qualities that are utterly different from the machine logic of networked sensors and processors.

Not surprisingly, because they are so nuanced, these are also exactly the topics that are most difficult to master through a reliance upon a traditional business education. While most business schools offer coursework in entrepreneurship and innovation, there is considerable doubt as to what exactly these subjects mean and how best to convey such learning. Judgment and intuition are even more difficult to define, yet are probably even more important. When Straub suggests that “management is in need of a second curve that sets a new positive path away from the diminishing returns of the first” he is undoubtedly correct, but what might that second curve look like and how to prepare for it?

Innovative organizations require leaders who are role models for living innovatively. While not necessarily being the source of new ideas, these leaders of the future must be comfortable in participating in an organizational environment where everyone is responsible for innovation, where others know more, where experimentation is the key to learning, where inclusiveness is necessary to assure that no good idea goes overlooked and where risk-taking and even daring are the hallmarks of a successful strategy. In a world where expertise is dead, no longer will functional training alone be sufficient to rise to the top, or to take a lead-role. New, more intuitive and relationship-oriented skills will prevail. One is reminded of Apollo 13’s Project Manager, Gene Kranz, possibly the person in the room with the fewest formal educational credentials, yet the one irreplaceable person on the team, thanks to his ability to inspire, direct and maneuver a team of seriously smart people towards a success that their expertise had convinced them was unattainable. In addition, Leadership in the future will undoubtedly be more metaphorically digital, in that it will be: faster, more connected, more inclusive, more risky, but it will also be more intimate and caring as well. In looking at the development of leaders in a future where technical expertise is a commodity, we might well pay attention to Kevin Roberts, Executive Chairman of Saatchi & Saatchi, who suggests that all of this is vivid testimony to “the idea of business management as a liberal art.”

About the author:

Bill Fischer is Professor of Innovation Management at IMD. He is co-founder and director of IMD’s partnership program with MIT/Sloan: Driving Strategic Innovation.