On The Horizon Weekly – Ecosystem Structure and Branding

Organizational Operating System | Ecosystem Branding | Micro-Communities

Image by Alina Grubnyak

New York NY 2019-07-16 – We look at how a platform company can structure its organization to support its ecosystem, and to extend that corporate organization beyond its own employees out into the ecosystem itself. Branding that ecosystem is almost part of the platform. It’s certainly one of a platform provider’s necessary skills.

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The Latest from On The Horizon

Lee Bryant on Digital Leadership – Inspired by a presentation from Lee Bryant, Stowe Boyd looks at platform-centered organizational structures such as the one implemented by multinational white goods company the Haier Group. Platforms plus services equals the new organization operating system.

Moving onto a platform-centered organizational model shifts the linear and vertical supply chain organization to a parallel and horizontal ecosystem model, where the new operating system is the combination of communications, conventions, and contracts — and the protocols of interaction and governance — that connect them together.

Bryant says such an organization is less dependent on managers telling people what to do, but rather setting a course, coaching, and acting as change agents for continuous improvement. Stowe adds:

This focus on continuous design is exactly what John Hagel means when he talks about scalable learning, where everyone engaged with the organization, not just management, is engaged in learning — including the customers — and iteratively improving processes, services, and products to better meet the needs of the customer.

Stowe compares Bryant’s “reverse hierarchy” model with customers on top with one of concentric circles where customers make up the center hub.

The value-creating functions (customer-facing microenterprises in Haier’s terminology) form the next concentric circle outward. They are directly involved in customer interaction and innovation, and they get back from the customer the transfer of money — in exchange for goods and services — but also new insights into customers’ needs and wants. This is the starting point of Hagel’s scalable learning.

He notes:

The concentric model represents something more revolutionary that flipping the top-down model of 19th- and 20th-century management principles and processes upside down. The true revolution lies in embracing Lee Bryant’s model of a new business operating system, that moves past the linear, vertical supply-chain thinking of the industrial era, and adopts a massively parallel, horizontal ecosystem model at all scales, for value delivery and learning, and for all participants.

Based on discussions with Haier, Stowe analyzes how the company pictures its customer-centered organizational structure.

Haier operates on an ecosystem model in its many lines of business. In the diagram we see ecosystem micro-communities, like the Internet of Water, the Internet of Clothing, the Internet of Kitchen), and the Internet of Food.[…]

The concept of ecosystem micro-communities (EMC) is the newest stage in how Haier thinks about organizational evolution. This builds on the basic entrepreneurial business unit of Haier, the microenterprise, and the ecosystem micro-community is made up of a network of microenterprises, including microenterprises within Haier and within ecosystem partners.

From an internal perspective, both microenterprises and partners from Haier’s EMCs would spontaneously embed in user-centered EMCs to achieve the vision of creating Users’ experience of a better life, and reflect the self-organized, flexible and efficient characteristics of ecosystem micro-communities as realized by Haier.

From an external perspective, each EMC would be directly involved in user interaction and innovation, and they get back from the users the transfer of money — in exchange for goods and services — but also new insights into users’ needs and wants, to further improve the users’ experiences. This is the starting point of Hagel’s scalable learning, as discussed earlier in this post.

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Successful Ecosystem Brands Are Win-WinI take a look at how branding is evolving as platform-based ecosystems become more prominent in industry.

Companies orchestrating platform ecosystems must evolve their branding strategy beyond products and platforms to the ecosystems themselves. A successful ecosystem brand is a win-win situation for its participants — including customers — and helps enable the continuous co-creation of the ecosystem itself. The shared value of that ecosystem encourages its participants to cooperate in the creation of user value.

My analysis of how Haier is doing it is based on materials from and conversations with Haier personnel, and the analysis done by the consulting/advertising giant WPP’s brand valuation done by its Kantar Millward Brown unit, as presented in its BrandZ Top 100 Most Valuable Global Brands report.

Haier officially announced its strategy to create the IoT ecosystem brand in 2018, following on the heels of its product and platform brands. It describes the product brand as that of typical enterprises and the platform brand as that of e-commerce companies. That progression can be illustrated by the schematic below.

Product branding focuses on delivering high-quality products that can command premium pricing. Good platform brands must supply high quality services that increase the flow of transactions on the platform. Its ecosystem aims to provide high-quality, heartfelt, and interactive experiences to customers over the lifetime of the engagement.

Haier uses connected appliances and what it calls its Touchpoint Network that connects participants through a variety of online and offline means, including social portals, stores, and service providers. It develops an ever-changing user “demand map” and dynamically establish a holistic ecosystem contributing to adaptable, customized service solutions and products. It can explore common and diversified demands from both urban and rural communities.

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Stowe initiates what will be a series of analysis pieces On Haier’s Ecosystem Micro-Communities — Part 1.

One way to differentiate ecosystem-based organizations is to consider them as horizontal and loosely-aligned networks of self-organized, self-driven, self-optimized organizational units, which Haier calls micro-enterprises. However, microenterprises still operate within the principles and managerial environment of Haier, and therefore their autonomy is not absolute. This may sound like a weakness, but the loose interdependencies between the members of an ecosystem are a source of strength, not a flaw in organizational design.

Stowe’s key takeaway: the modern ecosystem platforms must act as both transaction and learning engines –

One of the two engines of ecosystem platforms is the learning engine, the other being the transactions engine (the part that most people think about). The apparent chaos of a network of loosely-connected, but interdependent entities is, in fact, the best sort of learning engine, where the learning comes at low cost and as the outcome of already necessary communications between the parties. This leads to not chaos, but unintended order.

The Internet of Things and the rise of the platform era sponsoring innovative company organizations that can extend beyond corporate boundaries.

In this, the Platform Era, business and society are adapting to new models of communication — such as the use of protocols built into the tools, applications, and infrastructure of information technology platforms. As a result of those new communications channels, along with intentional organizational changes to operate in a more agile and responsive way, platform businesses can be considered as more fast-and-loose than the tight-and-slow organizations that are the dominant model across the world, today.

Stowe describes how Haier’s organization of teams organize into mini-enterprises around specific customer needs.

Haier’s CEO, Zhang Ruimin, has developed a set of principles that explore a model of interaction between micro-enterprises that are aligned toward shared ends and to dispel the notion that micro-enterprises do not have relationships with each other. This concept is called Ecosystem Micro-community.

Consider a Haier micro-enterprise that was formed to pursue a new market niche — for example, Community Laundry, an app-based service to allow college students to reserve dormitory washing machines and pay digitally. The team that created the idea created relationships with other micro-enterprises within Haier to help with marketing, the Internet of Things programming, and so on. That network of Haier micro-enterprises also aligned with dozens of external partners, who offered various value-added services to the students, the users who are the principal recipient of the value added by the others.

That ecosystem of Haier micro-enterprises, the external partners, and the community of users that participate in the design, development, and operation of Community Laundry can be viewed as an ecosystem micro-community (EMC). Any EMC can be viewed as operating at two scales at once. At the most micro scale, the community is an ecosystem of loosely-aligned units (each self-organized, self-driven, and self-optimized), with the Community Laundry micro-enterprise playing the role of micro-community owner and orchestrator. At a more macro scale, the network can be viewed as a single entity, a coherent ecosystem called Community Laundry. Both are true at the same time.


Elsewhere

Shopify and the Power of PlatformsBen Thompson is always lucid about industry and company structures, even if he’s a little obsessive over the difference between what he calls Platforms and what he calls Aggregators. Here, he posits that platform companies are the best competitors for aggregator companies (Amazon, Google, Facebook) by contrasting Shopify’s and Walmart’s approaches.

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The Four Biggest Challenges Digital Platforms Need to AddressMIT’s Initiative of the Digital Economy held a summit that Stowe attended and is in the process of writing up. Prior to that, the IDE sketched out for incumbents what those challenges mean: regulatory constraints, growth via adjacent markets, a shift from B2C to B2B markets, and emerging tech.

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Road-Tripping with the Amazon Nomads – is a very long, but fascinating story in The Verge about Amazon’s unofficial and only semi-supported ecosystem members.

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Meanwhile Amazon pledges to retrain 100,000 of its workers by 2015. Gizmodo is skeptical Amazon Says It Will Retrain Workers It’s Automating Out of Jobs. But Does 'Upskilling' Even Work?.

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Street Fight’s Mike Bolton thinks Amazon might build out a chain of on-demand kitchens to take advantage of its budding food delivery business: What’s a Cloud Kitchen? Amazon’s Next Move to Revolutionize a Major Shopping Sector. I’m not sure the margins or scale would justify such a thing for Amazon unless it’s highly outsourced.


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