Q6: Seized Opportunities: Leveraging Resources with Ecosystems
Our foundations series, summarized in FQ1, focused on the prospects of ecosystems and their respective components. We want to make it more tangible in the coming pieces by underscoring a few pain points, in business and beyond, where ecosystems come through as valuable contributors. This time, I’d like to frame it around the paradigm of missed opportunities, and how underutilized resources can be strategically acquired and subsequently deployed to improve organizational outcomes.
Prospects and Challenges of Interconnected Value Creation
No one is a stranger to the rapidly changing conditions of value generation. Over time, with our significantly enhanced abilities to coordinate (and doing so cheaply), we have come to a point where the resources of others can now serve as extensions of our own, and vice versa. This means that in the interest of building better, there are more reasons now to pay less attention (naturally to a degree) to where the necessary resources are coming from. As bad as it could be in the contexts of misinformation and beyond, a slight source agnosticism can constitute a huge positive for value creation — hence, open-source initiatives (not the focus of this piece, but certainly worth highlighting).
We’re seeing part of this mindset being adopted by larger organizations — but not without caveats. On one hand, the horizontal integration and associated collaboration we’ve seen organizations embrace are allowing us better products and services with lower barriers to mass production and/or distribution. Samsung being featured in Apple’s supplier list goes to show that even main competitors see aligned incentives for moving together toward a mutualistic outcome. On the other hand, these seemingly collaborative dynamics can leave entities vulnerable and overly dependent on partnerships — derived from the increase in interdependence that we’ve discussed previously. Think of the product example that was brought up in Q3, where the semiconductor chip shortage stopped some of the most prominent companies in the world from distributing their products for months and years. What to do about the downside?
First, it’s worth noting that much of this could be attributed to strategic errors — something we notice quite frequently through our ecosystem advisory. Leaving vital operations and activities in the hands of others is not to be taken lightly. One would think that the centralization of semiconductor chip manufacturing could have severe repercussions and should be accounted for. I’m naturally oversimplifying the situation here, but there will always need to be some thorough consideration of how to build partnerships to optimize ecosystems and their respective integrations (both horizontal and vertical). How important is a particular activity or point of production to uphold for a given holistic outcome? To what extent is control over this particular activity a core part of the competitive advantage? How does said competitive advantage relate to the parties with which you seek to collaborate? How can the partnership in question leave you vulnerable to opportunistic behavior? Questions of this nature should be asked and properly answered at any point of deployment.
Second, we’re getting better at this. Stronger coordination and network effects are together accounting for many of the interdependencies that result from larger ecosystems, regardless of whether they are service- or product-oriented. Productivity metrics certainly don’t provide the full picture, but to see how they reflect a significantly higher boost correlated with IT investments (for which the main task is often considered coordination and interdependency management) over time should provide a glimpse. The flexibility of coordination and options is significantly reducing the risk of collaborative dynamics between organizations, to the point where they become increasingly incentivized.
I want to be clear that this dynamic does not curb conditions for healthy competition — it just changes the nature of things. The core notion still holds — whoever provides the most value has the best prospects of getting more back. If a prominent party had anticipated the semiconductor chip shortage and accounted for that through a new production line, Sony and many others who were in desperate need to uphold their operations would with no hesitation include them in their respective product ecosystems (inevitably decreasing the market share of existing actors in that space). In less severe situations, where it’s simply a matter of price optimization and streamlined processes, you will see the same outcome. The point is that if something could be adding value to your mission and organization, you can acquire it with significantly less hassle and risk.
This explains how when we enter a collaboration, there are prospects for managing the resulting interdependencies. The problem, however, is that we seem to carry a competitive mentality into unwarranted contexts, to the point where collaboration doesn’t even become an option. This is not only worth considering for relationships between organizations, but perhaps even more so within organizations, where the holistic goals are assumed to be similar and thus incentives more aligned. But here, data silos of various kinds all too often get in the way. Teams do not communicate enough, nor do they co-strategize as often as they likely should. This applies to any form of organizational collaboration, from product development and client implementation to sales and operations.
The frequency with which I’ve seen teams within an organization reinvent the wheel separately (wasting money and time accordingly), or even work against one another (often subconsciously) in achieving interconnected goals, is quite high. The suboptimal conditions this yields for productivity and organizational prosperity highlights the importance of treading the fine line between good and bad friction (a core research area), but we’re moving toward contexts in which seamless collaboration has gone from a nice-to-have to a must-have, and organizations need to adapt to keep up.
Seize Opportunities by Orchestrating Resources
Despite digital innovation having lowered the barriers to collaborative efficiency, it doesn’t just “happen.” It becomes increasingly important to consider how these investments do not form a direct cause for the intended effect. Resources, regardless of their nature, often do not perform on their own. Rather, they afford performance. The resource-based view (RBV) makes a claim for how strategic resources (”assets that are valuable, rare, nonsubstitutable, and inimitable”) are what set competitive enterprises apart. However, in considering this view, it is increasingly important to highlight that none of these resources come for free, and once acquired, they still cost to maintain and deploy. In fact, RBV often highlights the alignment (as opposed to the mere presence) of resources as what leads to desired outcomes. So, if one intends to build a resource-based competitive advantage, one needs to make it a sustainable endeavor from the get-go — in acquiring, aligning, deploying, and maintaining the resources that make it all possible.
The productivity boosts we mentioned earlier that seem to result from IT investments have been limited in the short-term, but game-changing in the long-term. Why? Researchers would attribute this dynamic to an initial lack of alignment, and how structures that account for resistance to change and optimized workflows in organizations take months and years to implement. In fact, these structures and processes would be considered strategic resources themselves from the standpoint of RBV. Even for interorganizational ecosystems, there is a distinction made between community-focused and structural ecosystems, as the former is often deemed incapable of solving the most direct challenges in feeding a desired outcome for all parties involved (although they do prove useful in many other contexts, like innovation). Structural ecosystems are more difficult, but they are the dealmaker for sustainable, collaborative action to be geared toward specific missions.
So, what is then really missing for organizations to surmount said difficulties, and benefit from the collaborative dynamics that have been shown to improve conditions, almost universally? The answer is orchestration. The structures and processes that are associated with creating the right conditions for value generation, both within and between organizations, are very often neglected in the pursuit of the end result. In other words, the “strategic” in “strategic resources” often is disregarded, leading to a lesser ability for organizations to leverage all the assets at their disposal — both those housed in the given organization and associated collaborators/partners — in the interest of competitive advantage.
This is why more recent research on RBV has emphasized the need for various actions on behalf of managers and decisionmakers to “synchronize” strategic resources, and subsequently reap the benefits. This means accounting for modular architectures, aligned governance, decentralized decisionmaking, incentive structures, and more. The case is made that we often talk about the importance of strategic resources, while rarely underscoring how to grant individuals the locus of control to enable said resources for large-scale, high-complexity endeavors. Figure 1 (from D’Oria et. al, 2021) concisely visualizes some of the important components, and the performance that could follow:
Figure 1. “Integrative Model of Strategic Resources, Orchestration Actions, and Performance” (from D’Oria et. al, 2021)
There is much more to say on this, but the main point I’ve tried to make here is that if we conclude that valuable resources now more commonly are distributed across various organizations and environments, and we’re looking to leverage said resources in a context where complexity of interaction is higher than ever, we need to be increasingly conscientious about how to do so sustainably. If we want to stay competitive, we need to realize that it entails learning how to tread the same waters that can lead to semiconductor chip shortages and subsequent distribution bottlenecks, but equally to better products, services, and value propositions than we have ever seen. Some are already doing it, and it’s time to get other purpose-driven organizations on board.
Bardia Bijani
Managing Partner, FuzeQube Group
