Q7: Trusted Allies: How Ecosystems Streamline and Preserve Value Creation

In Q6, we covered how optimizing resources in various shapes and forms is what ecosystems act upon. Equally, we brought up the importance of orchestration in making ecosystems more actionable. But there is a barrier to every form of collaboration — trust. This time, we’ll discuss how carefully transitioning between various forms of ecosystems can help build and maintain trust to optimize business performance.

The Challenges of Trust

Trust is an essential component of all relationships, professional and personal. In business, it’s been shown to improve performance on so many ends. For KPIs, it means less money and time spent on risk mitigation, gauging partnerships, and micro-management. More holistically, it makes for better, more sustainable work- and collaboration environments — something I hope all entrepreneurs and managers prioritize. Nonetheless, that trust has to be somewhat (and somehow) justified. Opportunistic behavior in business and beyond serves as a constant obstacle, and to the extent that we can circumvent it, we certainly want to.

So, how do we know when to trust? When the degree of separation is low, life’s easy. We can gauge the individuals and entities in our respective environments directly and in real-time without assistance from others, or through a direct referral from someone we trust. The latter scenario implies the importance of having trusted intermediaries that bridge the gap between various players. Without them, building trust can be seriously taxing and time-consuming. Now, what digital innovation has done over time — particularly through platforms — is to enable trusted intermediaries for scenarios when the degree of separation remains high. Or, depending on how you look at it, platforms have the ability to reduce the degree of separation through various mechanisms. These intermediaries are everywhere — in financial contexts with Visa and Mastercard, in shopping with Amazon, in ridesharing with Uber… I could go on. They conveniently exist for many reasons, but a big one is ensuring that despite not knowing the service provider (whether it be a business or individual), customers can have enough trust in the vetting layer provided by said platforms to indirectly access said services. Through our trust in one party, we can trust everyone associated with them.

It goes without saying that trust and prospective utility go hand-in-hand. On a larger scale, to the extent that an independent infrastructure can serve as the intermediary, likely the more promising for trust. This is the entire point of the emerging field of trustless systems, which use blockchain and associated smart contracts to enable transactions without the need for companies to serve as middlemen. It takes opportunistic behavior out of the equation, at least to a degree. It just so happens to also leave lots to be asked in terms of flexibility of utility (and cost), which is why platforms with centralized control are still often preferred — something that might change in the years ahead. I’ll likely write a separate post on the topic, but let’s leave it there for now.

Now, think about how many of these platforms you use in your every-day. Hopefully it gets the point across that we are serious about avoiding opportunistic behavior, and rightfully willing to pay a hefty premium to do so (the business models of these platforms require us to). Equally, we’d prefer to cheaply reduce opportunistic behavior and spend that money elsewhere if possible. So, if there are prospects to increase the baseline level of trust, we’d jump at it. Now, that is a job for ecosystems. But, there are some variables to take into account.

Trust in Platforms

On one end, more trust feeds the resource maintenance function we discussed in Q6. On the other, more trust also means attaining desired resources quicker than what would have otherwise been possible (from an academic standpoint, we’d be talking about reducing search costs). But, there are caveats. The different factors that play into how these value propositions come through are many — Afuah’s (2013) model around network effects outlines this paradigm nicely:

Figure 1. “The role of structure, conduct, and basic conditions in network-related value creation and capture” (Afuah, 2013)

I won’t go through all of it (you should read the paper!), but the categories outlined should convey that in the pursuit of setting the right conditions for trust to be built, we need to wary of the complementarities a particular ecosystem — whether it be digital or organizational — is putting to use, and to what extent the environment in question allows it all to unfold.

Let’s consider platform ecosystems again, and what this might mean for them. Through their network effects, they allow us a lower degree of separation and more streamlined access to resources and potential partnerships. However, in the interest of leveraging said network effects, we usually lose out on some core vetting abilities we have beyond platforms. This is where we rely on various mechanisms, like reputation systems, to help us make decisions based on the collective experience and intelligence of the ecosystem. Nonetheless, these systems are not bulletproof. Not to pick on a particular solution, but I’m sure many of us have been to places highly rated on Google Reviews, only to face disappointment. Why? Because Google Reviews was made to be more open-ended and accessible — in some instances, great, in others where the stakes are higher, not so much.

In business and professional life, networks and partnerships are naturally way more than “just” a sub-par meal at a restaurant. The level of commitment that a particular transaction implies within a platform, and how that platform accommodates the conditions in question is, inter alia, a focal point. For instance, you likely don’t require much trust to simply chat to someone on a platform. Now, if you also want conversations to explore whether you could work with someone, the order is taller. That is why LinkedIn, for instance, needs to be centered around accommodating professional activities in a way that fits such a context.

Without picking it all apart (that would deserve a full article), think about the difference between LinkedIn and, say, Twitter — both of which are social media platforms with communication properties at the forefront of their respective value propositions. Twitter was made as a platform for practically everyone who wants to communicate and coordinate, whereas LinkedIn only targets the segment of professionals. What this means is that when you interact on LinkedIn, you know more of what to expect. Regardless of whether you are responding to a connection request or scrolling through public content — if it seems to have nothing to do with business or professional life, we often feel like it’s out of place. In other words, we have slightly more constraints around the use of LinkedIn compared to Twitter — which, in my view, is a good thing for trust (I consider LinkedIn one of the most robust platforms out there).

Transitions: Making Ecosystems Actionable

With this, going back to what the theory suggests, we should probably make a distinction between the two relevant types of ecosystems, and the role they play contextually. On one end, we have community-focused ecosystems, which put the actors in question at the center of the constellation. These are less concerned with what involved actors are up to, and mainly mobilize around some common denominator or interest. On the other end, we have structural, or activity-focused ecosystems, which are about how actors coordinate and act cohesively to achieve certain outcomes. These forms of ecosystems are usually presented as two discrete options, but with so many variables involved, we inevitably have a spectrum to consider.

Equally relevant, ecosystems are a recursive concept. Within a larger ecosystem, you have a bunch of sub-ecosystems of various natures — and for each smaller subset, they get more niched. In that sense, they also get around to becoming more activity-focused, as more clearly defined subsets are bound to result in a higher probability of synergy or meaningful interaction between parties. In setting itself up for a particular segment or audience, LinkedIn has thus enabled a focus on features and functionality that better speaks to their needs and intended outcomes, and sets the precedent for more meaningful structures to be built by actors independent from its largely community-focused nature.

This all may seem trivial, as we use these platforms every day — but these transitions from community focus to structural emphasis matter. The point of this discussion is to highlight how we’ve already lowered the barriers for trust building where the level of commitment is low, but that we rely heavily on already existing infrastructures (read: “platforms”) for this to be possible. So, what if we need to be building these structures for ourselves? If the case is made that technology has limited utility without accompanying organizational change (in the form of processes and incentives), then we should be equally capable of fast-tracking trust building when platforms aren’t the right fit, or have already exhausted their utility by finding the appropriate actors.

What mechanisms do you use to incentivize a team? Once you have orchestrated an ecosystem around a particular activity, how do you keep it diversified? How do you ensure your collaborators stick around? And, of course, how do you ensure value is being created beyond the sum of the individual parts over time? These are only some of the questions that must be answered. Community-driven techniques, which enable ecosystem members to participate more actively and receive more transparency from decisionmakers, are absolutely key in making this a sustainable endeavor over time — especially with increased expectations on personalization and distributed decisionmaking across various contexts. Nonetheless, there is more to explore on this end, and it all requires streamlining trust building and transparent collaboration.

As the ecosystem orchestrator — whether we consider an organization like FuzeQube, a platform like LinkedIn, the main ecosystem instigator for a particular product (say Apple), or the manager of a smaller department in a corporation — one is in a position to serve as the trusted party in a given context, and make it one’s responsibility to vet the entities and activities that would require the highest level of commitment for everyone involved in a given mission. Take that position seriously, and learn how to do it well with the tools you're given — it makes a world’s difference for your value creation.

Bardia Bijani
Managing Partner, FuzeQube Group