Strategy management

Networks relationships can either emerge from markets (semi-internalising transactions, e.g. acquisition of shares) or from hierarchies (semi-externalising activities, e.g. outsourcing)

independent

interdependent

internal units

integrated

-> it is a fact that aircompanies cooperate horizontal so along the value chain 
example one airline A has 15 free seats for a flight to zurich, another has at the same time
2 seats airline B, what makes sense? that airline B sells the seats to airline A

Vertical cooperation: Companies from different positions within the value chain cooperate

Business ecosystems result from configuration processes where an ecosystem leader aligns multiple independent but complementary organizations to offer an integrated solution to meet a specific and often complex customer need

(Stonig and Müller-Stewens 2019).

Same characteristics as business networks – but stronger emphasis on:

 Digital platforms for complementary solution «modules»  Wider, more ambitious value propositions
 Ecosystem leadership
 Relationships across industries and sectors

the simultaneous pursuit of cooperation and competition between firms (Brandenburger & Nalebuff 1996)

Causal rationality begins with a pre-determined goal and a given set of means, and seeks to identify the optimal – fastest, cheapest, most efficient, etc. – alternative to achieve the given goal.

vs.

Effectual reasoning begins with a given set of means and allows goals to emerge contingently over time from the varied imagination and diverse aspirations of the founders and the people they interact with.

Background

• Control and regulation technology

• Explanation for cyclical behaviour in management problems (often caused by delays)

Definition (in the literature on System Dynamics or Systems Thinking)

• Closed chain of cause and effects (Ford)

• Actions create effects in the environment, which in turn have an effect on the original actions (Lane).

Loop polarity

Denotes the effect of an initial change of one variable propagating through a feedback loop. Positive (reinforcing, R) loop: feedback effect reinforces the original change
Negative (balancing, B) loop: feedback effect opposes the original change

--> Rule of thumb: uneven number of negative link polarities --> balancing loop

“Causal diagrams are a powerful tool to map the feedback structure of complex systems. Causal diagrams can be helpful in the early phases of a project; when you need to work with the client team to elicit and capture their mental models...

To be effective, you should follow the rules for causal diagrams, including selection of variable names, layout, and assignment of link and loop polarities. It is best to build up diagrams in steps: resist the urge to create a single, comprehensive diagram.

As in learning to read music, practice is everything. Develop your skills in mapping the feedback structure of systems by sketching causal diagrams to capture the feedbacks you recognize as you read the newspaper or the great works of literature.” (Sterman)

Potentials

• Consistent representation of a complex problem

• Reduction to underlying core dynamics

• Endogenous perspective

• Taking into account (possibly hidden) feedbacks

Limitations

• Net effect of different feedback loops cannot be determined.

• Ambiguous, controversial evidence about specific cause-effect relations can be represented – but not solved

  (otherwise the model would become utterly complicated).

• People may have difficulties to read and understand causal loop diagrams.

the new economy of making resources available and sharing them via online platforms (Weiber & Lichter, 2019, p. 10)

a peer-to-peer-based activity of obtaining, giving, or sharing the access to goods and services, coordinated through community-based (online) services (Decrop et al. 2017; Hamari et al. 2015).

transactions that can be market mediated but where no transfer of ownership takes place (Bhardi and Eckhardt 2012)

focus on collaborative forms of consumption, production, finance and learning (“collaborative consumption” is closest to the orthodox sharing economy definition)

focus on “on-demand” (i.e. immediate and access-based) provision of goods and services

focus on workforce participation and income generation via “gigs”, single projects or tasks for which a worker is hired (limited overlap with skill sharing)

focus on workforce participation and income generation by freelancers, also known as independent workers and self-employed (limited overlap with skill sharing; freelance engagements are often longer and/or deeper than gigs)

focus on peer-to-peer (P2P) networks in the creation of products, delivery of services,

funding and more

focus on “access over ownership” (overlaps with sharing, though sharing is by no means requisite)

focus on economic models powered by “the crowd”, including but not limited to crowdsourcing and crowdfunding

 focus on anything powered by tech-centric platforms

focus on anything powered by digital technologies

1. Supply-side
 Durability of goods
 Technologies and business models that ensure the efficient sharing and protect the security  Regulation policies that support (or at least permit) the sharing of resources

2. Demand-side

 Goods must be suitable for sharing
 Cost of ownership should be relatively high
 Demand for the product is inelastic in certain context (e.g. power bank rental)
 Demand is short-term or on-demand (rather than long-term and planned)
 Demand is relatively straight forward, standardized and easy to meet (rather than complex)

 Strong operational capacity with low operating cost
 Unilateral or multilateral users to achieve positive network effects
 Ability to establish platform rules to reassure users and promote trust  Ability and patience to cultivate user habits
 Ability to lock in users
 Ability to plan for and respond effectively to (new) regulations

An ecosystem is “an interconnected set of services [or products] that allows users to fulfill a variety of needs in one seamless experience.”1 Ecosystems are built around consumer needs; they go beyond simple partnerships across industry boundaries to bring together
digitally accessible services or products, providing consumers with an end-to-end experience. (Catlin et al. 2020 – Mc Kinsey)

An ecosystem is a set of actors with varying degrees of multilateral, nongeneric complementarities that are not fully hierarchically controlled (Jacobides, Cennamo and Gawer, 2018)

“Ecosystem” is the alignment structure of the multilateral set of partners that need to interact in order for a focal value proposition to materialize (Adner 2016)

1) Focus "firm in the ecosystem" (centers on hub and its economic community of interacting actors), on leader focus

example: apple

2) innovation ecosystem

•  Ecosystem around a particular innovation or new value proposition and

  the set of components (upstream) and complements (downstream) that support it

•  Emphasis on understanding how interdependent players interact to create and commercialize innovations that benefit the end customer and/or social innovations that benefit the society —with the corollary that if coordination within the ecosystem is inadequate, innovations will fail.

example: automotive ecosystem

3) Focus "Platform ecosystems"

considers how actors organize around a platform

studies focus on a specific class of technologies—platforms—and the interdependence between the platform company and the relationship to its complementors

example: Video console platforms

4) Focus on (purposive - driven) co-created services

Focus on service exchanges in relatively self-contained, self-adjusting systems of resource- integrating actors connected by shared logics and mutual value creation

 The relationships are interrelated by a modular architecture and complementary

relationships. Since they are interrelated, there is a need for coordination/governance.

•  ...is the degree to which a system's components may be separated and recombined, often with the benefit of flexibility and variety in use.

•  ... allows interdependent components of a system to be produced by different producers, with limited coordination (no need for hierarchy).

•  ....still, the fact that the modules have to be designed according to predefined standards/ interfaces or in line with the overarching ecosystem purpose, the coordination via pure market relationships is opted out

 Modularity creates the conditions for an ecosystem to emerge

Ecosystems provide a structure within which complementarities can be contained.

3 Types of complementarity:

a) Unique: A doesn’t ‘function’ without B (one way or two-way, two-way = co- specialization) (e.g. Nintendo games – Nintendo console)

b) Supermodular – More A makes B more valuable – e.g. the more films/series from different production companies on Netflix, the more valuable for the user

Generic - good or service is needed but is generic enough for firms to draw on it with little concern for governance structure or risks of misappropriation (e.g. boiled water for tea).

1) Profit from complementors

Powerful firms (especially hubs or hub contenders) craft rules and shape the process of ecosystem development to tie in complements and make complementors abide to them

2) New profit models

Firms identify what drives value to users (B2C), but do not always charge the users for it; often they charge other clients (B2B), who show that they are affiliated with value-adding services (B2B2C).

3) Digitalization

The rise in coordination possibilities, enabled by the rapid progress of information and communication technologies, have lowered transaction cost and strategy based on interdependence (Adner 2016, p 50)

4) Unwitting emergence

Some firms — especially those that allow modular technologies—may unwittingly form ecosystems. For example, when hackers developed the first apps for Apple’s iOS, they ended up in court—until Steve Jobs realized he could turn an unwitting ecosystem into a regulated one, and profit from it.

Ecosystem strategy is defined by the way in which a focal firm approaches the alignment of partners and secures its role in a competitive ecosystem (Adner, 2016, p. 47).

• Focus on indirect links: The need to develop strategies that recognize and manage indirect links is one of the key distinctions between traditional strategy and ecosystem strategy.

• Focus on Alignment: If the heart of traditional strategy is the search for competitive advantage, the heart of ecosystem strategy is the search for alignment (Adner 2016).

• Dynamic: Sustainability of advantage has as much to do with maintaining relationships as it does with keeping rivals at bay

• Interdependencies between business models: business model should be “fed” by a business ecosystem consisting of a wide variety of organizations playing different but complementary roles, each contributing to the overall value delivered to the end customer (Casadesus-Mansanell and Ricart 2011).

The concept of shared value can be defined as policies and operating practices that enhance the competitiveness of a company while simultanesouly advancing the economic and social conditions in the communities in which it operates. Shared value creation focusses on identifying and expanding the connections between societal and economic progress.“ 

• Not all profit is equal

• companies must take the lead in bringing business and society togehter

• shared value is not a redistribution approach, about expanding total pool of economic and social value

• creating economic value also creates value for society by addressing it sneeds

• social harms create internal costs for firms

Questions to be asked:

− Is our product good for our customers? Or for our customers’ customers? Tasks to be done:

• −  Identify all the societal needs, benefits, and harms that are or could be embodied in the firm’s products

• −  Discover new opportunities for repositioning products with societal value in traditional markets

• −  Recognise the potential of new, emerging markets

• −  Embracing products and services that create societal benefits and focus on fundamental needs

Questions to be asked:

• −  Are we aware of all economic costs in our value chain caused by societal issues (i.e.externalities that cause internal costs)? and are our value chain processes designed tol everage the synergy potential between societal progress and value chain productivity?

• Tasks to be done - reexamining:− Energy use and logistics (e.g.,redesigning logistic sto reduce shipping distances)
  − Resource use (e.g., utilization of water, raw materials, packaging, recycling, reuse)
  − Procurement (e.g., avoid marginalizing suppliers)
  − Distribution (e.g., providing access in dispersed or overpopulated areas)
  − Employee productivity (e.g., implementation of employee well-being programs)
  − Location (e.g., consider the local SC as a value-adding rather than only a cost driver)

− The success of every company is affected by the supporting companies and infrastructure around it

Questions to be asked:

− Which public assets in the surrounding community do we need for our company to succeed? Tasks to be done:

• −  Analyse the gaps and deficiencies that exist in areas such as logistics, distribution channels, training, educational institutions, health insurances...

• −  Enlist partners for collective actions to share the cost, win support, and assemble the right skills (e.g. trade associations, government agencies and NGOs)