Before digitalization era as today, building and ensuring robust system, process and infrastructure is not enough in driving sustainability. Standardization, centralization, and automation (to lean) are not enough. It needs more emotional bound and personal touch to build trust amongst stakeholders. Trust is not something taken for granted. The philosophy comes from the human basic need; when we are not feeling safe, we need a company that can be trusted. What we need is a business ecosystem where our stakeholders have trust to work closely with each other, willing to go extra mile for each other. The strong business ecosystem can make every stakeholder in the circle grow together by being more agile and adaptive in the unpredicted fast-changing market environment.
Many managers struggle with the broad scope of the concept, unclear definitions, and the lack of practical advice. This article is intended to suggest thinking of business ecosystem as a solution to a business challenge, as a way to organize in order to realize a specific value proposition. To this end, a business ecosystem is a governance model that competes with other ways of organizing the creation of a product or service, such as vertically integrated organization, a hierarchical supply chain, an open market model, or both.
The concept of business ecosystem is not something new either. Professional people sometimes call it “Relationship Management”. Sometimes it is compared to Technology – which one is most important and really needed most. While many of today’s ecosystems are fostered by digitization, the concept of an ecosystem does not strictly require a digital business model. The concept of business ecosystem is thus more general than the concept of digital platforms. Digital technology is an enabler by increasing the speed, reach, convenience, efficiency, and scalability of many ecosystems and is thus one of the important drivers of their current growth. Therefore there are two business ecosystems: Internal and External.
Building internal and external business ecosystems to go together in one direction, we need a bigger purpose being accepted by all divisions and functions. Quoted from Kevin Turner: “People want to be part of something bigger than themselves. They will work for money but will give you their heart for meaning”. The question is: “Could each division mitigate their own risk – alone?”
Internal Business Ecosystem from internal risk management system approach
Let say, supply chain risk profile:
Outside supply chain, every divisions and functions have their own risk profiles that become their area of responsibilities in accordance to their nature of work.
We need to understand the high-level relationship map in the organization to maintain holism.
The relationship map can help to build stakeholders’ understanding the need of others and taking a bird’s eye view on how our internal stakeholders’ relation. By then organisation has a compass that can show how it impacts each others’ causes and effects.
Therefore, it needs more advance Internal Risk Management System design by understanding the need of others. The good governance organization shall set up a monitoring system to facilitate the early recognition of developments that may endanger the continued existence of corporation. The early risk recognition and risk monitoring system shall be based on the approach of multistable systems. The individual system elements or sub-systems are represented on the one hand by corporate level, region, business sectors, affiliated companies and strategic business units. The sub-system is linked by matrix organization and set within the framework of short term and long term planning.
In case there is a gap, the system elements can take corrective measures in the first place to meet the targets set – within certain limits.
Acting ethically and compliance becomes a guiding principle to base all business objectives that focus on growth, margin and cash. All internal stakeholders enter the same business ecosystem and blend each of their risk profiles become one company risk profile. The risk profile is mitigated by one internal risk management design.
The business objective drives the structures, starting from:
- Organization design & system infrastructure,
- Standardized governance, policy and standard,
- Standardized business process and RACI,
- Solid platform in Standard Operating Procedures & Work Instruction,
- Risk Management System.
This is how Internal Business Ecosystem is designed and built.
Is the Internal Business Ecosystem enough to overcome uncontrollable and unpredictable external environment, such as Pandemic (like COVID-19 pandemic we have had today), Politic, Economic & Social, Government, and Competition?
It is enough to play defensive only.
To adopt a simultaneous offensive & defensive strategy, we need a bigger ecosystem involving external business partners.
External Business Ecosystem from external risk management system approach
We need to identify the key external stakeholders who critically have access, impact and influence to strengthen our position in the market in order to stay as long as possible. The key point is not accelerating profitable growth but to sustain in the market as long as possible.
The key external stakeholders are as follow:
- Vendors and Subcontractors
- Key account customers
- Bank and any financial institution
- Consulting like Public Accountant Firm, Tax firm, and Law Firm
- PR Agency
- Government institutions including but not limited to Tax Office, Customs Office, Trade Department, etc.
- Business Association
In order to adopt a simultaneous offensive & defensive strategy, we need more advance External Risk Management System Design.
The external risk management system design takes into consideration the need of other stakeholders beyond our organization and link into a big ecosystem with bigger purpose.
Still based on same multistable business ecosystem approach, the only additional parameters are:
- Each player is linked by a common need to stay long in the industries.
- Never cheat other players (Integrity and ethics do matter).
- And always link to the bigger purpose that bind all external stakeholders with different business objectives.
Therefore networking and way of communication become important in this modern day.
Having a strategic mindset, building and maintaining network could become relevant and most required competencies to build and connect our internal business ecosystem to the external business ecosystem.
This is how the internal and external business ecosystems are combined.
Of course, there are also drawbacks to the business ecosystem model. By definition, an ecosystem consists of largely independent economic players that agree to collaborate, which implies only limited control of the overall system by each participant. Even a business ecosystem orchestrator has limited means to enforce or control the behavior of partners.
For example, we become the orchestrator.
It is not enough to make external stakeholders buying in our business objective without having a bigger purpose than attracting or inspiring them to follow. They have their own business ecosystems too.
Back to quoted from Kevin Turner: “People want to be part of something bigger than themselves. They will work for money but will give you their heart for meaning”.
Our business objective needs to expand further and connects to a bigger purpose. On the other words, having mindset that business objective is only the measurable action to advance a bigger purpose. Such in Ecolab, the bigger purpose is “making the world cleaner, safer and healthier – protecting people and vital resources”; therefore Ecolab is really proud of everything what they do because whatever they do matters for their people, customers, communities and the world.
When all differences and perceptions put aside with a bigger purpose, we can unite all stakeholders to become one view, one insight and one purpose. Together finding a giant apple and being courageous to be more acting ethical & compliant, advance the working relationship from working together to trusting each other, leverage excellence, and be resilient.
Of course, such business ecosystem governance shall be in place through the architecture of the ecosystem and through clear rules, standards, and norms that are established in a transparent, participative and fairway are adjusted as the business ecosystem evolves. However, a certain constraint on control is simply the price of open innovation, flexibility, and resilience, business ecosystem governance shall be finely balanced, leaving room for serendipitous discoveries and self-organized evolution.
This is how a strong business ecosystem is built for an offensive and defensive strategy. It offers at least three critical benefits: access to a broad range of capabilities, the ability to scale quickly, and flexibility & resilience.
Human Touch as Important Catalyst to have “Stickiness” in Business Ecosystem
Business ecosystem becomes today’s business model that could leverage all parties in having a direct or indirect connection to other internal stakeholders, including their external business partners.
To strengthen the bonding amongst the stakeholders, internally and externally, the business ecosystem needs to be built based on trust and emphatic. It needs more emotional bound and personal touch to build trust with stakeholders. Trust is not something taken for granted and needs to be built over the horizon.
To continuously and progressively improve risk mitigation, an excellent business ecosystem is met when our stakeholders trust to work closely and willing to go extra mile for each other.
The sustainable solid business ecosystem needs its soul. We call “Stickiness”.