Of the Concept of Value and Generative Ecosystems

/0 Comments/in , /by

October 15, 2015

The concept of Value is an intriguing one. We are quite familiar with terms such as Value Proposition and have an intuitive understanding of the term Value as well. We often think of it as transactional. As an enterprise we make something, either a product or a service or some combination of the two, with a target client in mind, and to us, it represents the value we create.

This understanding though is rather simplistic and often the reason why some offerings experience great success while others have to wonder why they did not find traction. Perhaps it is time to take a slightly different look at the idea of value and the associated systems.

Value, I argue is better understood as a complex concept with emergent properties. It emerges out of the interaction of and at the intersection of two broad organic systems – a Value Creating System, which is often a single enterprise, and the Value Receiving System, which in common language is usually referred to as the client or the customer. In reality, both Value Creating and Value Receiving Systems are actually complex networks of collaborating and competing entities, which actually quite contributes to their intrigue and charm.

I also like Elke den Ouden’s representation of Value:

I use the term ‘System’ rather deliberately. Thinking of these two entities as systems provides us with interesting perspectives and insights into the nature of the whole value enterprise. It provides us an understanding not only of Value but also what it means to create and introduce new value, topics of great concern in the domain of Innovation.

The notion of Value Receiving Systems is perhaps new, for I have not seen any reference in literature to such an idea. In very simple terms, no target of an offering stands alone, but rather, is embedded in a system, social or socio-technical. Sometimes these systems happen to be another enterprise. Having stated it this way, it seems obvious that indeed we must see the receivers of our value as embedded in systems.

These targeted receivers of value, are multi-faceted and multi-dimensional entities, even though we might be thinking of individuals, and have a complex set of needs, most of which they have a way of satisfying using services within the ecosystem in which they are embedded and operate.

It is important for us as value creators to understand this system or perhaps even many systems, for while the value they receive currently might not be perfect in its individual dimensions, the totality might indeed be quite substantial.

We are therefore challenged with having to understand the architecture of the current Value to begin with, and understand the systems that currently produce and receive it. That Value, even today, we must recognize, is occurring at the intersection of a complex of producing and receiving systems. Unless, this value is substantially dysfunctional, the system will not easily reconfigure to accept a new architecture of Value.

So not only must be have a better solution for a need, but we must be able to displace an incumbent value offering.

I have argued elsewhere, that an offering is always a solution. (I will write another post that describes how I understand offerings as generative design systems). We sometimes hear of people describing this in terms of offerings, products or services, doing a job for the client. I use the term solution, for just like in the case of the term system, it allows us to see the offering as a resolution of a set of intersecting and often contradictory vectors.

It is this perspective of displacing incumbents and introducing something new into a Value Receiving System that are critical ideas for thinking of disruptive innovation and innovation management. When we think of disruptive or radical innovation, that is what we are up against. The more we master these perspectives, the better we will be at being disrupters, for while simple offerings might afford to not invest in such understanding, nobody can nurture ambitions of being disruptors without a deep understanding of their Value Receiving Systems.

The Architecture of Value as an emergent idea and the Architecture and Design of the Value Creating System, follow from this first step.

To Create or not – is no longer the Question

/0 Comments/in /by

October 14, 2015

In my previous post, I made an artificial distinction between Value Creating Systems and Value Receiving Systems. That distinction caters to our extant way of looking at the world in terms of enterprises that create value and its customers or receivers.

However, useful as that distinction is for practical purposes, it actually distorts our understanding of the process of value creation. And in fact, in a world of extensively networked extended enterprises, the boundaries of an enterprise are no longer easily distinguishable (Rachel Happe rightly brought up this point in a comment on my earlier post).

A note: Value and its associated generative systems are contextual – the system that creates value for health being different than the one that does so for education, for example. All participants/stakeholder in any ecosystem are active contributors to the value created – and to the extent that they intend to remain viable members of the ecosystem, their contributions need to be at a minimum – positive. Thus all value is co-created by all the participants or stakeholders in the particular ecosystem.

As an enterprise, we often tend to see the process of value creation and delivery coming to an end with a transaction or a little beyond that at most. There is now a substantial body of work that understands that value creation continues way beyond the customer’s contact with the enterprise.

In fact that process, actually begins before the customer even comes in contact with the enterprise and continues over a lifecycle of value well beyond the contact. And during this activity of value creation from the subject’s viewpoint, many stakeholders other not related to the enterprise contribute. One way of thinking about this is that, the subject creates value, whether or not the enterprise exists.

And as my friend and colleague Doug McDavid consistently maintains – all these participants are engaged in the production of services – a view that aligns with the notion of Service-Dominant logic (as against a Goods-Dominant logic view of the world). This is the critical shift in perspective that we need today.

Having understood this, an enterprise has a choice as to the extent it wishes to become an integral part of the co-creating ecosystem – a strategic decision. and one that requires a transformational shift. While in the past, it made sense to remain outside the ecosystem, and therefore have essentially hands-off transactional relationships, as the locus of value creation increasingly moves to the empowered end-user/producer, enterprises must consider becoming a part of and equal partner in the value creating ecosystem.

In all value ecosystems the co-creation of value involves an architecture of value, something I had referred to in my previous post, and a grammar of value construction – a grammar that is available to all stakeholders. This grammar and its associated rules for the construction of value, constitute what I term a ‘design system’. Any participant has access to this system, and they may use its components, grammar and language to construct value as appropriate.

This design system thus serves as a platform empowering all participants. I am using the term platform here in a broader sense than it is used in the context of digital ecosystems. All ecosystems in my description have platforms that specify and coordinate the production of value. This does not preclude the existence of multiple platforms and corresponding design systems.

The enterprise as a participant, that chooses to participate in the ecosystem in order to make a positive value contribution, can also choose to provide leadership, envision an ecosystem of value creation and provide a platform that enables not just one target within the ecosystem, conventionally termed the customer, but recognize all the stakeholder participants and support them all.

This is the other choice enterprises can make – to envision a healthy ecosystem and to choose to be a platform provider.

In summary, value ecosystems include many stakeholders other than the enterprise, who provide services to the ecosystem and together participate in the overall creation of value. An enterprise can choose to be a part of this ecosystem or have a hands-off relationship to the process. Should it become integral to the ecosystem it could also become a platform provider and create the grammar for the language of value creation in the form of a design system.

Making Design a Business Priority

/0 Comments/in /by

October 11, 2015

Design is on everyone’s mind – has been for a while, and it is heartening to see that it continues to be so. While we know all the big names in design, those who like IDEO made it a household term, we now see others such as IT services companies of the likes of IBM and Infosys, and Management Consulting companies such as McKinsey champion it.

Mahin Samdhani, VP of Experience at McKinsey Design Labs was featured in a McKinsey Insights article. In an interview he talks about the need for businesses to make design a priority, what that implies and how to create an organization that leverages design. The article has a tenor that is similar to what one could expect if this were an interview with a design leader in any another services company that advocates design.

Briefly, this is what the article and the interview says:

There is evidence that companies that practice design or have made design an integral part of their strategy have not only delivered better outcomes for their customers but also have performed better on other indicators and created stockholder wealth.

If that is true, he asks companies to examine how they treat design and designers themselves – such as, the extent of influence designers carry on decisions as indicated for example, by their seniority in the organization.

He talks about the need to understand customers deeply and to put a lot of focus on truly understanding and solving their pain points. Focusing on lifestyles and experiences are the other two other commonly heard elements of advice.

When it comes to creating a design culture, he talks about the fact that companies need to make internal changes in the way they operate, their processes and systems in order to leverage the opportunities that come with becoming design-centric.

Here are my thoughts on these points:

These are all arguments we have heard for a while – that design delivers business advantage, that it is about customer-centricity, new dimensions of value such as experiences, and that one needs to foster a design culture that respects designers and gives them influence in the organization, while getting the whole organization to become design-thinkers.

I come away with the feeling I have now held for long, that there is something missing in this line of thinking.

The universe of design within any organization is vast – it touches not only what I prefer to call offerings that might include products, services, or a combination of the two, but also includes the systems and stakeholders that create that value, the business models that ensure that the value is captured, the processes and systems that deliver that value and so on. Yet, reading such articles, with their emphasis on customer-centricity, I think this more pervasive need for design in any enterprise is deemphasized and ignored.

Secondly, there is an implicit assumption that because one has ‘understood’ the customer, good design will result. I do not believe that such an outcome is an automatic correlation of the ‘understanding’. In fact, if there is anything that distinguishes design leaders from others that do or do not practice design, is their ability to translate what they have understood into offerings, systems and enterprises that make an impact, and deliver Positive, Distinctive and Enduring Value (I use the acronym VIPED – to bring these ideas together).

The operative word ‘understand’ is mostly described by the champions of design, as a data-gathering exercise, a result of open-minded observation and deep immersion. True, that is indeed important, but data gathering is but one stage. What follows is what makes the difference.

We all know what cognitive models do to what we see and how we learn. All enterprises have a history, they have a point-of-view about the world – frames through which they see reality. These extend way beyond their products and services to the extent that they are an integral part of their identity and sense of being. Those frames cannot be easily set aside, and reframing is non-trivial.

Even if one has an opportunity to get the frames right, the dots that connect the observation of the pain points to insights and eventually to good design too are non-trivial.

Nowhere do such recommendations talk about what that involves – the needs for understanding what value means, understanding ecosystems and systems and their dynamics, the many dimensions of the systems, such as Social, Technological, Economic, Environmental, Political and Values (STEEP-V) that one must understand. One must understand the different ways change manifests through these lenses, the implications of trends and likely futures on what one designs so that it has enduring value. There is almost no mention of creating offerings that are design systems in themselves – platforms for value co-creation within stakeholder ecosystems.

These are some of the reasons design cultures are hard to build. This is why one sees a lot of disappointment and disillusion with the word.

For, important, urgent and critical as it is – one needs to look design in its face and understand that enterprises that truly want to embrace design, must also think of it simultaneously as a strategic design challenge.

Else, it will remain a cosmetic effort. Skin-deep at best, It will not deliver positive, enduring and distinctive value and make an impact.

Innovation Fails Because…

/0 Comments/in /by

2014

The widespread interest in innovation is also combined with a sense of frustration. Many studies show that the success rate for innovation initiatives is not very high. Umair Hoque recently conducted an interesting experiment on Fast Company. He asked readers to complete the sentence – “Innovation Fails because…..”

Many people responded and continue to respond – Here are some recent results. The article lists the responses in the form of a running list. That is not very helpful, since I would have preferred to see the patterns, if there were any.

Some time back, I had shared a couple of presentations on Slideshare – “Modes in Innovation”, and “Innovation Praxis”. I decided to evaluate these responses using the frameworks I had proposed. The analysis is in the embedded document here below:

Failure-of-Innovation.docx

The classification of the responses in the various categories is not absolutely perfect or accurate, but it is a fairly good first approximation.

What is interesting to me is how people perceive why innovation fails. A disproportionate number of responses attribute the failure of innovation to issues related to what I would call innovation culture or ‘Practice’ in the terminology of our framework, with some attribution to poorly designed Programs.

What is even more interesting is how many of the other issues that actually contribute to Innovation success, such as proper Framing, Mobilization or Staging are or are not mentioned. There is almost no mention, for example, of the importance of Discovery – assessing what the current conditions are and whether or not the systemic elements that would contribute to success are present.

Culture is indeed one of the most important cause of failure across an enterprise. However, I hesitate to put all the blame on the shoulders of culture. There are many other factors that are necessary to ensure success and it is quite clear from this set of responses that people are not widely aware of what those might be. Some of the people who perhaps should know, such as the authors of these articles and Fast Company, should perhaps structure these responses and provide guidance to people to see how their understanding lacks a total systemic understanding of what innovation is. What use are such surveys otherwise?

Innovation fails because people do not understand its systemic nature and are not aware of the factors that need to be paid attention to in order to make it succeed.

Just how many wearables might we wear?

/0 Comments/in /by

2014

I was just looking at a Fast Company article on the new Ditto – a device with the form factor perhaps of a tie clip, that buzzes, kind of in synch with your phone. My first thought was – yet another! How many such devices will there be a place for on our persons?

wearables

I for one cannot imagine not only the proliferation of devices, but more importantly the challenge of managing them physically and integrating them functionally.

I am inclined to think that this has to be a platform play (that is not a new idea!). The eventual winners will be integration platforms that anchor application and sensor ecosystems.

While early versions work with phones and other devices, we should see some form of co-evolution between for example the phone and the wearable platform device – some functions moving from the phone to the device and vice-versa over time.

I have to wonder though, if that end-state vision would discourage entrepreneurs in the field today and those who continue to introduce new devices from venturing into this field. Is the platform a foregone conclusion – or is the future of the wearable as a device on the body still open?

I will allow for many possibilities since we are still fairly early in the evolution of the idea.

Digital Innovation – A Concise Take

/0 Comments/in /by

July 24, 2014

This is a very short take on what I think is the essence of digital innovation:

We can now instrument ever smaller parts of the world, make trapped facets and attributes of this world fluid, autonomous, smarter and sometimes even intelligent. We can interconnect our world for meaningful communications, transactions and commerce, and through these interconnections, relate to our humanity and sociality, and reconfigure these relationships in real time and often on the fly, making this world of ours transparent and accessible at all scales, through simple ubiquitous interfaces where the interaction at all touch points complements our being and creates extraordinary experiences.

NewImage

(Image Source: http://bschool.pepperdine.edu/studentblog/wp-content/uploads/2013/09/digital-innovation.jpg)

Now that is a mouthful and more – but that does it for me!

Strategic Latency – Foresight to Avert Disruption

/0 Comments/in /by

July 24, 2014

Over the years as I have thought about strategic foresight, I have often coupled the idea with the notion of latency. To me latency implied the time it took for an enterprise to respond to a contextual shift or event. Built into that idea was the notion that the concept of latency differs from enterprise to enterprise and that enterprises can be designed reduce their latency to foreseen events and contexts.

Military Image of Ukraine

I came across an article this morning in the Diplomatic Courier, that talks about China’s efforts to reduce its strategic latency, particularly with respect to defence technologies, and its drive to innovate.

Indeed when it comes to responding to threats, it is absolutely critical to reduce the latency if in fact you cannot anticipate.

However, I wonder if today there is a specific technology that you can innovate for in preparation. It is no longer a technology by itself that is a source of a security risk. Each technology brings with it a certain complement of capabilities and these can combine in myriad ways. Individually each technology can be applied for positive or negative outcomes. One can easily understand and prepare for negative outcomes, intentional or inadvertant.

The task of anticipation however becomes onerous when these technologies are used in combination with others and uniquely in particular contexts. Sometimes the technologies used for such purposes are in themselves not particularly sophisticated, but combinations can be devastating as we have seen in recent experiences.

The road to reducing strategic latency therefore is as much a task of systematically practiciing Technology Foresight as is it is one of practicing Strategic Foresight, imagining potential scenarios and plausible misuses leading to potential security threats. If one must innovate, it must be in the domain of responding to potential negative or inadvertant uses of extant or future technology developments.

Even when the context is not one of assessing for and preparing against security threats, every enterprise must strive to reduce its strategic latency. The term has a very reactive connotation – often it is very hard to respond to a disruptive innovation after the fact. While it seems commonsense, it bears repeating, that the ideal response is only possible when one has anticipated adequately.

Disruptive innovations are around us for a long time in a form we might term ‘weak signals’, and they have not yet become significant enough to show up on our radars. It is our task to sharpen our senses so we can notice them through the noise and give ourselves the time to react – a systemic challenge that requires time.

Better still is to imagine disruptive possibilities, and shift the challenge of reducing strategic latency to the other.

The Social Dynamics of Innovation Networks

/0 Comments/in /by

May 29, 2014

I work out of the Cambridge Innovation Center, one of the supposedly largest such places in the world with over 400 startups and early-stage technology companies that collectively claim a couple of billion dollars in funding.

The core idea of such a place is that not only does it make the startup process easier, but the fact that you have so many of these entrepreneurs in a phycial setting that encourages serendipitous encounters and complementary partnerships, actually accelerates the innovation process and likelihood of success.

The idea of creating such places is no longer novel. There are many such places that have sprung-up in Boston itself and more such places are coming up in the US. Frequently visitors from other countries come to learn how to replicate the success of CIC in their own neighborhoods.

(Image: http://noduslabs.com/tag/sociology/ )

The idea that you need physical proximity at all in a world where technology has made it possible for people to work remotely and collaborate with anyone in the world is what is interesting.

A recent report from the University of Twente titled ‘The Social Dynamics of Innovation Networks‘, caught my attention.

…why are governments across the world investing billions of euros in developing ‘innovation campuses’ that are justified precisely on the grounds that they help build up dense inter-personal networks that can help drive innovation processes?

I have been at CIC and other co-working locations before. There was a time when I worked out of offices and not remotely from home. In all those situations, there are a social dynamic that never happened once I increasingly started working from home. Not, that I did not build relationships remotely, but they did not have that opportunity to accidentally bump into each other, sometimes in the presence of a third person, or in the context of a discussion or an artifact.

There is nothing surprising here of course – those chance encounters, did not always spark something, but they laid the ground for a possibility, that sometimes built up over time. On one among many such occassions, all the accumulated tinder of ideas would catch fire and something novel would spring in our minds.

There is much attempt to de-skill, and deconstruct the magic of innovation. There is even talk of an ERP package for Innovation Management. There are certainly aspect of orchestrating large-scale innovation that can indeed be systematized, but underneath them all is this intangible layer that is formed by social relationships, and the unpredictable, unforeseen tipping points that happen through unexpected encounters in social networks.

Fail Faster, Fail Often with Poor Design

/0 Comments/in /by

2014

There has been disappointing news in the entrepreneurial / new venture world in recent weeks.

Recent studies by the Economist showed a decline in new ventures and entrepreneurial activity in the US and this article by James Surowiecki in The New Yorker, tries to analyze the phenomena of large scale failure among startups.

Start up – Runner on the blocks

While it is generally assumed that entrepreneurship is for those who have a healthy appetitie for risk, he argues that that is not necessarily true. What distinguishes this class of adventurers according to him is their self-confidence.

There is a culture that has been created around entrepreneurship too – advice that recommends “Fail often and fail fast”, the relatively easy task of getting money and started and other circumstantial and contextual aspects that encourage such risk-taking.

Somewhere in such a system are mechanisms that are supposed to identify and filter the good from the poor ideas. It is assumed that the financiers have the acumen and wisdom to identify the ventures most likely to succeed. Then why I wonder is the failure rate so high.

I have had some exposure to a number of such entrepreneurs due to the location where I work in Cambridge. I am surrounded by the highest density in any one location of startups anywhere in the world. These are really smart people with great ideas, energetic, often young, enthusiastic, and also sincere.

However, I have often found, whether due to the culture of the entrepreneurial sector or due to their self-cofnidence, that their ventures are usually based primarily on product ideas or rooted in some novel technology. However, in most cases, they do not seem to have robust business concepts.

There is however also no appetite or patience for the effort it would take to design a venture. Having developed a business plan, in their mind, is a good enough substitute for a business design. I do not think they are to be held a fault here. The system encourages such thinking.

One argument is that, a good design evolves. Evolution does indeed happen in business, but then it also leaves too much to chance. Perhaps, the failure of an individual entrepreneur or venture is but a matter of statistics for the venture capitalist.

But, there is indeed a better way. It would do all in the system good to take the time to design the venture well – even if in visionary terms, before going too far forward. It would take some more deliberate work up front, but we would not see the kind of failures we see.

It is romantic indeed to think in terms of the tooth and claw nature of the world of competition and failure and extinction of species in biological/ecological terms. But, we are humans, our social systems are an improvement on that logic. We can change things through design.

If, I want to be an entrepreneur, I do not want to discover what the Germans found – that failure does not necessarily guarantee future success. I do not want to be a statistic in someone’s portfolio. I can design my way to better outcomes.

Maintaining Continuity while Reinventing

/0 Comments/in /by

2014

One of the mainfestations of the rapid acceleration and change we are facing these days is that business ideas and concepts become invalid more frequently than ever before.

Strategic innovation is precisely focused on this issue and could also be termed “Business Concept Innovation”.

As one deconstructs the existing business concept and reinvents it to correspond to current and future reality, using new design principles, the question often arises as to – what of the previous business design must one carry forward into the future.

In the quest for agility in the face of contextual change, when all dimensions of business are subject to change, what an enterprise attempts to do, is to maintain the integrity of its identity. This identity is refelcted in its values, mission and embedded in its culture. It is this identity that I believe is the strongest link in the continuity between the past and the future.

Polaroid Images (Fubiz.net)

No other enterprise perhaps indicates the wrenching change it has faced recently than Polaroid. This article in Fast Company, describes how the company managed to pull itself out of a destiny of certain oblivion.

The article clearly illustrates the point I make above. Polaroid ensured that as it found new avenues to redeploy its assets and capabilities in a new context, it also made sure, that its identity, its ‘Brand’, was not compromised.

Great lesson and case here.