The Formal and the Informal – Together

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When we engage with the world in order to better it, often we end-up primarily studying, engaging with and intervening in formal systems.

The totality however must include informal systems as well, since, depending on the context where we are situated, these informal systems might actually be the ones that predominantly shape or influence the outcomes we see and wish to address.

When, for example, we want to address challenges related to Public Health, the tendency is to look at the Public Health Value Creating Complex consisting of institutions and enterprises that provide services to the Public Health Ecosystem.

A comprehensive systemic analysis of such formal systems might lead us to understand the worldviews, beliefs and values that informed them, that gave rise to the concepts on which the designs are based. These dominant worldviews and conceptual architectures, obscure other forms of value creation, often inadvertently or deliberately creating conditions that lead to their suppression or elimination.

The formal systems however do not adequately fulfill the functions that the informal systems play, for various reasons. Needs they fulfill might be invisible, or poorly understood – some of the reasons why their value is overlooked. There could be others, more pragmatic concerns of viability or feasibility.

I think, when the formal and the informal are seen together, a better integration might be possible, whereby the overall design of the health complex, recognizes the whole and the formal and the informal complement each other.

This process of reconciliation among the stakeholders is critical – so rather than just focus on addressing the conflict and differences within the formal, the perspectives of the informal should also be included in strategic design efforts.

‘Complexification’ – Defying Mortality

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Complexification isn’t a word of course, but as it seems to suggest, a tendency to make or become more complex.

All living enterprises have a need to endure, to survive and thrive, the more varied and diverse, the better. As the enterprise accomodates a larger range of variation in a given moment, or, over time, it must necessarily become more complex. In a sense, the complexity of the enterprise reflects, and to the best extent possible matches, the complexity it finds in its environment. Clearly, this complexity isn’t structural alone.

In some ways, the desire to survive and endure is an act of defiance – against mortality, and the need to become more complex then, originates in that desire.

The more successful enterprises, those that are able to manage a higher degree of such contextual complexity, endure a wider range of challenges and survive longer.

However, this effort turns out also to be a vicious loop. The increase in internal complexity also makes its own environment more complex – a positive feedback relationship ensues, which in turn drives the need for further complexity. Not only do we, the living enterprise, deteriorate the world we draw upon, the complexification is eventually malignant to our own health and well-being.

We justify our acts of increasing complexity as ones that apparently serve our well-being (a kind of aesthetic need), and a transcendent need (spiritual drive), yet, we remain fundamentally, materially bound.

The challenges we then create are often existential, which is what our current struggles have become. And the worse our existential struggles get, the less spare capacity there is for the aesthetic and the transcendental.

One aspect that has enabled us to grow this complexity, is the progress we have made in improving our productivity. The assumption has always been that the surplus capacity we create will enable us to pursue the higher goals and aspiration we have.

I wonder why that has not turned out to be the case. One way to think of it is perhaps that these surpluses we created were not directed towards collective well-being. For all of us involved in this enterprise must cross and rise above the existential thresholds and any barriers to that must be removed. That is the purpose of that surplus.

We must therefore redirect our surpluses and the corresponding coplexification efforts along pathways to better futures. Narrowly driven pursuits that create complexity, without carrying the whole forward, will make that complexity turn on the enterprise itself, savaging and sabotaging, not just the outside world, but also the inner.

An Upside to the Down – systems, foundational to Strategic Impact

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The practice of Strategic Impact Making, particularly in complex contexts, touches on many bodies of knowledge and practices. However, this brief note talks about how Systems Practice is foundational to such work.

Assuming that all such work begins with a certain objective, an issue or challenge that needs addressing, the System/s associated with that issue become the ‘Text’ that one tries to understand and decipher.

The heart of the Systems Impact making task involves understanding the natural evolution of the system in the face of Contextual Forces and the kind of interventions one might or must make to shift the System’s trajectory in a desired direction, towards a better outcome.

In order to understand the impact of any system of forces, whether contemporary, emerging or future, one would need to have an understanding of how the system would behave in its interaction with those forces. It would naturally be impossible, for example, to say anything about the future of such a system, without that foundational understanding.

For complex systems that implies understanding the system in its many dimensions, at many scales – from micro to mega and the interactions among and between them.

It also implies understanding the Context. Now, there is usually much literature, of a generic nature about Contextual issues – such as one might find, the Future of an Industry, a Sector, or some other Social or Environmental issue as an example.

However, most such discourses are of a generic nature. They make claims that are varied, depending on who makes them and they change with time. They have implied in them ideological paradigms, worldviews etc., which might be worth examining critically.

However, they serve a limited purpose. The issue that you might be working on or interested in is often a specific issue, located in a specific local context. Understanding such an issue might benefit from the Generic descriptions mentioned above, but basing your actions purely on these would mot certainly be problematic and likely sources of serious error.

This is why an investment in discovering and understanding the systems you are engaged with is crucial. A deliberate attempt should be made in this process to correct for any errors in understanding by going broad and deep.

When dealiing with complex challenges, the discovery process leads to the uncovering of a complex reality, and an ecology of systems – wide in variety.

This uncovering turns your world upside down, but to borrow from an eponymous title of a book (Homer-Dixon – The Upside of Down), there is great strategic advantage in this process – An Upside to the Down.

Charting the Corporate Mind – What’s in the book

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In my last post I had mentioned my rediscovery of the book, “Charting the Corporate Mind” by Charles Hampden-Turner (CHT), and how I find the whole topic of dilemmas particularly relevant to my practice of Strategic Impact Making.

I am documenting here some of the key points that I see as pertinent and noteworthy. While this is not a book-review, I will also make observations about how I see dilemmas playing a role in complex situations where leaders have to make strategic choices.

The Introduction by Ronnie Lessem in an interesting read in itself. Most people might not know of him, but during the 90’s when this book was written, he too was considered a Mangement Guru.

The author CHT is taking on an ‘existential’ challenge most managers face – having to make difficult choices from among myriad complex alternatives. CHT has separately written about his vision of the Radical Man.

A manager is a social being in relationships with others – their capacity for synthesizing, symbolizing and exploring frees them from being ‘stimulus bound’. Such capacity permits them to rebel against the absurdity of atrophying cultures and empty forms and enables them to create new meaning and renew themselves in their environment.

He goes on to list other qualities about this ‘Radical Man’ manager, such as quality of perception, self-awareness etc., but the one I found interesting was something about ‘suspending their cognitive structures, permitting their own structures to crumble in the face of contradiction.

This is a quality that will be pertinent to the issue of reconciling and resolving dilemmas. This is the idea in Strategic Design – one discovers the complexity that underlies a seemingly simple situation, that it has many dimensions and scales – and often issues that do not seem to reconcile easily. These dimensions then must be brought into a dialectical process – perhaps that is the process of making/prototypiing – that then tries to find a reconciliation between various dilemmas – the only way one can do that is to perhaps transcend.

Another interesting thought goes – ‘When there is no initial dilemma, there is no gain from designing a solution’. This is for me the starting step of the Meta-Design Process, the one I refer to as Q0 – something you must do before you even engage on a Strategic Impact journey – The need to clearly identify the challenge that creates a Case for Action.

In critiquing the use of Profit as a measure, he highlights why it falls short, mostly in systemic terms as not serving the cause of organizational learning, such as, it comes too late for it to help in the learning, it is too narrow in its scope (the system has many more dimensions to pay attention to), there might be other things more important and that it does not deal with societal or environmental issues.

Here is another interesting statement – The hunt for the unicorn is a doomed quest – no pure unambiguous essence of virtue exists.

We are like jugglers he says – the more balls there are the more we are likely to drop them if we get fixated on just one.

CHT, as the book title suggests, uses Charts to make the dilemmas Visible, something people can periodically review to check progress. I have personally used such visualization in managerial group setting and confirm how effective it is for faciliating conversations about contentious complex topics.

The journey of resolving dilemmas has a direction – towards an ever richer synthesis of values, towards mounting complexity, towards packages of knowledge more intensely and aesthetically organized, and towards the expansion of the mind itself.

In essence, dilemmas are an existential reality, resolving them requires a certain mindset – the kind a ‘Radical Man’ possesses, particularly in the sense of being willing to set aside cognitive structures, recognizing the need to use devices to facilitate conversations among diverse stakeholders and finally to see the whole proces of resolution and reconciliation as a learning journey.

Book Cover - Charting the Corporate Mind

Navigating through Complexity – grappling with dilemmas

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In recent times there has been growing awareness of the concept of Complexity, with a corresponding increase in the number of publications that advise us on the need to embrace it, as a necessary condition of our times, and even more so going into the future.

Complexity is the very nature of the reality on which we layer aritificial and human/social systems often obscuring it in the process. At some juncture, the alienation and misalignment between reality and our constructs leads to dysfunction, often serious. Complexity also arises within the systems we construct to counter and master complexity, one of the hallmarks of our times.

This happens through all the interconnections and interdependence that we build and live with and continue to grow every passing day. I do not mean to write here about the nature of complexity, and all that is implies but just bring attention to what that realization or discovery leads us to.

On the one hand is the awakening to a certain kind of underlying beauty – a sense of awe. On the other hand is the realization that there is a reason we encounter so much intractability in our times, and that, if we accept this ’truth’, embrace it so to say, there is hope.

For all that I have read and heard, I have seen very few recommendations on how to actually deal with the many possibilities that such challenges rooted in complexity expose. We recognize that there are many possible pathways to navigate through the situations – many possible dimensions and possible points of intervention. The recommendations then have to do with experimentation, probing, and building rapid learning organizations, among others. There is more to the various approaches and I will deal with that in some other post.

One of the things that occurred to me, was that complexity posed the decision maker with dilemmas – of course in this case a multi-horned multi-lemma so to speak. That train of thought led me to thinking about dilemmas and the work that has been done in dilemma theory.

I was reminded of a book from several years ago – “Charting the Corporate Mind”, by Charles Hampden-Turner. I had referred to this book in the early 90’s when I was pivoting my career from business management to consulting. The book is certainly targeted at the Corporation and the role of the Manager. However, during my recent reading I realized that much of the book’s discussion of dilemmas and how to approach them remains relevant to our complex contexts in general.

Over the next couple of posts I will review some of the key concepts from the book and how I believe those concepts and approaches might be relevant to our need to deal with complexity in a somewhat systematic manner.

The Five Obstacles to Growth

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May 12, 2016

In the course of my work helping enterprises design breakthrough solutions to impact and growth, I have found there are five general patterns that help us understand why an enterprise might not experience growth, or if they do, why that growth might not maximize its true potential.

The five inhibitors, may not all apply to an enterprise, and while they suggest a logical sequence, an order I use when thinking about a new venture, these are better thought as inter-related ideas, that together provide answers to five questions that correspond to these statements.

Often, it is likely that one might only be looking at the implications of change in the Context of the enterprise and the opportunities or risks it creates. Or, we might just be exploring the opportunities created by new approaches to Design. However, to truly maximize the impact of any of these interventions, one must invariably look at whether all these issues have been satisfactorily addressed in a systemic way so that they together maximize the opportunity to realize the true potential of the enterprise.

  1. Enterprises do not understand themselves well enough.
    A Living Enterprise, a dynamic co-evolving entity, is the expression of an idea. The idea originates in a cognitive frame that describes its understanding of itself in relation to its context and the systems it serves.

If the enterprise is new, as in the case of a startup or a new venture, it is the idea that expresses the entrepreneur’s vision for what needs to happen in order to change a target system.

If the enterprise has been around for a while, the frame is refined and over a period of time is reinforced by its experiences and learning in the course of its operations.

As its routines get increasingly codified over time and knowledge becomes refined and specialized, the committment to the frame becomes stronger. It is quite natural too, that these frames become invalid, a fact that reflects in sub-optimal or dysfunctional results.

It is in this sense that an organization needs to deeply understand the foundational ideas and frames on which it is designed, and regularly examine their validity, a need that is becoming urgent and more frequent given the acceleration in change we are experiencing now.

Frames inappropriate to a current and/or evolving context are one of the most powerful obstacles to growth. When we find ourselves at such dramatically evolving moment in history, such as the one we are in now, there is an urgent need for something I call a Frameshift.

  1. Enterprises do not understand their Contexts, Capabilities, and most crucially, the Creative Value Ecosystem in which they play a role.
    All value is dynamically co-created by participants in the Creative Value System of which the enterprise is a part. Value is created at the intersection of the Creative Ecosystem with the Context in which it operates and the Capabilities that various particpants bring to the process or can leverage.

A deep understanding of all these three interacting elements is crucial to maximizing value creation. This understanding also needs to be dynamic in order to understand how these things have evolved to the state they are in at the present moment and more importantly, how these will potentially evolve in the immediate and distant future.

Understanding the Creative Ecosystem involves understanding the organizational relationship between the various entities and stakeholders that interact and orchestrate resources and capabilities to co-create value. It is that co-creation which originates in and is aligned with the foundational frame and is the basis for the Enterprise’s Mission.

It is obvious that the Creative Ecosystem is embedded in a Context, all the inter-related entities that lie outside the defined boundaries of the Value Creating Ecosystem but have an influence on the value creating enterprise. The competition within the industry, the economies and societies in which the systems find themselves are all dynamically interlinked and evolving too. Understanding the dynamics of these superordinate systems, the trends and drivers operating now, and the vectors of change that will shape them in future must inform the approaches to growth.

When these have not been systematically examined and understood, they carry within them the potential for surprises and risks, but more importantly latent opportunities which could become the engines for growth.

There is within them a flux which the savvy entrepreneur anticipates and capitalizes on.

  1. Their interventions in the Value Ecosystem, manifested in their Value Propositons and through their Offerings, are incomplete and temporally inflexible.
    The Enterprise brings its vision of the new value creating system into being through its value proposition and offerings.

Without going into much detail about value propositions I want to emphasize that these should stem from the understanding that enterprises are co-creators and participants in the value creating ecosystem. The extent of participation might vary, but the propositions must add to and complement the existing or desired value creation processes and systems, which are dynamic and evolve over time.

The offerings form one of two key interventions an enterprise must execute in order to realize its mission to bring about positive, distinctive and enduring impact.

In additon to its offerings, an enterprise must also, at least in its early stages, before it becomes a viable enterprise, consider the interventions necessary to shift the existing ecosystem or build one ab-initio around its own idea.

It is in that sense that the intervention might not be complete. Further, this latter intervention demonstrates the enterprise’s mastery of Systems Innovation – the ability to navigate and bring about a change in a complex system.

Temporal inflexibility has been addressed in ideas such as agile and adaptive to some extent. However, it also implies linking offerings to changing frames discussed earlier.

  1. They do not design well.
    I am talking about hte process of designing. We have mastered the processes for designing products, services and business models perhaps. The practice of Design Thinking has caught people’s imagination and there is increasing interest in that practice as well.

What then do I mean when i say that Enterprises do not maximize their opportunity when they do not design well?

I think of design differently in this context. Design is that ability to bring multiple lenses and perspectives to any situation, and reconcile the deliberate parallax so created with multiple capabilties, hitherto not leveraged in the traditional practice of design. Some of those capablities are latent within the participants in the ecosystem – we need to learn to see and recognize them. We need to think beyonf designing products and services in the emerging context of cocreating value ecosystems. We need to be creating Design Systems and Architectures that empower and enable particpants in the ecosystem to become those cocreators of value. We need to turn the Value Ecosystem into a coevolving living enterprise – a living engine of value creation.

This perspective is in my opinion the true meaning of design thinking, and we need to do this collaboratively. That is when we design well.

  1. They do not Practice being a true Living Enterprise.
    The Living Enterprise is a dynamic co-evolving entity in my argument as I have made amply clear by now. Practicing being such an enterprise implies that all of these things that we describe here that drive growth and impact are not activities that one undertakes once in a while – they are embodied in practice. It is when and only when we become such practitioners, can we sustainably deliver enduring, positive and distinctive impact and growth.

On Path-dependence and Foresight

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October 31, 2015

In my previous posts I had focused on understanding the nature of value, the ecosystems that create that value with the participation of a multitude of stakeholders, and how these ecosystems and the contexts in which they live are dynamic and co-evolving.

I also touched upon the enterprise as a participant in the ecosystem, though the extent to which it co-creates and is completely integral to the value creation act is a strategic choice, something that it must consider in the evolving world.

Thinking of value ecosystems and the platforms that inform it, one is naturally led to thinking in terms of economies – not just economies of exchange (see Bill Sharpe – Economies of Life), but in the broader sense of all dimensions of value. The core challenge an enterprise that has an intent to make the ecosystem better faces, is to understand the economics of value – ‘what is the currency that makes meaning for all the stakeholders in the system?’.

That understanding then becomes the basis of creating context, content, community and commerce.

In my last post I talked about a continuum of time from the past into the future on which value ecosystems and enterprises find themselves. One of the concepts I find useful in this context is the notion of path-dependence.

Manuel de Landa in his excellent book – A thousand years of non=linear history, opened my eyes to the notion, that the history we are most comfortable with, is mostly a linear narrative. A sequence of events that neatly fit together into a storyline, something we construct to give meaning to our own lives, as much as we do collectively as enterprises and societies.

De Landa vividly explains how that is far from the truth. All histories are replete with chance events, some externally driven, some the result of deliberate choices. (There is much literature on the idea of path-dependence and path-creation other than de Landa).

Out of this complex interplay of forces and actions, and of course the complexity increases the higher up one goes into the systems hierarchy, paths are created that are neither foreordained nor obvious. In the process of creating neat explanations, we often leave out these contingencies, things that could have been different if only some other conditions had been present or we had acted differently.

This realization is extremely crucial from the point of view of how we see the future. Extrapolating our preferred narratives into the future can be very misleading if it ignores path-dependence. The future too just like history will result from a confluence and collision of many drivers and vectors of change, and as much as we are students of history, we must be students of the future in order to act meaningfully now – in order to create the paths that will lead to desired outcomes for all.

Our purpose after all is to make an enduring impact, and we must guide our coevolution along the paths that open up or we actively create.

I will elaborate further in other posts on ideas I believe are relevant to this practice of foresight, but for now, I will mention a couple of key concepts that guide me.

Firstly, the practice of foresight is not some isolated thing one does, but integral to the practice of being that seamlessly integrates histories, the many futures, and the now into one seamless whole.

I like the concept of time horizons – every entity requires time to re-architect itself to be on a different path – the more radically different it is, the more challenging the change and the time it will take to respond. Every enterprise must therefore have a sense of how much into the future it must be able to anticipate if it should be able to respond in a timely fashion when conditions demand so.

Accommodating the future and its many possibilities is fundamentally an architectural challenge, one of knowing possible, plausible and preferred variations that one must accommodate in one’s being.

One response to this need to accommodate variation is agile and lean thinking, and the notion of discovery-driven planning etc., but one can easily be blinded to that many paths that run alongside the one you are on. A foresight practice must inform all these approaches, or one might not realize that a radically different future is coming to birth that might eventually invalidate one’s designs.

Finally, a foresight practice is first and foremost a cognitive practice. It is about opening up one’s mind – traveling into the future like a stranger on an adventure in unknown lands. If all you come back with are familiar stories one might say you have not experienced the future.

That then brings us back to frames – the one we discussed in my previous post. If you carried your frames into explorations of the future, you probably saw only one part of the proverbial elephant. As extensive as the exploration of the outside world is, as deep must be the inquiry into one’s own deeper truths – one’s architecture, in order to develop meaningful foresight.

The Time Continuum – A Co-Evolving Universe of Value

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October 19, 2015

In my last post, “To co-create or not….”, I had painted a picture of the world of value-creation as comprising of an ecosystem and a co-creating web of entities. The enterprise, as we understand it in the conventional sense, has a choice as to the extent to which it intends to participate in this value ecosystem. I had also suggested, that as our world changes, driven by technological and other drivers, to participate intimately in the process of value co-creation will no longer be a choice. There is, on the other hand, an opportunity to become a keystone, or a platform / design-system within the ecosystem, that defines the grammar of value, with a sense of service.

Today, I want to add another perspective to the value-creation ecosystem idea – that of dynamics and time. Richard Normann in his wonderful book – Reframing Business, had described how all enterprises live on a time continuum. They all have a history, and at any instant, involved in the dynamic process of evolving to a future, actually not just evolving but co-evolving with all the other entities in the ecosystem.

This dynamic conception is of course very different from the static conception of the enterprise that we are used to and comfortable with. Many have argued how, these static conceptions were useful and valid when in the recent past things were relatively stable and predictable. Those conditions as we now know, are better described with the acronym VUCA (Volatile, Ambiguous, Uncertain and Complex). To this I add the letters UM to suggest unmitigated messes that have resulted from our lacunae in operating in a dynamic world and not being dynamic learners.

Not only is the enterprise evolving in time, but the value ecosystem it serves is also evolving in time. It too has a history, fundamentally non-linear, and at any instant it too is dynamically working out a state of being that resolves all the complex vectors of change that are acting on it. Where these vectors will lead in the future is immaterial to the value ecosystem since it is usually not a purposeful entity.

The enterprise on the other hand, as a purposeful entity, that intends to create a positive, distinctive and enduring impact on the target ecosystem, is concerned about how the vectors of change might impact it, and what the implications might be for its own continued existence. I will elaborate on this idea of foresight in another post.

Factoring this dynamics conception of the value universe in how we sense, act and learn is the critical challenge of the enterprise. Normann, mentioned earlier provides a wonderful nine-box framework, that allows us to integrate our knowledge and frames of the past, and the evolving future into a dynamic realization in the present.

One of the most important concepts from the perspective of the purposeful enterprise in this sense, is that the enterprise, a complex adaptive social entity, works with frames – frames that order how it makes sense of its own history, the world around it, and who it is and wants to be. These frames, too co-evolve over time to some extent. However, they, a manifestation of a complex of values, beliefs, worldviews etc, become integral to structures and systems, cultures and practices.

These cultures become rigid over time, and prevent frames from evolving. It is when frames and the structures we build on top of them, become invalid with the current and evolving context of the target ecosystem and its own context, that the enterprise, experiences misalignment and ceases to be a productive member of the value co-creation enterprise. That is when, the enterprise is no longer healthy or living to endure.

In the accelerating and dynamic, co-evolving world that we live in, enterprises must design themselves to be living enterprises, to constantly sense, act and learn, while examining the appropriateness of their frames. Without that there will be no co-evolution. Without that there is no opportunity to make a positive, distinctive and enduring impact.

Of the Concept of Value and Generative Ecosystems

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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

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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.