Dave Ulrich: The Market Oriented Ecosystem

 

This is my second post reviewing and providing my insights on Arthur Yeung and Dave Ulrich’s new book, Reinventing the Organization.

My last post on this suggested that Dave’s new organisational logic means that we need to think about what happens outside of an organisation before we look at its internal arrangements.

However, for me, my logic from The Social Organization (TSO) still applies, ie we need to understand the capabilities an ecosystem will provide and the principles it uses in doing this in order to identify the most optimal organisational solution for a particular environmental context.

For Dave and Arthur, the key thing about the external environment is that it is uncertain and fast changing - or superdynamic. This means organisations need to be more market oriented, and they suggest the key ecosystem capabilities an ecosystem needs to provide are information, customer, innovation and agility.

Josh Bersin - network of teams

They also suggests some ecosystem principles (which provide a basis for an ecosystem’s common shared values / style) to respond to the new environment:

• Establish a consistent set of priorities
• Create the future by anticipating what the market will be
• Win through a focus on growth
• Stay a step ahead of the market by anticipating targeted and future customers
• Effectively use different options to execute a growth pathway: buy, build or borrow
• Seek and inspire agile employees
• Use scorecards and data to drive a growth mindset
• Always reinvent strategy because strategy is never finished.

In this environment, and with these capabilities and principles, they suggests the best organisational solution for any company is a Market Oriented Ecosystem (MOE).

The book reviews seven main case studies of this organisational form - Amazon, Facebook and Google in Silicon Valley and their digital cousins - Alibaba, DiDi, Huawei and Tencent  in China (as well as Supercell in Finland, which is a bit of an outlier, organisationally as well as geographically, as explained below).

The MOE is first of all, an ecosystem (generally defined to mean a network which extends beyond an individual firm). Given the logic reviewed above, a MOE is deliberately designed to involve external allies - partners providing staff, skills, structures and systems and stakes in the ecosystem.

Niels Pflaeging - value creation structure

But the MOE resembles an ecosystem within the orchestrating organisation too, with autonomous teams (cells) working alongside each other through a network rather than as a result of hierarchical coordination. Amazon’s single threaded teams is a great example. And I think this logic works - if an organisation is cellular internally, it also makes it easy to work with cells which are outside. It also provides the customer focus required by the MOE (see TSO on horizontal teams).

The other distinguishing feature of the MOE is that this uses a digital platform to support the operating network. As I noted in TSO, it’s quite hard to scale a network without a common platform, so this makes good sense too. It also provides most of the required information and agility, and together with the cells, innovation. The use of a platform makes the MOE a highly centralised ecosystem though. (Work is done autonomously within the cells, but the leadership of the ecosystem is centralised under the platform owning part of the MOE.)

Note, however, that I don’t think Dave and Arthur are referring to what I would call a platform based organisation where a digital platform enables autonomous groups to work together without hierarchical management or other forms of co-ordination. (I think the best example of a platform based organisation is Haier who also presented at the Drucker Forum last year. If you’ve not seen it, then Gary Hamel has provided a great case study of this company / platform / ecosystem in HBR recently. I particularly like this example because Haier’s platform treats internal and external micro enterprises in just about the same way, so it’s much more similar to a biological ecosystem than a MOE.)

Dave Gray - podular organisation

Instead of this, MOEs just use platforms to support the network (rather than the network being constructed on the platform). For example, Facebook’s internal use of Workplace is included as an example. Workplace as a product is a digital platform as it provides apps through the system, and it’s also an organisational platform as it enables cell based and multi-company networking, but it’s not a platform based organisation platform (!).

My favourite case study is Tencent as I think this makes Dave and Arthur’s ideas about platforms very clear. “Tencent shares its expertise and resources in technology, legal affairs, government affairs, and talent and organisation management with its strategic partners. For instance, Tencent offers technological and service infrastucture through Tencent Cloud…” In addition, Arthur's in-house consulting team “offers consulting, training, and coaching support to help key strategic partners upgrade their leadership, key talent, and organisational capabilities”.

Therefore, although the platform fits mainly within the structure element of an organisational systems model, there can also be an aspect which is more about the style that people work in, within and across their organisations, too.

Of course, none of this that new. That's not a criticism of the idea or the book, in fact it reinforces the suggestion that this is happening, and it is important.

Michael Arena - adaptive space

However, if you've not come across some of these examples of platform enabled organisation, then firstly, it already exists in Dave and Arthur’s case study organisations, even if this is largely limited to two main geographies.

But it’s also not that new in terms of the ideas being articulated as an organisation form. Eg the book's platform enabled organisations are similar to the following models which I have illustrated throughout this post:

Josh Bersin's network of teams (though this doesn't demand a platform)

• Niels Pflaeging's value creation structure (with the informal network formalised through the platform)
• Dave Gray's podular organisation (with a more formalised version of the technological part of his backbone making up for a less significant cultural aspect) 
• Michael Arena's entrepreneurial teams and communities (once again, with the adaptive space network formalised through the platform)
• McKinsey's agile organisation
• BCG's dynamic platform structure
• My own melded network organisation, from TSO.

In TSO, I focus internally within organisations so I only touch on external ecosystems. (I also don’t put much focus on internal platforms as I wanted to write about organisational management rather than the use of market mechanisms. In fact, for me, this is the best thing about Dave’s book - it’s packed full of case study evidence about platform enabled organisations and closely linked organisation forms.)

McKinsey - agile organisation

I agree, and do state, that internal and external are becoming more blurred. But for me, the best thing for most organisations to do is sort out their internal organisation - before they grapple with the additional complexity outside. These organisations can still create internal networks of teams, and use internal platforms.
 
In fact, although Dave’s organisational logic suggests we need to look externally, beyond a single organisation, before we look internally, most of the book’s examples focus on their internal networks of teams, not the way their ecosystem involve allies from outside the organisation.

In particular, the book’s other main case study, Supercell in Helsinki, is a great example of a network of teams approach. However, this company doesn’t really do much externally. Yes, it has partners with shared resources, as most organisations do these days, but I don’t see any evidence of an external ecosystem. And the company’s website provides interesting points about its team focus but says nothing to suggest it followed Dave’s new organisational logic in developing this.

Dave also suggests Amazon first created its capabilities within the organisation and only later magnified this throughout its ecosystem.

BCG - dynamic platform structure

Dave’s case studies also demonstrate that the model is fairly flexible in the way it is applied and suggests that it can be extended to other, non digital sectors, including retail, manufacturing, healthcare, finance, consulting and other professional services. For example, Walgreens / WBA’s stores and organisational management systems are seen as MOE cells and platform too. Now I’ve worked with Boots here, which is a great company, but not what I would understand as an ecosystem or even less so, a platform enabled organisation. But then if the model is going to potentially extend to any organisation I think you do need to interpret it quite loosely.

My insights from this are:

• I do think it will be useful to look externally at potential parters and the opportunities for creating an ecosystem before focusing on internal organisation design (see TSO for how to do this internal piece). I’m fully persuaded of this evolution in organisational thinking.
• This won’t always result in creating a MOE or even an external ecosystem and that is fine.
• Regardless of this, creating an internal network of teams is an increasingly good idea. It provides many of the benefits of an MOE with less bother, and provides a great basis to extend externally later on as well (and one again, see TSO for how to create this internal network of teams, or other melded network options).

Jon Ingham - melded network organisation

https://tinyurl.com/49bzch4u

RoundMap® : Framework 48 Lenses

 

The RoundMap™ framework addresses many focus areas and suggests multiple mindsets to comprehensively understand your business, its environment, and its dynamics. By putting on multiple Thinking Caps, you can obtain a panoptic view of your team, division, or business situation (panoptic is derived from the Greek panoptēs, meaning “all-seeing”).

We advise clients to select between 6 and 12 dimensions most relevant to their (desired) situation. As each Thinking Cap comes with 30 questions, selecting 6 viewpoints will provide a 180° Panoptic, while 12 dimensions will provide a 360° Panoptic. We’ve mapped 12 random Thinking Caps in the image below for illustration purposes.

Overview of Thinking Caps

Below is a rich pallet of 48 Thinking Caps, consisting of 24 focus areas and 24 mindsets. We’re not implying that this is a complete list or that you should draw dividing lines between them. However, putting on any number of complementary Thinking Caps will give you a more comprehensive and holistic understanding of your business.

24 Focus Areas

Bottom-line Thinking Cap

Bottom-line thinking is a mindset that prioritizes and focuses on the ultimate outcome or result of a decision, action, or initiative. It involves considering choices’ financial, practical, and strategic implications to determine their impact on the overall bottom line or end goal. Bottom-line thinking involves assessing different options’ costs, benefits, and risks and making decisions that optimize resources and maximize desired outcomes. It emphasizes efficiency, effectiveness, and the ability to achieve measurable results. Bottom-line thinking encourages individuals to consider their decisions’ long-term sustainability and profitability and to align their actions with organizational objectives or personal goals. It helps ensure that choices and actions contribute to the overall success and deliver tangible value or impact

SCOPE: profitability, shareholder value, decision-making, budgeting, management, efficiency, measurements, results, KPIs

RELATED: Growth analysis, risk analysis, budgeting, strategy execution, scenario planning

OPPOSITE: Stakeholder value, sustainability, effectiveness, customer value, employee health, and intangible outcomes

Brand Thinking Cap

Brand thinking focuses on developing and managing a strong, memorable brand identity. It shapes perceptions, builds trust, and creates a positive brand image through consistent messaging and experiences. It requires understanding the target audience, crafting a compelling brand story, and effectively communicating value. Brand thinking involves continuous brand management and adaptation to stay relevant in the marketplace. It drives brand loyalty, recognition, and long-term business success.

SCOPE: Corporate identity, PR, brand value, reputation management

RELATED: Marketing communications, customer loyalty, attraction

OPPOSITE: Profit-driven, short-termism

Budget Thinking Cap

Budget thinking is a mindset and approach that prioritizes careful planning, allocation, and management of financial resources within a defined budgetary framework. It involves considering the financial constraints and goals of an individual, organization, or project when making decisions and setting priorities. Budget thinking entails analyzing income and expenses, identifying areas for cost optimization, and making informed choices to ensure expenditures align with available funds. It emphasizes the importance of fiscal responsibility, efficiency, and achieving desired outcomes within the allocated financial limits. Budget thinking is vital in financial planning, resource allocation, and stability.

Business Model Thinking Cap

Business model thinking refers to the systematic analysis and design of the fundamental structure and components that drive the success and sustainability of a business. It involves a deep understanding of how a company creates, delivers, and captures value in the market. Business model thinking requires examining the key elements such as value proposition, target customers, revenue streams, cost structure, key partnerships, and distribution channels. It encourages entrepreneurs and business leaders to critically assess their existing models, challenge assumptions, and explore innovative approaches to gain a competitive edge. By adopting business model thinking, organizations can adapt to changing market dynamics, identify new opportunities, optimize their operations, and create sustainable and profitable business models that align with their goals and customer needs.

Change Thinking Cap

Change (readiness) thinking prepares organizations for successful change. It assesses readiness, addresses barriers, and fosters a supportive environment. It involves training, communication, and engagement to enhance employee readiness. Leadership plays a crucial role in guiding and inspiring change. Change readiness thinking enables organizations to adapt, minimize resistance, and seize opportunities in a dynamic business environment.

Customer Dev. Thinking Cap

Customer (development) thinking focuses on understanding and validating customer needs to build successful businesses. It involves customer discovery, validation, creation, and company building. Entrepreneurs engage with customers, refine their models based on feedback, and test assumptions. This customer-centric approach reduces risks, encourages experimentation, and promotes adaptive learning. It leads to market-driven businesses that effectively meet customer demands and achieve long-term growth.

Digital Thinking Cap

Digital thinking leverages technology for problem-solving, decision-making, and communication. It recognizes the transformative power of digital innovation and its potential for achieving outcomes. It involves navigating, evaluating, and utilizing digital information ethically. Digital thinking fosters critical reflection on the impact of technology on society, privacy, and ethics. It promotes digital literacy, computational thinking, and leveraging digital tools for analysis and collaboration. Digital thinking enables individuals to adapt to technological advancements and make informed decisions in a connected world.

Growth Thinking Cap

Growth (development) thinking drives sustainable business growth through strategic planning and innovation. It involves seizing opportunities, improving operations, and expanding market share. By analyzing trends, customer behaviors, and competition, businesses optimize their strategies and explore new markets. Agility and adaptability are key, challenging the status quo for long-term success.

Innovative Thinking Cap

Innovative thinking generates and implements new ideas to overcome challenges and create value. It embraces curiosity, creativity, and exploration. It breaks free from conventional patterns, challenges assumptions, and takes calculated risks. Innovative thinking identifies opportunities and approaches them with a fresh perspective. It connects unrelated concepts, combines knowledge in novel ways, and explores alternatives. It values experimentation, iteration, and learning from failures for continuous improvement and breakthroughs. Innovative thinking nurtures an environment that rewards creativity, collaboration, and diverse perspectives. It drives progress, competitiveness, and adaptability in various domains.

Leadership Thinking Cap

Leadership thinking guides individuals in leadership positions to inspire and influence others toward shared goals. It involves strategic thinking, emotional intelligence, and effective decision-making. Leadership thinking envisions the future, sets direction, and communicates a compelling vision. It fosters a positive culture, builds relationships, and empowers others. It includes communication, motivation, and ethical considerations. Leadership thinking promotes adaptability, resilience, and navigating change. It inspires others, drives innovation, and achieves success in various contexts.

Management Thinking Cap

Management thinking applies principles, strategies, and techniques to coordinate resources, processes, and people. It involves planning, organizing, executing, and controlling activities to achieve outcomes. Management thinking uses a systematic approach to problem-solving and decision-making. It includes analyzing data, setting objectives, allocating resources, and monitoring progress. Management thinking organizes workflows, motivates teams, and resolves conflicts. It promotes efficiency, productivity, and operational excellence. Management thinking drives organizational objectives and sustainable growth.

Market Dev. Thinking Cap

Market development thinking focuses on expanding into new markets. It involves identifying opportunities, segmenting markets, and developing tailored strategies. Businesses adapt offerings to suit new dynamics by researching and understanding customer preferences. Through geographical expansion or targeting underserved demographics, they drive growth, increase market share, and diversify their customer base.

Mission Thinking Cap

Mission thinking centers around purpose, values, and long-term objectives. It aligns actions, decisions, and strategies with the mission to create impact. It emphasizes clarity, understanding the “why,” and aligning efforts with a larger vision. Mission thinking reflects on values, defines a mission statement, and ensures alignment. It inspires commitment and determination to make a positive difference. Mission thinking promotes accountability and progress assessment. It fosters identity, resilience, and meaningful impact.

Organizational Thinking Cap

Organizational thinking optimizes an organization’s structures, processes, and dynamics. It evaluates goals, culture, resources, systems, and relationships. This holistic view recognizes interconnections. By assessing internal and external factors, it identifies strengths, weaknesses, opportunities, and threats. It guides decision-making for effectiveness and efficiency. Strategic planning, goal-setting, and resource alignment drive desired outcomes. Organizational thinking fosters collaboration, effective leadership, and a positive work environment. It encourages innovation, adaptability, and continuous improvement. Leaders rely on it to navigate challenges and leverage strengths. Applying this approach enhances performance, optimizes processes, and achieves sustainable success.

Product Dev. Thinking Cap

Product (development) thinking is a customer-centric approach to creating valuable products. It involves market research, ideation, prototyping, testing, and iteration. Businesses develop innovative and competitive offerings by understanding customer needs, collaborating cross-functionally, and incorporating feedback. This proactive mindset drives growth and ensures products meet evolving demands.

Purpose Thinking Cap

Purpose thinking centers on clarifying and aligning actions with a higher sense of purpose. It involves understanding core values, aligning goals with purpose, and finding inspiration in meaningful contributions. Purpose thinking fosters intrinsic motivation, adaptability, and a sense of fulfillment, driving individuals and organizations toward their potential.

Risk Thinking Cap

Risk thinking is a proactive approach to recognizing, assessing, and managing potential risks. It involves analyzing the probability and impact of risks, taking measures to mitigate them. Risk thinking identifies threats and uncertainties that could hinder objectives. It emphasizes understanding consequences and trade-offs. It includes contingency planning, risk assessments, and mitigation strategies. Risk thinking promotes informed decision-making and calculated risks while minimizing negative outcomes. It enables navigating uncertainty for successful outcomes.

Scenario Thinking Cap

Scenario thinking explores alternative futures, assessing risks and opportunities. It involves creating plausible scenarios, analyzing uncertainties, and considering interdependencies. It supports decision-making by evaluating strategic choices across scenarios. Scenario thinking stimulates strategic conversations, fosters innovation, and promotes adaptive planning. It identifies early warning signals for timely action. This approach enables proactive, agile strategies in a rapidly changing world.

Shareholder Thinking Cap

Shareholder thinking refers to an approach where decision-making and strategic planning primarily focus on the interests and expectations of the shareholders or owners of a company or organization. It entails considering the financial returns and value creation for shareholders as a key priority. Shareholder thinking often involves assessing business decisions based on their potential impact on shareholder wealth, dividends, stock prices, and overall financial performance. It recognizes that shareholders are key stakeholders who have invested capital in the organization and expect a return.

Stakeholder Thinking Cap

Stakeholder thinking recognizes diverse interests and impacts. It considers a broad range of stakeholders and their perspectives. It engages and incorporates their input in decision-making. This approach promotes ethics, responsibility, and shared value creation. By balancing stakeholder interests, organizations build trust and sustainable relationships for mutual benefit.

Strategic Thinking Cap

Strategic thinking analyzes, formulates long-term plans, and considers future impact. It assesses internal and external factors, identifies trends, and anticipates challenges. Strategic thinking requires critical and creative thinking, and the ability to take calculated risks. It involves evaluating trade-offs and making informed choices. Strategic thinking is vital for leaders, aligning resources and guiding the organization. It enhances competitiveness, adaptation, and success.

Structural Thinking Cap

Structural thinking in organizational development analyzes and designs structures and systems to align with goals, enhance efficiency, and enable effective decision-making. It involves restructuring departments, roles, and workflows to improve performance and collaboration. This approach balances stability and flexibility while considering interdependencies. Structural thinking promotes intentional design to foster agility, efficiency, and growth in organizations.

Transformational Thinking Cap

Transformational thinking is a cognitive approach that challenges norms, seeks radical change, and envisions a better future. It questions assumptions, embraces innovation, and takes calculated risks. It inspires visionary leadership, fosters collaboration, and empowers individuals to drive positive transformations. By pushing boundaries and embracing creativity, transformational thinking uncovers innovative solutions to complex problems, driving lasting change on various levels. It shapes a better future through bold ideas, strategic planning, and a commitment to growth.

Vision Thinking Cap

Vision thinking imagines and conceptualizes a desired future state. It taps into creativity and foresight to envision what could be. Setting ambitious goals and communicating a clear vision inspire and motivate others. Vision thinking anticipates trends and embraces innovation for transformative change. It provides meaning, guides decision-making and engages stakeholders. Cultivating vision thinking inspires, fosters innovation, and creates a positive impact.

24 Mindsets

Agile Thinking Cap

Agile thinking is a mindset and methodology that promotes adaptability, collaboration, and iterative project management and problem-solving progress. It involves embracing change, breaking down complex tasks into smaller manageable ones, and delivering incremental value through regular feedback and adjustments. Agile thinking prioritizes customer satisfaction, cross-functional collaboration, and self-organizing teams. It emphasizes flexibility, continuous improvement, and quick response to evolving requirements or market conditions. By promoting transparency, open communication, and continuous learning, agile thinking enables organizations to deliver high-quality results efficiently, foster innovation, and effectively navigate dynamic and complex environments.

SCOPE: Teamwork, cross-functional collaboration, problem-solving, innovation, feedback, change readiness, adaptability, flexibility, digital transformation, customer development, and continuous improvement

RELATED: Lean, Scrum, SAFe, Kanban, DevOps, Design Thinking

OPPOSITE: Linear Thinking

Analytical Thinking Cap

Analytical thinking refers to breaking down complex problems or situations into smaller components, analyzing them systematically, and drawing logical conclusions based on evidence and reasoning. It involves applying a logical and structured approach to problem-solving and decision-making, utilizing critical thinking skills and analytical tools. Analytical thinking entails gathering relevant information, identifying patterns, evaluating data, and considering multiple perspectives to understand the problem or situation comprehensively. It emphasizes identifying cause-and-effect relationships, making inferences, and generating insights to guide effective actions or solutions. Analytical thinking enables individuals to approach challenges systematically and objectively, allowing for well-informed and rational decision-making processes.

SCOPE: Complicated problem-solving, evidence-based decision-making, engineering, identifying patterns and trends, cause-and-effect relationships, and critical thinking

RELATED: Data-driven, facts, patterns, logical thinking

OPPOSITE: Systems thinking, creative thinking, design thinking

Agile Thinking Cap

Agile thinking is a mindset and methodology that promotes adaptability, collaboration, and iterative project management and problem-solving progress. It involves embracing change, breaking down complex tasks into smaller manageable ones, and delivering incremental value through regular feedback and adjustments. Agile thinking prioritizes customer satisfaction, cross-functional collaboration, and self-organizing teams. It emphasizes flexibility, continuous improvement, and quick response to evolving requirements or market conditions. By promoting transparency, open communication, and continuous learning, agile thinking enables organizations to deliver high-quality results efficiently, foster innovation, and effectively navigate dynamic and complex environments.

SCOPE: Teamwork, cross-functional collaboration, problem-solving, innovation, feedback, change readiness, adaptability, flexibility, digital transformation, customer development, and continuous improvement

RELATED: Lean, Scrum, SAFe, Kanban, DevOps, Design Thinking

OPPOSITE: Linear Thinking

Antifragile Thinking Cap

Antifragile thinking thrives in uncertainty, learning, and adapting from disruptions. It embraces chaos as an opportunity for growth and innovation. Failures are seen as valuable feedback, leading to improvements. Antifragile thinkers diversify options, build robustness, and consider long-term consequences. This mindset fosters resilience and agility, enabling individuals and organizations to flourish in ever-changing environments.

Behavioral Thinking Cap

Behavioral thinking focuses on understanding human behavior, including thoughts, actions, and emotions. It examines factors influencing behavior, such as individual traits and social norms. By studying patterns and triggers, it predicts responses and facilitates behavior change. Behavioral thinking informs decision-making, interventions, and environment design to support desired outcomes.

Circular Thinking Cap

Circular thinking prioritizes sustainability and resourcefulness, considering the entire lifecycle of products or processes. It aims to minimize waste, maximize reuse or recycling, and promote regenerative practices. This approach embraces innovative design principles like cradle-to-cradle, prioritizing durability and the use of renewable resources. Circular thinking challenges the linear model of consumption, advocating for circular economies that are economically and environmentally beneficial. By embracing circular thinking, individuals and organizations contribute to a more sustainable future.

Collaborative Thinking Cap

Collaborative thinking is a collective cognitive process where individuals actively work together to generate ideas and solve problems. It fosters cooperation, open communication, and mutual respect among team members. Collaborative thinking promotes active listening, feedback, and exchanging insights. It harnesses the group’s collective intelligence, challenges assumptions, and generates innovative solutions. It enhances creativity, problem-solving, and decision-making, leading to effective teamwork and robust outcomes.

Conditional Thinking Cap

Conditional thinking (“what if”) involves reasoning and decision-making based on specific conditions or contingencies. It considers cause-and-effect relationships, potential outcomes, and dependencies. It helps individuals assess the likelihood and implications of different scenarios. Conditional thinking enables strategic planning, problem-solving, and adapting to changing circumstances. It optimizes outcomes by aligning choices with specific conditions.

Creative Thinking Cap

Creative thinking generates innovative ideas, solutions, and perspectives. It breaks free from conventions, embraces novelty, and explores new possibilities. It involves questioning assumptions, connecting unrelated concepts, and thinking outside the box. Creative thinking encompasses imagination, curiosity, flexibility, and divergent thinking. It explores multiple perspectives, embraces experimentation, and promotes unconventional solutions. It fosters innovation, problem-solving, and pushes boundaries of knowledge.

Critical Thinking Cap

Critical thinking is the process of objectively analyzing and evaluating information, ideas, or arguments to form well-reasoned judgments or decisions. It involves questioning assumptions, examining evidence, considering multiple perspectives, and employing logical reasoning to arrive at informed and thoughtful conclusions. It enables individuals to discern between fact and opinion, detect biases, and navigate complex problems with intellectual rigor and open-mindedness. Critical thinking fosters intellectual independence and empowers individuals to make informed choices in various aspects of life.

Cultural Thinking Cap

Cultural thinking appreciates diverse cultural perspectives, values, and norms. It recognizes the impact of culture on beliefs and interactions, considering cultural context in decision-making. Cultural thinking develops competence, awareness, and sensitivity to different cultural backgrounds. It fosters inclusive environments, challenges biases, and cultivates empathy. It promotes cross-cultural understanding, effective communication, and collaboration in multicultural settings.

Cyclical Thinking Cap

Cyclical thinking embraces the concept of recurring cycles and interconnectedness. It recognizes predictable patterns and interdependencies within systems. By analyzing past experiences and historical patterns, it informs decision-making for the future. Cyclical thinking acknowledges natural, economic, and social cycles, enabling adaptation and identification of opportunities within patterns. It promotes a holistic perspective to navigate complexities and understand the dynamic nature of the world.

Design Thinking Cap

Design thinking is a human-centered, iterative problem-solving approach that emphasizes understanding user needs, challenging assumptions, and generating innovative solutions. It involves empathizing with users, defining the problem, ideating potential solutions, prototyping ideas, and testing them with users. Design thinking fosters collaboration, embraces ambiguity, and aims to create meaningful experiences by putting users at the center of the design process.

Dialectic Thinking Cap

Dialectical thinking embraces contradictions, opposing viewpoints, and complexity. It holds multiple perspectives, understanding that reality often involves conflicting elements. It explores paradoxes and tensions, seeking synthesis between opposing ideas. Dialectical thinking goes beyond binary thought, considering nuances and diverse viewpoints. It fosters critical analysis, intellectual flexibility, and navigating ambiguity. It deepens understanding of complex problems, encourages creative problem-solving, and synthesizes ideas for comprehensive perspectives.

Didactic Thinking Cap

Didactic thinking is an instructional approach that emphasizes clear communication and structured content delivery. It focuses on providing foundational knowledge and follows a teacher-centered approach. With specific learning goals, it aims to transmit information effectively, but it may not encompass interactive or participatory learning methods.

Emphathic Thinking Cap

Empathic thinking emphasizes understanding and relating to others’ thoughts and experiences. It involves actively listening, observing cues, and engaging in non-judgmental dialogue. By embracing empathic thinking, individuals can understand others, build relationships, improve communication, make informed decisions, and drive positive change. It fosters compassion, empathy, and inclusivity for a more interconnected society.

Environmental Thinking Cap

Environmental thinking considers the impact of human activities on the environment and promotes sustainable practices. It recognizes the interconnectedness of ecosystems, finite resources, and the need to preserve the environment for future generations. Environmental thinking involves understanding environmental challenges, mitigating their effects, and promoting conservation and sustainable resource management. It fosters responsibility, stewardship, and respect for nature, guiding decision-making and actions to coexist harmoniously with the environment.

Ethical Thinking Cap

Ethical thinking involves evaluating moral principles and consequences in decision-making. It reflects on the ethical implications of actions on individuals and society. Ethical thinking analyzes dilemmas, weighs perspectives, and aligns choices with ethical standards. It embodies integrity, fairness, and respect for others. Ethical thinking promotes critical self-assessment, considering broader impacts, and acting for the greater good. It develops moral reasoning, empathy, and a commitment to ethical conduct. Ethical thinking fosters trust, social responsibility, and a just society.

Lateral Thinking Cap

Lateral thinking is a non-linear, outside-the-box approach to problem-solving and creative thinking. It involves exploring unconventional ideas, making unexpected connections, and breaking free from traditional thought patterns. Unlike linear thinking, which follows a sequential progression, lateral thinking encourages leaps of imagination and embraces ambiguity. It encourages individuals to consider multiple perspectives, challenge assumptions, and seek alternative solutions. Lateral thinkers often employ brainstorming, analogies, and “what-if” scenarios to generate innovative ideas and overcome mental blocks.

Linear Thinking Cap

Linear thinking is a logical, step-by-step approach to problem-solving. It breaks down complex problems, analyzes them individually, and connects them sequentially. While effective in structured domains, it may overlook complexity, lack adaptability, and miss creative solutions. Complementing it with other styles, like lateral thinking, enhances problem-solving abilities for innovative solutions.

Logical Thinking Cap

Logical thinking in organizational development and change involves rational analysis, objective evaluation, and systematic reasoning. It identifies problems, develops data-driven strategies, and manages change processes. It emphasizes evidence-based decision-making and drives continuous improvement.

Motivational Thinking Cap

Motivational thinking understands and harnesses factors driving human behavior. It identifies motivators, sets meaningful goals, creates a supportive environment, tailors strategies, and inspires others. It emphasizes personalization, understanding differences, and fostering intrinsic motivation. Motivational thinking unlocks potential, achieves outcomes, and cultivates engagement.

Positive Thinking Cap

Positive thinking is an optimistic and constructive mindset emphasizing hopeful interpretations of events. It reframes challenges as growth opportunities, maintaining resilience and perseverance. It cultivates self-belief, gratitude, and a positive outlook. Positive thinking employs affirmations, visualization, and self-talk to shape attitudes and outcomes. It promotes proactive problem-solving, learning from failures, and staying motivated. Positive thinking yields psychological and physiological benefits, enhancing resilience and well-being. It fosters relationships, a supportive work environment, and personal and professional success.

Situational Thinking Cap

Situational thinking (“what is”) is assessing and adapting to specific circumstances. It involves gathering information, analyzing the situation, and considering the factors at play. Situational thinking requires flexibility and considering multiple options. It adapts communication and decision-making styles to suit the situation. It enables well-informed decisions, navigating complexities, and responding to change. Situational thinking is valuable in dynamic environments. It optimizes outcomes and manages risks.

Systems Thinking Cap

Systems thinking understands interconnected and dynamic systems. It analyzes feedback, cause-and-effect, and emergent properties. It considers the structure, behavior, and boundaries of a system and its interactions with the environment. This multidisciplinary approach helps identify leverage points and develop effective solutions. Systems thinking tackles complex problems and promotes sustainable change.

Why put on multiple Thinking Caps?

Executives need to put on multiple thinking caps to better understand their business situation. Each thinking cap represents a different perspective or framework through which executives can analyze and interpret the complexities of a business situation. Here are some key reasons why multiple thinking caps are important:

1. Broaden perspectives: Each thinking cap brings a unique viewpoint, enabling executives to see the situation from various angles. This broader perspective helps identify potential opportunities, risks, and underlying factors that may not be apparent from a single viewpoint.

2. Enhance decision-making: By considering multiple thinking caps, executives can gather a diverse range of insights, ideas, and information. This enriches their decision-making process, allowing them to weigh different options, consider various scenarios, and make more informed and well-rounded decisions.

3. Anticipate consequences: Each thinking cap prompts executives to consider their decisions’ potential consequences and implications. It encourages them to think beyond immediate outcomes and consider long-term impacts on stakeholders, resources, and the overall business strategy.

4. Challenge assumptions: Different thinking caps challenge preconceived notions and biases that executives may have. It encourages critical thinking, questioning established practices, and exploring alternative viewpoints that can lead to more innovative and effective solutions.

5. Embrace complexity: Business situations are often complex and multifaceted. Executives can navigate this complexity more effectively by putting on multiple thinking caps. It allows them to analyze various interconnected factors, relationships, and interdependencies, leading to a deeper understanding of the situation.

6. Facilitate collaboration: Each thinking cap may represent a different expertise or perspective within a team. By embracing multiple thinking caps, executives can foster collaboration, harnessing the collective intelligence of diverse team members. It encourages open dialogue, knowledge sharing, and synergy in problem-solving.

Overall, putting on multiple thinking caps helps executives to perceive a business situation from different angles, consider various aspects, challenge assumptions, and make more informed decisions. It promotes strategic thinking, agility, and adaptability in navigating the complexities of today’s business landscape.

Why is this relevant today?

When things become too erratic, forcing companies to rethink their strategy and operations daily, it’s critical to understand the organization completely. With a 360° view of the business, executives can make better-informed decisions, mitigate risks faster, adapt or pivot when needed, and know how and when to seize new opportunities.

In general, here are a few reasons to increase your understanding of the business:

1. Complexity and interconnectivity ─ In today’s world, organizations operate within intricate systems involving various stakeholders, technologies, and global networks. Understanding and navigating this complexity requires executives to adopt a systems-thinking approach. By considering the interdependencies and feedback loops within the system, executives can make more informed decisions and avoid unintended consequences.

2. Accelerated change ─ The pace of change in technology, markets, and societal expectations is constantly accelerating. Cyclical thinking allows executives to anticipate and respond to cycles of disruption and innovation. By recognizing that change is inevitable and planning for it, executives can position their organizations to adapt and thrive in dynamic environments.

3. VUCA environment ─ The business landscape is volatile, uncertain, complex, and ambiguous (VUCA). To thrive in such an environment, executives need a positive thinking mindset. Focusing on strengths and possibilities rather than dwelling on challenges fosters resilience, agility, and innovation. It enables executives to lead their teams through uncertainty and drive positive change.

4. Strategic foresight ─ A multidimensional approach helps executives develop strategic foresight by considering various perspectives and dimensions of their business. It allows them to anticipate potential future scenarios, identify emerging trends and opportunities, and make proactive decisions. This foresight is crucial for staying ahead of the competition and driving sustainable growth.

By embracing a multidimensional approach, executives can better navigate the complexities of the present and prepare their organizations for the challenges and opportunities of the future. It enables them to be agile, resilient, and forward-thinking, which are essential qualities in today’s rapidly evolving business environment.

A Kaleidoscopic Lens for Holistic Decision-Making

In the heart of Denmark lies an architectural marvel that offers a sweeping view of the city of Aarhus—the ARoS Aarhus Kunstmuseum and its iconic rooftop panorama. Like the myriad colors that fill its circular walkway, representing various shades and perspectives, the RoundMap Panoptic lays out 48 Thinking Caps. These ‘caps’ or viewpoints, much like the hues at ARoS, offer a comprehensive vantage point for decision-making.

Just as no single color can capture the essence of the world below the rooftop, no single perspective can fully encapsulate the complexities of today’s business landscape. By engaging with multiple lenses, we learn to appreciate the shades, nuances, and subtleties that might go unnoticed. The RoundMap Panoptic is your rooftop over the world of enterprise, offering a 360-degree, multi-colored view for holistic decision-making that is as equitable as it is effective.

https://tinyurl.com/mrdyemeb

Principles of Marketing. Unit 1 Setting the Stage. Chapter 1 Marketing and Customer Value. 1.3 Factors Comprising and Affecting the Marketing Environment

 

Figure 1.6 The Components of the Marketing Environment (attribution: Copyright Rice University, OpenStax, under CC BY 4.0 license)

LEARNING OUTCOMES

By the end of this section, you will be able to:

• 1 Define and describe the marketing environment.
• 2 Explain the components of the marketing environment.
• 3 Identify and describe the internal factors of the marketing environment.
• 4 List and describe the components of the micro- and macroenvironments.

The Marketing Environment Defined

Organizations don’t operate in a vacuum. They’re not self-contained, self-sufficient machines; rather, they are complex systems that require interaction with facets of both their internal and external environments in order to survive and prosper. In this section, we’re going to explore the internal and external factors that drive an organization’s marketing activities.

The marketing environment is comprised of both the external and internal factors and forces that influence an organization’s decision regarding its marketing activities. Some of these factors—internal factors— are within the control of the organization. Other factors—external factors—are outside the control of the organization. We’ll explore these in more depth below.

To illustrate this concept of internal and external factors and forces, think about your body as an organization. Your body is composed of several internal organs and systems, like your heart, lungs, and digestive system. These organs and systems function both independently and yet interdependently to keep your body going. The same is true with a business. The systems of the business are the people and departments that make up the internal organization (such as marketing, accounting, human resources, etc.). And just like the human body, these systems function independently and interdependently.

At the same time, your body is exposed to external influences, like expectations from your family and friends, cultural or gender stereotypes, and family responsibilities, that influence decision-making in either a positive or negative way. The same is true of the marketing activities of a business. They’re influenced by factors both from the macroenvironment and the microenvironment. Let’s take a closer look at these factors.

The Components of the Marketing Environment

As we’ll explore below, the internal environment is company-specific and includes the 5M framework and organizational culture. The external environment is subdivided into two components: the microenvironment (or task environment) and the macroenvironment (or broad environment), as illustrated in Figure 1.6

Components of the Internal Environment

The internal environment in marketing refers to those elements within the organization that define the atmosphere within the company’s structure. These factors include what’s known as the 5Ms of marketing and organizational culture.

The 5Ms of marketing (sometimes also called the 5M framework) is a marketing/management model that defines the elements of a marketing strategy that must be addressed in order to be successful. The five elements (sometimes known as the organization’s assets) include minds, minutes, machinery, materials, and money.19 Let’s take a closer look at each of these factors:

• Minds (Staffing): This “M” might well be considered the most important factor because it’s people who make sure the rest of the 5Ms are utilized in a productive manner to achieve the goals of the organization.20
• Minutes (Time): Time is another valuable asset. We’ve all heard the saying that time is money, and this is true within the marketing arena. For example, in formulating and implementing a new strategy, marketing needs to assess factors such as whether existing production processes are as efficient and effective as they can be, the length of time it takes the organization to introduce a new product to the market, and how responsive the organization is to competitive pressures.21
• Machinery (Equipment): Machinery consists of the equipment and/or physical assets used to process materials into finished or semifinished products.
• Materials (Production): Materials consist of the inputs needed to produce goods and services.
• Money (Finance): Perhaps second only to staffing, money is a very critical resource because it’s used to acquire and/or hire other resources.

Organizational culture is comprised of the shared values, attitudes, expectations, norms, and practices that guide the actions of all within the company. Think about organizational culture as “the way we do things around here,” and the culture can help or hinder an organization. For example, a good culture embodies positive traits that lead to improved performance and profit. On the other hand, a dysfunctional culture that’s toxic and/or inefficient can hinder even the most successful organization.22

For an example of a positive organizational culture, consider Zappos, where happiness is at the core. Founder Tony Hsieh wrote a book on the topic and has said, “We’re willing to give up short-term profits or revenue growth to make sure we have the best culture.”23 Hsieh was not afraid to put his money where his mouth was, either. In support of maintaining an outstanding company culture and a productive workforce, he instituted a policy that would pay new, unhappy employees $2,000 to quit following their four-week training period.24

By contrast, consider what a dysfunctional culture can do to an organization. During the summer of 2020, The Ellen DeGeneres Show was called out for having a toxic work environment. Eleven employees spoke out publicly about the negative organizational culture. There were allegations of sexual misconduct, intimidation, and racism.25 Ratings faltered as a result of the allegations, and DeGeneres ultimately decided to end her daytime talk show.

But how does organizational culture impact marketing? Here are three very tangible ways that your company’s culture can make a positive impact on marketing:

• Branding and marketing efforts emanate from the organization’s core values and culture and guide the organization’s marketing message. Therefore, if your marketing message doesn’t match the reality of the business, it’s akin to that old adage of “putting lipstick on a pig.”26 You’re talking the talk but not walking the walk.
• A strong culture strengthens your marketing message because it gives prospective customers a better idea of the values of your business, and customers who know what you believe and value are much more likely to do business with you. For example, research has demonstrated that 86 percent of buyers are willing to pay more for a positive customer service experience.27 Once again, think about the culture at Zappos. One of the ways in which the company has developed a strong following of loyal customers is through its policy that call-center employees are empowered to do “whatever it takes” to make the customer happy. Call-center employees don’t use scripts for calls, and there are literally no time limits on calls.28
• A strong organizational culture is also key in attracting and retaining employees. In his quest for a happier, more positive work environment, Hsieh implemented several policies at Zappos that he felt contributed to this environment, including a relaxed dress code, discounted food and drink, relaxation areas, and more.29 TOMS (featured in Companies with a Conscience later in this chapter) is another excellent example of this.

Components of the External Environment

There are two elements within the external marketing environment: the microenvironment and the macroenvironment. Although the factors within these environments are not directly within the marketer’s control, they still influence the decisions made by marketers. We’ll first examine the factors in the microenvironment, as shown in Figure 1.7.

Figure 1.7 Components of the Microenvironment (attribution: Copyright Rice University, OpenStax, under CC BY 4.0 license)

The microenvironment consists of five predominant factors.

• Suppliers. Suppliers (sometimes also called vendors) are those partners from whom we receive the parts and products necessary for our business. Let’s assume that your company produces microwave ovens. Some of your suppliers may be providers of transformers, the turntable, control panels, magnetrons, etc. As long as you have options in terms of the component suppliers, the bargaining power of each supplier is relatively weak. However, if two suppliers merge and decide to raise the price of the component the new entity supplies, that vendor now wields increased power.
• Market Intermediaries. Often, products are distributed by third-party sellers such as retailers, wholesalers, and others in the distribution channel. The reputation of these market intermediaries plays an important role in the marketing of the product or service, both positive and negative, so companies need to select and monitor market intermediaries on an ongoing basis. We’ll learn more about the roles of these intermediaries in Distribution: Delivering Customer Value, but let’s provide a couple of definitions and examples to help you better understand some of the parties in the distribution channel. Retailers (like Walmart or Target) purchase large quantities of goods from producers and then sell smaller quantities to end customers for personal use or consumption. Wholesalers purchase large quantities of products from producers and then sell to smaller businesses such as retail stores. A good example of a wholesaler is Gexpro, which sells electrical supplies for the construction industry.
• Customers. Understanding who your customers are will enable you to effectively reach them, whether online, locally in retail stores, or internationally.
• Competitors. Successful marketing strategies must be implemented after consideration of your competition. Knowing who your competition is and what they are and are not offering allows you to find the gap in the market. You want to be where the competition is not, at least in the sense of offering something unique to a targeted market.
• General Public. Because companies provide their offerings in communities that support them, they have an obligation to satisfy those communities. There’s an old saying that “perception is reality,” so marketers’ actions must be evaluated through the perceptual lens of those communities, because the public’s perception of you—your reputation—is essential to your success.30

Components of the Macroenvironment

Obviously, marketers can’t ignore what’s going on in the external environment. One of the tools used by companies to assess the environment in which they are operating is a PESTLE analysis. PESTLE is an acronym for political, economic, social, technological, legal, and environmental factors that provide marketers with a comprehensive view of the whole environment from multiple angles.31 These macroenvironment factors can be used to understand current external influences so that marketers can more easily identify what might change in the future, mitigate the identified risks, and take advantage of competitive opportunities (see Figure 1.8).

Figure 1.8 PESTLE Factors (attribution: Copyright Rice University, OpenStax, under CC BY 4.0 license)

Let’s look at these factors more closely:

• Political Factors. These factors include environmental and trade restrictions, political stability, and business policy. For example, Tesla announced in late 2021 that it is moving its headquarters out of California to Texas, following similar announcements by Hewlett Packard Enterprise (HPE) and Oracle, citing such things as lower housing costs and tax rates and fewer regulations, making it easier for companies to operate in Texas.
• Economic Factors. Economic factors play a huge role in terms of a company’s prospects in a market. For example, economic factors affect pricing and can even influence the supply/demand curve for a product or service. For example, high inflation causes consumers to have less spending power, which translates into lower sales and revenue. In 2022, consumers experienced both product shortages and higher prices, blamed largely on COVID-19, Russia’s war on Ukraine, and the availability of certain commodities, such as corn, sunflower oil, and wheat.32
• Social Factors. Social factors take in a wide swath of elements, such as cultural norms and expectations, health consciousness, population growth/decline, the age distribution of a population, and even career attitudes. Let’s take one of these factors—age distribution—and examine how it impacts marketing. Baby boomers (born between 1946 and 1964) comprise approximately a quarter of the US population. It’s largely as a result of this group’s aging and retirement that active adult communities such as Del Webb and others have sprung up across the nation.33
• Technological Factors. These factors encompass the innovations and developments in technology that impact an organization’s operations, as well as the rate of technological change. For example, look at one simple technological change with which we’ve all become comfortable in the public arena over the past decade or so: free WiFi. Starbucks was able to take advantage of this change and reposition its coffeehouses and differentiate itself from competitors by offering free WiFi.34
• Legal Factors. These factors include changes to legislation impacting employment, industry regulation, licenses and permits, and intellectual property.
• Environmental Factors. In the context of a PESTLE analysis, environmental factors refer to variables affecting the physical environment, like climate change, pollution, the scarcity of raw materials, and the growing concern over companies’ carbon footprints.

Knowledge Check

It’s time to check your knowledge on the concepts presented in this section. Refer to the Answer Key at the end of the book for feedback.

1.

The extent to which the supply chain adds value to our marketing strategy is best addressed by our evaluation of which of the 5Ms?

1. Materials
2. Money
3. Machinery
4. Minutes

2.

________ consist of third-party sellers such as retailers, wholesalers, and other resellers in the distribution channel.

1. Suppliers
2. Market intermediaries
3. Partners
4. Customers

3.

If you wanted to fill a gap in the marketplace, you would have to carefully consider ________ to see what is already available on the market.

1. the competition
2. the customers
3. the public
4. the resellers

4.

Which of the domains of the macroenvironment are most likely to be responsible for cutting-edge innovations?

1. Economic
2. Technological
3. Political and legal
4. Social and cultural

5.

You want to target a market more narrowly than simply using demographic data. You are also considering segmenting on people’s attitudes and interests. Which domain of the macroenvironment is most likely to be a relevant data source for your decision-making?

1. Economic factors
2. Natural factors
3. Political and legal factors
4. Social factors

https://openstax.org/