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

Dave Ulrich: Reinventing the Organization

 

I continue to be impressed by Dave Ulrich's ability to articulate the future of HR, leadership and organisation. Since my current focus is on organisational management, that applies in particular to Dave's recent focus on organisations, with the suggestion that organisation has four times the value of talent (in Victory through Organization). So I really appreciate Dave writing the Foreword to The Social Organization (TSO) too.

And now, writing with Arthur Yeung, Dave has once again moved his thinking on a significant notch. Reinventing the Organization deals with the formation of the Market Oriented Ecosystem (MOE) which I referred to when posting on Dave's and other sessions at the Drucker Forum in Vienna last year.

In many ways I see the book as a follow-on from mine. TSO dealt with the opportunity for melding networks, including the use of platforms, internally. MOE is a build on that, extending the ideas internally and developing them externally too. But I still believe that in the majority of cases, the first useful step to create a MOE might be to develop something more like the melded network from TSO. That then provides a great basis to develop this approach outside of the firm too (see more on this later).

Regardless of where you start, Dave’s book is by far the best book you can read to understand the development of platform based ecosystems, particularly over the last five or so years. It's a deep book, and quite hard going (for me, that's not a negative) so although I've been through the book twice, I need to spend quite a bit longer on it too. Therefore, my notes here summarise my early, rather than fully formed, thoughts.

However, I think I have now got my head around why Dave suggests the book provides an evolution in organisational thinking - a reinvention of the organisation rather than just incremental experimentation. Dave explains this as “reinvention means more than just changing people’s reporting relationships, building teams or announcing a new strategy. You must build a fundamentally new organisation, redefining how your organisation works. Besides understanding and shaping your work setting, you need to change how you coordinate the work, the principles that govern it, and your own and others’ leadership actions.”

If I'm correct, then Dave’s organisational reinvention isn’t about the MOE itself, but the way we see organisations which Dave suggests has progressed from a focus on structure (leading to a focus on hierarchy / bureaucracy) to one on more holistic organisations (the systems view of McKinsey’s 7S or Jay Galbraith’s Star model), and mainly through Dave’s own insights, onto the outcomes or capabilities which an organisation provides. I think TSO develops these ideas further too, describing how organisational forms and other options can be selected to provide the capabilities and organisation principles which are required. That logic applies to the selection of a MOE just as it does a functional, team based or other organisational form. So despite the following diagramme, I don’t think the MOE itself is the radically new idea.

The new idea - and I suppose it’s not that new, but as a result of this book, it’s now more strongly articulated, is that we should always think about an organisation’s ecosystem and not just an individual organisation. Eg I liked the suggestion that MOEs focus on stakeholders more than processes.

So actually, the new logic, I think, is to be clear about the external environment and the required capabilities, and then to develop the ecosystem, systems and structures to support them. I think that this is at least a partial reinvention of organisation design. So I’d adapt the diagramme like this:

By the way, the mini-slide I’ve chosen to illustrate capability on the top left in the above diagramme is the one from TSO showing how the different elements of an organisation from the systems perspective can link with the different aspects of capability, ie human, organisation and social capital. I still think that works for an ecosystem too, although the social capital needs to be extended to what I normally call relationships capital, which is the value of the connections and relationships outside of the single organisation.

You could argue, and maybe this is what Dave is doing, that the traditional ways of seeing systems and structures needs to be replaced by the key features of the MOE, which I explain in a later post. However, I don’t think that’s so. MOEs still have the 7S’s structures, systems, shared values, style, staff and skills, or the Star model’s people, rewards, processes and structure (see the ecosystem model from IRC4HR below), or whatever other set of elements you pick (eg in TSO I present the Organisation Prioritisation Model which focuses on work, infrastructure, people and connections as well as a largish number of organisation and HR enablers, which might not be a reinvention but is, I think, a bit more suited to today’s organisations, and ecosystems too).

Assuming that a reinvented organisation has got to have a particular feature takes us back to the first step in Dave’s evolution diagramme when we assumed all organisations had to have a hierarchical, functional structure, just with a more modern equivalent replacing this. I don’t see that as helpful and certainly don’t believe it would contribute to more evolved thinking. Much better to start with a set of core elements and then build up from there.

It’s still helpful to have an archetype. Dave’s three legged stool for HR is a good example of this, but that’s different to saying all HR organisations need to have three legs. Or that all organisations need to have a platform.

Dave actually suggests there are three archetypal MOEs but I’m just going to review their basic features - see my next MOE related post over the next few days for more on this.

https://tinyurl.com/cudc3zv2

Organisational power

 

The powers and duties of directors were the focus of some earlier posts, however these make quite narrow use of the concept of ‘power’ – which has many forms and applications.

My previous post dealt with powers legally (and therefore legitimately) afforded non-profit boards and directors, and made reference to those powers being distinctly different to other expressions of power, such as ‘power over’, ‘power with’ and ‘power within’. The header image above offers definitions for each of these, which may aid your reflection on the distinctions.

Types of Power

French and Raven catalogued the bases of social power in 1959, and while there have been some later variations on this typology, their analysis continues to be widely used today.

The chart below positions legitimate power (the right to exercise control) adjacent to informational power, at the boundary between the major categories of positional and personal power. While coercion often involves the abuse of power, from an organisational perspective, it also accommodates the authority to impose sanctions for non-compliance with policies or procedures. Getting the balance right in your organisation is a key determinant of your culture – and the likelihood that you will be identified as ‘an employer of choice’.

Sources of organisational power

Unpacking the sources of your legitimate organisational power a little further, the following schematic identifies various of the controls or ‘governance systems’ you are employing to achieve your purposes, and to meet performance and conformance obligations. Using this chart as a checklist of your control systems, you might identify some areas in which there are opportunities for improvement.

The power to delegate to committees or individuals is one such area, which many non-profits find tricky. This power is embedded within the ‘Use of organisational structure, rules and regulations’

https://tinyurl.com/25m2x5dx

Elements of organisational policy

 

Policy-making is not a ‘paint-by-numbers‘ process. Being clear about the structural elements of an organisational policy however, helps both policy writers and users to focus their attention on the purposes served and outcomes sought from working within the policy guidance.

This post follows on from my two previous posts on Organisational Policy, and is effectively part 3 in a series. Having offered distinctions between governance policies and operational policies in the first article, the second referred readers to toolkits and templates which could provide them with sets of boilerplate policies, for them to customise according to their needs. (See links below).

Most non-profit policy development is undertaken by committees of volunteers, who rarely have any background in writing documents of this kind. Relatively few associations and charities have policy staff who have been selected for their expertise in policy writing.

I find that non-profit organisations generally welcome guidance on what policies they may need to improve their governance and/or operations, and how to construct and implement these policies and procedures.

A compact and very helpful outline of one policy ‘framework’ is offered by the Australian Indigenous Governance Institute. While intended to aid Indigenous people to “design pathways into the future that maximise their self- determination through effective, legitimate governance”, it references “world-class governance practice” relevant for all non-profit bodies.

Source: https://toolkit.aigi.com.au/

The chart below offers a comparison of four examples of policy structure drawn from quite different sources:

• the Australian Indigenous Governance Institute
• The University of Melbourne Policy Library
• Nancy Campbell’s book Writing Effective Policies and Procedures: a step-by-step resource for clear communication (Amacom,1998), and
• the Institute of Community Directors’ Policy Bank.

Noteworthy common elements are highlighted in the chart. These suggest the essence of all organisational policies, regardless of sector or entity type, while allowing additional elements according to the nature and needs of the organisation concerned.

https://bitly.ws/3gDv2

An Organisational Policy ‘Taxonomy’

 

In Carrots, Sticks and Sermons – sorting policy types, I outlined a broad range of policy categories. This provided a very simplified view of the various types of policy and policy instruments available for use in divers policy settings.

Excellent analyses of public policy typologies and taxonomies have been catalogued for many years (e.g. in 2003 Howlett and Ramesh identified 64 types of instrument in the economic policy field alone), however, these only seek to categorise government or political policies. They don’t encompass governance and operational policies used by organisations.

I have developed a partial taxonomy of Organisational Policies for use with my non-profit clients. This is quite idiosyncratic, and has not been developed according to the usual academic processes and standards. Nevertheless, as ‘Carrots, Sticks and Sermons‘ remains one of my most frequently viewed articles (even today, three and a half years after it was posted), I am prompted to offer two additional high-level summary charts for reference by non-profit policy workers.

The ‘map’ of broad policy types which appears in the header image seeks to highlight the distinction between Governance and Operational Policies within the Organisational Policy field. It also suggests some clustering of policy sub-types within these categories, although doubtless different sub-types would be required for organisations serving different purposes. For example the types of policies required by a university or school will be quite different to those required by an aid charity, or a professional society promoting ethical interactions with patients or clients.

The chart below, takes the suggested categories and sub-types of Organisational Policy, and offers selected examples of policies likely to be required by most non-profits in each of those areas. You could use this as a checklist if you like, to help you identify policies worth including in your governance/management ‘system of controls‘.

The distinction between governance and operational policies is helpful in organisations with staff. Small volunteer-run bodies may find the distinction less useful. Feel free to adapt the lists to your needs.

Future posts will discuss policy precedents and frameworks, with a view to offering NFP policy authors some structures and resources that may speed up the policy development and approval process.

https://polgovpro.blog/