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Chapter 1 - The concept of business ecosystems
Traditional Markets
“Market” = the place where two parties gather to exchange goods and services (buyers and sellers),
can be physical or virtual.
Traditional methods of analysing the markets
Î PESTLE (Political, Economic, Social, Technological, Legal and Environmental influences on the
business environment)
Î Porter’s Five Forces = High to low in strength of these forces on competitive environment.
New entrants, bring extra capacity and intensify competition. Rivalry amongst competitors,
existing competition, Substitutes, across industries. Power of buyers, can force price cuts
and/or quality improvements. Power of suppliers, can charge higher prices.
Î Porter’s Three Generic Strategies (ways an organisation can become a superior competitor).
= Cost leadership, offering products/services of same quality at lower cost. Differentiation =
charging higher prices but for more innovative products or higher perceived quality. Focus =
concentrating on a small part of the market and optimising it.
However, growth of technologies create the need for a more modern method of analysing the
market.
EFFECT OF TECHNOLOGY ON TRADITIONAL MARKETS
Impacts markets through effect on productivity, efficiency and production and delivery of new
goods/services, hence, a source of competitive advantage for organisations.
Technology enables individualised and integrated experiences for customers, but some businesses
are not able to deliver these types of experiences, hence, they face increased risk and threats. “Each
successive development lead to a decline in demand for the previous format”.
DRIVERS OF THE DIGITAL REVOLUTION
Î Mobile and internet penetration, increasing rate of mobile ownership and internet access.
Î Connected devices, growth of 27.5 bn between 2009 and 2020.
Î Data analytics and the cloud, increased use of e-commerce platforms, social networks, apps
etc – increased need for automated data analytics.
Î User interfaces, how humans interact with machines, it is quicker and more efficient to carry
out tasks with machines such as voice recognition, motion-tracking systems.
Î Global accessibility, rising living standards in developing economies means more access to
internet.
Î Increasing urbanisation, growing percentage of people living in urban as opposed to rural
areas – greater reliance on technology.
EMERGENCE OF “BUSINESS ECO-SYSTEMS”
The external competitive environment is changing rapidly, as these emerging technologies (social,
mobile, analytics, cloud, 3D printing, bio- and nanotechnology) create the following environments:
Î Connected and open – increased ownership of phones and interest access, new levels of
trust and accountability between partners and consumers, as they hold personal
information.
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Financial services are the largest market in terms of capitalisation, so if users were to switch to
blockchain, this would heavily disrupt the industry, but also improve the efficiency of those financial
services. Transactions are direct with no intermediary, making deals faster and cheaper to make.
They are also transparent, traceable, and secure. Blockchains can also be used to track physical
goods in supply chain, assisting with monitoring suppliers in real time.
SURVIVING DIGITAL DISRUPTION
How can a business rethink its business models to thrive in a digital era:
1. The internet of me – users are being placed at the centre of digital experiences, through
apps and online services which are personalised to the users.
2. Outcome economy – increasing ability to measure outcomes of services, which is what
organisations should focus on, as customers are more attracted to outcomes rather than just
products.
3. The Platform (r)evolution – global platforms are easier and cheaper to set-up and maintain,
due to development like cloud computing and mobile technology, which offer innovation
and quicker delivery of next-gen services – the rate at which this is evolving will only
continue to increase as users take more advantage.
4. The intelligent enterprise – using data in a smart way enables organisations to innovate and
operate more efficiently, with better information to serve customers.
5. Workforce reimagined – the role of humans should not be completely removed; they are
just being used in a different way. Human and technology should be used together to create
better outcomes.
Although, there are various myths about digital transformation:
Myth 1 Æ those organisations that are not digitally prepared have missed their chance of success.
However, existing business have invaluable assets that technology cannot replace – know-how,
customer relationships, brands, reputation, distribution channels, data. These should be leveraged
to their advantage; the business model just needs to adapt.
Myth 2 Æ becoming a digital business is an administrative exercise that focuses on achieving
operational efficiencies – successful business should not just use technology to cut costs, it should
be to increase revenue sources available to them as well.
Myth 3 Æ digital transformation can be successfully achieved just by creating a digital business unit
headed up by a Chief Digital Officer – the process of digitalisation will impact all employees, which
everybody should be involved in. the CEO should just take responsibility for it.
ROLES AND RESPONSIBILITIES OF THE BOARD AND SENIOR LEADERSHIP
1. Inspirational leadership – change management on a larger and faster scale, hence, the need
for a leadership team to energise and inspire confidence of the workforce that digitisation is
best approach. Will only be a success if leaders take responsibility and persuade others to
commit.
2. Competitive edge – as well as leaders motivating people within organisation, must also be
able to persuade them to change their mindset. Be prepared to innovate and think outside
the box, to experiment and learn from failures.
3. Establishing a strategic direction – strategies are normally present in any organisation but
may have to be tailored to take digital strategic direction as well/instead. Planning horizon
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leading virtually as well as physically, due to the advancements in technology and greater reliance
upon it.
Can cause communication challenges, culture sensitivities and issues with performance
management, which virtual leaders must juggle alongside ensuring a successful business. Leaders of
virtual teams must act as managers and leaders – management to ensure work is undertaken
correctly, timesheets and documentation are produced accurately on within time frames, whilst also
being a leader to set the culture, tone and pace of the new, virtual context in which the team
operate. Motivation needed to succeed in this environment is great and can challenge the
achievement of business goals and objectives, so leaders must be able to provide suitable guidance
and convey influence upon the individuals to motivate them, without actually meeting them and
being able to deal with situations physically.
It is often easier to lead when you can see what is going on around you, you can visualise the
relationships between colleagues, you can see the employee’s approach to work and you can sense
the tone of the office, which virtual leaders do not have the advantage of. There is a higher level of
ambiguity, virtual leaders must be able to understand and lead across culture boundaries and lead a
distributed team of personnel.
SAP – largest inter-enterprise software company, using virtual team collaboration. Each centre
distributed across the globe has its own area of expertise that is shared across the company,
reducing costs. Managers can form virtual teams that comprise of employees from each specialty
group, making a well-rounded team with a diverse set of expertise to offer. They also focus on team
building activities, one of which was a training program for teams to work together and build a
community through online learning, conference calls, briefings, and coaching sessions.
LEADERSHIP AND ETHICS
Business ethics are the set of moral rules that govern business operations, how decisions are made
and how people within the business are treated. Law can guide these ethics, particularly due to
dealing with different stakeholders – government, banks, suppliers, clients etc. Business may follow
these ethical standards to gain public acceptance.
Leaders need to create a healthy culture that influences employee actions, decision making and
behaviour. Takes time and requires awareness, sensitivity, patience and resources to achieve.
Unethical behaviour may be ingrained into a company’s culture and regarded as “just the way
business is done around here”, so may not be considered unethical to those involved in it.
NESTLE – WHO (world health org) found children in developing countries who used nestle’s infantformula had mortality rate five to ten times greater than that of breast-fed children. Nestle had a
sinister campaign of appointing nurses to distribute formula to mothers for free, long enough for
mothers’ milk to dry up. Mother and child became dependent on formula, but could not afford it, so
gave an insufficient quantity, and were also unable to use clean water.
ASDA – Failed to embed corporate responsibility into its operations and supply chains. Led to
workers rights abuses at factories, accusations of discrimination and other charges.
A good leader will have a strong following and a strong sense of ethics. Direct link between
leadership and ethics, they must display an ethical approach to all they do, if they wish to influence
others to follow their actions. How should an organisation create ethical leaders?
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departmentally would be escalated to top level organisational scorecard, so the source of failure can
be quickly identified, and action can be taken.
Beneficial because it avoids managers reliance on short-term or incomplete financial measures,
managers can identify problems earlier through non-financial measures i.e. customers satisfaction,
steps can be taken to improve it before customer goes elsewhere, before having impact on finances.
It can ensure that divisions develop their own success measures relevant to overall organisation
goals, and it can help stakeholders to evaluate firm (given that measures are communicated
externally).
Drawbacks are that it does not provide a single overall view of performance, quite complex, measure
like ROCE are popular because they provide a summary in one convenient measure. There is no clear
relation between balanced scorecard and shareholder analysis. Measures can be conflicting and
confusing to management – if two areas are failing, which one should manager sacrifice, or which
should they prioritise in actioning. Often requires a shift in culture in order to implement it.
OTHER TECHNIQUES TO ENHANCE PERFORMANCE
Mentoring
A relationship where one person helps another to improve their knowledge, work or thinking. It is a
valuable development tool for the mentee and the mentor. Ensure faster career progress, good
value for money as the cost is small, boosts company image by reducing staff turnover because they
are empowered, so less likely to seek other employment, and also improves staff motivation,
preserving the well-being of employees and others, improve morale, trust and motivation.
A mentor should be able to give practical support and advice, technical, ethical and general business
guidance. Can help develop interpersonal and work skills. Impartial sounding board, no direct
reporting responsibility, so unbiased. Must be a good guide, counsellor. Be a role model who can
improve career goals. A mentor tends to be from the same function, unlikely to be a direct line
manager. Would have already achieved a status and possibly qualification that the subordinate
desires.
For a mentoring system to be a success, relationships should be based on a genuine wish by the
mentor to share knowledge, but also for the mentee to receive, listen and take on board that
knowledge, must be of mutual trust. They work alongside formal control mechanisms, such as
appraisal, intending to provide employee with a means to discuss development issues, but in a
relaxed and supportive environment – issues surrounding training, choice of qualification,
interpersonal problems, and career goals.
Their role is to encourage and assist junior members of staff to analyse performance in order to
identify their strengths and weaknesses. They should provide honest but supportive feedback on
how weaknesses can be eliminated or neutralised, and they could also act as a sounding board for
ideas, helping junior staff to question and reflect on their experiences in the workplace.
A mentoring system has both career-enhancing and psychological functions, the career function is
concerned with career advancement through exposure, visibility, and sponsorship. The psychological
function is concerned with aspects of the relationship that enhance competence and effectiveness in
management roles. A mentoring system should help junior staff to expand their contacts network
and gain greater exposure in the organisation. “A mentee will find a safe environment where they
can admit gaps in their knowledge and skills, raise queries and consider their strengths” AAT article.
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3. Social proof Æ influence through peer pressure, if others act a certain way, we may be
inclined to act in a similar way.
Use opinions of those already supporting you to entice others to join the support, if others are
talking about it then new people will want to be involved.
4. Liking Æ we are more likely to be influenced by people who we like, who are nice and
friendly towards us, and if they are similar to us.
Build relationships with those you want to influence so they trust you, it can take time and different
approaches may be required for different individuals.
5. Authority Æ influenced by people in positions of authority, coming from a sense of trust and
respect for the position that person holds.
Use your own authority and the authority of others as influencers. Get the backing of senior,
powerful people who will encourage others to back you as well.
6. Scarcity Æ we are more likely to want something if it is limited, we will support it if we are
scared of losing out if we don’t pursue it.
Make people aware that they could miss out if they don’t act quickly. Impose deadlines to
emphasise urgency, encouraging others to support the cause.
Persuasion is the attempt to deliberately get others to change an attitude, opinion, or behaviour –
deliberate as opposed to influence is the ability to change. This is a stronger version of influence,
influence can be direct or indirect, intentional, or unintentional, whereas persuasion is ALWAYS only
direct and intentional. Influence could be used to inspire someone to buy in to an idea or make a
particular decision, while persuasion would aim to change a person, or groups attitude or behaviour
towards something or someone. The person would have a clear objective and be set on achieving it
by getting others to support them. Is just short of telling or ordering someone to do something but
uses coercion to attempt to get the other person to agree. The six principles of influence can also be
used in persuasion, but in a stronger form.
Negotiation is the ability to discuss an issue with one or more other people in the attempt to
establish ways to reach agreement. Can be used by managers in their relationships with
subordinates and other stakeholders (suppliers, customers etc). The aim is to settle differences
between people or groups, allowing them to reach an agreement for both parties to accept. Three
main characteristics of negotiation:
1. Conflict of interest between two or more parties, what one wants is not necessarily what the
other wants.
2. No established set of rules for resolving conflict, or parties involved may wish to work
outside of an established set of rules to form their own resolution.
3. Parties prefer to search for an agreement rather than to fight openly, to have one side
capitulate, to break off contact permanently, or to take their dispute to a higher authority.
Managers may need to undertake negotiation on their own behalf when securing a pay rise, or an
improvement in the terms and conditions of their employment. On behalf of a department or
function, like securing a budget for that department. With external environment on behalf of the
business, like obtaining planning permission for an extension, or like securing a deal with a supplier.
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project team members. Regular meetings ensure all members are aware of progress and any
potential issues.
Project progress review meetings Æ regular, formal and involve the PM, team members and
customer or steering committee. Might take place quarterly and PM would present summary report.
Those involved can ask questions not covered by written report. Purpose is to provide an update on
project status, identify any issues and establish action plans from that point.
Project problem solving meetings Æ held on ad-hoc basis to deal with problems as or when they
arise.
Meetings with external parties Æ PM will arrange meetings with external resource providers like
suppliers, or sub-contractors.
5. Closing
Project must be delivered to users, end of project meeting conducted, formal sign off project,
project review meetings held, final report issues, and project team disbanded. The end of project
meeting confirm project closure by a formal sign-off, a review evaluates how successfully the project
was managed, if deadlines were met, quality standards achieved, budgets adhered to. Lessons
learned are stored and used for future projects. Project review meetings should be conducted
internally with project team members and externally with customer.
Internal review Æ an opportunity to review planning, management, reporting, and control. Can
discuss success and failures of project process. Establish what can be learned to benefit future
projects. PM can discuss with individuals their role in projects, to improve their own performance on
future projects.
External review Æ crucial aspect of project closure. Important to establish whether project has
satisfied the customers requirements. Obtain feedback to help improve future projects. Customers
can voice any concerns regarding how the project was ran.
The final report
Will include brief overview of project, customer original requirements and original project
deliverables, list of deliverables that customers actually received, actual achievements (costs,
schedules and scope), degree to which original objective was achieved, and any future
considerations. This report should refer to feasibility study and report, the PID, project planning
reports, and milestones and gates.
The purpose of closing stage of the process
To ensure the project is finally completed and conforms to latest definition of what was supposed to
be achieved, to provide a formal comparison between PID and project outcomes, to evaluate
performance of project against agreed levels of performance. Cost of the system in comparison with
the budgeted with an explanation for variances. Comparison of time taken against time budgeted.
To review effectiveness of the management process. To highlight the significance of any problems
encountered. To complete the project termination activities – organisation and filing project
documentation, receiving and processing final payments to suppliers of resources, agreeing with
customer that deliverables have been provided, meeting with PM and customers to report on
success and failures, disbanding project team. To provide continuous improvement and feedback. To
learn from the experience.
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If the project is complex and forms a major part of the business, then a clear line of authority is needed,
unlike conventional structures where the authority between line managers and project managers is
often unclear.
Matrix and project structure
A matrix structure’s objective is to combine benefits of de-centralisation (like the enhanced
motivation of identifiable management teams, closeness to the market, speedy decision making) with
the many benefits of co-ordination (achieving economies and synergies across all business units,
territories and products).
This structure adds flexibility and lateral coordination, by creating project teams made up of members
from multiple functions or divisions. These individuals will have a dual role, to maintain their original
role as well as completing their duties as a part of the project team. Horizontal and vertical
relationships are emphasised (between departments and between managers).
This structure is suitable where the business conducts a series of projects, each requiring staff and
resources from multiple technical functions, where several projects have different start and end dates
(resources are being re-assigned from project to project), when the projects are complex and staff can
therefore benefit from being assigned to a technical function where knowledge can be shared, when
projects are expensive and better utilisation of resources can be achieved by the use of functional
heads, and also when the projects are customer facing so a single point of contact (the PM) can be
available to deal with their needs.
Impact of matrix structure on project achievement
The use and implementation of a matrix structure can improve decision making by bringing a wide
range of expertise together avoiding the departmental/divisional boundaries, by replacing formal
control with direct contact, to develop managers by exposing them to company-wide problems and
decisions, and to improve lateral communication and cooperation between specialists.
Although, it can cause issues due to a lack of clear responsibility, clashes of priority between project
and function, functions losing control over the psychological contract, career development can be
hindered, one specialist may struggle to appraise another discipline in multi-skilled teams, PM’s may
be less likely to impose authority if they are due to become subordinates in later projects (vice versa
when they become subordinates being overly authoritative), confusion with employees reporting to
two bosses (departmental and project), managers need to be trained in resolving interpersonal
frictions, and managers are required to spend a lot of time in meetings to prioritise tasks.
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