Navigating Change: How to Find Ecosystem-Strategy Fit
Navigating Change: How to Find Ecosystem-Strategy Fit
A guide and tools for how to lead your ecosystem’s future.
In 1972 biologists and philosophers Francisco Varela and Humberto Maturana published Autopoiesis and Cognition and spurred a generation of systems and business thinkers. Their biggest insights were that entities could be self-sustaining in complex, competitive environments and entities that co-existed in an ecosystem were structurally coupled (i.e., that they co-evolved through their interactions). While that may seem obvious, it was (and is) revolutionary to how we typically conceive of cause-and-effect in strategic decision-making. Gone are rational actors digesting information to produce outcomes in isolation. Instead strategists must embrace and navigate the messy world. Static analysis was swallowed by wayfinding. Yet, these learnings are still not being practiced by most conventional organizations, which rigidly centralize decision-making away from knowledge and emphasize status, power, and control.
Making Good Long-Term Decisions
A strategy is any decision made between reasonable choices. The waiter asks, “soup or salad?” You might consider nutrition, flavour, appetite, and the social context (soup is slurpy after all). Both decisions are valid, yet you inevitably decide. Organizations, like corporates, aren’t so different from organisms, like people. We’re living systems with a shared purpose and interrelated parts that work towards that purpose. Yet, unlike our choices for lunch, corporates make decisions with consequences that can unfold over decades. Expand into Europe? Develop a machine learning capability? Launch a new product? Once the ball starts rolling it’s expensive to stop or turn.
Imagine you’ve been tasked with identifying a promising new area to invest in. Investments usually take a while to mature. Let’s say 10 years. At this range, there are many, messy factors involved. How will the global post-COVID recovery unfold? How will artificial intelligence shape technology? How do you make sense of it all? Data is inherently historical. We can’t ‘monitor’ the future. Yet, this decision is too important to rely on intuition or speculation. Governments, organizations, and corporates confront this future-data problem every day.
As Tim Kastelle says, “hierarchy is overrated.” The old way of doing strategy misaligns organizations, gives shallow, generally ignored direction and lacks followthrough. The caricature of senior executives isolating themselves at a strategy retreat, building a vanity deck, and expecting it to land when they return feels antiquated. Take the infamous Burning Platform letter Nokia’s CEO, Stephen Elop, published in 2011. Elop anticipated a revenue freefall as iPhone sales surpassed Nokia’s and wanted to inspire his employees to respond. The letter, while beautifully written, failed. Nokia’s revenue would drop by 90% from $60 billion to $6 billion by 2014. A year later Microsoft acquired Nokia and Elop was demoted.
Like many organizations, Nokia’s challenge was that the future was unfolding around them faster than they could respond. Thus, inevitably they were surprised and disrupted by change. This story has happened time and again. Blockbuster, Xerox, Yahoo — they fell behind their competitors’ offerings or customers’ needs and went bankrupt, were acquired, or collapsed. The only way to survive the future is to lead the future. Whether it’s a corporation, SME, NGO, government, or community group, any institution that isn’t driving the future is driven by it.
The lifespan of multinational corporations has never been shorter. Half of today’s S&P 500 firms will be replaced over the next 10 years in what will be the most turbulent decade in modern history. How might organizations avoid this fate? In Patterns of Strategy Lucy Loh and Patrick Hoverstadt build on Varela and Maturana’s work. They imagine ecosystems as topographical maps and organizations as organisms navigating these maps through power, fit, and time. Business advantages are peaks that make reaching them harder, while unique competitive advantages, like patents, create breathing room around an entity. They conceive of 80+ strategy patterns or repeatable action models that organizations can execute. For example, the Knight’s Move is a strategy pattern focused on concentrating power on a competitor’s weak flank.
What if we raise this thinking past how decision-makers act and towards the product of their collective actions over time? In fact, there are five of these strategy archetypes. From top to bottom each successively has a higher resource cost and change response speed.
- (Level 1) Fixed: The institution remains static and immobile in their ecosystem, such as a company offering the same product year after year without updates or changes. They may endure for a time, like a ship anchored at sea, but eventually, they will break down or have to move.
- (Level 2) Reactive: The institution is consistently caught by surprise and acts carelessly in the face of change. Much like a prey species in the wild, they are content to merely graze and amble until a predator forces them to react. This is not meant to glorify hostile or aggressive behaviour but simply acknowledge the passivity of reactive institutions.
- (Level 3) Responsive: The institution is aware and fluidly responds to drivers of change in the ecosystem around them. Imagine someone navigating a forest path. The forest dictates the terrain but using their skill and stamina they traverse it. For instance, they detect and counter market after a competitor launches a new offering.
- (Level 4) Emergent: The term Emergent in strategic contexts arose from Robert Chia and Robin Holt’s Strategy Without Design. Emergent strategy is when the institution becomes a driver of change within the ecosystem that others react or respond to, such as Netflix shifting consumer expectations from rentals to streaming.
- (Level 5) Collective: Collective strategy is when the institution (or more commonly a collection of individuals and entities) becomes the ecosystem in which others innovate and navigate. Often collective institutions are tightly coupled with partners across the ecosystem. For instance, Google has become the dominant web platform through which millions of individuals and entities provide offerings and navigate the online world.
It’s generally advantageous to be at a higher level. For instance, a level 5 institution, like Amazon, will generally out-innovate and -maneuver a lower level entity, like Barnes & Noble. Curious what level your institution is? Try answering these brief diagnostic questions and see what you think.
- What are the most impactful and uncertain forces shaping the ecosystem around your firm?
- What long-term outcomes are possible within your ecosystem?
- How well does your firm seem to fit within your overall ecosystem and the long-term trajectory?
- To what extent does your firm create change in your ecosystem, rather than reacting or responding to it?
- What cooperative or competitive relationships does your firm have with others in your ecosystem?
The more your institution is aware of and navigating change, fits (or is driving) change patterns, and has cooperative, symbiotic relationships the higher level your institution is and thus the more it’s leading the future.
Finding Ecosystem-Strategy Fit
Institutions that lead the future will have a bold, clear purpose and an approach to realizing it that’s tailored to their unique ecosystemic context.
First, let’s look at building a clear purpose crystallized through a bold vision. There are (unsurprisingly) patterns behind the types of visions institutions offer that match the strategy patterns from earlier. I’ll be using the purpose of a construction materials supplier, which we’ll call Pallet, to demonstrate.
- (Level 1) Fixed: Pallet offers a construction solution with a fixed technology. They haven’t modified or changed their process or offering in years but customers seem to like it and business is good (for now).
- (Level 2) Reactive: Pallet offers discrete solutions to customers, such as certain materials at a certain time and place.
- (Level 3) Wayfinding: Pallet offers entire end-user value propositions, such as housing or office space. Roles-Royce offers something similar with jet engines where they charge per mile flown but not for products or servicing.
- (Level 4) Emergent: Pallet offers a world-leading suite of construction value propositions and is a leader in sustainable materials, energy efficiency, zero waste supply chain management, and ethical building.
- (Level 5) Collective: Pallet offers a supplies and construction management platform, which ensures tens of thousands of buildings worldwide can be built and through which vendors, builders, investors, and tenants can connect, purchase, and sell.
Notice that integrating technology and keeping pace with customer needs is common at higher levels. Further, as Pallet becomes a higher level their complexity, resource requirements, and ecosystem influence increase. Having a bold, clear purpose that matches or elevates the level of futures leadership your institution represents today is necessary to survive future disruptions.
Second, an institution’s approach to realizing their purpose that’s tailored to their unique ecosystemic context. Think of this as a bridge. There’s your present state or the side of the gap you’re currently on and the future state (your purpose), which is on the opposite side of the bank. How might you best cross this chasm? Since an ecosystem is more like terrain than a gap, I like to refer to it as a route. The ideal route is unique to every institution but generally being a higher-level institution will offer more choice, autonomy, and control, which better allow an institution to make and execute sound decisions.
If we put it together, we reach what I call Ecosystem-Strategy Fit. Like problem-solution fit and product-market fit it’s both a milestone and a continuous necessity that (unlike PSF and PMF) exists above the product level (i.e., a discrete value proposition) at the company and movement levels. To put all this together, I’ve designed the Ecosystem Strategy Canvas. It’s a printable worksheet and design tool you can use to model your institution’s present state, desired future state (purpose), and the ideal route to get there.
It’s broken into three sections: Ecosystem, Strategy, and Fit. Download it here. Give it a try let me know what you think.
“The rules of navigation never navigated a ship. The rules of architecture never built a house.” —Thomas Reid
Ultimately, these are just ideas and tools. It’s up to all of us as futures designers to identify and realize products, companies, and movements that shape a better world. Whether we work in or lead a private company, public corporation, government, NGO, or nonprofit we’re all capable of making the world a more just, democratic, progressive, and prosperous place. But if you’d like a little help — let me know.
This is the fifth article in the Lead The Future series, which will continue exploring the design of products, companies, and movements that shape a better world. Would you like to be notified when the next article’s launched? Subscribe to the Boardroom Labs’ newsletter in the sidebar.