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How do you deliver superior value at digital scale and speed?

Updated: Nov 17, 2019

A few weeks ago there was an article in the Harvard Business Review on the type of organization that is going to prove superior at the scale and speed required in the Digital Age. The article was based on a recently published book, titled “Reinventing the Organisation” (Yeung and Ulrich).


Competing successfully in the digital age.

Based on a study of seven of the most successful companies around today, including Alibaba, Supercell, Tencent and Amazon, the book articulates a blueprint for what makes these companies successful. They called this the Market Oriented Ecosystem (MOE).


The book also proposes a 6 part framework for re-inventing the organization as a Market Oriented Ecosystem (MOE). The 6 part framework is shown below.



Source: Yeung, Arthur. Reinventing the Organisation . Harvard Business Review Press.


This blog summarises:

· My key take-aways after reading the book, focusing on the 6 part framework (shown above).

· How the blueprint and key capabilities discussed align to how competition has evolved over time.

· Why marketing orientation is so important for success in the digital age.


Please note: this blog considers the definition of "market oriented" in the book to be one and the same as the definition of marketing orientation.


Environment and Strategy

The first two parts of the framework concern macro environment analysis and the development of strategy.

The Digital Paradox

What I found interesting in these sections was the discussion about the paradox between today’s digital environment driving disruptive change super-fast and the need of people to have continuity and security.


Continuity and security can lead to inertia. Inertia leads to strategic wear-out – where companies and products become obsolete. In the digital age this happens much faster. Holding on to what you know and not looking forward is a recipe for fear and failure.


This paradox is one that leading companies are only too aware of.


Only last week, at the TM One LEAP Summit, a leading executive of Malaysia’s largest bank spoke on this very topic. The Banking sector, like all sectors, is facing major disruption driven by the emergence of Fintech.


In response, banks such as Maybank are embracing Fintech and digital change to transform themselves. This change means that many knowledge rich tasks, such as compliance, will become heavily automated using AI. The continuity and security that banking once provided to it’s staff is fast becoming a thing of the past.



Madam Nora Manaf, Group Chief Capital Human Officer and Group Exco member, spoke about how Maybank is assisting employees find, explore and develop new opportunities as SME’s.


They do this by providing employees the option of part-time work and SME financial assistance. This give’s their staff some form of stability as they take the plunge into entrepreneurship.


In this example, Maybank as a company uses digitalisation to change it’s business operations and assists those employees brave enough to pursue their dreams and opportunities outside of the company.


What is really cool about this story is that HR is driving the business to innovate !


Overcoming the Digital Paradox

So what do today’s leading companies do to overcome the paradox of a fast changing environment versus the need for continuity and security.


In a nutshell – they bring the two together to help forge the future of the company.


These super successful digital age companies use the need to accelerate environmental analysis and strategy formulation as an opportunity to engage and energise their employees. There is so much change, these companies no longer leave analysis and strategy to only an elite few.


By involving employees in identifying opportunities created by change, these companies are able to: drive belief (meaning and purpose); enable becoming (learning and growth); and create a sense of community and belonging (connection and teams).



Digital well-being

The book goes on to highlight the invaluable importance of positively involving employees with the changing environment. Technology does provide opportunities, but the flip side is that technology can also make the world a more difficult place to live in.


Social media is a case in point. It is blamed for increasing personal malaise and isolationism – the open internet with billions connected makes people lonely. The US surgeon general recently stated that loneliness is more serious a health problem than are opiates. In the UK there is a minister of loneliness.


Google got in on the act only last week, when they announced their Digital well-being experiments. A place for tools and ideas that help people, at an individual level, find a better balance with technology.




Strategic Agility

At an organizational level, leading companies use the environmental disruption as an opportunity to give employees a sense of purpose. But if large sections of the company are constantly keeping an eye out on macro trends and identifying opportunities, there is a danger of strategic chaos.


The book makes the case that traditional strategic planning has to evolve to enable strategic agility.


Strategic agility being the ability of a company to make strategic choices quickly, creatively and intelligently in order to transform a company as fast, or faster, than the environment around it changes.


For strategic agility to be effective, a structure of clear and concise priorities must be in place to give direction to the environmental sensing and opportunity identification activities.



A great example of this is Alibaba, who have always had a mission statement of “to make it easy to do business anywhere.”


They have had this mission statement since they started in 1999 as an online platform enabling small chinese companies to have global reach. They still have it now as they start building new ecosystems to transform traditional industries.


Along that journey Alibaba has launched a plethora of new successful businesses - as can be seen below.


Source: rubygarage.org


Prioritisation is just one amongst several other principles that the book mentions.


Involving employees in the first two parts of the 6-part framework, ensures that all employees are tuned into the environmental trends (including customer) and that they fully understand why they and the company have to change.


This increases the probability that a company will successfully execute against constantly emerging threats and opportunities.


Capabilities

At first glance, the 3rd part of the Market Oriented Ecosystem (MOE) framework seems to be a duplication of the Environment and Strategy section. However the thrust of the capability section is that there are a set of capabilities that should be shared across an organization to make it more marketing oriented and successful.

Product Lifecycle Capabilities

The capabilities section of the book references a study by Professor Ulrich of 1,200 companies in 2016. This study identified and explored the impact and level of effective execution of eleven basic organizational capabilities.


The results of the study were plotted on the below graph, which shows the relative impact of these capabilities on business results (x-axis); versus how well these capabilities had been deployed (y-axis).



Source: Yeung, Arthur. Reinventing the Organisation . Harvard Business Review Press.


Interestingly, the three most impactful capabilities were all shown to be ineffectively deployed across most companies.


In terms of process these high business impact capabilities form the basis for the Product Lifecycle Process (aka New Product Development, Proposition Development or more recently Design Thinking).


Shared Capabilities


Fast forward to the recent study of leading successful digital players - such as Tencents and Google. These companies are not only strong in all these Product Lifecycle Process capabilities, but have developed these as central capabilities that are shared across the organisation.

The below diagram shows the four shared capabilities that all the companies in the study have in common.


Source: Yeung, Arthur. Reinventing the Organisation . Harvard Business Review Press.


Established versus Effective Processes

What I find interesting about these capabilities, is that if you sit down with many leaders of established large companies, they will tell you they have strong Product Management teams and established Product Lifecycle Management Processes.


However, when you scratch the surface, the processes may exist but they are not applied or operated effectively, and are not usually shared across different functions and businesses.


Take customer obsession, and the capability of gaining a deep understanding of customer needs as an example. Many companies do make an effort to gather consumer insights, through activities such as surveying customers, tracking usage and interactions. However, how many make effective use of these insights?


The enterprise arm of a large telco group once invested over 10 million pounds on creating an enterprise segmentation model and related insights – these insights ranged from understanding existing ICT infrastructure that different types of companies deployed, all the way to their attitudes towards mobile data.


The aim was to use these insights to help develop new propositions and take them to market. At a group level, the product teams segmented on product characteristics, and not customer segment. The size of the consumer research investment (10 million pounds) meant they had to take the insights and new segmentation model into account.


The group product teams had to change how they created propositions.

However the Go-to-Market teams at group and country level, were used to pushing mobile services. They hardly changed.


One country commercial director even went so far as to say the new segmentation model and insights were useless. On being asked to explain why, he stated because no one used them.


It was his role, and that of his peers to use these insights to make their business more effective. The reality was that they did not know how to use the insights and new segmentation model.


Just making capabilities available to the whole organisation does not mean that they will be used.


Companies need to ensure that the employees across the organization are trained to use these capabilities more successfully and to help continually improve them.

Morphology

The fourth part of the framework is all about the organizational structure that leading digital companies employ to ensure that they are nimble and capable of capturing market changes and opportunities.

Platforms-Cells-Partners

The organizational form most useful in this regard consists of platforms, business teams (cells), and strategic partners (allies). The book provides the example of the Supercell organization, shown below.


Source: Yeung, Arthur. Reinventing the Organisation . Harvard Business Review Press.



Supercell, the creator of Clash of Clans, uses the concept of Cell’s to create new game concepts.


Each cell is a self-contained team responsible for pursuing a market opportunity and tasked with converting the opportunity into a new business.


Each cell benefits from being part of the Supercell family, by being able to use the shared platform of services and partners. They can also call on talents and capabilities in other cell’s to help and participate on projects with them.


The platform-cell-partner organizational model replaces the old hierarchical models with a flatter and more pro-active approach to driving new innovation.


It overcomes the dilemma of companies wanting to be big enough to enjoy economies of scale, and small enough to be responsive and entrepreneurial.


It also acknowledges the importance of third party relationships by introducing these partnerships into the organization fabric, as key elements to help drive new digital business.

Platform-centric business

At the centre of this model is the shared platform. Many digital commentators and analysts speak about the future being dominated by platform-centric businesses. So what exactly is this platform – what does it entail?


The book explains that what a platform is, depends on the specific business in question. It is different for different companies. Platforms can be a mix of core business capabilities, functional support and technology support.


Three guiding rules for a platform are given as follows:

1. have everything that can or should be shared – in terms of resources and competences.

2. empower cells and partners – not control them.

3. set common standards – e.g. standards for sharing assets.


The below video from Tencents explains a common guideline that is applied to 3rd parties to ensure that they focus on being an enablement platform and remain agnostic to all partners.


Many software companies try the platform model, whereby employees can setup their own companies within the overall organization structure. The idea being to tap into the desire to run their own businesses and have some sort of autonomy.


Two key challenges that many companies encounter to applying this concept are:

· the lack of effective capabilities in the shared platform that supports these businesses

· the governance mechanism’s used to ensure some level of strategic alignment between the individual businesses.


Governance and Leadership

In the previous section, I mentioned that platforms had to enable, and not control, cells and partners within the platform-cells-partners organizational structure. This is where Governance and Leadership come in.


6 Governance Attributes

Market Oriented Ecosystems need a governance structure that focuses on enabling the ecosystem to move fast to respond to market opportunities.


The governance needs to provide coordination, alignment, ideation, talent management, resource sharing and collaboration.


The book identifies 6 key governance attributes that have an impact on how successful companies deliver the four key capabilities mentioned in the previous section.


The below diagram shows these 6 governance attributes.


Source: Yeung, Arthur. Reinventing the Organisation . Harvard Business Review Press.


Below, I discuss two of these governance attributes – culture and Ideation.

A market orientation without feeling is not a market orientation at all !!

The book explains that culture is an important governance mechanism as it defines the key priorities and behaviors people should pursue collectively in an ecosystem.


Within the context of culture, extra weight is given to “think, behave and feel” aspects of culture, and that this is shown within an organization in people’s emotional responses to how things are done in a company.


Consider Amazon, where Jeff Bezos will interrupt his VP’s if they mention competition. His focus has always been on understanding and meeting the customer need. He believes focusing on the competition is counter-productive, as it loses energy towards the all important customer.



My personal opinion is that the order should be slightly different – “feel, think and behave”. For my view on the importance of feeling, please refer to my previous blogg on Jurgen Klopp and Liverpool! (yes, I am a Liverpool fan).


A market orientation without feeling is not a market orientation at all !


Removing the gatekeeper

The governance insight that hit home the hardest was for Ideation. The book argues the importance for a fast creativity process. I have always been, and still remain in the camp that believes effectiveness is more important than speed – when considering innovation.


However, the book makes a very good point on the gating process used within typical Product Lifecycle Processes.


The gating process slows down the conversion of Ideas into products, and also decides whether an idea is improbable or not. It curtails both curiosity and creativity.


Amazon is used as an example of a company that has removed the gating process as a mechanism to gain access to shared resources. The shared resources are provided as self-service to all employees.


Steve Bezos, CEO of Amazon, believes the self-service nature of platforms is important because even well-meaning gatekeepers slow innovation.

A culture of feeling and thinking, and the ability to use resources to try out new ideas without a formal gating process, are two examples of how the governance within marketing oriented ecosystems enable fast response to market opportunities.

5 Key areas of effective leadership


A governance that enables an ecosystem also requires leadership that drives the shared direction and purpose of that ecosystem.


A key finding from the study suggests that there is a common leadership thread that runs through all these companies. That common thread is that these seven companies are a direct reflection of their leaders’ personal values and leadership style.


The book then states that even though each of the seven companies has leaders with different styles and approaches, they have identified 5 key common areas that these leaders invest their time and effort. These are shown below:


Source: Yeung, Arthur. Reinventing the Organisation . Harvard Business Review Press.


These areas relate directly to the Market Oriented Ecosystem. Business Strategist (Environment and Strategy), Talent manager, Culture definer, Personal proficiency (Governance) and Organisation architect (Morphology).


In total, these 5 key areas help set the tone of “doing the right things in the right way”, both functionally and emotionally. This is one of the reasons why I see no difference between market oriented ecosystem and marketing orientation.

The evolution of competition


What I found of particular interest with the concept of the Marketing Oriented Ecosystem (MOE) is how it ties up with our (Apti Services) view of competition in the digital age and the evolution of Marketing Orientation.


As mentioned above, this blog considers the definition of the market oriented ecosystem in the book to be one and the same as the definition of marketing orientation.


The evolution of marketing orientation

To explain how the Market Oriented Ecosystem aligns with the Apti Services view of the evolution of Marketing Orientation, consider the below illustration which shows:

· how the way companies compete has changed over time.

· how the different elements of Marketing Orientation have changed alongside this.



Source: Apti Services - Evolution of competition and marketing orientation over time.


The three elements of marketing orientation above, can be related directly to the capabilities highlighted by the book: Customer focus (with Customer obsession), Competitor focus (the focus of the Innovation) and Inter-working (External sensing and agility).


All the leading companies mentioned in the book, have successfully managed to develop ecosystems where they collaborate effectively with partners to deliver greater combined value to end customers.


For example Google with it’s shared open API platforms, driving innovation around it’s data assets; or Amazon sharing it’s cloud resources for free to new start-ups, helping them get off the ground and becoming their long-term infrastructure partner.


Value based platforms

To compete in a shared value digital world, companies need to define clearly what value they deliver to the end customer (whomever that may be), and what value they can deliver to their partners. This then needs to form the basis of their “platform”.


With technologies such as 5G, AI, AR and VR set to become mainstream over the next 5 years, collaboration is likely to drive those players with stronger well-defined platforms into positions of greater success and business performance.


Why?


Because the latest technologies will enable collaboration that will deliver richer, more impactful and personal experiences to the end customer.


The question all companies that are looking to grow at digital scale and speed should be asking in the digital age is “what type of platform business do I want to become?”

The Law of Marketing Orientation

Marketing orientation is not a new concept. It has been around for almost 30 years – being coined by Naver, Slater, Kohli and Jaworski in 1990.


So surely, it should have become obsolete over so many decades.


I would like to end this blog with an explanation as to why market orientation is becoming increasingly seen as the panacea to achieve successful business performance in the digital age.


The explanation can be found 30 years ago, in the ground breaking study undertaken by Naver and Slater.


In this study they plotted the impact the level of marketing orientation had on the business performance of different types of business.


The results were not immediately clear, but upon further analysis they uncovered what can be considered the Law of Marketing Orientation.


What is this Law?


Traditional businesses (commodity business units) do not show a linear relationship between the level of marketing orientation they deploy and their business performance.


Innovation businesses (non-commodity business units) do have a linear relationship between the level of marketing orientation they deploy and their business performance.


This is shown below.


As almost all organisations move away from traditional ways of working and embrace digital they naturally move into the area of innovation.


Traditional ways of working and archaic structural hierarchies become obstacles, and past knowledge and success become barriers to a successful digital future.


Improving your Marketing Orientation Capabilities is the key to growing at superior scale and speed


It is no surprise at all that today’s leading business performers all have high levels of marketing orientation and that this is now a shared culture across their ecosystems.


But how do you go about improving your marketing orientation capabilities?


Apti Services was formed to answer just this question.


We take the view that to improve the Marketing Orientation capabilities of an established company you need to focus on improving the Product Lifecycle Management capabilities - which are highlighted throughout the 6 part framework mentioned above.


Why is the Product Lifecycle Management process so important?


It is the process that defines and delivers more than just a product - it defines the full customer value proposition, including the customer journey and the operations required to support it.


It is the key agent of change within an organisation and, when effective, overcomes silo's and enables customer and competitor focus.


Apti Services work with our clients to help them improve their core Product Lifecycle Management capabilities - leading to the improvement and development of a market orientated ecosystem.


Successful innovation has almost always required organisations to have a marketing orientation culture.


Companies that embrace and improve their level of marketing orientation will reap the rewards as the world becomes ever more digital.

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