By Sergei Irisov

Digital transformation frequently fails not because of technology, but because organisations attempt to modernise systems without redesigning how decisions are made and work is governed. Drawing on experience from regulated engineering environments, this article explores why operating models, architecture, and governance must evolve together to translate strategic ambition into sustainable execution.

Digital transformation has become a central ambition for organisations across every industry. Boards approve ambitious technology programmes, leaders announce platform strategies, and executives invest heavily in digital capabilities. Yet the long-term results are often disappointing. Productivity gains remain modest, innovation slows, and competitive advantage proves fragile.

The problem is rarely technology.

It is the operating model.

In regulated engineering industries — aerospace, energy, and advanced manufacturing — this reality becomes visible earlier and more sharply than in most sectors. Certification regimes, safety constraints, and complex product lifecycles expose a fundamental truth: digital transformation succeeds only when operating models are redesigned before systems are deployed.

Strategy without execution is not strategy

Strategic ambition frequently outpaces organisational readiness. Leaders articulate digital visions and innovation roadmaps without redefining how decisions are made, how accountability is distributed, and how work flows through the organisation.

Michael Porter argued that strategy is about making choices and building systems that reinforce those choices. Without an operating model that encodes strategic intent into daily operations, digital initiatives become fragmented investments rather than sources of advantage.

In regulated engineering, this misalignment is unsustainable. Certification processes, safety cases, and audit regimes quickly reveal inconsistencies between declared strategy and operational reality.

The operating model as the missing layer

Most transformation programmes focus on three elements: strategy, technology, and talent. The operating model — the structures, governance mechanisms, incentives, and decision rights that determine how work is executed — is often neglected.

In product-based organisations, the operating model governs how requirements become designs, how changes are approved, how risks are managed, and how value is delivered across decades of product life. When operating models remain unchanged, digital platforms merely automate existing dysfunction.

Architecture as organisational design

Enterprise architecture is frequently treated as a technical discipline. In practice, it functions as a form of organisational design.

System boundaries define decision rights. Data ownership shapes accountability. Integration patterns reflect coordination mechanisms between functions. In high-performing engineering organisations, architecture becomes a strategic instrument that encodes governance, aligns incentives, and enables controlled experimentation.

In this sense, architecture is not infrastructure. It is management by design.

Governance that enables speed

The belief that governance slows execution remains deeply embedded in management culture. Regulated environments demonstrate the opposite.

Clear decision rights, explicit role definitions, and automated controls reduce friction by eliminating ambiguity. Teams move faster when they understand ownership, approval thresholds, and compliance obligations. Effective governance is not bureaucracy; it is a scaling mechanism that enables organisations to grow without losing control.

From project delivery to product operating models

The shift from projects to products is widely discussed but rarely implemented with discipline. In regulated engineering, the product operating model becomes essential.

Platforms evolve continuously under configuration control, ownership remains stable, and funding aligns with lifecycle value rather than short-term milestones. This approach integrates naturally with certification regimes and long-term asset management while creating organisational memory — a prerequisite for sustained advantage in complex systems.

Competitive advantage under constraint

Rita McGrath has argued that competitive advantage is increasingly transient. Regulated engineering offers a different perspective.

Here, advantage emerges not from rapid disruption but from the ability to execute reliably under constraint. Organisations that align strategy, operating models, and architecture build capabilities that competitors struggle to replicate. Certification becomes a barrier to entry, governance becomes an asset, and architecture becomes intellectual capital.

Conclusion

Digital transformation does not fail because technology underperforms. It fails because organisations attempt to digitise without redesigning how they operate.

In regulated engineering, the lesson is clear. Sustainable advantage arises when strategy, operating models, and architecture evolve together. Transformation is not a programme. It is an organisational redesign.

Without it, even the most advanced technology cannot deliver the future leaders promise.

Acknowledgements

The author confirms that this article reflects original analysis and intellectual contribution. AI-assisted tools were used only for language refinement and formatting support and did not influence the conceptual framework, argumentation, or conclusions presented in this work.

About the Author

Sergei Irisov is Head of IT & Digital Transformation at ZeroAvia. He leads enterprise architecture and operating model design for regulated engineering organisations across aerospace and advanced manufacturing, focusing on digital platforms, governance, and long-term product systems.

The post Why Digital Transformation Fails Without an Operating Model appeared first on The European Business Review.

By Juliana Queiroga

As U.S. research faces disruption, Europe must move beyond funding to capture global talent. By adopting Brazil’s Porto Digital model, Europe can bridge the “valley of death” through “triple helix” collaboration, high-density urban innovation districts, and integrated market validation, transforming a brain drain into a sustainable, world-class ecosystem.

The current talent exodus from the U.S. creates a strategic opportunity for Europe to build transformative innovation ecosystems with the help of Latin America’s proven playbook

The numbers tell the story: By February 2025, hundreds of U.S. researchers had been dismissed from agencies such as NOAA within 90 minutes’ notice. The European Research Council responded by doubling its relocation budget to €2 million per researcher.

Thirteen European countries, including France, Germany, and Spain, signed an urgent letter to the EU Commission demanding accelerated talent acquisition programs.

This isn’t just about individual career moves—it represents a $940 billion research ecosystem in flux. As Gray McDowell at Capgemini Invent warns, “Regulatory uncertainty, funding cuts, immigration restrictions, and diminished international collaboration create a perfect storm for brain drain.”

High-profile departures like historians Timothy Snyder and Marci Shore from Yale to the University of Toronto signal a broader trend: leading researchers are questioning their future in Trump’s America.

Immigration lawyers report unprecedented inquiries from tenured professors and senior technology executives exploring opportunities in Canada, Europe, and Australia.

For European policymakers, this represents the most significant talent acquisition opportunity in decades. But as Princeton’s Michael Oppenheimer notes, “Europe would likely need a long time to overturn that spending advantage…for several decades.”

The challenge isn’t just money; it’s methodology.

Europe’s innovation challenge runs deeper than funding gaps.

Despite the EU’s €381 billion annual R&D investment, the World Economic Forum identifies persistent “valley of death” problems between breakthrough research and commercial success.

The blueprint already exists in the Americas —not in Silicon Valley or Boston, but in an unexpected location: Recife, Brazil in the heart of Porto Digital, dubbed the “quixotic tech hub that actually worked” by WIRED magazine in 2023.

The Porto Digital Model

Twenty five years ago, Porto Digital transformed a declining historic district in northeastern Brazil into one of Latin America’s most successful innovation ecosystems. Today it hosts 475+ companies, employs more than 21,000 professionals, and generates R$6.2 billion in annual revenue after maintaining double-digit employment growth for more than a decade.

What makes Porto Digital remarkable isn’t just its scale; it’s how it achieved sustainable growth through what innovation experts call “triple helix collaboration” that unites academia, industry, and government to drive innovation and economic development.

Unlike traditional tech parks that rely primarily on tax incentives and infrastructure, Porto Digital integrated three critical elements from inception: academic research excellence, government policy coordination, and private sector engagement.

Unlike traditional tech parks that rely primarily on tax incentives and infrastructure, Porto Digital integrated three critical elements from inception: academic research excellence, government policy coordination, and private-sector engagement.

The Federal University of Pernambuco’s top-ranked computer science program provides a talent pipeline. Strategic fiscal incentives create competitive advantages. Most importantly, deliberate urban planning ensures researchers, entrepreneurs, and business leaders interact through what Endeavor’s Anderson Thees calls “synchronicity”—casual, fortunate encounters that drive innovation.

This model directly addresses Europe’s persistent innovation challenge. European institutions excel at technical innovation but struggle with technology transfer. Porto Digital embeds market validation throughout the research process rather than treating commercialization as an afterthought.

Why Traditional European Approaches Often Fall Short

Current European innovation policy often follows linear models: fund research, transfer IP to industry, hope for commercial success. This yields impressive academic publications but limited market impact.

The fundamental problem lies in organizational culture. European institutions often maintain rigid departmental boundaries that prevent the cross-functional collaboration essential for technology transfer. Legal teams block user testing due to privacy concerns. Operations departments resist real-world trials that might disrupt existing relationships. Innovation teams develop solutions isolated from business units expected to implement them.

These silos become particularly problematic when competing against more integrated approaches. Chinese companies benefit from state-coordinated innovation strategies and deeply connected supply chains. American firms leverage sophisticated VC markets that fund rapid iteration. Many European organizations are often caught between academic timelines and commercial demands.

Capitalizing on the Brain Drain Moment

The current disruption creates unprecedented opportunity, but European success requires learning from proven models. Three key insights from Porto Digital directly apply:

First, geographic concentration accelerates innovation. Porto Digital’s “15-minute walkability” principle ensures researchers, entrepreneurs, and investors interact regularly. European cities pursuing scattered innovation districts miss the serendipitous encounters driving breakthrough collaborations. Portugal’s emerging innovation hub demonstrates this density principle in action.

Second, cultural transformation precedes technological breakthroughs. Porto Digital’s success built on the Manguebeat cultural movement, combining traditional Brazilian rhythms with modern influences. This foundation created openness to experimentation that traditional tech parks lack. European innovation hubs must cultivate similar cultures of creative risk-taking.

Third, sustainable models require policy coordination beyond tax incentives. Porto Digital’s fiscal advantages operate within broader strategies aligning municipal, state, and federal priorities. European innovation policy currently sets member countries as competitors. Coordinated regional approaches would amplify individual efforts.

The European Implementation Path

Attracting America’s departing academic talent requires immediate action on three fronts:

• Accelerate visa processes for academic families. Current procedures assume individual relocations rather than household moves involving spouses and children. Streamlined family reunification would eliminate practical barriers preventing academic relocations.
• Create integrated innovation districts. Academics seek communities, not just jobs. European cities must develop neighborhoods where international researchers can establish roots—coordinating housing, schools, and cultural amenities alongside research infrastructure.
• Leverage Brazil-Europe partnerships. Through programs like Horizon Europe and the All-Atlantic Ocean Research Alliance, EU institutions can offer American researchers access to Brazilian biodiversity data and Amazon research that Canadian or Australian institutions cannot match.

breakthrough innovations. This requires coordinating housing policy, school systems, and cultural amenities alongside research infrastructure.

Leverage Brazil-Europe partnerships to create unique value propositions unavailable elsewhere. Through programs like Horizon Europe and the All-Atlantic Ocean Research Alliance, European institutions can offer American researchers access to Brazilian biodiversity data, Amazon research opportunities, and LatAm advantages that Canadian or Australian institutions cannot match.

Beyond Opportunity Capture

The U.S. brain drain offers a chance to fundamentally restructure global innovation networks toward more distributed, collaborative approaches. Porto Digital’s experience demonstrates that successful ecosystems require decades to mature but achieve transformational impact when properly designed.

European policymakers have months, not years, to capitalize on American instability while competing destinations mobilize. The opportunity is clear: build ecosystems that attract displaced American talent, or watch these researchers settle elsewhere.

Porto Digital’s blueprint provides the roadmap. But implementation requires recognizing that successful technology transfer depends more on organizational culture change than funding increases. The organizations that succeed will embrace Porto Digital’s core insight: innovation happens through sustained collaboration between researchers, entrepreneurs, and communities—not through isolated excellence.

The question isn’t whether Europe has sufficient resources to compete. It’s whether EU leaders will move quickly enough while U.S. researchers are still deciding where to rebuild their careers.

About the Author

Juliana Queiroga is Executive Manager of CESAR Europe, expanding Latin America’s proven innovation methodologies into European markets. With more than 18 years in strategic innovation management, she specializes in technology transfer, organizational culture change, and cross-border ecosystem development. She holds a master’s degree from Queen Mary University in Management and Organizational Innovation.

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By Fernanda Arreola and Dr. Gregory C. Unruh

When we think of innovation, our minds often jump to startups or young tech firms. But what about institutions that are centuries old? How do they adapt and remain relevant in today’s world? Business schools—some with origins dating back more than 200 years—offer a compelling case study.

Despite their heritage, business schools today are under immense pressure to change. They must train future leaders for jobs that do not yet exist, respond to societal challenges such as climate change and inequality, and prove their relevance to stakeholders ranging from students to governments. Their transformation shows us that innovation is not only the domain of the young and agile; it is possible even in organizations with deep traditions and entrenched systems.

The Pressures That Drive Change

Business schools no longer operate in isolation. They are embedded in a wider ecosystem of expectations and regulations. External drivers—including accreditation bodies like AACSB, EFMD, and PRME, as well as government regulations and corporate demands—set the standards for relevance and accountability. Rankings and media scrutiny amplify this pressure, while alumni and donors demand proof of long-term impact.

Innovation is not only the domain of the young and agile; it is possible even in organizations with deep traditions and entrenched systems.

At the same time, broader sustainability challenges—climate change, inequality, resource scarcity—force schools to prepare graduates for a future that will look very different from the past. As one dean recently put it, “Our students expect us to prepare them for jobs that don’t exist yet, in industries that are only being invented.”

Examples abound: HEC Paris has integrated sustainability projects into its core programs, ensuring that students graduate with hands-on experience in tackling real-world challenges. IE Business School in Madrid led the way in digital learning long before the pandemic made it essential. Harvard Business School now embeds ESG and climate risk across research agendas, influencing global boardrooms. These cases show how external pressures translate into innovation.

Innovation Through Teaching, Research, and Engagement

Through interviews with leaders at top European business schools, we have constructed a framework that shows how schools innovate. We call this the value chain of sustainable education, and it highlights the systemic way in which institutions translate pressures into impact. First, inside business schools, innovation takes shape through three primary activities: teaching, research, and engagement with stakeholders.

1. Teaching: Curricula are redesigned to reflect sustainability, digital transformation, and societal responsibility. Traditional case methods are being complemented by experiential projects, hackathons, and cross-disciplinary approaches.
2. Research: Faculty redirect efforts toward questions of pressing societal importance. Climate risk, digital ethics, inclusive finance, and governance innovation are no longer niche topics but mainstream research streams. This is reinforced by research funding, collaborative events, and stronger dissemination strategies.
3. Engagement: Alumni networks, boards, recruiters, and donors push schools to stay relevant. Businesses want actionable insights; governments expect policy contributions; and students demand meaningful career preparation. Together, these stakeholders ensure that innovation is not confined to classrooms but extends into society.

Second, business schools follow a four-stage process that leads them to produce relevant and sustainable innovation. This value chain of innovation works as follows:

1. Inputs: students, faculty expertise, financial resources, voluntary and regulatory standards.
2. Processes: teaching, research, and institutional practices that absorb and reinterpret these inputs.
3. Outputs: knowledge creation, trained graduates, and transparent impact reporting.
4. Outcomes: contributions to society and business practice, from advancing sustainable strategies to influencing government policy.

This framework makes one thing clear: innovation in business schools is not about isolated initiatives. It is about designing a chain of activities that systematically link education to broader societal impact.

From Knowledge Providers to Future Architects

Through our study, we’ve unveiled a reality that is becoming increasingly evident: the role of business schools is shifting. No longer just knowledge providers, they are becoming architects of the future of business. Their legitimacy now depends on their ability to align education with societal needs and business realities while preparing students for a world in flux.

The task ahead is clear: innovate boldly, engage deeply, and measure impact transparently. By doing so, business schools will not only secure their own survival but also actively contribute to the reinvention of business itself.

This transformation, however, extends beyond academia. The evolution of business schools offers important lessons for managers across all sectors. Like schools, companies must navigate a complex landscape shaped by external pressures—regulators, investors, customers, and civil society—while also grappling with internal challenges related to culture, processes, and strategy.

In this context, organizations can draw inspiration from how business schools are reimagining their value chains. The way schools innovate provides three takeaways for leaders in business:

1. Innovation is systemic, not cosmetic. Adding a sustainability initiative or a digital pilot is not enough. True innovation requires redesigning the value chain—aligning inputs, processes, and outputs with broader goals.
2. Stakeholder engagement is a catalyst. Schools innovate because alumni, students, boards, and accreditors demand it. Companies, too, must listen to and integrate feedback from stakeholders who increasingly expect responsibility and transparency.
3. Impact is the ultimate measure. For schools, success is not about courses created but about the graduates they shape. For companies, it is not about projects launched but about the value delivered to society, employees, and customers.

In short, the innovation journey of business schools is a mirror of the challenges all organizations face today. For managers, the message is clear: embrace innovation as an ecosystem endeavor, measure what truly matters, and prepare to shape—not just respond to—the future.

About the Authors

Fernanda Arreola is a Professor of Strategy, Innovation, and Entrepreneurship at ESSCA. Her research interests focus on service innovation, governance, and social entrepreneurship. Fernanda has held numerous managerial posts and possesses a range of international academic and professional experiences. 

Dr. Gregory C. Unruh is the Arison Professor of Values Leadership at George Mason University and an outstanding voice on sustainability and leadership. He serves as guest editor for the MT Sloan Management Review and is the author of the upcoming Academic Authority: The Professor’s Guide to Becoming a Sought-After Thought Leader.

The post How Do 200-Year-Old Institutions Innovate? The Example of Business Schools appeared first on The European Business Review.

By Ben Hughes

This article explores what business leaders can learn from musicians, highlighting resilience, improvisation, purpose-driven work, and deep listening. Drawing parallels between the stage and the boardroom, it shows how musicians’ adaptability, creativity, and connection-building offer a powerful model for modern leadership, organisational culture, and navigating uncertainty with agility and authenticity.

Welcome to the music business: the toughest industry on earth. It is a machine that devours dreams and demands resilience. Any business leader understands a daily grind, but the climb within music is unlike any other. The myth suggests only the ultra-famous have made it, but the truth is far broader: countless people in creative, technical, and management roles within the music business have built and sustained thriving careers behind the spotlight.

What strikes me most as an entrepreneur and musician is how the music business mirrors countless other industries yet with one defining difference. It has its own pressures, products, timelines, and workflows to master and overcome, but most people in it, especially artists, are willing to delay reward for the sake of long-term purpose. They will work for years on uncertain returns because the art itself is worth it.

Imagine telling your employees: Do this job, and you may or may not get paid in ten years. No one would agree, yet that is the reality for most artists. They commit to the long game. The question is why are they willing to do this, how are they capable of it, and what can companies learn from that mindset?

The traditional model of punishment and reward is familiar, but musicians are not driven by simple incentives. In a time of financial insecurity, promising a distant payoff is no longer ethical or effective for business owners. To inspire genuine commitment, companies must weave motivation and purpose into the fabric of their culture.

Any serious musician is a master of hustling, finding opportunities, negotiating pay, creating products, and building audiences. If workers in other fields displayed the same energy, many would become millionaires. But money is rarely the main goal for artists: art is! Hustling is simply how musicians keep their art alive.

That hustle involves building relationships, honing craft, mastering technology and social media, assembling teams, pitching, budgeting, and performing often all in the same week. Few professions require juggling so many moving parts.

I live this every day through my work as the artist Hughzy and as director of CherryUp Projects. Navigating the music business demands constant adaptation, resourcefulness, and communication. Every artist I manage has taught me that success lies in balancing instinct with structure. While boardrooms rely on systems and strategy, musicians rely on rhythm and improvisation. Those who can blend both keep creativity, connection, and courage alive in a world that evolves faster than any plan.

Modern musicians, whether on stage, in studios, or across digital platforms, are masters of resilience, communication, and reinvention, skills today’s leaders need most. No performance ever goes exactly to plan. A string snaps, a sound fails, an audience shifts mood. Musicians do not stop; they adapt. Improvisation is not mere flair; it is a disciplined skill built on listening and response.

In contrast, the corporate world often clings to fixed strategies and five-year plans. Structure has its place, but rigidity can be fatal in uncertain markets. A musician’s mindset offers an alternative: planning matters, but so does flow, the ability to move lightly and adapt in real time.

Take jazz musicians. They perform within frameworks yet move freely within them. The best leaders do the same, setting clear parameters while allowing flexibility. Meetings that encourage improvisation, where ideas evolve dynamically, often spark innovation that spreadsheets cannot.

Musicians spend years learning to listen to tone, timing, and tension. Great players know when to lead, when to support, and when silence carries more power than words. Through my own projects, I see how success always depends on relationships, how you listen, respond, and show up. A career in music is ultimately a career in human connection.

Taylor Swift proved this when she built a global following to billionaire status by turning connection into community. Ed Sheeran and Yungblud did the same. They are not just creating fans, they are creating families.

In business, listening is often undervalued. Too many meetings become performances of authority rather than collaboration. Yet the best music is built on mutual awareness, with each part adjusting to the others in real time. In a band, everyone contributes. In contrast, the boardroom can reward dominance over teamwork. Musicians remind us that collaboration is not weakness, it is creative strength.

Leaders can learn from great session players, those who blend seamlessly to make others sound better. In music, ego kills groove; in business, it kills culture. Most musicians do not create for money alone. They create to express, connect, and contribute something meaningful. That sense of purpose becomes their compass through uncertainty.

Businesses, too, must show purpose, not as marketing but as moral infrastructure. Employees and consumers want to know why an organisation exists beyond profit. Musicians teach that authenticity cannot be faked. Audiences know when a performance lacks heart; stakeholders sense the same. When a company’s purpose resonates like a melody, clear, consistent, and human, it inspires loyalty that no advertising can buy.

Every musician knows failure: missed gigs, poor reviews, empty rooms. Yet they continue. Resilience comes from understanding that progress is not linear and rejection is not final. In business, resilience is equally vital. Musicians treat setbacks as creative data, signals to adapt and try again. Leaders who adopt that mindset turn failure into growth.

A musician’s greatest power lies in presence, the ability to be fully engaged in the moment. When performing live, distractions disappear. There is only the song, the sound, and the shared experience. In leadership, presence is equally magnetic. Too often, executives hide behind slides or jargon, losing the human connection that makes communication memorable.

Performance, like leadership, is not about perfection, it is about honesty. A wrong note does not ruin a concert if the emotion is real. Likewise, leaders who communicate with sincerity, even imperfectly, build trust more effectively than those who deliver flawless but empty words.

The boardroom does not need to become a stage, but it could learn from one. When strategy feels stuck or teams feel disconnected, remember the lessons of music: tune in, find your rhythm, and adapt to both consonance and dissonance. When everyone listens, adapts, and performs in harmony, business, like music, becomes something far greater than the sum of its parts.

About the Author

Ben Hughes (Hughzy) is a Liverpool musician whose global career spans performing with major artists, developing talent, and extensive studio work. Ben has taught at UK universities, spoken at TEDx and major festivals. He is the author of Make Music Your Business: The Musician’s Blueprint for a Thriving Career, founder of Cherry Up Projects, and host of the podcast More in the Moni. 

The post What Can the Boardroom Learn from the Musician? appeared first on The European Business Review.

By Eugenia Mykuliak

Before shifting from B2B to retail, fintechs must ask themselves the big question: are they truly ready? Retail markets have their advantages and pay-offs, but making this transition is not a simple matter. To succeed, you need a mindful approach that will allow your business to scale in B2C without breaking what was already there for B2B. 

Every B2B company eventually faces a moment of contemplation that maybe it’s time to try aiming for retail clientele. After all, if the brand is solid and the product works, why not reach the millions of people using fintech every day — whether through neobanking, payments, or trading platforms — instead of just a few dozen enterprise clients? 

The appeal for further growth and expansion of the customer base is very understandable, but putting that idea into practice is not so simple. Because the truth is, going B2C isn’t just about adding a new audience. Moving from serving businesses to serving individuals means rethinking everything: compliance rules, customer experience, even internal culture. A company has to rebuild everything from the ground up.

So if your business has come to that stage, the real question you have to ask isn’t whether you “want” to go retail — it’s whether you’re “ready” for it. 

Check Readiness Through Numbers — Don’t Just Make a Leap of Faith 

One of the biggest misconceptions one can have here is to assume that enthusiasm can make up for readiness. It doesn’t. A company is truly ready for a B2C transition only when its fundamentals — financial, technological, and structural — can withstand a completely different pace and scale. And to make sure of that, you need to check hard numbers. 

Let’s look at finances first. Proper money flow is essential for the health and functioning of any business, but retail margins are generally thinner compared to institutionals, and customer acquisition costs are high these days.

If you’re looking to enter this sector, you should be prepared to see profits per user dropping by 30-50%. At least, at the beginning, while you’re still building up your client base anew. That means your company must have strong financial reserves and the ability to sustain longer payback periods before you can break even.

Another prominent factor to think about is infrastructure. Keep in mind that supporting a relatively minor number of enterprise clients is a world apart from serving millions of individual users. You need to rebuild your entire support system in order to make it work.

Automation and advanced CRM tools are going to be necessary instruments from day one to make this transition easier. Without them, even the best strategy you can develop will buckle under operational pressure when you try to put it into practice. That’s how big a difference in scale we’re talking about here. 

Finally, internal structure matters, and much more so than many teams expect. Transitioning to serving all those above-mentioned millions of retail clients strains not just the technology, but the personnel as well. Why? Because the rhythm of work changes completely.

You need to develop a whole new playbook, and every department — sales, support, compliance, marketing, and so on — needs to be rearranged to operate in sync. But all of them have their own KPIs and focus areas, and for institutional services, those focuses are very different. Without taking the time to adjust workflows and priorities, operations will clash and cause chaos instead of efficiency. The company won’t be able to get anything done. 

Get Ready to View Compliance as a Core Function

As I already briefly mentioned above, fintechs in retail face a very different compliance landscape than in the B2B space. The relevant frameworks and consumer protection laws fundamentally reshape how you should approach risk management. 

In B2B, compliance often revolves around counterparties — verifying institutional clients, maintaining reporting standards, and ensuring partner-level data protection. In B2C, the focus flips entirely because every individual user becomes a regulated entity in your system. And any misstep in handling their data or their rights can be cause enough for lasting reputational damage. 

Frameworks like DORA or GDPR demand airtight data governance but also transparency about how user information is handled. Consumer protection frameworks add another layer of complication, requiring clear lines of communication, fee disclosure, and easy dispute resolution — all of which require automation and real-time monitoring to stay compliant. 

To get it right, fintechs must ensure strict segregation of client funds, maintain real-time updates and disclosures, and reinforce cybersecurity protocols capable of reacting instantly to incidents.  

In short, compliance in retail isn’t about passing audits — it’s about building trust into your very foundations and proving your reliability with every single interaction you have with users. 

Grow Retail Without Breaking Your B2B Core 

Based on everything we’ve covered above, it should feel clear that for a business to successfully expand into retail, it’s not enough to simply “add” a B2C stream alongside its existing ones.  

You have to pretty much build an entirely new business unit to sustain efforts in this direction. One with its own dedicated team, KPIs, risk framework, and data infrastructure. Such clear separation is meant to protect both sides of the equation: ensuring the retail arm can grow, but without destabilizing the B2B backbone. It’s about focus, control, and direction. 

A retail operation moves fast, measures success differently, and depends on real-time data to adjust to customer needs. Meanwhile, a B2B division is more likely to run on long-term relationships, negotiated contracts, and tailored services. Trying to run both on the same set of processes will inevitably lead to tensions. Or worse, cause bottlenecks and lead to the quality of service dropping on both sides. 

That’s why separating the retail and corporate structures is a necessary safeguard. The can — and should — still be aligned in overarching brand values and vision, but everything else simply works too differently to run on the same rails. 

How to Balance Branding Across Corporate and Retail Audiences 

Finally, one last crucial thing that we must cover is how moving to the retail sector means learning to speak a whole new language. 

Broadly speaking, what B2B clients value most in their partnerships is precision and long-term stability. Retail users, on the other hand, respond far more readily to clear explanations, simplicity in operations, and speedy services. As a result, you need to adjust how you talk to both of these very different groups.

Some companies solve this by creating separate branches — one for corporate clients and one for consumers. Others go for a unified identity but develop distinct communication strategies for both groups. Either approach can work, and only you can decide which is better for you.

But one thing I must emphasize is consistency. Even if you speak in a different tone, both institutional and retail audiences need to trust you. Without that, you won’t get results. And that means that the quality of your services, communications, and overall brand values must stay on an equal level, no matter which of the two groups you’re dealing with. 

Sending out a blurred message can damage credibility and lead to your reputation taking a hit. 

Think Carefully Before You Cross This Line 

In the end, I can only underscore once again that while expanding into retail can unlock tremendous growth, it is not just a decision to make hastily or lightly. A B2C transition takes serious commitment because it forces you to both rebuild your systems and retrain your teams. Your entire mindset from the ground up needs to be rethought.

Done right, it can create long-term strength and brand credibility. But if a business misjudges its capabilities, it can lead to operational strain, regulatory missteps, and lasting financial and reputational damage.

So before crossing the line into B2C, measure your readiness — not your desires. That’s what’s going to make all the difference. 

About the Author

Eugenia Mykuliak, Founder & Executive Director of B2PRIME Group, a global financial services provider for institutional and professional clients.

The post How Fintechs Can Build a Strong B2C Foundation appeared first on The European Business Review.

By Javier Cabello Llano, Professor Ambika Zutshi and Sahan J. Fernando

The jewelry industry is facing rising pressure to ditch wasteful, exploitative practices and embrace sustainability. Here, the authors present their a vision of how the 10R framework could be applied to give the sector a much-needed revamp incorporating the principles of the circular economy.

The jewelry industry

The global jewelry industry, valued at 300 billion dollars and with an estimated growth rate of 4 percent annually until 2030, is heavily dependent on non-renewable resources. The rising demand for jewelry has raised concerns over the environmental and social impacts of the industry beyond the on-material sourcing, to incorporate carbon emissions and labor exploitation. Increasing pressures to adopt sustainable practices (Lin & Sai, 2023) and the principles of sustainable fashion emphasize the importance of reducing the environmental and social impacts of the jewelry industry by facilitating circularity in business models.

The adoption of circularity in the jewelry industry offers three benefits. First, it enhances economic value through securing raw material supply, reducing cost, innovation, and minimizing waste (Faccioli et al., 2023). Second, enhanced economic value enables organizations to shift capital and resources to areas of high productivity and greater yield, such as product availability, new product development, and business expansion. Third, circularity in the jewelry industry appeals to a sustainability-conscious customer base in the target market and enhances brand equity (Lin & Sai, 2023). Here, we present our recommendations for supply chain practitioners using the 10R framework to facilitate the circular economy in the jewelry industry.

The 10R framework for the jewelry industry

Figure 1 illustrates operationalization across the various stages of the jewelry supply chain to facilitate circularity by optimizing material usage and extending product life cycles. The jewelry life cycle can be broadly classified into three categories of circularity.

Figure 1: The 10R framework in the jewelry industry 

Category 1: Smarter product use and manufacture

This first category includes thought-provoking steps for practitioners to advance the circular economy in the jewelry industry by refusing (R0 Refuse) unsustainable materials and rethinking (R1 Rethink) design and production to minimize waste and resource use (R2 Reduce). By adopting alternative, eco-friendly materials and more ethical practices, manufacturers can reduce reliance on non-renewables and lower environmental impact.

Category 2: Extend the lifespan of the product and its parts

This second category is about extending product lifespans using multiple options, including reusing (R3 Reusing), repairing (R4 Repair), and refurbishing (R5 Refurbish) of jewelry pieces. Nonetheless, staying competitive requires a constant supply of new designs and poses a challenge for circular opportunities when trying to remanufacture (R6) and repurpose (R7) existing jewelry items into new designs.

Category 3: Useful application of materials

This category includes the critical step in closing the loop by establishing recycling systems (R8 Recycle) and recovering (R9 Recover) materials from unsold or discarded jewelry, supporting both sustainability and emerging consumer preferences. This is achievable, as demonstrated by some start-ups (e.g., Oushaba, Lylie, The Royal Mint’s 886, So-Le Studio) who have been focusing on creating jewelry from discarded materials.

There are several opportunities for practitioners to move the conversation from circulatory challenges in the jewelry industry to having practical strategies to achieve the same. Table 1 overviews these strategies by showcasing the example of a bracelet. It outlines actionable interventions across the Level 1 processes for APICS frameworks: Product Life Cycle (PLCOR), Design Chain (DCOR), Customer Chain (CCOR), and Supply Chain (SCOR). These strategies can assist managers and industry partners to design and manage products with circularity in mind, whilst simultaneously balancing their profit margins. From selecting sustainable raw materials and modular designs to enabling take-back programs and recycling pathways, these strategies encourage reflection on critical questions such as, “Have you considered alternate materials or adaptive product designs?” or, “How can your supply chain better support product recovery and reuse?” These recommendations aim to support more sustainable and resilient business models within the jewelry sector.

In summary, the first step in working towards circularity in the jewelry industry is identification, followed by integrated efforts from key stakeholders across the upstream and downstream supply chain. This piece provides reflection and action points for supply chain practitioners using the 10R framework, incorporating aspects of reverse logistics systems for product return, use of standardized and recyclable materials, and design simplification to facilitate disassembly and reuse. Further, embracing extended producer responsibility (EPR) and cross-sector partnerships can unlock broader circular solutions, particularly in the use of non-renewable resources. Nonetheless, establishing a circular economy in the jewelry industry is only a beginning. It must be continuously evaluated and improved in the design, sourcing, production and disposal stages to remain effective and resilient over time.

About the Authors

Javier Cabello Llano is a PhD student at the Technical University of Denmark. His research focuses on supply chain and operations management, with a big interest in how companies can remain responsive while pursuing sustainability. He is especially engaged with challenges in the fashion industry and other dynamic markets, aiming to bridge performance and responsibility.

Professor Ambika Zutshi is Dean of ACU’s Peter Faber Business School and author of over 100 publications focused on CSR, higher education, supply chain management, and stakeholder relationships. Editorial board member of the International Journal of Consumer Studies, and editorial advisory board member of Management of Environmental Quality.

Sahan J. Fernando is a PhD candidate at Deakin Business School, Australia. He holds qualifications as a Bachelor of Business Administration and a Master of Business Administration. His research interests include entrepreneurship, social issues in management, cross-sector partnerships, and institutional theory. He is also a Senior Lecturer at the University of Colombo, Sri Lanka.

References

1. Faccioli, G., Martin, K., & Sheehan, E. (2023). “Global Powers of Luxury Goods 2023”. In Deloitte. Retrieved December 4, 2023, from https://www.deloitte.com/global/en/Industries/consumer/analysis/gx-cb-global-powers-of-luxury-goods.html

2. Kirchherr, J., Reike, D., & Hekkert, M. P. (2017). “Conceptualizing the circular economy: An analysis of 114 definitions”. Resources, Conservation and Recycling, 127, 221–32. https://doi.org/10.1016/j.resconrec.2017.09.005

3. Lin, Y., & Sai, N. (2023). “Ethics and sustainability in the jewellery industry”. Frontiers in Business, Economics and Management, 7(3), 187–93. https://doi.org/10.54097/fbem.v7i3.5533

The post 10R for Circularity in the Jewelry Industry appeared first on The European Business Review.

By Dr. Nadia Morozova, Tamara Miner, and Karen Taylor Crowe

Successful deployment of AI solutions continues to be a challenge for many organizations. In this paper, the authors provide recommendations to senior leaders on how to approach developing and deploying AI solutions to ensure that they empower ethical AI culture in their organizations and allow them to avoid harmful business mistakes.

Introduction

How can we ensure that AI brings real value to our organizations? How can we take advantage of AI’s opportunities while mitigating the risks? Behind success stories of profitable business transformations and productivity gains, unintended consequences lurk – bringing operational, reputational and legal risk.

As a business leader, how can you ensure your organization uses AI effectively and responsibly? This starts with data. To provide accountability and oversight for their organizations, leaders need to know what questions to ask.

Here, we provide a practical framework for deploying your data effectively in AI systems:

1. Strategy first: align your AI use cases to your business goals
2. The right people: find the experts, internally and externally, to lead data review and governance
3. Know your assets: Identify the data you hold, their quality, accuracy and relevance
4. Mind the gaps: find and fix gaps in your data (internal and external)
5. Future proof: clarify how data will be updated and evolve over time
6. Human-in-the-loop: establish procedures for human oversight of results and protocols to adjust systems quickly

Figure 1: Framework for building ethical AI culture in an organization

Strategy First

As with any business transformation project, start with your strategy. Your business goals and key performance indicators (KPIs) drive your data and AI requirements. An example use case: predicting consumer demand for a product. Building an AI model that represents your market landscape as accurately as possible means gathering and synthesizing multiple datasets.

Understanding the purpose of the model will help you:

• identify relevant datasets
• plug any data gaps
• minimize ‘noise’ by removing unnecessary information

For very targeted use cases, smaller datasets can enable faster deployment and more accurate results than Large Language Models (LLMs)^[1]. Datasets should be large enough to provide a workable model of ‘reality’, but not so large that more room for error is introduced^[2].

The Right People

This is why you need the experts! Internal experts and external consultants can help with the nuances of model development and delivery. Thoughtful talent strategies and organizational development are critical to overall success. Data scientists are your friends!

Know Your Data

Anything we think of as ‘information’ is data: pricing charts, sales records, product specifications. Many companies are sitting on underexploited datasets they could leverage to drive revenue growth or operational efficiency.

Use these questions to evaluate your use cases for AI deployment:

• Size and scope: Is your dataset right-sized and high quality enough to provide accurate predictions? Is it well-defined for smooth deployment and updating. Reliability and repeatability are the goals.
• Time: Does your data cover a long enough period to encompass seasonal fluctuations in demand or changing economic conditions? Balance historical data for accuracy with new information to avoid your model becoming outdated and inaccurate. What’s the right cadence and pruning strategy?
• Variables: What variables are relevant for your particular use case (e.g. product lines, regions, customer segments, channels)?
• Completeness: If you don’t have all the data you need in-house, what datasets could fill those gaps? Always evaluate the integrity of external datasets (How often are they updated, how will you receive them, how are they gathered and processed)?

Mind the Gaps – Data Normalization 

Data normalization (standardization) is critical for successful AI deployment. Whilst some AI tools can work across data which has not been enhanced or edited, AI tools achieve their best results using ‘structured’ data. Structured data is information that has been sorted, labeled (‘tagged’) and formatted for consistency allowing relevant information to be surfaced easily within the AI model.  Simple examples include names, dates, or prices.

Data normalization also helps flush out missing information e.g. prices omitted in some of your sales records. Gaps can be filled through manual human effort, such as ‘best guesses’. Where a price is missing, for example, you could take the average of known price points for the same product and use that. While not historically perfect, this creates a more complete dataset thereby giving more accurate results once operational.

Consult with your data scientists and experts to understand the level of accuracy you really need for particular use cases. Some gaps might not be meaningful, while others could throw your entire model off^[3][4]! Don’t spend time and money on perfection unless it drives tangible business outcomes. Sometimes good enough is good enough.

Future-Proof Your Data

LLMs and internal business information systems are reliant on data from the past, but the variables that feed the models are subject to change. That means they can stop representing ‘reality’ very quickly.

In our consumer demand example, the model needs to be continuously updated to reflect new information, such as changing sales patterns or prices. Developing a scalable and sustainable AI solution means knowing when sources are updated, and regularly reviewing changing model outputs as new data enters the system^[5].

Good data stewardship also involves ‘pruning’ data when it is no longer relevant. If you eliminate a product line or stop selling to a particular segment, that information might need to be culled from the model, so it better reflects your current business reality.

Data Science Handbooks help to align and track changes in how you do data science. Document your standards for quality, integrity, and accuracy for both internal and external data sources. Clarify roles, responsibilities, and decision-making protocols for data changes. Establish escalation pathways for unintended consequences. In other words, you need humans in the loop!

Human-in-the-Loop & post deployment monitoring is mandatory

Cutting edge technological advances in AI do not negate the need for human oversight of AI use. Quite the opposite! Deploying AI tools means understanding your business strategy and goals, making decisions about which use cases to prioritize, which datasets to leverage, and monitoring results and post-deployment impacts^[6]. These are all human responsibilities (i.e. leadership).

The critical difference between ‘standard’ data-enabled systems or predictive models (which you might already be using) and AI-powered solutions is that AI is a self-learning system. There is a compounding effect at play, which risks producing more of the same information over time. Increasingly self-referential, fragile systems can produce misleading results with serious business and societal impacts^[7].

Unintended Consequences

A powerful example of an AI solution compounding inherent issues rather than solving them was Zillow’s real estate auto-purchasing system. Initial trials went well, generating huge profits for the platform. However, as the market shifted, homeowners found ways to drive more profit to themselves than the platform, and Zillow did not adjust their predictive model to reflect this new ‘reality’. Without human oversight and regular review, by the time Zillow could see what was happening and decommissioned the system, they had lost millions of dollars^[8].

As a business leader you cannot simply launch and leave AI solutions. Any major changes of process, people, or systems require benchmarking and ongoing monitoring to secure the intended business benefits. Vigilance and quick action to address ‘unintended consequences’ is critical. As self-learning systems, AI tools can – and do – go off-piste and human behavior when interacting with these systems is unpredictable. We are nowhere near a post-human world yet! Business leaders must exercise judgment and put guardrails in place to mitigate negative impacts on business performance and stakeholders. Also unintended consequences can be unexpected opportunities! Don’t miss out because you’re not monitoring the ripple effects of new tools on your teams or markets.

Just this one example (out of many!) demonstrates just why business leaders need to ask the right questions when evaluating AI development proposals and data use. Managing AI opportunities and risks sits squarely with leaders. It is not a ‘technology’ or ‘legal’ issue. Profitable and responsible deployment of AI tools requires commitment to good governance with effective, accurate use of data. The bottom line is, you need to protect your bottom line, to drive, not destroy, business value.

Takeaways

To take advantage of the growth and profitability potential of AI:

• Start from what you want to achieve as a business.
• Bring the right expertise on board, internal or external.
• Get familiar with key terminology and tools: understand what your data can do for you, and how to use it effectively and responsibly.
• Put people and processes in place to observe, measure, and adjust inputs and outputs as your business needs, markets and models evolve.
• Don’t wait for a crisis or miss opportunities! Profitable and responsible data governance and AI deployment relies on human leadership and accountability.

Who guards the guardrails? You do!

About the Authors

Dr. Nadia Morozova is Chief Analytics & Insights Officer at Enriched Insights and Strategic Industry Advisory Board Member at Warwick Manufacturing Group – University of Warwick (United Kingdom). Her research is focused on data-driven organizational culture change and consumer neuroscience.

Tamara Miner has worked on infrastructure, data, and developer tools for 20 years in the US and Europe. She is a Chief Technology Officer and strategy advisor, launching SaaS products for several London-based startups, Riot Games, and Microsoft Azure. Her current focus is democratizing data via ethical AI at Climate Policy Radar.

Karen Taylor Crowe is the Founder & Strategic Advisor at Aviina Growth Consulting. She is a global SaaS and legal-tech executive specializing in data-driven product innovation and responsible AI. She helps organizations transform decision-making, governance, and growth through intelligent systems and ethical design, drawing on deep leadership experience across IP management, analytics, and enterprise software.

References

^[1] Whiting, K. (2025). What is a small language model and how can businesses leverage this AI tool? Available at: https://www.weforum.org/stories/2025/01/ai-small-language-models/

^[2] Hoerl, R.W., Redman,T.C. (2023). What Managers Should Ask About AI Models and Data Sets. Available at: https://sloanreview.mit.edu/article/what-managers-should-ask-about-ai-models-and-data-sets/?event=work24

^[3] Redman, T.C., Hoerl, R.W. (2024). AI and Statistics: Perfect Together. Available at: https://sloanreview.mit.edu/article/ai-and-statistics-perfect-together/

^[4] Titah, R. (2024). How AI Skews Our Sense of Responsibility. Available at: https://sloanreview.mit.edu/article/how-ai-skews-our-sense-of-responsibility/

^[5] Popovic, D., Lakhtakia,S, Landecker, W., Valentine, M. (2024). Avoid ML Failures by Asking the Right Questions. Available at: https://sloanreview.mit.edu/article/avoid-ml-failures-by-asking-the-right-questions/

^[6] Panikkar, R., Saleh,T., Szybowski,M., Whiteman, R. (2021). Operationalizing machine learning in processes. Available at: https://www.mckinsey.com/capabilities/operations/our-insights/operationalizing-machine-learning-in-processes

^[7] Dilmenagi, C. (2025). Synthetic Data vs Real Data: Benefits, Challenges. Available at: https://research.aimultiple.com/synthetic-data-vs-real-data/

^[8] Glaser, V.L., Omidvar, O., Safavi, M. (2023). Predictive Models Can Lose the Plot. Here’s How to Keep them on Track. Available at: https://sloanreview.mit.edu/article/predictive-models-can-lose-the-plot-heres-how-to-keep-them-on-track/

The post Business Beyond the Algorithm: Understanding Data for Effective AI Deployment appeared first on The European Business Review.

By Frank Cespedes and Ben Plomion

If you’re looking for an instructive case study of the absorption of AI technology into a somewhat conservative industry, the dentistry sector should be high on your candidate list. Sit back comfortably as Frank Cespedes and Ben Plomion conduct a thorough dental examination.

Much current “analysis” of AI’s impact is mainly armchair thinking, trying to divine the future by extrapolating speculative assertions about evolving technological capabilities – what the economic historian Robert Gordon has called the musings of “techno-optimists.”¹

But we don’t need to think about AI in these abstract terms. Truly impactful technologies like electricity, Wi-Fi, or GPS are ones that we don’t see anymore, because they are embedded in workflows and tasks, and this is happening with AI in places you might least expect – e.g., dentistry where, in just a few years, AI has progressed from research prototypes and clinical pilots to FDA-cleared tools embedded in daily patient care. This article examines the dental industry as an instructive case study for AI-driven change and the strategic lessons for other industries.

From X-rays to revolution

Dental services, including diagnostic, endodontic, and periodontic procedures, as well as cosmetic dentistry, were a $519 billion industry globally in 2024; it’s a $155 billion market in the U.S. alone, and, driven by demographic and social trends, growing at 4.5 percent annually.²

The dental industry includes a mix of many small independent practices, group-practice Dental Service Organizations (DSOs), public-sector and state-affiliated clinics, a wide range of equipment and service suppliers, and highly regulated procedures where payment is often tied to reimbursement procedures from insurance or governmental entities – a traditional recipe for an industry resistant to change. Yet AI has already driven major changes in dental diagnostics, clinical workflows, and administrative tasks, while increasing productivity and patient care and trust.

Diagnosis:

Onsite Dental, a DSO, runs clinics at company locations. Some of its units are spread across miles, as in Georgia where Onsite Dental teams visit 70 different carpet factories on a rotation basis. Others are consolidated, as in an office campus or at a big shipbuilding facility in Newport News, Virginia.

In 2024, Onsite began using AI-powered software for patient diagnostics. It provides the dentist with a second opinion, saving time and increasing confidence in the diagnosis. As one dentist notes, AI often is more granular in displaying the care situation, “showing me, for example, that a cavity has progressed into the dentin whereas my eyes are saying it was maybe just short, convincing me that we need treatment now rather than being reevaluated 6 to 12 months from now.”

Equally important, patients could see AI-generated, color-coded dental imagery, often in 3D, on a screen, which helped them better understand the diagnosis and increased trust in the treatment plan. As another doctor puts it, “Patients see that something objective says I have a cavity and the doctor agrees.” The results are better diagnoses and preventative care, and also better business. In one Onsite office, the average revenue per visit went from $27 per patient to $137, a 400 percent increase without the addition of new services.

In turn, AI’s improvement of a core task like reviewing X-rays had positive ripple effects throughout Onsite’s locations from faster diagnoses to better patient engagement. Like most DSOs, Onsite traditionally audited care providers via random selection; a dentist was chosen for review and their charts were audited. But data from AI diagnostics allows Onsite to zoom in by location and provider, pinpointing which clinics or clinicians may need additional support or training. Former VP of technology Behrod Ganjifard notes that “you’re able to say, OK, this doctor has a high or low misdiagnosis rate, and hone in on the exceptions or the opportunity,” a more comprehensive approach driven by network-wide insights that improve aggregate performance and care.

Other practices use AI applications for creating odontograms, graphical charts that visually represent a patient’s mouth, including tooth condition and treatments performed or planned. These charts provide a record of a patient’s dental health, and dentists use its standardized numbering system to communicate with patients and colleagues.

Traditionally, dental assistants recorded the details manually, e.g., the location of crown, cavity, or fillings. Now, AI analyzes dental X-rays to populate the odontogram, which the dentist then reviews and edits, if necessary. Studies show that about 70 percent of AI-generated odontograms are accurate and do not need changes. This saves time, speeds exams, makes the process easier for doctors and patients, and allows dental teams to see more patients daily.

In many clinics, the patient-dentist interaction now starts with an AI simulation, not just to save time but to build trust.

Another widely adopted tool is an AI simulator which shows how teeth can move with aligners. After a quick 3D scan, the software creates a before-and-after smile preview in minutes. Dentists say this makes it easier to explain the orthodontic treatment and patients are more willing to accept the treatment when they can see the expected result. Dentists still review the output, but the tool saves about 30-50 percent of time, depending upon specific patient conditions. In many clinics, the patient-dentist interaction now starts with an AI simulation, not just to save time but to build trust.

Workflows:

AI is also transforming the operational side of dental practices. One persistent issue is missed calls, often due to understaffed front desks, peak call volumes during business hours, or the time-consuming nature of listening to voice mails and manually dealing with requests.

Now, AI-powered communication platforms transcribe and analyze incoming calls in real time, highlighting the caller’s intent, identifying unanswered questions, and even flagging high-priority messages. This allows staff to follow up faster and more effectively. One group practice reported over 50 percent fewer missed calls, as well as better visibility into patient interactions across locations.

They also found that AI tools improved core workflow planning, helping practices anticipate patient needs, adjust staffing proactively, and prepare the office before the patient arrives. For example, if a patient needs a treatment like deep cleaning but has not booked an appointment, the AI automatically sends a reminder, including the last X-ray image. Patients can then schedule directly from their phones. As it gathers data over time, moreover, the algorithm learns the best time of day to reach each patient, increasing the likelihood that more people actually book appointments.

Many clinics, especially group practices, now use AI receptionists after hours. These systems can answer routine questions, schedule appointments, and triage urgent needs – for example, directing a patient with severe tooth pain to an emergency provider – without human staff present. This improves patient satisfaction, allows best practices to be more easily diffused and adopted across offices, and promotes a continuous improvement ethic, even if the staff doesn’t notice the changes. It’s just how things work.

AI systems for insurance claims, typically a time-consuming and resented activity in healthcare, now check records and reimbursement codes, improving accuracy and payment. If something is missing, the tool alerts staff in the dental practice. Then, the AI generates detailed annotations and explanatory notes on the X-rays, highlighting findings such as cavities, restorations, or areas requiring treatment. These visual cues and summaries make it easier to understand for the insurance claims administrator, reducing back-and-forth requests for clarification. Some results show that AI cuts the time spent on this work by 40 percent and speeds payment as well.

Conversely, for insurance companies, the AI-driven data improves productivity in a transactions-intensive aspect of their business, and helps them better detect claims mistakes and fraud, which costs the industry an estimated $12.5 billion annually.³ It also helps these companies go beyond a curt “coverage denied” response and make it clearer to patients and dentists why reimbursement is not applicable, and/or what specific information might be required to get reimbursed for the procedure.

In dentistry, AI is not just a tool to do a search or create a chatbot, but part of daily routines, increasing productivity for all parties, while decreasing risks.

Lessons for other industries

Dentistry’s AI adoption shows how even old industries can change when the right things come together, illustrating important lessons for other industries.

Workflow integration:

Research indicates that people evaluate new products and tools relative to their current usage system and see any required behavioral changes as “losses,” not gains – the phenomena known as “loss aversion” and the “endowment effect.”⁴ Hence, as in dentistry, smooth workflow integration is usually essential for productive adoption of a new technology.

Other industries are starting to recognize that the real power of AI lies in integrating it into workflows, not as a separate tool. In construction, AI has been embedded in project management platforms, automatically generating cost estimates based on historical data, flagging safety issues via real-time site monitoring, and drafting responses to contractor queries – all as part of daily processes that these teams use on the job. As one executive observes, “AI is a very powerful general-purpose capability, [but] you’ve got to meet users where they are.”⁵ 

This has implications for questions that leaders should ask before deploying AI:

• Is the AI inside daily work, or a tech layer on top of core workflows?
• What change does productive use of the AI tool require, and how can you minimize the required change(s) in behavior?

The focus of most people in a firm most of the time is on near-term operating issues, not a technological revolution. There’s nothing wrong with that, but adoption of new tools means embedding them in those operating activities. Word processing was a niche technology as a stand-alone product, but became ubiquitous once integrated into daily software like email and other applications.

Here, advancements in AI software are important.  Because AI allows code creation, bug fixing, and feature iteration at higher speed and lower cost, the bottleneck is shifting from building AI tools to understanding user needs in the flow of work. And that is a managerial, not a technology, issue.

Trust and transparency:

In dentistry, patients don’t trust AI because they believe it’s flawless; many know that AI can make mistakes and sometimes surface more issues than a dentist would typically treat. But trust grows when patients can see and understand the results, making it easier to have informed conversations with their provider. There is a generalizable principle here.

In his work, Daniel Kahneman noted that radiologists who evaluate X-rays as “normal” or “abnormal” contradict themselves 20 percent of the time when they see the same picture on separate occasions, and he cited over 40 studies that show similar and often higher levels of inconsistency by auditors, pathologists, managers in various areas, and other professionals. He emphasized that “this level of inconsistency is typical, even when a case is reevaluated within a few minutes.”⁶

People as well as AI algorithms make mistakes. Working together, however, there are fewer mistakes and, as dental groups have discovered, diagnostic accuracy improves. In FDA-reviewed clinical trials, dentists using AI detected pathologies such as caries and bone loss with up to 37 percent greater accuracy compared to unaided practitioners. Clinics also report more consistency in diagnoses and adherence to clinical standards when AI is integrated into workflows.⁷ Equally important, the combination of technology and practitioner with domain expertise provides the patient with more visibility into the diagnostic logic and results. Dental groups report that when they use AI images, treatment acceptance increases by 30-40 percent⁸, because the patients feel that the diagnosis is more comprehensive and they trust dentists more. Also ask these questions about AI tools:

• Can people see and understand what the AI tool is doing?
• How best can a credible and shared language be established for the resulting outputs?

Companies often do this in their sales activities to demonstrate the operational value of products and services, and justify price, with customers. “Value calculators” in many sales contexts take customer input data and, with a transparent process, help to quantify and demonstrate the total cost of current procedures versus the life-cycle cost of the seller’s product. Making good use of AI is aided by this kind of activity, internally and in external customer or supplier activities.

Institutional endorsement and data:

One reason why AI has been adopted extensively in dentistry is a set of ecosystem benefits. Approval from regulators like the FDA and Europe’s Union of Medical Device Regulation was necessary and, once obtained, aided trust and transparency. Just as important, the technology reduced transaction costs on both sides of the dental practice–insurance company exchange. In turn, this spurred adoption of AI in a self-reinforcing manner.

In addition, AI became relevant as the industry was undergoing structural change. Over the past decade in the U.S. and Canada, many solo practices have consolidated into group DSOs, which now account for about 23 percent of the dentistry market in those countries.⁹ This model separates dentistry from business management, allowing dentists to focus on their clinical skills, while leaving administrative and operational tasks to the DSOs – a better work-life balance for many dentists. DSOs also provide patients and dentists with advantages ranging from access to multiple locations and specialties to negotiating leases with landlords and reimbursements with insurance companies to more purchasing power for supplies including technology.

DSOs were early adopters of AI because their group structure gives dentists more opportunities to network and collaborate with colleagues, explore new applications in the flow of work, and disseminate the benefits across practitioners. Their access to proprietary data across multiple practices allowed them to improve data inputs, which remain crucial in developing, maintaining, and improving AI algorithms. Then, DSOs used the outputs from AI to improve performance monitoring. This combination helped to accelerate adoption compared to independent practices.

In many other industries, omni-channel buying means multiple groups in a channel impact the customer journey from search to purchase to service. Successful AI adoption depends on building and coordinating its foundations and use among multiple stakeholders. The biggest time and expense in these sectors is often not the purchase of AI tools, but cleaning up and keeping relevant the data inputs for those tools. So, also ask these questions about AI in your industry:

• Are you building robust data sources for planned AI initiatives?
• Who else in the ecosystem is relevant to both data and relevant use of AI tools?

How dentistry embedded AI in its processes is more than an interesting use case; it is also a lesson for survival and how to win in markets increasingly influenced by AI.

About the Authors

Frank Cespedes teaches at Harvard Business School, has written for numerous publications, and is also the author of six books including Aligning Strategy and Sales and Sales Management That Works: How to Sell in a World That Never Stops Changing (Harvard Business Review Press).

Ben Plomion is Chief Operating Officer of Pearl, a startup in the healthcare sector. He also writes on innovation and emerging technologies for various publications.

References:

1. Robert J. Gordon, The Rise and Fall of American Growth (Princeton University Press, 2016), xi.

2. https://www.precedenceresearch.com/us-dental-service-market?utm_source

3. https://phmic.com/dental-fraud-12-5-billion-dollar-problem/

4. For the core academic research and concepts, see Daniel Kahneman and Amos Tversky, eds., Choices, Values, and Frames (Cambridge, England: Cambridge University Press, 2000). For research indicating the impact in various industry contexts, see P. Chatterjee, C. Irmak, and R. Rose, “The Endowment Effect as Self-Enhancement in Response to Threat,” Journal of Consumer Research 80 (October 2013).

5. https://www.wsj.com/tech/ai/what-is-ai-best-at-now-improving-products-you-already-own-f6087617

6. Daniel Kahneman, Thinking, Fast and Slow (Farrar, Straus, and Giroux, 2011), 225.

7. https://hellopearl.com/blog/topic/the-growth-of-ai-in-dental-radiology?utm_source=chatgpt.com

8. https://theleadmagazine.com/ai-insights-from-pearl/?utm_source=chapgpt.com

9. https://www.precedenceresearch.com/us-dental-service-market?utm_source

The post What Dentistry’s AI Revolution Teaches Other Industries appeared first on The European Business Review.

By Pavel Shynkarenko

Rigid work models like China’s 996 or the standard 5-day week no longer fit today’s blended workforce. Freelancers and full-timers work on different rhythms, and productivity now depends on flexibility, trust, and outcomes, not hours. Leaders must design adaptable systems that balance urgency with sustainability and empower diverse teams.

The “996” work model — working from 9 a.m. to 9 p.m., six days a week — has resurfaced in startup circles, often presented as a shortcut to innovation. The appeal is clear; its benefits, according to its promoters, are undeniable: speed, urgency, and scale.

However, romanticizing extreme hours misses the biggest picture. Work isn’t one-size-fits-all. And for companies balancing full-time teams with a growing freelance workforce, rigid schedules can do more harm than good.

Born in China’s tech sector during a period of hypergrowth, 996 offered a fast track to product launches and market dominance. It didn’t last long, though — in 2021, China’s Supreme Court declared it illegal. Companies like ByteDance abandoned the practice, citing burnout, reduced efficiency, and long-term talent costs. This provided valuable lessons, particularly, the fact that what works for a founder under pressure doesn’t scale easily across a diverse workforce.

Today, the conversation is broader: How should different types of workers work? As 4-day pilots multiply and remote-first teams rethink structure, it is time to acknowledge that not everyone experiences time the same way, and that not every model serves the same people.

Urgency vs. sustainability

Some sectors still reward speed over balance. In AI, companies like OpenAI, Anthropic, and Perplexity release model updates and product features at a breakneck pace. When market leadership feels like a race, longer hours can seem inevitable. For small, technical teams chasing breakthroughs, the instinct to compress time is understandable.

On the other hand, for most knowledge workers — including freelancers — the law of diminishing marginal returns kicks in fast. Research consistently shows that productivity declines sharply after 50 to 55 hours per week. Beyond that, fatigue sets in, decision quality deteriorates, and burnout creeps in — often unnoticed.

Even in startups, hustling has its limits. As analyst Josh Bersin notes, while founders may work 60 to 100 hours per week, their teams typically don’t. And, by the way, they shouldn’t. Building for scale means designing systems that protect energy instead of merely extracting it.

Sustainable pace matters, not just for health, but for output. Forcing everyone into a high-stress timebox like 996 risks short-term gains at the cost of long-term velocity and durability.

Rhythms and realities: Full-time vs. freelance

The traditional 5-day, 40-hour workweek remains the global default — anchored by labor laws, payroll systems, and team routines. When reinforced by a strong culture and clear expectations, it still works. But in hybrid and remote contexts, its edges blur quickly.

Asynchronous Slack messages creep into evenings. Zoom fatigue leads to inconsistent engagement. Without active management, “flexibility” becomes a time drain. In this context, reducing hours — when done intentionally — can increase focus. That’s why companies like Buffer and N26 have embraced 4-day models, with clear metrics around output and well-being.

While the debate often centers on full-time employees, freelancers make up an increasing share of the workforce. And they experience time differently.

For freelancers, value is tied to deliverables, not hours. Autonomy is everything. Hence, the 996 model is incompatible with freelance logic — culturally and contractually. Freelancers choose their hours based on peak productivity, client deadlines, and global time zones. Imposing rigid schedules breaks the very flexibility that attracts them to the work in the first place.

That doesn’t mean freelancers don’t work hard. It means they work differently — often more efficiently, with sharper boundaries and outcome-based focus. Meanwhile, full-time employees may crave predictability but increasingly value freedom over face time. They want clarity, but not micromanagement.

Layered models beat rigid mandates

Today, the most effective work models are layered, not universal. They recognize that freelancers, contractors, and full-time team members operate on different clocks — and that’s okay.

Some companies experiment with 4-day weeks for internal teams, while giving freelancers project-based autonomy. Others adopt asynchronous workflows, enabling everyone to work at their own peak hours.

At the end of the day, what matters most isn’t the number of hours worked, but how that time is used — setting clear goals, eliminating low-value meetings, and empowering teams to make decisions without lengthy and unnecessary approvals.

For example, freelance designers or developers may work in short, high-intensity bursts followed by rest periods. Full-time product teams might block out deep work days midweek. What they need is clarity on objectives, trust in execution, and tools to stay aligned without constant check-ins.

Time, in this model, becomes more strategic than standardized.

Final thoughts: Productivity is an outcome, not a schedule

In the age of AI, automation, and global collaboration, the ability to produce high-impact work quickly no longer depends on hours at a desk. The metric has shifted from attendance to output, from visibility to velocity.

996 may have made sense for a narrow slice of founders in a very specific context. But it is not a playbook for modern teams. It is a warning.

The future of work belongs to those who can build flexible systems — ones that honor different rhythms, reduce unnecessary friction, and reward outcomes in lieu of optics.

So, based on this, it is the responsibility of the leadership team to design environments where people — freelancers and full-timers alike — can do their best work without burning out. The first step to accomplish that is letting go of one-size-fits-all expectations.

The best work model is the one that fits the work — as well as the people doing it.

About the Author

Pavel Shynkarenko is a founder and CEO at Mellow ($1M MRR), an entrepreneur with over 20 years of experience, a freelance economy pioneer, who aims to transform how companies engage with contractors. In 2014, Pavel launched his first HR tech company, Solar Staff, a fintech payroll company for freelancers, which showed $10M+ revenue for 2022 and 2023. Earlier in 2024, responding to the growing demand for specialized solutions for long-term interaction with contractors Solar Staff, as a global company, pivoted to Mellow. Pavel is a recognized professional in IT, but he is also a creator: he enjoys combining AI, Art and Photography, and his images are being displayed in galleries in New York and Chicago, as well as in Europe, Asia and Australia.

The post Why 996, 5-Day, and 4-Day Workweeks Impact Freelancers and Full-Timers Differently appeared first on The European Business Review.

As AI reshapes online discovery, small businesses must prioritise trust and reliability over traditional SEO. Fast, secure, and structured websites, combined with accurate, original content, help AI systems recognise credibility. By focusing on performance and expertise, SMBs can earn AI-driven visibility and compete effectively with larger brands.

Artificial Intelligence (AI) is rewriting the way people discover and consume information online. Instead of scrolling through endless lists of search results, users now have access to and expect quick summarised answers directly from AI-driven platforms.

Research shows users who encounter an AI summary click on a traditional search result in 8% of all visits, nearly half the 15% rate for searches without AI summaries. For businesses, this shift is profound: traditional search traffic is declining, and the rules for being discovered are changing fast.

This isn’t just a disruption, it’s an opportunity. Competing with large enterprises has never been easy, but it no longer comes down to budget-heavy campaigns. AI levels the playing field by prioritising trust, authority and performance over marketing spend.

The question for SMBs is no longer ‘how do I rank higher?’ but ‘how do I become a source AI trusts enough to reference?’

From search rankings to trusted references

SEO has traditionally been about getting to the top of search results. Teams focused on using the right keywords and climbing the rankings through building backlinks.

Visibility now is not just showing up on page one. It’s being the kind of source AI systems trust enough to cite and being seen as credible and authoritative, not just well-optimised.

Click-through traffic still matters, but the bigger win is being referenced as a trusted voice. This means SMBs must shift their mindset from purely chasing rankings to demonstrating the credibility AI systems recognise.

Signals of trust in the AI era 

Credibility begins with technical reliability. Research shows humans will give up on a website after waiting for only two seconds. AI is even harsher; it doesn’t wait at all. If a website is slow or frequently unavailable, it will dramatically reduce the likelihood of being referenced. Instead, fast, mobile-ready, and always-on sites give AI the confidence to reference them.

This means uptime and site speed directly impact visibility. Many businesses are using AI-powered monitoring to spot issues early, fix them fast, and keep sites running smoothly so customers have a good experience and visibility in search isn’t lost.

How a site is built matters just as much as its content. If the pages are easy to navigate, the layout is simple, and the information is well-organised, it’s not just visitors who benefit; AI does too. Clear and structured content allows AI systems to understand and share it more accurately.

The more ‘readable’ a site is, the more likely it is to show up in AI-generated summaries that people are relying on.

Crafting content AI can’t overlook

Once SMBs have mastered technical and site reliability, they must prioritise crafting content AI can’t overlook. SMBs relying on generic or outdated copy risk being overlooked, as AI thrives on accurate, unique and evidence-based content.

This is where original research, practical case studies and data-driven insights come into play. They don’t just attract readers; they also give AI systems the depth of context needed to reference a source with confidence.

Content must always be factually accurate and up to date. A local healthcare provider publishing new patient resources, or a software startup highlighting recent product updates, is far more likely to surface in AI summaries when their information is current and clearly presented. Consistency across blog posts, product pages and landing pages will further reinforce expertise over time and build a pattern of trust AI systems can confidently rely on.

The new definition of visibility

The decline of traditional search traffic may feel like a challenge. But for SMBs, AI-driven discovery levels the field. Visibility no longer hinges on expensive ad campaigns or competing with enterprise-scale backlink networks.

Smaller businesses that are agile, credible and consistent can earn references right alongside (and sometimes above) their bigger competitors. By focusing on performance, structured content and unique insights, SMBs can establish themselves as trusted voices in their niches.

Technical reliability must come first. Even the most insightful blog or well-crafted case study won’t be surfaced if the site is down, slow, or poorly optimised for mobile. This means over the next year, uptime, site speed and secure structures must move from being a back-office concern to the number one priority for discoverability.

Investing in robust hosting, monitoring and performance optimisation can be the difference between being recognised by AI as a brand that can be trusted, not just in what it says, but how reliably it delivers information.

About the Author

As the Director of Product Management at Cloudways, Ali Khan brings over a decade of product leadership experience from multiple industries. He is dedicated to simplifying complex cloud technologies and empowering businesses to succeed with fast, reliable, and secure managed hosting. His work is centered on delivering powerful solutions that solve real-world challenges.

The post How Small Businesses Can Stay Seen in an AI-Driven Search World appeared first on The European Business Review.

By Mostafa Sayyadi and Michael J. Provitera

This is a peek at Gordon Moore, the co-founder and emeritus CEO of Intel, who has been noted as one of the most prominent and successful managers today. Intel company, under the strategic leadership of Moore Group, has become the largest manufacturer of computer chips in the world. This company is now one of the most admired companies in America and one of the most profitable companies on the “Fortune 500” list. Gordon Moore coined the phrase “strategic turning point”. Moore argues that at the magic point of a strategic turning, all rules change. Moore owes most of his victories to his strategic leadership philosophy, revealed in this article. We recount the experience of his victories and failures and show how he has controlled events and turned threats into opportunities at Intel. The process of decoding the DNA of Moore’s leadership secrets and the strategic turning point at Intel company comes from our consulting work with its headquarters in Greenwich in Australia, Santa Clara in California, and Hillsboro in Oregon.

Introduction

Benchmarking is a reliable way to do things better. When experience is carefully analyzed, we can learn from it to create better systems. We identify Gordon Moore’s strategic leadership laws and the strategic turning point, which contains a story.

Gordon Moore believes that a manager´s first responsibility is to protect his economic enterprise against the threat of competitors. According to him, a strategic turning point is any company that is considering a transformation of some kind. The transformation can be a success or failure depending on the strategic turning points in the process.¹ Moore argues that a strategic turning point may be caused by competition, or it could be created by leaders of the organization to instill motivation, teamwork, and strategic management.²

Toshiba Memory Corporation, the Japanese maker of “computer memory”, placed Intel at a strategic turning point.³ Intel was forced to stop making “memory chips” and move to make “microprocessors”. This technology narrowed the field for traditional mainframe manufacturers.

Before Reaching the Strategic Turning Point

At the beginning of the computer industry, it was established in the “vertical method”.^4,5 In this way, every computer company treated others like the owner of a row of houses on the street.⁶ All the sellers would be found and would offer a complete computer package to a potential buyer. He also had all the technology at his disposal without having the right to choose other people’s products. The shortcoming was that customers had to rely on the seller company for a long time after choosing the first one. The vertical method continued for a decade.⁷ After that, microprocessors arrived, and the construction of a personal computer based on this technology created a “tenfold” transformative force.

With the placement of microprocessors in the computer industry, the costs decreased dramatically and made the personal computer a suitable tool for work in the office and at home. Over time, this transformation caused a shift in the entire industry and made it “horizontal”. In the horizontal method, no company owned everything. The customer got the right to choose and buy different parts of the computer and several ready-made application software from different manufacturers and stores. Therefore, since the 1980s, the computer supply process has changed from vertical to horizontal. First, personal computers, then large, shared computers, and finally the entire industry became horizontal. Since the last years of this decade, large companies that worked in a vertical way were forced to reduce their workforce and rebuild their organizational structure, and at the same time, new actors entered the field.

With the progress of this relocation process, the companies that were victorious in the old vertical system gradually faced failures. On the other hand, this transformation provided an opportunity for a number of newcomers to excel. Compaq was placed on top of the “Fortune 500” list.

Intel’s Strategic Turning Point

Over time, Intel took the leadership of the microprocessor market and Microsoft took the leadership of the operating system market. There are five critical laws that could be a strong reflection of a strategic turning point for organizations:

• Follow the Boston Consulting Group market share and product performance model and be honest about your product’s placement along those parameters.
• In the hyper-competitive world, only the emergence of new and outstanding technology will provide key opportunities.
• Push-pull pricing will only work if demand and supply are in your favor.
• Inertia drives up costs, be relentless in keeping costs down.
• Be relentless in keeping costs down.

Memory makers in Japan came into the field in the early 1980s.⁸ At that time, there was a shortage of chips in the market. The managers of “Hewlett-Packard” argued that the quality of Japanese-made memory is much better than American products. As a competitive inflection point, the Japanese seized the entire semiconductor market in one decade.

Intel raised the quality and reduced costs. In 1981, Intel’s second product, the microprocessor, was used in the personal computer manufactured by IBM.⁹ Intel established several new factories in strategic locations. By the fall of 1984, everything changed, and with intense competition from high-quality, cheap, and mass-produced products in Japan, Intel lost for a long time in the “memory chip” field. Intel was losing its revenues to the competition.

Leading an organization through a “strategic inflection point” is like marching in unknown territory. On occasion, the rules of business are unfamiliar or not yet formed. Organizations must work hard to overcome this stage. Gordon Moore says:

When we chose and advertised the slogan “Intel, the microprocessor manufacturer” in 1986, we wanted to show that we plan to be number one in the industry.

Peter Drucker, a leader in management education development and the author of several well-known management books, argues that a key activity is the complete transfer of resources from previous businesses to new businesses, including the organization’s ideas. Human capital, encompassing knowledge, skills, and experience, is at the forefront of Intel’s success.¹⁰

Any organization that has a dynamic culture and can deal with constructive discussion while controlling disturbances is a capable and adaptable organization.

Gordon Moore allocated resources to build the corporate culture by moving resources to achieve strategic goals. From his point of view, the strategy of the organization is formed from such actions instead of following traditional methods. Traditional strategic planning is less consistent with the real world of the organization.¹¹ Strategic actions are the steps that Intel has taken and indicate their long-term desire and goal, which is based upon intangible capital such as human capital and social capital.

Reaching the “strategic turning point” provides visible and effective strategic actions.¹² Managers react on time or earlier to increase positive and lasting actions. Doing the right thing and pursuing a strategic goal is very difficult but Moore led the organization with a clear and simple strategic direction.

Frederick Winslow Taylor once talked about the one-best way to lead and manage, and many organizations espouse these beliefs today. However, it is not easy to get people to think about the best way unless they see a clear and attractive path for them. Today, we are faced with an unclear future, yet people are expected to accept new and unprecedented missions together and work hard in an uncertain environment. Continuous improvement is very important as organizations attempt to secure their future. Senior leaders find it difficult to have direct contact with their employees. Hence, talking to individuals, groups, and departments can help improve strategic initiatives.

Intel shows adaptive behavior. Any organization that has a dynamic culture and can deal with constructive discussion while controlling disturbances is a capable and adaptable organization.

Moore’s Strategic Leadership Laws: Moore’s Heritage in Strategic Leadership

Survival is possible. Being in the middle, maybe. However, it is not possible to achieve unprecedented profits and produce productions that will get the best awards for the company. But now, Intel has become one of the leaders of the world’s industries. The four main factors that caused this to happen are:

• More income (by selling more productions)
• Fewer costs (reduction of costs by 10% over several years)
• More quality and speed (with attention and emphasis on product and management)
• Maximum alliance with Google and Microsoft (finding ways to complement each other)

Gordon Moore changed the minds of people inside the Intel organization forever. He did this with awareness and initiative.

However, if you want to know how Moore made Intel successful, you will find all the answers in his strategic leadership laws. Gordon Moore changed the minds of people inside the Intel organization forever. He did this with awareness and initiative. Moore was not a leader who used his superior position as a tool to force people to obey him and rule over them. On the contrary, he came to the field by relying on the facts and intelligence he had in conversations with people.

Moore’s strategic leadership laws are a combination of simplicity, commitment, and aspiration.¹³ This strategic leadership, which has infiltrated Intel employees around the world, can be summarized as:

• Set big but achievable goals
• Make the role and level of responsibility clear to everyone
• Be quick but efficient
• Examine the growth and progress of the work
• Evaluate work results based on reality

Simplicity: The issues that many companies face in making fundamental changes are very complex. Things like a multi-cultural organizational alliance, inter-organizational teams made up of members who speak different languages, and production, purchase, and design plans are not simple. But employees and managers at Intel clarify and simplify complex matters for those around them, and in every meeting, they look for a point that everyone can agree upon. Moore also taught executives at Intel to consider listening to be an important factor in good leadership and success.  In particular, Moore learned from anyone who has valid information to help Intel. His position in the company or society was no longer important to him.

Commitment: Commitment has certainly been a part of large and small actions and activities around the world. However, in our consulting experience with Intel headquarters in Greenwich in Australia, Santa Clara in California, and Hillsboro in Oregon, we have found that no company uses this concept as extensively and efficiently as Intel.

Aspiration: Making a commitment and acting on it is not enough; the next important word in Intel’s vocabulary is aspiration. Intel is strengthened because Moore has taught the next generation of Intel managers to give power and authority to employees at all levels by gathering information and creating inter-working teams, but big decisions should always be made in the CEO’s office. With the help of each other, Intel employees dismantled the existing physical and cultural barriers from Europe to Asia and North America with a new spirit and an attitude of harmony and integration. The result is a different company with the centrality of Santa Clara in California, which contains the true meaning and concept of globalization. They intended to revive the company, but they achieved something more than that. New productions are designed with the best ideas from different regions in a collaborative way. Communication plans are prepared with a commercial brand and an identity. Plans related to human resources are integrated and centralized and represent organizational standards, not regional ones.

In Conclusion

The strategic turning point is a pivotal time for an organization. Intel is both competitive and victorious. Intel survived the challenges faced by its competitors by focusing on microprocessors. As a result, “Intel” became one of the largest semi-media manufacturers in the world. The key success factor for Intel is that they fell forward over and over again. There were enduring periods of confusion, trial and error, and chaos. This is tantamount to a strategic turning point and organizations must deal with the messy middle when engaging in change efforts. This article also proves that authentic leadership coupled with persistence is one of the best strategic leadership methods for an organization. Intel’s calculated risk-taking is a characteristic sign of this company’s action and effort in achieving profitable and sustainable growth. Now, by showing the transformation in the process of bold action and the production of new products, Intel seeks to conquer the hearts and minds of customers across the globe.

About the Authors

Mostafa Sayyadi works with senior business leaders to effectively develop innovation in companies, and helps companies—from start-ups to the Fortune 100—succeed by improving the effectiveness of their leaders. He is a business book author and a long-time contributor to top management journals and his work has been featured in the top-flight publications.

Michael J. Provitera is an associate professor of organizational behavior at Barry University, Miami, FL. He received a B.S. with a major in Marketing and a minor in Economics at the City University of New York in 1985. In 1989, while concurrently working on Wall Street as a junior executive, Dr. Provitera earned his MBA in Finance from St. John’s University in Jamaica, Queens, New York. He obtained his DBA from Nova Southeastern University. Michael J. Provitera is quoted frequently in the national media.

References

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Artificial intelligence (AI) is disrupting SEO with smarter, more contextual search algorithms. AI technologies in search can impact rankings and SEO strategy, but these strategies and predictions can help your brand adapt and keep up with best practices, both now and in the future.

Everything evolves with time, from human culture to the technology that makes its way into our day-to-day lives. Artificial intelligence (AI) is one of the rapidly developing technologies that’s found its way into nearly every facet – from industry and business to smart thermostats and AI-assisted driving tools.

One of the most promising – and potentially challenging – applications for AI is its effects on search engines, and by extension, search engine optimization (SEO). While there are benefits to AI’s capabilities, its use in digital marketing has raised almost as many questions as it’s answered.

How is AI Used in Search Algorithms?

Search engines have come a long way in the past 20 years. Increasingly sophisticated algorithms have broadened the scale, while improving the accuracy, of the search engine results for each query.

In the past, search engine algorithms relied on keyword matches to provide relevant results. Now, search engines rely on a combination of different AI technologies, such as machine learning (ML), natural language processing (NLP), and semantic search – the key aspect of understanding the context and intent of searches.

Google has been at the forefront of AI technology to enhance search results. In 2015, Google introduced RankBrain, an AI-driven solution that had an impact on search engine rankings. The brand has also implemented Bidirectional Encoder Representations from Transformers (BERT) in 2019 and Multitask Unified Model (MUM) in 2022.

With each release, Google has provided more advanced capabilities. But there’s a caveat – with every major change, the variables that affect SEO and search engine rankings have experienced a ripple effect.

AI-Driven SEO Strategy

Traditional SEO tactics like relevant keywords and domain authority still have their place, but there’s more to focus on than the old rules. New ranking factors and requirements are emerging with the addition of AI technologies, leading to some new considerations to earn the visibility you want.

Quality Content

One of Google’s most important factors is the experience, expertise, authoritativeness, and trustworthiness guidelines, or the E-E-A-T guidelines. As the name suggests, Google considers the experience of the content creator, their expertise and authority in the industry, and their overall trustworthiness to determine the content’s rankings.

In many cases, Google positions itself as the top result for user queries. The content is often accurate, extensively researched and supported, and written by creators with subject matter or industry expertise. With new AI technologies at play, this will likely become more important.

User Experience

Users trust Google results because of the consistent experience it provides. If every user query was met with high-ranking results that are irrelevant, outdated, or have poor performance, they would no longer trust or turn to the search engine.

One of the most important metrics to watch is the bounce rate. A high bounce rate indicates that the engagement with the on-page content is lacking in some way. Improving your site’s navigation system, structure, and performance can improve your bounce rate and earn you a higher place in the search engine results page.

Technical SEO

Technical SEO has always been a staple of strong SEO. Google and other search engines want to provide users with the most relevant and helpful information, but it needs to be in a format that’s quick and simple to access. The quality of the content has no value if the user has a frustrating experience.

Your brand still needs to pay attention to technical SEO. Focus on the speed and overall performance of your site and make them mobile friendly. You should also use structured data markup, or schema markup, to categorize your content and help search engines index it effectively.

Predictions for the Future of SEO with AI

Ai-driven search engine algorithms have already had effects on SEO, but we can expect more to come in the future. Here are some predictions for the future of SEO with the addition of AI:

Search Personalization

Search engines are becoming increasingly in-tune with user intent and needs, especially with the digitization of data in search history, IP locations, and frequented pages or topics. AI algorithms will likely supercharge this, providing a deeper understanding of the users’ preferences and habits to provide more relevant and personalized results. Marketing teams now use AI Search Visibility Tools such as Peec AI to track how their brands perform in personalized AI responses, measuring visibility scores and citation patterns that shift daily across major language models.

Conversational AI

Voice assistants like Amazon Alexa, Google Assistant, and Apple’s Siri are highly popular, giving users the convenience of searching for products or services with just their voice and delivering results. AI-powered voice recognition technology underpins these devices, and we can expect that to continue learning and evolving with more use. in response, brands may need to adjust SEO strategy to include more long-tail keywords and conversational queries.

Zero-Click Search Trend

Search engines providing direct answers to queries, instead of the user clicking on different results, is a growing trend. The “zero-click search” provides these answers in knowledge panels, featured snippets, or AI overviews, leading to lower click-through rates for websites. While this can be difficult to navigate, establishing authority to become the source for a direct answer can boost your visibility in the search results pages.

Adapt Your SEO Strategy with AI Trends

AI technologies are part of virtually every industry, including digital marketing. As more changes come, it’s crucial to adapt your SEO strategy to meet these evolving requirements and continue to earn top spots in the search engine results pages – and keep an eye on what’s on the horizon with AI-driven search algorithms.

About the Author

Jason Khoo started freelancing in SEO in college, sold his first agency, and now is the founder of Zupo, an Orange County-based SEO consulting agency helping construct powerful long-term SEO strategies for our clients. Jason also enjoys multiple cups of tea daily, hiding away on weekends, catching up on reading, and rewatching The Simpsons for the 20th time.

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By Jaime Byrom 

Belonging is redefining the business of sport. Jaime Byrom, Founder and Executive Chairman of BEYOND Hospitality Group, explores how emotional connection and exclusive, experience-led engagement are reshaping fan expectations, and why sports organisations that deliver meaning over spectacle will lead the next era of loyalty, value, and growth.

In our world of endless entertainment, on-demand content and instant gratification, what keeps fans coming back to live sports events? Sports businesses – whether that’s stadiums, team franchises, or events rights holders – aren’t just competing with concerts, shopping or other sports businesses, they’re competing for attention both in the digital and real world.

The answer is the feeling of belonging. Loyalty has been core to fandom since the ‘year dot’, but as competition for attention (and discretionary spend) intensified, emotional connection and ‘exclusive’ experiences are strategic advantages. Today’s sports fans want to feel part of something bigger. We believe the most successful sports brands are no longer simply selling tickets – they’re curating experiences, building communities, and tapping into the deep emotional ties that turn spectators into lifelong supporters.

In my four decades in global sports event delivery, I’ve seen how this emotional currency, coupled with a desire for exclusivity, is reshaping the economics of sport and the future of sports events. This isn’t just a cultural shift. It’s a business opportunity for the industry, and a necessary one.

According to Statista, the global sports event market was worth approximately USD 267 billion in 2024, with Europe maintaining the largest regional share. But raw scale only tells part of the story. The more important metric should be engagement: how deeply people connect, how long they stay, how much they’re willing to invest – not merely in money, but in identity.

Fans don’t want a seat. They want a story.

The average match-day experience isn’t the singular draw it used to be. Not when every fan carries a smartphone, streams behind-the-scenes footage, joins the club’s WhatsApp chat, and chats on sports-focused forums with strangers who feel like family.

The fan economy is increasingly shaped not by proximity to the event or pitch, but proximity to meaning. People want to feel like they’re part of something that reflects who they are, and if they feel connected to their team through digital and broadcast, they will be incentivised to close that gap in the real world. A wonderful example is Netflix’s “Drive to Survive” which expanded the sport’s global popularity, by providing drama, team and driver personality insights, and behind-the-scenes access. The technical content remains there for motorheads, but with a focus on human narratives, the show welcomed younger viewers, more women, and new fans into the F1 fold.

Writing the show off as frivolous pop culture, denies the business savvy at play that ultimately led to spikes in TV ratings, race attendance, merchandise sale, and social media engagement – particularly in the US, with the Miami Grand Prix being one of the biggest beneficiaries. The broader eventing world should take note. Sports brands and events that create compelling emotional arcs, and tap into fan rituals, shared history, highs and heartbreaks will outperform those that treat fans like anonymous customers.

Consider Nike’s partnership with basketball phenomenon Michael Jordan. In the early 1980s, Nike was a successful athletic brand, but facing increased competition and declining market share. Then, with the 1984 launch of Air Jordans, it began selling more than shoes; Air Jordans communicated identity, aspiration, and belonging. The result? A global movement. By 2023, according to Nike, the Jordan brand generated $6.6 billion in annual revenue. By understanding the emotional connection and power of fandom, Air Jordans transformed Nike’s trajectory. This was more than smart marketing, it was a shift from product to purpose.

The new premium: belonging with benefits

Moreover, experience – including its high-end cousin, exclusivity – is becoming a key strategy for building loyalty within sports events. Luxury hospitality experiences, bespoke travel packages, and deluxe accommodation have their place in the consumer array, but now they have dual pay-off – both as an aspirational product, and in the emotional connection that they offer. This will be increasingly important as the next generations age into the sporting consumer universe.

According to a 2024 report by McKinsey, over 70% of Gen Z and Millennial consumers prefer to spend on experiences rather than material goods, particularly in categories tied to personal identity like sport and entertainment. Deloitte has similarly found that brands offering emotionally resonant, personalised experiences enjoy up to 1.6 times higher customer loyalty compared to those offering transactional interactions.

For sports organisations, this presents a strategic opportunity: when fans are invited into meaningful, exclusive interactions – tunnel clubs, meet-and-greets, stadium and pit tours, commemorative gifts and photographs, and so on – they’re buying more than access. They’re buying an emotional connection.

What sports organisations get wrong

Too many rights holders and event organisers still treat fans as a monolith. They rely on volume instead of value. But today’s fans don’t want to be one of a million. They want to feel like one in a million.

This is where data and design come in. The more we understand fans as emotional beings, the better we can tailor experiences that resonate. Deloitte has called this the rise of the “fan of one”: the ability to deliver personalised content, offers, and experiences using data-rich insights. Yet personalisation without purpose is just noise. The goal isn’t to target fans more efficiently. It’s to understand them more deeply.

From spectators to stakeholders

There’s a bigger idea here, one that may define the next decade of sports: moving from event delivery to community curation.

This means rethinking what it means to host a tournament or fixture. It’s not just putting on a good show. It’s facilitating access and shared memory. Creating pathways for fans to matter, to each other and to the team.

It’s strategic and emotional. Such loyalty is less price-sensitive, more resilient during downturns, and more likely to grow via word-of-mouth. It creates communities that are self-sustaining.

The takeaway: belonging is good business

If we want to future-proof the business of sport, we need to stop thinking of emotion and exclusivity as intangibles or perks. They are, in fact, the product.

Organisations that get this will design entire ecosystems; not matches, but moments. Not tickets, but pathways of access and belonging. Those that don’t risk becoming obsolete in a market where fans expect more than a seat in the stands. Our team know – from decades of experience, and contemporary insight – that sport is so much more than “a game”. It is where narratives of struggle and triumph, identity and shared experiences coalesce. It is inherently emotional. The entertainment industry has known this about sport for a long time; look at the classic sports movies, Rocky, Chariots of Fire, and Remember the Titans. It is time that the sports (and sports events within that) embrace this too.

We work hard to do so: Yes, to provide the logistics solutions to connect people physically to an event, but moreover, to connect people emotionally. We’re not in the spectacle business anymore. We’re in the belonging business. Herein feelings aren’t fringe, they’re the foundation.

About the Author

Jaime Byrom is the Executive Chairman and founder of BEYOND Hospitality Group. He has 40 years of experience in the sports events industry, with extensive knowledge in business development he continues to drive the financial and commercial growth of the group by expanding business opportunities and developing its global footprint. Jaime leads the BEYOND Hospitality corporate strategy and retains executive oversight of our global operations and all key contractual negotiations.

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By Michael J. Provitera and Mostafa Sayyadi

We aim to expand Kotter’s change model to address both scholars and practitioners throughout the world to initiate a new conversation on organizational transformation. Our reasoning is based on the true transformation which has to be team-oriented. We blend our consulting practices with not only practicing leaders but also scholars from leading universities such as, but not limited to, Harvard, UC Berkeley, Rutgers, and Cornell. The C-suite will find our idea novel in approach and scholars will delve into our idea of high-performance transformation so that they can expand on it, criticize it, extrapolate it, and, in some cases, replicate it. Much of what we share in this article has been adapted from our book titled Management Consulting’s Black Box, which summarizes our 25 years of consulting work experience and will be published in the Business Expert Press in 2025.

Introduction

High-performance transformation is at the heart of teamwork. While working as senior corporate executives, we realized that self-managed teams may be self-managed but may not be high-performance teams. This led us to change the name from self-managed teams to high-performance teams. John Kotter, in 2007, coined the term “Leading Change: Why Transformational Efforts Fail” in the Harvard Business Review. Since then, many authors implemented different applications of this idea, which is easily transferred to organizations and companies in a practical and virtuous way.

With Michael as Andreas School of Business senior faculty professor and Mostafa in a senior management consulting role in Australia, we guide managers toward the goal of transformation using high-performance teamwork by expanding on Kotter’s model of change. In this article, gained from our consulting work experience and adapted from our book titled Management Consulting’s Black Box, our effort is to help leaders improve their team performance in organizations. Many organizations are restructuring, reengineering, reorganizing strategies, merging companies, downsizing, quality planning, and undertaking new, in-vogue cultural projects. Having a management mentality to create transformation, despite the presence of quality people in the process, self-managed team transformation will face inevitable failure. There are several categories of pressure for transformation. One is the difference between leadership and management, and the other is the culture of the organization.

The Problem Of Self-Managed Team Transformation And Its Solution

Why do organizations fail? Today, changes in organizations are inevitable. For success, it is necessary to make continuous changes, and an organization that cannot implement these changes correctly and in accordance with its goals will inevitably fail. In this context, organizations commit frequent and common mistakes that accelerate the failure of change. The most common mistakes organizations make are:

1st Mistake: seeking too much comfort

When comfort levels are high, changes always fail to achieve their goals.

This is a fatal mistake because, when comfort levels are high, changes always fail to achieve their goals. The occurrence of change that aims to reduce people’s convenience paralyzes managers; people become defensive; morale is weakened; or even worse, managers confuse necessity with concern, and by showing their concern to employees, they cause them to sink deeper into their known safe haven and even show more resistance to change. When you take away supervisor titles and replace them with team leader, you might as well put up tepees, because people are going to feel a tribe mentality.

2nd Mistake: failure to create powerful coalitions

In order to create successful change, it is necessary to create a coordinated team composed of senior managers, department managers, or heads of departments, in addition to a number of other people who are committed to improving team performance. Team activities that do not have a strong enough coalition will have only limited progress. Teams struggle with tradition and short-term interests, preventing structural change from bringing about the needed behavioral change that comes with high-performance teams.

3rd Mistake: underestimating the power of perspective

Vision plays an important role in bringing about beneficial changes by guiding, aligning, and inspiring people’s activities.^1,2 Some people, understanding the problems of creating change, try to manage their activities quietly behind the scenes and deliberately avoid any discussion in public. Without a blatant published vision to guide decisions, every choice employees face will lead to endless debate.

4th Mistake: insufficient transmission of the vision to the employees

The willingness of employees is necessary in high-performance teams.^3,4,5 People are not willing to sacrifice if they are not satisfied with the current conditions. They must see the benefits and believe that change is possible. Without establishing effective communication, it is not possible to conquer the hearts and minds of employees. Draw the vision clearly in the minds of the team without any doubt to help them fully.

5th Mistake: the presence of obstacles against the new perspective

When employees feel that they are facing obstacles on the way, new, poor job classifications such as team members can reduce effectiveness. New compensation systems or performance evaluation systems can force employees to choose between divesting from a new perspective and focusing on personal resources such as new employment options.^6,7 Things get worse when supervisors refuse to adapt to new conditions because they feel that they are being usurped. Whenever intelligent and benevolent people avoid facing obstacles, they weaken the employees and destroy the transformation.

6th Mistake: inability to create short-term victories

Real transformation takes about eighteen months. If the efforts to create transformation or reconstruction of business and work lack short-term goals that are easy to reach or admirable, the motivation of employees will be lost. Most people do not continue with long-term efforts unless they see signs of the expected results after a short period of time. Most employees give up without short-term victories or resist change because the target is too far into the future.

7th Mistake: premature declaration of victory

After several years of hard work, the employees want to announce the results of the transformation as a victory. Although celebrating a victory is a good thing, it should not be considered a complete victory, and this is a mistake. The changes must be deeply penetrated and institutionalized in the organizational culture, and this usually takes three to 10 years.

8th Mistake: neglecting to stabilize the changes in the culture of the organization

Change takes place and becomes stable when it is part of a new or enhanced culture.^8,9,10  Regression is real and easily accepted. Conscious efforts by leaders must show the importance of change and much work to improve the attitude to improve the attitude employees must be ongoing.

These eight mistakes may be summarized
as follows:

• New strategies are not implemented well.
• With the merger, the expected synergy does not occur.
• Reengineering takes a lot of time and money.
• Downsizing does not control costs.
• Quality improvement programs do not produce the expected results.

The Expansion of Kotter’s Change Model

The challenge of the global economy creates opportunities and threats for everyone and puts companies under pressure. Successful organizations in the change process have learned how to adopt new strategies of integration, reengineering, quality programs, and restructuring. In 2007, John Kotter proposed his model of change. In many cases, scaffolding is used as a success factor. Multi-stage processes with the appropriate authority level from senior leaders provide motivation. This process is effective when it is led by top management with a high-quality leadership steering committee.

Now, we expand Kotter’s change model and, as shown in table 1, present the eight success stages of organizational transformation that correspond with the eight main mistakes.

Stage 1: Recognizing necessity and urgency

Examining the market and the competitive realities by diagnosing current and potential crises. People outside the organization can be useful along with customer relationship management. Additional information can be gathered by suppliers and shareholders.

Stage 2: Creating a guiding coalition

A steering committee with enough authority to lead the transformation and guide the group in such a way that they work as a unified team. A powerful guiding coalition with the right structure, appropriate level of trust, and common goals will steer the organization in the correct direction.

To create an effective guiding coalition, four key features should be considered:

1. The organizational capital of the situation:Are there enough key people involved in this coalition so that other people cannot create a barrier against the transformation?
2. Broad expertise:Are there different departmental experts that are knowledgeable and some that are outsiders to offer an outside point of view so that the correct and intelligent decisions can be made?
3. Credibility:Does the steering committee have a good reputation in the company so that other employees of the company take their opinions seriously?
4. Leadership: Does the steering committee have leadership knowledge, authority, and autonomy so that they can guide the transformation process well?

The combination of trust and a common goal between people with the right and appropriate characteristics can lead to the creation of a strong steering committee.

Stage 3: Creating a vision, mission, and strategy

A vision that guides change efforts is usually five to 10 years out, while a mission could be a daily continuous day-to-day operation. The strategy is much more inclusive of both vision and mission but also guiding principles, goals, and objectives. Thus, vision refers to a clear picture of the future that shows why an organization thrives. In the transformation process, a good vision has three important goals:

• Clarify the development path
• Motivate people
• Keep people focused on the mission.

Most visions have the following characteristics:

1. Provide a picture of the future.
2. Show the long-term interests of employees, customers, shareholders, and stakeholders.
3. Include realistic and practical goals.
4. Clear to provide the necessary decision-making.
5. It is an iterative process that may change.
6. The vision is easy to remember, easy to manifest, and known and practiced by all employees.

The degree of desirability of a transformation vision can be determined by asking the following questions:

• What is the customer value proposition offered by our vision?
• What effect will the vision have on the shareholders and the communities in which the organization prospers and serves?
• What is the effect of the vision on attracting and retaining talented professionals?

Stage 4: Providing an engaging vision

Continuously convey the vision and strategy and create role models that portray the mission and vision. A great vision serves an important purpose. The real power of a vision is revealed when most of the people involved in the transformation activity have a common understanding of the organizational goals and direction. When the sense of urgency is high, employees will be able to create a vision and transfer that vision into the future appropriately. To effectively convey the vision, some important features should be considered:

1. Use simplicity: all technical terms and jargon should be left out.
2. Use metaphors: similes, examples, verbal images are worth a thousand times more than written writings.
3. Use multiple platforms: informal memos and company newsletters, all are effective in spreading the vision.
4. Use repetition: ideas penetrate deeply into people’s minds only when they are repeated and heard over and over again.
5. Use leadership: present models and host monthly praising sessions.

Stage 5: Empowering employees

Changing systems or structures that help people thrive strengthens the vision, encourages risk-taking, and welcomes ideas. Use a customer-centric vision so that the organization continually adds value.

Stage 6: Creating short-term wins

Planning for visible improvements in performance or small victories, whatever they may be, is important to provide an impetus of positive momentum in the company’s vision and mission. Appreciating and giving rewards to the people who make progress possible is very important. Major developments take time and in some cases require great care. Loyal believers want to see clear evidence that the transformation is working. Managing a transformation effort without a major focus on short-term wins is incredibly risky.

A short-term victory has at least the following three characteristics:

• It is visible. A large number of people can
  see if the result is real.
• It is not ambiguous. Clarification and advertising may be necessary.
• It connects the transformation efforts, and it is a victory.

Improving the functions that are learned in a short period of time helps the changes in six ways.

• Provides evidence of good decisions and valuable sacrifices.
• Short-term wins as positive feedback improves morale and motivation.
• They help provide clear vision and strategies; short-term victories provide objective information to the guiding coalition about the validity of their ideas.
• They reduce pessimism and conservative resistance; evidence that clearly indicates the improvement in performance makes it difficult for people to resist the required transformation.
• They keep the leaders in the scene; for the people who have a higher position in the chain of administrative ranks, they provide evidence that the transformation is on its way.
• They bring motivation to people; they turn indifferent people into supporters and reluctant supporters into active helpers.

Stage 7: Celebrating victories

Celebrating victories is not just throwing parties for no reason; it is built on employing, promoting, and developing people who can implement the organizational vision, and individual change agents that are advocates for the mission and change initiatives. As agents of change, each employee plays a critical role that needs to be celebrated.

Major changes, especially in large organizations, require spending a lot of time and money. This money spent must go to operative projects for improvement in the tangible assets of the organization, such as human capital, social capital, and organizational capital.

Emphasizing the development and production of sustainable technologies at home will allow European companies to compete with Chinese peers in the future.

The process of creating transformation needs to have everyone in the organization rowing in the same direction. Reward people for coming on board the change initiative, then halfway through, using short-term victories. The work on the strategic planning process must be coordinated and each step along the way must be communicated. Things to communicate via intranet or paper distribution would cover things such, as but not limited to, restructuring, reengineering, or change in strategic planning, monitored or new training programs, modifying information systems, increasing or decreasing the number of employees, and new enhanced performance evaluation systems. Finally, the stage of summarizing the victories must build upon each other incrementally from an off-site gathering to a full-blown concert or trip to an exotic island.

Stage 8: Opening lock-in cultural norms

Customer-oriented leadership, customer relationship management, and customer-value proposition are derived from intangible assets of organizations such as social capital, organizational capital, and human capital. Thus, productive behavior, more effective leadership, and better management establish a connection between new behaviors and organizational success. This creates tools to guarantee and develop leadership prowess throughout the organization. How this is manifested has to do with the seven stages mentioned above but, without a way of making this transformation stick, all efforts are bound to revert back to inertia.

Culture refers, in this case, to the norms of behavior and shared values among the stakeholders of the organization. Norms of instilling this behavior and sustaining it are common and penetrating methods of action that are found among successful organizations that prosper.

Shared values are important tasks and goals shared by most employees that shape group behavior and often persist over time, even if employees change. Thus, talent management and onboarding new people are very important to organizational success. Culture is important because it can have a great impact on human behavior, while changing it may be difficult.

When, in a transformation effort, new activities are not compatible with existing cultures, they are often subject to going back or regressing, causing inertia. Therefore, tying the knot on positive change is just as important as setting up the transformation process.

Locking in the culture is powerful for three reasons:

1. People are selected based on the culture of the organization with talent management.
2. Culture, like morale, can change easily and this must be monitored, and culture needs to be nurtured.
3. Culture can also be challenged by opposing egos that unconsciously undermine the transformation for self-interests.

These key eight stages have been presented in figure 2 below.

Conclusions

In many transformational efforts, the main axis of the previous culture is not in conflict with the new perspective, although there will be conflict with some of the tried-and-true previous cultural norms. In such cases, linking new activities to old roots while removing incompatible components is a fundamental challenge. This is why we suggest that leading strategic change must be the competency of senior leaders in the C-suite. Institutionalizing a set of activities in a culture that are even compatible with its core values is also a complex challenge. The biggest obstacle to transformation is a group’s culture. Thus, the first step in a big transformation is to change norms and values. Once accomplished, this has to be the organizational mantra instilled in the mission, vision, and guiding principles of the organization. Leaders need to understand the existing culture so that they can raise the level of urgency and necessity for change.

The key to the survival of successful organizations in today’s era of disruptions is effectively leading strategic change. Employees must be able to handle the competitive and constantly changing environment.

About the Authors

Michael J. Provitera is an associate professor of organizational behavior at Barry University, Miami, FL. He received a B.S. with a major in Marketing and a minor in Economics at the City University of New York in 1985. In 1989, while concurrently working on Wall Street as a junior executive, Dr. Provitera earned his MBA in Finance from St. John’s University in Jamaica, Queens, New York. He obtained his DBA from Nova Southeastern University. Michael J. Provitera is quoted frequently in the national media.

Mostafa Sayyadi works with senior business leaders to effectively develop innovation in companies, and helps companies—from start-ups to the Fortune 100—succeed by improving the effectiveness of their leaders. He is a business book author and a long-time contributor to top management journals and his work has been featured in the top-flight publications.
.

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The health sector has gone through some testing times since Iñaki Ereño became part of it in 2005, including COVID-19. Now Group CEO of Bupa, he puts into focus the group’s priorities and achievements, as well as its ambition to become the world’s most customer-centric healthcare company.

Hello, Iñaki. Thank you for taking the time to speak with us today. To begin, you’ve had a remarkable journey from leading Sanitas (part of Bupa) in Spain to becoming Group CEO of Bupa. What key experiences have shaped your leadership style?

I first joined Sanitas in 2005 and it’s hard to believe that it is now 20 years ago! I became CEO in 2008 and that timing coincided with the Spanish financial crisis. That was a very hard situation to navigate, and it had a huge impact on my leadership style, because to survive we needed to choose a growth mindset no matter what the obstacles were. We had to find new, creative ways to work and to be resilient through it all.

Another experience that shaped my leadership style was the knowledge that healthcare as an industry needed to transform. As a sector, healthcare has been slow to digitise. We wanted to offer something different and provide care in a way that customers experience other consumer products and services so that it is on their terms.

My leadership style evolved again during the COVID-19 pandemic. It was a very intense period. We were caring for people in very tough situations and some of our patients and residents did not survive this terrible virus. We wanted to honour them and make sure that we always spoke their names and that those impacted were all remembered for the people they were, and not as a statistic. The organisation demonstrated its immense capacity to be caring at this time and that has shaped my leadership style, too.

How have these experiences influenced the way you steer a global healthcare business today?

We can never be complacent. That’s especially true for a global healthcare company, where our customers are relying on us to deliver for them in one of the most important areas of their lives. Bupa is over 75 years old, which is a wonderful achievement, but we need to keep adapting. We are a unique company who do not have shareholders. Our structure means we are able to reinvest our profits back into the business and into our purpose, ensuring we are constantly improving the services we provide for our customers.

These improvement ideas can be small, for example training our dental reception teams to be able to detect a nervous patient and put them at ease when they arrive for an appointment. Or, the innovation can be in the form of much more significant business initiatives; for example we are making a significant investment in expanding mental healthcare support by opening 200 mental health facilities called “mindplaces” worldwide.

Since taking the helm in 2021, what shifts or transformations are you most proud of initiating?

We’ve grown hugely as a business over the past few years; we now have more than 60 million customers worldwide and 100,000 colleagues. We’re growing faster than the market average, too, and that is testament to the hard work of the teams around the world and their growth mindset, and I’m truly inspired by them.

We’ve also made a lot of progress towards our ambition of becoming the world’s most customer-centric healthcare company. We’ve built a customer system so we can listen to our customers’ feedback right across the organisation via a customer listening app, and we’ve asked all our colleagues to listen and generate ideas to improve the experience that we provide wherever possible.

Since 2022, we have listened to nearly 200,000 customer calls and made over 24,000 customer improvements. As a result of this, our customers’ likelihood to recommend us is now much higher than ever before, which makes us all incredibly proud, while recognising that there is always more we can do.

This focus on our customers and their experience has also had a significant impact on our colleagues and their sense of pride. We measure colleague engagement twice a year and our latest results from May 2025 saw 87 per cent of colleagues participate and give an engagement score of 83 per cent. I am especially positive because there were so many comments provided, which shows that our people believe we take their feedback very seriously, too, which we definitely do.

Having worked across diverse markets in Europe and Latin America, what leadership lessons have you learned from managing teams across different cultures? How have these insights shaped your approach to leading Bupa?

It has been extremely valuable to build a broad perspective from working across our different markets. A big reflection for me is how to communicate well and keep it simple. We want our strategy to be understood around the world by every colleague, which means we need to be simple, clear, and consistent.

In 2021, one of the first projects we introduced was the launch of an internal communications platform so that all our 100,000 colleagues could connect with each other. Through this platform, there are hundreds of groups which have been spontaneously created on different topics, where our people can ask each other questions, share problems, and find solutions together, no matter which country they are working in.

While we’re a global company that benefits from global collaboration, it’s clear that each market faces a range of different needs and challenges, whether that’s different regulatory environments, healthcare landscapes, or cultural trends. It is so important to empower the local management teams, who know their market and are best placed to take care of the customers who live there.

Fostering innovation at scale is a major challenge for any multinational. How are you cultivating a culture at Bupa that empowers employees to take smart risks and learn from both success and failure?

One of the biggest shifts has been reshaping Bupa’s culture. In early 2021, we consulted with the leadership team about streamlining the company’s values and together we refined them from seven down to three: Brave, Caring, and Responsible.

We consulted with the leadership team about streamlining the company’s values and together we refined them from seven down to three: Brave, Caring, and Responsible.

Caring and Responsible were more established and expected values, but Brave was deliberately new. Bravery is central to the culture we’re building here at Bupa. That means pushing boundaries, taking calculated risks, and innovating – and that applies to everyone.

We want all our colleagues to be involved and to think of innovation as both the big, exciting, strategic ideas and the small suggestions that each make such a difference for our customers. With our customer listening app and the ability to listen and make improvement suggestions, we’ve tried to create a tool that enables every single colleague to be able to innovate.

How is the business’s leadership focusing on fostering talent and supporting people’s careers at Bupa?

We’ve had a strong learning and development programme in place for our colleagues for years, but we’ve recently made additional investments to ensure that our people have the skills and confidence to thrive in their careers and change the future of healthcare.

In June 2025, we launched a global initiative, known as Bupa Campus, that is bringing together the best in physical and digital learning experiences, creating a modern way of growing the skills of our people, to deliver better care for our customers. While it is a global programme, it will be tailored to the specific needs of each market.

We also take advantage of our global footprint to learn from each other, offering short-term placements, long-term relocations, or temporary secondments to the various Bupa offices across the globe. We want to do even more to offer mobility in a flexible way and to encourage more colleagues to try something new, boosting their skills and capabilities.

Bupa’s ambition is to become the world’s most customer-centric healthcare company. How is your digital health solution Blua transforming the healthcare experience for customers globally?

Blua, our digital health solution, is core to our customer-centric philosophy. Blua gives our customers access to virtual consultations, digital health programmes, and remote healthcare, which is revolutionising the way we deliver care. And our customers agree – we’re seeing widespread adoption across our markets, with 7.5 million customers already using the service globally.

Blua is always evolving. A good example of this is the “Monitor your Health” feature used by our Spanish customers with chronic illnesses like arrhythmias or high blood pressure. Instead of waiting for issues to arise, the “Monitor your Health” feature detects early warning signs, enabling patients to set goals and make lifestyle adjustments proactively, helping to prevent potential health problems.

Blua also integrates with customers’ wearable devices to sync their real-time health data directly with a team of healthcare professionals, including doctors, psychologists, nutritionists, personal trainers, and physiotherapists.

In 10 years, I think we’ll look back and wonder how we managed our health without this kind of digitisation. The potential is massive.

You’ve spoken passionately about the link between planetary health and human health. How is Bupa embedding a sustainable approach into its global operations?

It’s undeniable that human health and the health of the planet are linked. To help people stay healthy, we are working to help create healthy environments where everyone can thrive. We call this our “better world” strategy and there are three core elements.

Firstly, we want to help even more people access affordable and preventative healthcare. We have set ourselves the target of helping 25 million people in this way by 2027.

Secondly, we want to help improve the environments where people live: cities. As part of our ongoing “Healthy Cities” initiative, we’re working to get our people, customers, and communities active. We want to support at least 50 cities to become healthier places to live in over the next few years by investing in projects that champion healthier, more inclusive communities and that ultimately will contribute towards creating a healthier society.

Lastly, we want to invest in nature restoration, too, reducing our impact on the planet and restoring key nature ecosystems. Our intention is to ensure that 75,000 hectares of nature can be restored in order to support people’s health. It’s a big, ambitious plan but one that we are tremendously excited about delivering.

As you look to the future, what is your vision for Bupa’s role in shaping global healthcare?

It’s an incredibly exciting time; we want to become the world’s most customer-centric healthcare provider and redefine what people expect from a healthcare provider.

Through this process, we know that we will find solutions and create tools that we can share beyond Bupa, finding new methods to help the whole healthcare sector improve how we serve customers and patients. We want to encourage even more sharing between private healthcare providers and public health systems for the benefit of all.

This will be a game-changer for global healthcare, revolutionising our ability to prevent and treat disease so we can live longer, healthier, happier lives.

And finally, as a CEO, how do you define success?

We have a method for measuring success that we call a “performance triangle”. As you would expect, there are three elements, given that it’s a triangle! Financial performance is obviously key. Making sure we have a strong, sustainable business that is generating profit and enabling us to reinvest in our purpose is one of the core elements.

In addition, we must prioritise customer experience. Having customers that recommend our services to others and that choose to stay with us and trust us to look after their health needs is a critical factor in our success.

And finally, it’s about doing the right thing for our colleagues, investing in their development, supporting their careers, and listening to their feedback. High rates of colleague engagement are the third element to our triangle.

Success, to me, means delivering each of these factors in balance, so that each side of the triangle is equal, ensuring that one aspect does not overpower the others. Strong financial performance, and customers who highly recommend our services, and a team of colleagues who are highly engaged and want to do their best work is when we know we have been successful.

Executive Profile

Mr. Iñaki Ereño is Group CEO of global healthcare company Bupa. Appointed in 2021, he is responsible for managing the business’s worldwide operations and heads up the Chief Executive Committee, driving the performance of the business and setting the strategic agenda. He was previously CEO of Bupa Europe and Latin America, and CEO of Sanitas (part of Bupa).

The post Healthcare with the Customer Front and Centre: Interview with Mr. Iñaki Ereño of Bupa appeared first on The European Business Review.

By Hervé Legenvre

In less than a decade, HMD has created a niche in the mobile phone market despite fierce competitors. Here is a look at its survival strategies other small businesses could borrow.

In an industry dominated by behemoths such as Apple, Samsung, and Huawei, entering and sustaining a position in the mobile device market is a daunting task for any small company. Yet, HMD, the Finnish company responsible for the resurgence of Nokia-branded smartphones, provides an intriguing story on how to thrive in this challenging environment.

Established in 2016, HMD has leveraged strategic partnerships and differentiation strategies to compete in a saturated market. This article examines the company’s collaborative origins, its focus on reparability and mental health as differentiators, and the broader implications for small businesses aiming to survive against corporate giants.

The Genesis of HMD: A Collaborative Foundation

A Bold Vision for Nokia’s Revival

HMD was formed with a singular goal: to bring the iconic Nokia brand back into the smartphone market. This vision was bold, given the rapid advancements in mobile technology and the market’s domination by entrenched players. Yet, rather than attempting to build every capability in-house, HMD Global embraced a partnership-driven model that allowed it to focus on core competencies while leveraging the strengths of industry leaders.

Partnerships at the Core

Four pivotal partnerships shaped HMD’s trajectory in its early years:

• Nokia: The partnership with Nokia allowed HMD to license one of the most recognized names in mobile technology. Nokia’s legacy brought immediate brand recognition, credibility and goodwill to HMD’s offerings, an asset in a crowded market.
• Foxconn: Through a manufacturing partnership with Foxconn, HMD avoided the capital-intensive process of establishing its own production facilities. Foxconn’s global manufacturing expertise ensured that HMD’s devices met high-quality standards while maintaining cost efficiency.
• Google: By integrating Google’s pure Android operating system into its devices, HMD provided a user experience free from the bloatware often associated with competing brands. This decision aligned with consumer preferences for clean, reliable, and regularly updated software.
• Qualcomm: Partnering with Qualcomm enabled HMD to leverage industry-leading chipset technology, ensuring that its devices delivered competitive performance, energy efficiency, and connectivity.

HMD’s growth is also supported by global partnerships that facilitate access to new audiences and industry segments. Collaborations with companies such as Heineken, Mattel, and FC Barcelona enable the integration of mobile technology into specific consumer experiences. By engaging with diverse audience groups, including sports enthusiasts and families, HMD enhances the visibility and relevance of its products.

In 2017, HMD launched its first line of Nokia-branded smartphones alongside feature phones that harkened back to Nokia’s heyday. These devices quickly gained traction, praised for their minimalist design and affordability. By the end of its first year, HMD had sold over 70 million devices, a remarkable achievement for a nascent company operating in a highly competitive industry. The collaborative model had laid a solid foundation for HMD’s future.

Differentiating through Reparability and Mental Health

As HMD matured, the company recognized the need to differentiate itself in a crowded market. While competitors focused on cutting-edge camera technologies or foldable screens, HMD adopted a unique approach: prioritizing reparability and mental health. This strategy not only set the company apart but also aligned with growing consumer demand for responsible products.

Modern smartphones are often criticized for their “planned obsolescence”—a design philosophy that prioritizes frequent upgrades over durability and reparability. HMD sought to challenge this norm by designing devices that consumers could easily repair themselves. Key elements of this strategy included:

• User-Centric Design: Models such as the Nokia G22 and G42 5G were designed with DIY repairs in Users could replace common wear-and-tear components like screens, batteries, and back covers using basic tools. This approach made repairs accessible and cost-effective, reducing the financial and environmental burden of device replacement.
• Collaboration with iFixit: Recognizing that reparability requires more than just hardware, HMD partnered with iFixit, a leading provider of repair guides and replacement parts. This partnership ensured that consumers had the resources they needed to maintain their devices, reinforcing HMD’s commitment to usability and sustainability.

HMD Global embraced a partnership-driven model that allowed it to focus on core competencies while leveraging the strengths of industry leaders.

HMD’s emphasis on reparability aligns seamlessly with broader societal trends toward sustainability. The growing “right to repair” movement, coupled with increasing awareness of electronic waste, has fostered an environment where repairable devices are viewed not merely as novelties but as necessities. By extending the lifespan of its smartphones and incorporating recycled materials into its designs, HMD has successfully appealed to environmentally conscious consumers, particularly younger demographics. This commitment to sustainability has positioned HMD among the top 1% of companies globally, earning it a prestigious EcoVadis Platinum rating for three consecutive years.

HMD also plays a purposeful role in the digital detox movement by offering consumers tangible solutions to manage screen time and mental well-being. The company has spearheaded the resurgence of feature phones, like the Nokia 2660 Flip, as an alternative for those seeking a break from digital overload. With initiatives like The Better Phone Project, HMD is going even further, working with parents, experts, and campaigners to co-create devices that offer balance and control over smartphone use—particularly for younger generations. As concerns about screen addiction and mental health rise, HMD is not just highlighting the problem but providing real, practical solutions that empower consumers to reconnect with themselves and their surroundings.

A Partnership-Centric Growth Path

HMD’s future growth is anchored in the power of partnerships with three key growth paths:

Device Financing

HMD’s device financing initiatives are powered by a partnership with M-KOPA, a leading micro-finance institution. This innovative model integrates HMD’s proprietary Softlock technology with its partner’s financing capabilities. By eliminating the need for large upfront payments, HMD enables customers—particularly in emerging markets—to adopt a pay-as-you-go model, allowing them to own high-quality smartphones through affordable and flexible payment plans. This strategy addresses the digital divide, it could enable millions of people in underserved markets to participate in the digital economy. This partnership facilitates access to premium devices, enhances productivity, connects individuals with opportunities, and improves quality of life. HMD’s partnership-driven financing model is positioned as a catalyst for social and economic inclusion.

Secure Devices

In the secure device market, HMD recognizes that partnerships are the driving force behind innovation and growth. Through joint R&D investments with strategic partners, the company is expanding its presence in critical sectors such as the military and healthcare, where security and reliability are paramount.

By extending the lifespan of its smartphones and incorporating recycled materials into its designs, HMD has successfully appealed to environmentally conscious consumers, particularly younger demographics.

One such partnership is the HMD’s OffGrid initiative, in collaboration with Bullitt and FocusPoint, which represents a strategic move into the rugged and emergency communication segment. By partnering with Bullitt, a leader in satellite and rugged mobile technology, HMD ensures that its OffGrid solutions meet the demands of users in extreme environments, from outdoor adventurers to remote workers. FocusPoint’s expertise in crisis response and global assistance further enhances the offering, providing users with reliable safety and emergency connectivity services. This partnership positions HMD at the intersection of durability, security, and advanced mobile connectivity, expanding its portfolio beyond traditional consumer devices.

Family-Oriented Services

HMD’s family-focused solutions are built on its collaboration with Xplora, a leader in wearable technology. Xplora combines safety, communication, and activity-tracking features to offer families practical tools for staying connected. In this partnership, HMD’s device portfolio serves as the foundation for Xplora’s innovative services. Xplora’s technology allows parents to monitor their children’s location in real-time, set safe zones, and communicate with pre-approved contacts via voice calls or text messages—eliminating the risks associated with traditional smartphones. By combining HMD’s robust hardware capabilities with Xplora’s expertise in family-oriented software and services, the partnership delivers comprehensive solutions tailored to the unique needs of families.

Across all these initiatives, partnerships are not merely a minor complementary aspect of HMD’s growth strategy—they are its foundation. By fostering collaboration, co-innovation, and shared vision with key partners, HMD is unlocking new opportunities, expanding its reach, and delivering solutions that drive mutual success in an increasingly competitive landscape.

Overcoming Challenges in A Competitive Landscape

HMD’s story is one of resilience, innovation, and collaboration that led to the creation of the largest European mobile phone company, with 520 employees across 30+ countries and shipping to approximately 100 nations.

By embracing a partnership-driven model and focusing on reparability, the company has carved out a unique position in the mobile device market. Yet, in its quest for long-term survival, HMD faces formidable challenges. The mobile device market is characterized by intense competition, rapid innovation cycles, and significant marketing expenditures—factors that favour established giants.

While reparability and mental health are compelling differentiators, they are not yet the primary purchasing criterion for most consumers. HMD must balance the need to innovate in other areas, such as camera technology and processing power while maintaining its commitment to affordability. Also, as a smaller company, HMD is more susceptible to disruptions in its supply chain, whether due to COVID-19, geopolitical tensions, market tensions, or natural disasters.  Finally, competing against companies with massive advertising budgets presents a significant hurdle. HMD must continue to rely on creative and cost-effective marketing strategies as well as global partners for broader reach to build brand awareness and communicate its value proposition.

As HMD looks to the future, it must double down on its collaborative ethos, forging new partnerships and strengthening existing ones. The company’s ability to survive and thrive will depend not only on its innovations but also on its capacity to build a robust ecosystem of allies. In a world where no company is an island, the spirit of partnership is not just a strategy—it is the only way forward.

Collaboration is a mindset that demands ambition, clarity, and trust. Organizations must approach partnerships with a commitment to shared growth, openness, and the willingness to tackle challenges together. When this mindset is in place, partnerships can unlock new market opportunities, enhance operational excellence, and drive meaningful innovation.

About the Author

Hervé Legenvre is Professor and Research Director at EIPM. He manages education programmes for global clients. He conducts research and teaches on digitalisation, innovation, and supply chain. He has been one of TEBR’s esteemed columnists since 2023, contributing thought-provoking insights to the publication since 2019. Lately, Hervé has conducted extensive research on how open-source software and open hardware are transforming industry foundations (www.eipm.org).

The post Surviving Among Giants: How HMD Thrives Through Partnerships appeared first on The European Business Review.

By Dr. Oliver Rossmannek

The users of peer-to-peer platforms come and go, but they do so in very different ways. I outline four unique paths for platform users and show their distinct motivations. Platform managers need to know these paths in order to understand their users and to design successful strategies.

Peer-to-peer (P2P) platforms have become key players in many sectors. Home-sharing platforms, such as Airbnb, Vrbo, Novasol, and Canopy & Stars, enable millions to go on holiday every year. Retail platforms, such as eBay, Etsy, Vinted, and Mercado Libre, have replaced flea markets for many consumers. Entrepreneurs and their supporters come together on platforms such as Kickstarter, Indiegogo, Patreon, and Startnext. Ride-sharing platforms, such as Uber, Lyft, Bolt, and DiDi, have become important elements of many metropolitan transport systems. The idea behind all of these business models is that users can be service providers (e.g., drivers, hosts, entrepreneurs, and sellers), customers, or even both.

Table I: P2P-platform sectors with examples

It was once thought that monopolies would arise in many platform-dominated sectors^[1]. This “winner-takes-it-all” dynamic should have resulted from network effects. The larger the network of users, the more attractive the platform becomes for new users, which, in turn, results in further user-base growth and, ultimately, in the emergence of a monopoly.

The implication that many platforms drew from this prediction was that they had to grow their user bases at all costs. The easiest way to do so was through massive investment. Backed by venture-capital firms, the platforms spent billions on subsidizing users and on wide-ranging advertising campaigns. For instance, in 2019, SoftBank alone invested nearly $20 billion into several ride-sharing platforms^[2]. The resulting cash flow was used to reduce drivers’ fees and to make rides cheaper for customers^[3]. Unfortunately for customers, those days seem to be over. The venture-capital firms soon discovered that the winner-takes-it-all dynamic is a fairytale in many sectors.

Throwing money at platform users may help to attract and keep them for a while. However, it has been proven to be unsustainable as a strategy. As soon as the money dries up, the competitive position of the platform is likely to be in danger. The fortunes of a platform can turn fast because of the high turnover of users. For instance, for Uber it was found that only 25% of new drivers were still driving for the platform a year later^[4]. Consequently, platforms learned something that traditional service firms had long known: attracting and keeping users requires sophisticated service strategies. Different platform users can have very different needs and motivations.

Drawing on many years of studying platforms and on the extensive literature on the subject, I argue that most platform users come and go on four distinct paths. Each path is associated with distinct motivations. For instance, some Uber users may be switching from Lyft, while others are trying ride-sharing for the first time; some Airbnb hosts may be driven chiefly by economic motives, while others are participating in order to form new social connections. Due to this variety, platform managers need to familiarize themselves with the four paths in order to devise successful strategies.

The four paths

Figure 1: The four paths of platform users

Path I: Start/stop using the business model

Platforms that pioneer a business model face the problem of ensuring that users accept it. Not everyone is keen on the idea of renting an apartment from or to someone that they just found on Airbnb. Likewise, many people do not like the idea of stepping into strangers’ cars instead of hailing a yellow cab. Even if users do embrace the business model initially, they may withdraw their support later. In general, the questions that follow are key to (potential) users.

“Do I trust the business model?” Trust has been identified as key barrier to the use of P2P business models^[5]. Users may perceive a business model, such as ride-sharing or home-sharing, as trustworthy, or they may not. Often, trust simply accumulates over the years as a business model garners wider acceptance in society. Potential users observe early adopters until they eventually decide that the business model is safe enough for them to give it a go. Even if the business model seems too risky to users initially, the platform can try to build trust. A strong brand, a decent review system, insurance schemes, money-back guarantees, a 24/7 emergency call center, and verification mechanisms for service providers (e.g., for Uber drivers’ licenses) may allow users to trust the platform. When this is done right, platforms can even become more trustworthy than traditional (non-platform) service providers. For example. a recent poll found that Gen Z perceives Airbnb as substantially more trustworthy than the largest U.S. airlines and hotel companies^[6].

“Does the business model promise good experiences?” Several studies have shown that expectations about experiences can influence users positively as well as negatively^[7]. The positive influence of experience on the usage of a P2P business model is driven by users’ preference for uniqueness on P2P platforms and the expectation of meeting interesting people from all over the world^[8]. The negative influence comes from experiences with unpleasant users or from witnessing the unpleasant experiences of other users^[9]. In general, platform managers should not underestimate the role of experiences and feelings. The authors of this text once tried to buy a pair of really cheap sneakers on eBay. They wound up being scammed. As a consequence, the author would only patronize brick-and-mortar footwear stores for several years as a result. An experience does not need to be first hand to affect users – interested readers may want to visit the website airbnbhell.com and read about home-sharing nightmares. Experiences also work the other way around. If one simply wants to support someone on Kickstarter and this act of support produces a lifelong friendship, one may remain a crowdfunding enthusiast for life. Overall, platforms need to minimize bad experiences and foster good ones. The approaches that recommend themselves most readily are banning troublesome users with low ratings and adjusting matching algorithms to reconnect users who have rated each other highly in the past. More pro-active approaches are often difficult to identify. For example, Uber once planned to use AI in order to detect drunk users and deny them access to rides^[10]. Such an innovative approach could help to avoid violent interactions between drivers and drunk passengers, but it also leaves drunk passengers alone and in danger in the streets.

“Are there alternative business models that fulfill my needs?” In many sectors, it has been shown that P2P models function as alternatives or substitutes to traditional services. Ride-sharing and taxis supply a salient example, as well as home-sharing and hotels, and second-hand retail platforms and thrift shops. In some cases, the availability of alternatives means that the user does not even begin to use a P2P business model. A person who is living right next to a thrift shop will most likely seek their next party outfit there instead of on an online platform for second-hand clothing. Platform managers need to be aware that they compete not only against other platforms but also against potential alternatives from non-platform sectors. Picking up this fight can make sense if one’s business model is competitive. For example, a strong company may offer ride-sharing trips that are cheaper than taking a taxi. At other times, it makes sense for platforms to focus on niches that are not covered by their non-platform competitors. For instance, crowdfunding has become a standard way for publishing niche content that is not suitable for mass-market publishers^[11], such as fantasy board games.

Path II: Switching platforms

Once users have accepted a business model, competition between platforms becomes more important. Whether someone rents a holiday home via Airbnb, Vrbo, Booking.com, Homestay, Novasol, FlipKey, misterb&b, or Canopy & Stars depends on several factors. Existing research has shown that three questions are essential for existing platform users.

“Am I satisfied with the service?” It has been shown that service quality matters a lot for the users of P2P platforms^[12]. Platforms are in the service business. In almost all cases, they provide a matching service. This service can be very basic (e.g., the provision of a list of unicorn lunch boxes for under $30 on Etsy) or quite advanced (e.g., matching ride-hailing drivers and their customers in downtown Manhattan). Most platforms also offer additional services, such as payment processing, displaying additional product information, or even loans. If users perceive service quality as inappropriate, they are likely to switch to a competitor. However, the appropriateness of service quality depends on the user segment. For instance, many home-sharing hosts are simply looking for a matching service and often end up with the market leader (e.g., Airbnb or Vrbo). Others are much more interested in administrative support. Platforms such as DanCenter or Novasol target such hosts and assume responsibility for activities such as cleaning and the delivery of keys to guests.

“Can I live with the costs?” Studies demonstrated that users’ choice of platform and their loyalty to it depend on the perceived costs or price of the platform and its services^[13]. Platforms typically carry several costs for users. The most visible ones are the fees that the platform charges directly. For instance, Kickstarter takes 5% from the total sum that is raised for a successful project, as well as 3% from each individual payment^[14]. Airbnb usually charges fees of 3% for hosts and of 14% for guests^[15]. The non-monetary costs include the collection of user data and targeted advertisement. The users of a platform that is not the market leader also “pay” by agreeing to target a smaller user base. For example, a Lyft driver in a city with more Uber customers “pays” by accessing fewer customers via the platform. Platforms do not need to be the cheapest to succeed. Instead, good communication is key. Providing high-quality services (e.g., a 24-hour hotline or even face-to-face support) typically enables a platform to charge higher fees. The challenge is to communicate those advantages successfully—users must know what they are paying for.

“Is the platform a good fit for me?” Finally, fit can make a difference for some users. The research on user-platform fit is scarce, but it has been shown that compatibility (i.e., users’ social values and usage patterns) is important for the users of platform services^[16]. Many people do not really care if they book via Airbnb or some other platform. However, some people might find it more comfortable to use a niche platform. For example, the platform misterb&b focuses on travelers from the LGBTQ+ community and makes it easier for them to find tolerant hosts. If they follow Michael E. Porter’s advice, platforms should avoid becoming “stuck in the middle”^[17]. Thus, it is advisable for platforms to either target the mass market or to focus on a specific user group that has specific needs.

Path III: Multi-homing

Platform managers often try to lure users to only use their own platform ecosystem, a phenomenon that is called single-homing. In reality, however, multi-homing is often the norm. For instance, many drivers work for Uber and Lyft at the same time. On the customer side, many shopaholics do not abandon their search if they fail to find an appropriate second-hand Louis Vuitton piece on eBay; they simply move onto Vinted. Whether multi-homing is an option for users or not depends mainly on the answer to a single question.

“Do the benefits of a larger market outweigh the additional effort that multi-homing requires?” The decision to engage in multi-homing usually results from cost-benefit reasoning^[18]. Multi-homing enables users – both service providers and customers – to access the markets of several platforms. In some cases, this results in substantial benefits. Hosts may offer their holiday home on several platforms in order to be more visible to guests and, ultimately, to increase their booking rate. If this is true of many hosts, the offerings of platforms become more similar. This similarity, in turn, dramatically reduces the benefit that guests derive from searching for offers on several platforms. The costs of multi-homing mostly originate from the increase in administrative effort that it entails. Users need to maintain profiles on several platforms, to update their data, and to familiarize themselves with different platform ecosystems. Sometimes, this is easy; at other times, it is not. For example, a home-sharing host can use rental-management software, such as Hostaway, Smoobu, or Uplisting, which makes it easier to keep the availability of a holiday home up to date on all home-sharing platforms. Conversely, it is difficult to launch a crowdfunding campaign on Kickstarter and Indiegogo simultaneously because the two have very different structures and because keeping track of comments and regulations is demanding^[19].

What can platform managers learn from the foregoing? One option would be to decrease the incentives that their users have to use other platforms. Some platforms require single-homing in their terms of use; however, this requirement cannot always be enforced effectively. Other platforms increase the costs of multi-homing by introducing unique rules and software elements that are different from those of their competitors. However, in some cases it even makes sense to encourage multi-homing. The easier it is for users from other platforms to switch to one’s platform, the greater the potential of that platform to generate additional revenue.

Path IV: Self-distribution (intermediation and disintermediation)

Not every user needs a platform to interact with their peers. Instead of selling one’s old stuff on eBay, a customer may switch to self-distribution and organize a car-boot sale in their backyard. Just as in the other paths, this proposition cuts both ways: platforms can become intermediators and gain users or, in the case of disintermediation, lose them. Disintermediation typically occurs only in select cases. For instance, if a customer would like to re-book their holiday home from last summer, they may speak to the host directly in order to circumvent the platform and its fees. When the same users are about to travel to a new destination, they are still likely to use Airbnb or Vrbo. When and how (dis)intermediation will occur is relatively difficult to predict. Out of all the paths, (dis-)intermediation on P2P platforms has received the least attention by researchers. However, especially two questions seem to matter.

“Can I live without the risk-reducing tools of the platform?” Many scholars see risk mitigation as a primary reason for the existence of platforms^[20]. Hence, platforms have implemented all kinds of risk-reducing services, such as insurances, certifications, and review systems. While these services are a key source of value for many users, some do not need them. After contact has been established, repeated transactions (e.g., re-bookings of holiday homes) can be based on the trust that has been established in the past, which substitutes the risk-reducing tools of the platform. Occasionally, the value of the transaction is simply too small. Most of those who are looking to buy a used radio for $5 from a flea market can probably live with the risk of finding out that it does not work once they try it out at home. In other cases, users may already have a solid reputation. For example, the fantasy-book author Brandon Sanderson is a well-known figure in his community and has many loyal fans. His recent Kickstarter campaign closed at over $41 million, which was put up by more than 180,000 backers^[21]. It is likely that Sanderson’s fans did not care much about Kickstarter’s risk-reducing tools.

“How much effort does it take to do it alone?” Support with the administrative aspects of the transaction can be an important aspect of value creation on platforms^[22]. A well-designed IT infrastructure helps users with the boring and nasty aspects of transactions: invoicing, the formulation of terms and conditions, and the generation of automated translations. High-frequency transactions are likely to benefit particularly from support of this kind. For example, an Uber driver could not fill out 50 invoices by hand within a day. In contrast, a week-long stay at a holiday home only requires one invoice to be issued. Another criterion is the availability of outside options for administrative support. Invoicing is not rocket since; there is a Word template for it. More professional users can also use specialized software solutions, such as Shopify, which help them to navigate the e-commerce jungle.

In general, the question of disintermediation is a question of value creation. If the platform is only perceived as an intermediary that takes a cut, users will try to avoid it. However, if the platform offers valuable services, users will stick with it even when they can circumvent it. The home-sharing platform Novasol is a salient example. It offers numerous services to hosts, including communicating with guests, managing reservations, and estimating an optimized rental price.

Conclusion

Usually, not all paths are equally relevant at the same time. When the business model is new, users mostly come and go via Path I (starting or ceasing to use a business model). In many countries, business models such as ride-sharing and home-sharing are very well established, which often reduces the importance of this path. However, even some major e-commerce markets differ in this regard. For instance, the era of home-sharing is yet to dawn in China, and ride-sharing exists only in a few German cities due to regulatory issues from the past. In these markets, Path I matters a lot.

Sometimes, it is not geographical restrictions but the specificities of a given sector that constrain paths. For example, in Path IV (self-distribution), it may be viable for the buyers and sellers of used items to circumvent platforms such as eBay or Vinted by simply communicating via email because cheap items, such as used t-shirts, rarely need to be insured by the platform. For home-sharing hosts and their guests, however, risk-reduction tools are often essential. In this sector, self-distribution mostly occurs in the context of re-bookings. Since re-bookings are rare on most home-sharing platforms, this threat is often relatively small. Consequently, the most important lesson for platform managers is to conduct thorough market research. In my experience, many platforms know surprisingly little about the characteristics, motivations, and needs of their users. In one case, I observed that the platform did not even know the age of its users. Where users come from and where they go is a much more complicated question and hence often a mystery for platform managers.

Market research can be based on internal data, the distribution of surveys, or interviews with users. Internal data can show how many newly created accounts remain active and for how long, which can help the platform to evaluate its return on user-acquisition costs. Surveys may highlight the weaknesses of a platform, such as poor service quality or ineffective measures to reduce user misbehavior^[23]. These approaches, however, only scratch the surface. They show where users come from, if they show anything at all, but they almost never reveal where those users go or why.

Platform managers who really want to understand their users need to communicate with them intensively. They can do so through focus interviews or, alternatively, by simply assuming the identity of a user. Dara Khosrowshahi, the Uber’s CEO, recently spent several months as an undercover driver[24]. Airbnb’s CEO Brian Chesky not only sleeps in Airbnb apartments but also rents out a room from his own house on the platform^[25].

Focusing on market research can produce a comprehensive mapping of the strengths and weaknesses of a platform. Whether a certain development reflects an actual weakness depends on whether it is caused by incoming or outgoing users. For instance, a high multi-homing rate can be caused by outgoing users who consider the market of the platform to be too small. It can also be caused by incoming users, which would indicate that the platform is easy to access for those who rely on rival platforms. In that case, the receiving platforms can build on its advantage by attracting even more users.

In conclusion, I encourage platform managers to analyze user behavior in much greater depth. Only those who really understand their users can design successful strategies in highly competitive platform markets.

About the Author

Dr. Oliver Rossmannek is a lecturer at the University of Freiburg, Germany. He has published several academic articles on the behavior of users in the sharing economy and consulted a home-sharing platform for several years. Currently, he works for a utility and develops an energy sharing business model.

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^[18] McIntyre, D., Srinivasan, A., Afuah, A., Gawer, A., & Kretschmer, T. (2020). Multi-sided platforms as new organizational forms. Academy of Management Perspectives

^[19] Di Stasi, M. (2023). Run a campaign on Kickstarter and Indiegogo at the same time. Yes or no? Retrieved from https://mattiadistasi.com/run-a-campaign-on-kickstarter-and-indiegogo-at-the-same-time-yes-or-no/

^[20] Andreassen, T. W., Lervik-Olsen, L., Snyder, H., van Riel, A. C. R., Sweeney, J. C., & van Vaerenbergh, Y. (2018). Business model innovation and value-creation: The triadic way. Journal of Service Management, 29(5), 883–906

^[21] Whitten, S. (2023, May 31). Fantasy author’s record-breaking Kickstarter campaign closes at $41.7 million. CNBC. Retrieved from https://www.cnbc.com/2022/03/31/authors-record-breaking-kickstarter-campaign-closes-at-41point7-million.html

^[22] Rossmannek, O., David, N., & Schramm-Klein, H. (2022). Suppliers’ loyalty to their sharing platform: The influence of multiple roles. Journal of Business Research, 143, 272–281

^[23] Rossmannek, O., David, N. A., Schramm-Klein, H., & van der Borgh, M. (2024). Customer misbehavior and service providers’ risk perception in the sharing economy. Journal of Business Research, 170, 114340

^[24] Dixit, P. (2023, April 9). Uber CEO Dara Khosrowshahi went undercover as driver and delivery agent for months; Here’s what he learnt. Business Today. Retrieved from https://www.businesstoday.in/technology/news/story/uber-ceo-dara-khosrowshahi-went-undercover-as-driver-and-delivery-agent-for-months-heres-what-he-learnt-376667-2023-04-09

^[25] Novak, A. (2022, November 16). Airbnb CEO Brian Chesky is renting out a room in his home: “I’ll make you fresh cookies”. CBS. Retrieved from https://www.cbsnews.com/news/airbnb-ceo-brian-chesky-renting-room-home-cookies/

The post How to Attract and Keep Users on Peer-to-Peer Platforms appeared first on The European Business Review.

By Jiayi Huang and Xiangming Chen

From a battery maker to the world´s leading electric vehicle producer, BYD’s spectacular rise is an eventful journey fueled by dedication, tenacity, and consistent research and development. This analysis of the giant EV auto manufacturer´s success will help growth-oriented companies fine tune their strategy in the age of transition toward green mobility.

The Chinese EV company BYD, headquartered in the high-tech megacity of Shenzhen bordering Hong Kong, has ascended to the pole position in global green mobility. BYD not only overtook Tesla in selling more EVs in 2024 but also beat Tesla by having developed a more advanced charging system that can charge its latest cars in just five minutes to go 400 km (250 miles), relative to Tesla’s Superchargers, which take 15 minutes to add 320 km (200 miles). In addition, BYD offers its proprietary “God’s Eye” driver-assistance system on cars that cost just below $10,000. How did BYD rise so spectacularly to its current position from a budding battery maker in 1994? While much Western media reports on BYD’s rapid growth, we take an in-depth look into the company’s eventful journey and the real sources of its success over the past three decades.

After persistent investment in R&D for nearly 20 years, BYD achieved breakthroughs in key technologies of electric vehicles and took off in the global passenger vehicle market.

Since its founding in 1994, BYD has leveraged three transformative opportunities to develop its core technologies and expand its businesses around the world. The first opportunity was China’s integration into global supply chains after China intensified market reforms in the 1990s. Between 1994 and 2002, BYD developed a cost-effective system to manufacture batteries for top mobile phone companies such as Motorola. The second opportunity that BYD leveraged was the historic growth of China’s automotive market in the 21st century. BYD built a vertically integrated system to mass-produce internal combustion engine (ICE) and new energy vehicles. The third opportunity was the electrification of the global automotive industry in recent years. After persistent investment in R&D for nearly 20 years, BYD achieved breakthroughs in key technologies of electric vehicles and took off in the global passenger vehicle market. BYD’s founding and current president, Wang Chuanfu, acutely identified the three opportunities when they arose.

From 0 To 1: How BYD Established A Firm Footing In The Automotive Industry* 

BYD’s rise to a top battery supplier

Wang Chuanfu formally founded BYD by registering it in Shenzhen in February 1995 to leverage opportunities in the battery industry. Wang saw enormous potential in the battery market given the increasing demand for electronic products. Wang was a battery expert when he founded BYD. He moved from Beijing to Shenzhen in 1993 when he was assigned to manage a state-owned enterprise that produced nickel batteries. He discovered that the state-owned enterprise could not keep pace with market changes, so he created his own company. As China’s first special economic zone (SEZ), Shenzhen was a pioneer in China’s market reforms and opening to the world. Financial incentives like lower taxes provided by the Shenzhen government, coupled with bordering Hong Kong, created a favorable environment for entrepreneurially-minded people like Wang to pursue their economic opportunities. Wang obtained financial support from his old friends and several companies to found BYD. BYD started with a team of around 20 employees. BYD exemplified a wave of entrepreneurial start-ups around that time, a number of which later turned into highly successful global companies such as Huawei and Tencent (Chen and Ogan 2017).

BYD created cost-effective ways to produce high-quality nickel and lithium-ion batteries. Whereas its Japanese counterparts used automated processes to make nickel batteries, BYD leveraged abundant labor in China to develop a much cheaper method of production. Wang arranged labor and fixtures in an efficient way that achieved robotic functions. After making breakthroughs in nickel batteries, Wang began studying lithium-ion batteries which were more sophisticated and had a bigger market than nickel batteries. BYD soon became the first Chinese company to mass-produce lithium-ion batteries. Wang decided to target the biggest clients in the battery market so that BYD could learn about the highest standards for quality management. Many multinational companies began outsourcing to China around 2000 allowing BYD to become a supplier to Motorola and Nokia in 2001 and 2002 when BYD also underwent an initial public offering on the Hong Kong Stock Exchange, culminating its achievement as a company focused on producing batteries.

BYD’s great success as a battery maker, more than anything else, stems from Wang Chuanfu being a battery chemist at heart. BYD’s competitors quickly stopped trying to compete with Wang’s battery, which was far superior, and instead used BYD as their supplier. By driving BYD to improve its battery technology, Wang achieved great success in making BYD’s batteries better and cheaper than any competitor (Ogan and Chen 2016). Starting out as a battery manufacturer laid the most logical and sustainable foundation for BYD to enter and thrive in the automotive industry.

BYD’s entry into the automotive industry

After the early success in battery manufacturing, Wang Chuanfu made a bold decision to enter the automotive industry. Wang aimed to enter an industry that was bigger than the consumer battery industry and had connections with batteries. He saw the enormous potential of the Chinese automotive market. In the early 2000s, the Chinese government was reforming the automotive market and encouraging families to buy cars. Most people in China used motorcycles or bicycles for everyday transportation. Wang predicted that a historic number of Chinese people would buy cars over the next decade and that the automotive industry would be more energy-efficient and cleaner, creating opportunities for battery manufacturers. He was confident that BYD could produce high-quality cars at low costs after mastering the core technologies, just like its past experiences in battery manufacturing. BYD obtained the license to produce cars by purchasing the Qinchuan Automobile Company in 2003.

Qinchuan did not have full mastery of automobile technologies so Wang led his team to invent new cars. Although Wang was the most interested in electric vehicles, he understood that the technologies and market for electric vehicles were immature. Inventing ICE vehicles could be a transition and help BYD understand the automotive supply chain. BYD initially wanted to procure parts from external suppliers, but it was difficult to find suitable suppliers. Wang decided to pursue vertical integration. Vertical integration was time-consuming at first but enhanced the efficiency and reduced the costs of R&D in the long term. BYD’s current General Manager of the Branding and Public Relations Division, Li Yunfei, comments, “If you rely on external suppliers, they will not tell you their long-term plan for R&D. They usually provide you with the technologies that are the most profitable for them. Vertical integration helps BYD come up with comprehensive solutions to existing problems in automotive products.” BYD produced its first ICE vehicle model called F3 in 2005 and its first battery electric vehicle (BEV) model e6 in 2009. BYD launched F3DM (DM stands for dual modes) in 2008 and became the first company to sell plug-in hybrid electric vehicles (PHEV) in the world.

BYD started developing electric commercial vehicles in 2008. Wang realized then that it would still take a very long time to electrify passenger vehicles; roadblocks include the lack of the charging infrastructure, consumer distrust in relevant technologies, and the high prices of electric vehicles. But Wang saw at least two benefits of electrifying commercial vehicles. First, electrifying commercial vehicles could act as a buffer zone that educates consumers about electric vehicles. Second, electrifying taxis and buses could significantly reduce air pollution because they accounted for over one-third of air pollution from vehicles. The latter has stayed with Wang as a top consideration in BYD’s relentless pursuit of building more and better EVs as a worthy contribution to the climate cause.

Since 2013 BYD’s electric buses have entered major overseas markets such as the UK, the US, Japan, and India. By 2015, BYD K9 electric buses and e6 electric taxis have spread to over 190 cities in 43 countries and regions. BYD’s buses succeeded in different climates and regulatory contexts. For example, BYD delivered electric double-decker buses to London in the 2010s. In fact, Wang walked side by side with President Xi Jinping of China during the latter’s official visit to the UK in October 2015 when London bought more zero-emission electric buses from BYD (Chen and Ogan 2017). This purchase by a top global city with an iconic bus system went a long way to elevate BYD’s brand and global reputation. It also motivated BYD to solve the technological challenges in transforming the K9 model into a double-decker bus, such as a higher center of gravity and limited space for batteries.

Wang has the deepest understanding of the cutting-edge technologies at BYD. He knows how and when the current bottlenecks will be solved. Solving those bottlenecks will completely transform the customer experience.

BYD established a firm footing in the automotive market and managed to maintain its strategic focus on R&D for electric vehicles despite abrupt changes in market conditions. BYD sold around 400,000 to 500,000 vehicles every year in the 2010s. BYD’s revenue declined in 2012 and 2019, coinciding with fluctuations in the Chinese automotive market. The two troughs pushed BYD to increase the efficiency of its management system. In a system of vertical integration, some BYD factories lacked the motivation to reduce the costs and raise the quality of their products because they were guaranteed that their products could be sold to other factories in BYD. BYD thus made significant changes to its procurement system. It used external suppliers as benchmarks and closed some underperforming factories. Some factories started competing with external suppliers in bidding processes.

The year 2019 turned out to be a very difficult one in BYD’s history. Its net profit for shareholders was only 1.6 billion RMB that year, but Wang Chuanfu still invested 8.4 billion RMB in R&D. Li Yunfei comments, “Wang has the deepest understanding of the cutting-edge technologies at BYD. He knows how and when the current bottlenecks will be solved. Solving those bottlenecks will completely transform the customer experience. His technological expertise has helped BYD to develop a long-term vision and strategy. He is like a prophet and a time traveler. He can maintain his strategic focus and avoid being distracted by fluctuations in external conditions. We firmly believe that our future is bright. We will be lucky if market tailwinds arrive sooner. We are prepared to withstand the difficulties if market tailwinds arrive later.”

Back in 2008, Wang described his three green dreams. The first dream was to develop affordable technologies to use solar energy. The second dream was to help humans store energy. The third dream was to build electric vehicles to reduce air pollution. BYD has invested in R&D for solar cells and energy storage power plants since the 2000s. The three dreams have motivated Wang to expand BYD’s presence in other green industries besides electric vehicles at a global level.

BYD’s Take-Off In The Global Automotive Market

BYD released the revolutionary Blade Battery in March 2020, leading an unprecedented wave of breakthroughs. The Blade Battery is a lithium iron phosphate (LFP) battery for electric vehicles and looks like a blade (Figure 1). The Blade Battery has higher energy density than traditional battery packs and increases the range of electric vehicles, which paved the way for upgrading the Dual Mode (DM) technology platform of hybrid vehicles. The earlier versions of the DM platforms primarily relied on fuel. The DM 4.0 platform, released in June 2020, primarily relied on electricity. BYD released the e-Platform 3.0 for battery electric vehicles in 2021, which Wang Chuanfu called the most essential step from electrifying vehicles to increasing their intelligence. The e-Platform 3.0 was a brand-new platform specifically designed for electric vehicles and integrated the most critical technologies of electric vehicles.

Powered by technological breakthroughs, BYD quickly diversified its vehicle models to meet different demands from consumers. BYD currently has four brands and five sales networks in China. The four brands are BYD, DENZA, FANGCHENGBAO and YANGWANG. The bestselling brand is BYD, which has two sales networks (Dynasty and Ocean). BYD stands for “Build Your Dreams”, symbolizing BYD’s green dreams. In China, vehicle models of the Dynasty network are named after Chinese dynasties (Qin, Han, Tang, Song, Yuan, etc.).  The Ocean network looks more youthful than the Dynasty network. DENZA offers a new luxury travel experience. FANGCHENGBAO, meaning “formula leopard” in Chinese, is a professional personalized brand. YANGWANG is a high-end brand. This quartet of brands has provided BYD with a broader and more diversified portfolio of assets.

Wang drives BYD

As BYD’s founder but going beyond a conventional founder’s role, Wang Chuanfu has played a pivotal role in shaping and sustaining both the technological core and cultural meanings of the BYD brands. Li Yunfei recalls, “Not everyone in the marketing team is an engineer, but our marketing is driven by a thorough understanding of our technologies. We have launched some pioneer technologies. Many consumers found engineering concepts very boring, so it was challenging to quickly impress our consumers with the strengths of our technologies. Wang was willing to work with the marketing team in the planning stage of marketing campaigns. He was like a professor giving lectures to students. He translated sophisticated technological concepts into plain words. After his lectures, Wang would double check whether we fully understood. He also has great admiration for traditional Chinese culture, which is reflected in the names of our Dynasty models and the logo of our high-end YANGWANG brand. When we started to design YANGWANG’s logo, Wang told us to borrow from the oracle bone script used in ancient China. While some of us proposed using the oracle bone script of ‘electricity’, other proposals went beyond the oracle bone script. Wang ultimately chose our proposal.” Given its thorough understanding of technologies and consumer demands, it was no surprise that BYD’s sales and revenue took off in 2022. Its revenue jumped from 216.1 billion RMB in 2021 to 424.1 billion RMB in 2022, pushing BYD onto the Fortune Global 500 list. Its revenue further rose to 777.1 billion RMB in 2024 (Figure 2). BYD produced its one-millionth new energy vehicle in May 2021 and its ten-millionth new energy vehicle in November 2024. By February 2025, BYD’s passenger vehicles reached 90 countries and regions (Table 1).

Wang’s personal influence is key to BYD’s brisk overseas expansion through a growing and more internationally informed team of senior executives. BYD sold 4.25 million passenger vehicles in 2024, and over 417,000 of those were sold in overseas markets. Since its first overseas office opened in the Netherlands in 1998, BYD has established over 40 branch offices overseas. BYD opened a factory in Thailand last year and is currently completing factories in Brazil and Hungary. Its overseas branches have gained extensive knowledge of local markets by selling batteries and commercial vehicles. Li Yunfei comments, “Many senior executives of our overseas branches have been working in BYD for over 20 years. They are familiar with foreign culture and BYD’s internal organization. They have laid a solid foundation for BYD’s overseas expansion. In addition, we have incorporated overseas talents into our teams.” Regarding Europe, Li adds, “We want to give European consumers more choices, which will benefit them. We have a high respect for automotive brands in Europe and been learning from the European brands. Market competition can motivate everyone to make progress.”

Wang Chuanfu has continued to prioritize innovation through R&D. In 2024, BYD invested 54.2 billion RMB in R&D expenditure, which increased by 35.7% year on year. In March 2025, BYD’s global workforce reached one million, and over 120,000 of those work on R&D. Li Yunfei comments, “A wise leader is essential to a company’s development. A few years ago, my team was planning to build a powerful public image of Wang Chuanfu like other companies but he asked us to stop as soon as he learned about our plan. He said that we should focus on communicating our technologies and products to the public instead of building individual heroism. People that have interacted with Wang have been impressed by his low-key manner. Over 80% of Wang’s meetings focus on technologies and lead to plans for the medium and long terms.”

From a corporate innovator to a global leader

Continued innovation has become the core DNA of BYD, leading to a series of technological breakthroughs in recent years (Figure 3). While recent, these innovations reflect BYD’s persistent and cumulative investments in R&D over the three decades of its rapid growth. BYD’s passion for innovation has been fueled by the larger environment of Shenzhen as its home city that strongly favors corporate innovation and has nurtured several innovative companies like Huawei and DJI in a dense technological ecosystem. Beyond Shenzhen itself, BYD has benefited from competing against many domestic and international automakers in China’s highly competitive EV market irrespective of government subsidies. It is no surprise that these competitive and innovation-conducive local and national environments have fostered BYD’s cumulative success as a leading corporate innovator.

As BYD has innovated from its home base, it has leveraged its innovative capacity in elevating the BYD brand globally and extending its market footprint across nearly 100 countries. Having spanned all segments of the global EV market, BYD has moved up and forward into one of the world’s leading automotive companies, and more importantly, as a pace-setter in green mobility. At a time when geopolitical turmoil has disrupted the global agenda on climate change and energy transition, BYD has proven as a robust and innovative corporate and national leader in pursuing that agenda.

About the Authors

Jiayi Huang is a senior specialist at BYD’s headquarters in Shenzhen. She researches on international political economy and works on overseas public relations for BYD. She holds a Ph.D. in political science from the University of Pennsylvania, a master’s degree in economics from Duke University, and a bachelor’s degree in economics and mathematics from Trinity College in Connecticut.

Xiangming Chen is Paul E. Raether Distinguished Professor of Global Urban Studies and Sociology at Trinity College in Connecticut and an Associate Fellow at the Center for Advanced Security, Strategic and Integration Studies (CASSIS) at the University of Bonn, Germany. He has published extensively on urbanization and globalization with a focus on China and Asia as well as a frequent contributor on “China in the World” to The European Financial Review and The World Financial Review. He has also conducted policy research for the World Bank, the Asian Development Bank, UNCTAD, and OECD.

Footnote

• The first two sections draw heavily from the Chinese book The Soul of Engineers, which BYD recognizes as its official history. This article including its illustrations also draws from other material and information compiled by BYD unless otherwise noted. The interview with Li Yunfei was conducted in March 2025 specifically for this article.

References

• Xiangming Chen and Taylor Lynch Ogan (2017). China’s Emerging Silicon Valley: How and Why Has Shenzhen Become a Global Innovation Center. The European Financial Review, December/January p. 55-62.

• Taylor Lynch Ogan and Xiangming Chen (2016) The Rise of Shenzhen and BYD—How a Chinese Corporate Pioneer is Leading Greener and More Sustainable Transportation and Urban Development. The European Financial Review, Feb/March p. 32-39.

• Shuo Qin and Yuejia Xiong (2024) The Soul of Engineers: BYD’s Rise During 1994-2024 (in Chinese). (Beijing: The CITIC Publisher).

The post BYD’s Rapid Ascent to the Global EV Leader appeared first on The European Business Review.

You built your business from the ground up—every decision, every detail. But what got you here won’t get you to the next level. In this piece, Elizabeth Eiss explores how effective delegation and a mindset shift can help you do less, lead more, and scale smarter.

Suppose you’re a small business owner or solopreneur. In that case, chances are you are all too familiar with the feeling of being CEO plus your own marketing team, sales force, customer service rep, bookkeeper, and operations manager – all in one. It’s the nature of starting and growing a business from scratch, and it’s normal. But the “jack of all trades” approach isn’t scalable if you want to build a successful business. In fact, it’s one of the biggest obstacles to long-term growth.

In our previous article, Scaling You: Leverage the Value of YOUR Time to Scale Your Business Impact, we explored how small businesses can use strategic time management and delegation with the Process-Tools-People (PTP) method to scale more impactfully. In this article, we’ll dive even deeper into effective delegation, discussing the importance of an “invest vs. spend” mindset and the role of core vs. non-core work distinction so you can “do less” while achieving more. 

Value of Your Time: A Mindset for Scaling

Time is the one resource you can’t buy more of, so shifting your mindset from “spending” to “investing” time is the difference between building a business or simply keeping busy.

There is a subtle but powerful difference between spending time and investing time. When you invest time, you’re putting energy into activities with a multiplier effect – actions that lead to more client value and thus more growth, revenue, or leverage in the future. Spending time, by contrast, often results in maintenance, not momentum.

When solo business owners and lean teams start treating time as a finite resource, they become more intentional.

Entrepreneurs must think of their time as an investment to truly understand the value of time. Ask yourself: What is my time worth per hour? More importantly, what kinds of tasks are truly worthy of that rate? If you’re spending hours on administrative work or repetitive tasks that could be outsourced for a fraction of your hourly value, you’re not making the best use of your time. Our complementary ROI of Time Calculator can help define and determine the value of your time (in dollars).

When solo business owners and lean teams start treating time as a finite resource, they become more intentional. That intentionality is the foundation of smart delegation and scalable growth.

The Art and Science of Delegating Effectively

Delegating is a skill, and like any skill, it improves with intention and practice. Simply offloading tasks isn’t enough—you need the right people, clear communication, and accountability structures in place.

At ResultsResourcing, we believe one of the secrets to scaling is creating systems that allow you to focus on high-value work. If you’re constantly bogged down with tasks, you’re limiting your ability to grow.

For small business owners and solopreneurs, scaling doesn’t mean managing a big team – it means working smarter by:

• Protecting your schedule for strategic thinking and revenue-generating work
• Building repeatable systems and processes
• Delegating effectively so you can lead instead of manage

This mindset shift helps you operate more like a CEO and less like an operator. 

Do or Delegate: Get Clear on Tasks to Create Time

To determine what to delegate, you must first identify the “core” work of your business. Core work is anything that:

• Directly contributes to your unique value proposition
• Drives revenue or client satisfaction
• Requires your expertise, vision, or leadership

Non-core work, on the other hand, includes tasks that are necessary for operations but don’t require your unique skills. These can include bookkeeping, scheduling, customer support, social media management, and more.

Here is a practical framework for identifying and categorizing tasks:

1. List all the tasks you do over a week.
2. Label each task as core or non-core.
3. Evaluate whether you are the best person to do each task.

By assessing the urgency and importance of each task, you can determine whether you need to handle it yourself or delegate it to someone else.

For solopreneurs especially, it’s easy to fall into the trap of doing everything yourself. But chances are, you’ll find many non-core activities that consume a disproportionate amount of your time. That’s your opportunity to delegate.

The Process, Tools, People (PTP) Method can help you delegate even more intentionally by layering in processes and tools before you outsource to people.

Build to Scale by Doing More (of the Right Things)

If the thought of letting go makes you anxious, you’re not alone. Many small business owners and solopreneurs struggle to find the right talent or fear that no one can do the work as well as they can.

Many small business owners and solopreneurs struggle to find the right talent or fear that no one can do the work as well as they can.

But growth requires change. To scale, you must invest your time where it creates the most value. That means doing what only you can do—and delegating the rest. So, ask yourself: What can I stop doing so I can start scaling?

Remember: Core work is where your leadership, innovation, and vision live. Everything else is a candidate for delegation.

The smartest small business owners know their highest-value activities and guard their time fiercely. They don’t try to do it all. Instead, they build flexible teams who complement their strengths and allow them to stay focused on what matters most.

If you’re not sure how or where to start, ResultsResourcing can help you get clear on your needs and optimize resources to reach your goals and objectives.

For further insights on strategic hiring and scaling your impact, visit ResultsResourcing.

About the Author

Elizabeth Eiss is a well-known speaker on entrepreneurial growth and a sought-after expert on the future of work, business performance, and culture, on-demand talent/virtual staffing trends, as well as leadership transformation from intrapreneur to entrepreneur. After decades of running Fortune 500 business operations, she launched ResultsResourcing, a virtual fractional talent platform, and service to help solopreneurs and small business owners find the resources they need to grow and scale.

The post Scaling You: Do Less to Achieve More with Effective Outsourcing appeared first on The European Business Review.

By Michael J. Provitera and Mostafa Sayyadi

Management knowledge, beginning with globally well-known author and management consultant Peter Drucker, grew and then flourished in the profession of management. A great CEO and industrial leader, the Japanese Kōnosuke Matsushita, CEO of Panasonic created a 200-year strategic plan that was carried out by his successors efficiently and effectively. Coined as the “Father of Japanese management.” In the 1930s, he was the first person to talk about the management of human resources in organizations and considered humans to be the greatest asset in the world. Thus, beginning the Human Development Movement mastered by the Hawthorne Effect. Matsushita has written more than 40 books in the field of management and an article has been prepared about his thoughts and experience in the field of management and leadership, mostly from his work at the Panasonic company. This article aims to decode how Matsushita’s leadership grew the Panasonic company and present his big leadership lessons at this Japanese multinational electronics company for executives and senior executives across the globe.

Introduction

Kōnosuke Matsushita would be coined as a maverick with an overzealous mindset.^1,2 First and foremost, he was not eloquent when he spoke to his followers. His IQ was average. He mustered up the ability to motivate many people to live a better life in the corporate world.  He left a valuable legacy for the modern-day leader. Not only because he was the founder of Panasonic, but also because he managed to drive great economic success. Outside of Japan and in the US, Europe, and Australia, Matsushita is still unknown. After leading Panasonic to large profitability, he used the income from his leadership efforts for such things as establishing an institution such as the Nobel Peace Prize and establishing schools to help children and young adults become future leaders.

Matsushita, born at the turn of the 19^th century, faced challenges in his youth. In 1917, he decided to work for himself with only 100 yen in savings. He started school later than the other children in his location and began school in the fourth grade of Japanese primary school. His small company with little capital eventually flourished with his efforts. He believed in one key principle. He called his main principle: “Adapt yourself and your business according to the command of the market.”

Adapt yourself and your business according to the command of the market.

He also believed that you should treat the people you do business with as if they were members of your family.^3,4 Without realizing that he came up with something that is well known today called “Customer Relationship Management.” He would contact customers to ensure that they were properly treated and really satisfied. He also, without realizing it, created what is known today as “Customer Orientation.” The key point for senior executives and leaders here is that customer-oriented business people are not selling-oriented but care about the customer before, during, and after the sale.^5,6 He even came up with the term used by Ed Deming, “Total Quality Management,” who came to Japan after WWII. Matsushita felt that any waste, even a single sheet of paper, would increase the price of the product by much.⁷ Another vital important idea he surfaced way before it became a management fad is the “Just-In-Time Inventory.” He argued that not having inventory in the warehouse is due to carelessness.⁸ If his customers were unhappy for any reason, he would immediately apologize to the customer. His motto was:

Like Elon Musk today as the founder and CEO of the American multinational automotive and clean energy company Tesla, Matsushita read many books and took notes in areas where he felt deficient. He sought out mentors and listened very carefully to the words of those who talked to him. He also skillfully used the knowledge of others to enrich his thoughts. Despite all the wealth he created, he never felt that money was that important. He did not spend his wealth in luxurious ways. He believed in continuous improvement.

Responsibility and familiarity with it in adolescence

Kōnosuke Matsushita began as a laborer in a cement company, then found a job at an electricity company. In 1910, he started his business (electrical business) and entered an industry that began flourishing. He worked at Osaka Electric Company and in three months, he was transferred to the newly established branch of the company and was promoted from the job of assistant to software engineer, and he received a salary increase. His job required heavy physical work, he had to climb the electric poles and screw the electric lights, install the screws in the ceiling and this took a toll on his body.

Matsushita was a real magnanimous leader. Similar to Marshall Goldsmith’s Feedforward Exercise, he created professional activities and got to know thousands of people in various business settings.^9,10 He finally went back to school at the age of seventeen, failing to compete among his colleagues, he ranked 175 among 380 people and was asked to leave the school. Personally, Matsushita believed that the reason was his inability to write. This did not deter his success, however. During the years he worked at the Osaka Electric Company, he gained knowledge about electricity, which could create four industries (production, transmission, consumer electronics, and industrial electronics) and create jobs for millions of people. At the age of sixteen, he was entrusted with the administration and management of employees. This was a new start and the pivotal focal point in his success in the future.

Thus, at the age of nineteen, he was responsible for large and complex projects. While working at Osaka Electric Company, Matsushita rubbed elbows with very important people. While this was a highlight in his career, he lost his mother in 1913 which devastated him. It took him three years to forget this tremendous sorrow and he eventually was able to get married in 1915. Two years after his marriage, Matsushita was promoted to his job due to his hard work coupled with his business skills. He felt that he needed to love his work to become motivated. He once noted “I was unemployed for a long time. This work was soulless and devoid of gravity. I said to myself, what is the benefit of staying in a job that I don’t like?” He left that company in 1917.

Matsushita’s entrepreneurial efforts also helped him to more effectively control his destiny. As a leader, he challenged the status quo and encouraged people to innovate, change, transform, and create. In June 1917, the dark days of Matsushita’s life ended. He started his own small business in the field of screw making with his four assistants (i.e., his wife, his wife’s brother, and two friends) with the pitons of his only savings of 100 yen. He had to teach his coworkers the screw-making trade. His small working courters limited his space to only 14.5 square meters in size. The company prospered throughout 1918.

The key leadership lessons from panasonic

Kōnosuke Matsushita made his debut in the 1960s and 1970s when Panasonic became a brand name in major cities around the world. From tape recorders to televisions and radios, the Panasonic name became a household name brand. Many factors developed the main principles of Panasonic: High customer satisfaction; Low cost; a Loyal workforce; Innovative marketing, and; a powerful marketing plan. Panasonic was able to very quickly adapt to the current market conditions.^11,12

Matsushita also loved competition and strived for perfection. He believed that competition leads to success, continuous improvement, and progress. Matsushita was a humble leader who said:

In 1961, Matsushita developed his very famous 200-year strategic plan in small chunks of five to ten years each. He said:

The main reason why this strategy was so big and famous is because all employees focused on the daily grind, the near future, and the projected progress forthwith. The managers talked about how the strategic initiatives will help them keep their jobs, and hire their children, and grandchildren. It was an epic event for Japanese employees. One never surfaced again.

Matsushita asked the chief engineers of the group how many people live on the earth. He said 2 or 3 billion people. Matsushita told him that all these people need similar basic electronic components in their homes and we will provide them. With innovation, cost reduction, and the creation of new products, the first five-year strategic goal was accomplished, and the company met its profitability target.

If we cannot make a good profit, it means that we have committed some kind of sin towards society

In January 1960, at the annual meeting of Matsushita’s directors, he said that he wanted Panasonic to be the first company to reduce working days from a six-day to five. He argued that workers should be given a chance to enjoy their life. Panasonic became the envy of employees all over Japan. His idea of growth and prosperity from an economic point of few began with his view as an economist.

Furthermore, Matsushita emphasized group wisdom improvement while maintaining humility. He particularly believed that:

• A humble person will never be reckless or self-righteous.
• A humble person will pay attention to the ideal mission.
• A humble person will listen to others and do what is right. Even though he was introduced as a famous person.

In this way, Matsushita also stated:

To make more effective leaders for the future from Matsushita’s key leadership lessons, in 1979, the Matsushita Government and Leadership Institute was established in the heart of Tokyo. The institution aimed to nurture and encourage leadership in politics and government in the 21^st century. A clear mission and a set of principles were established for this institution. His main goal was to help peace and prosperity through research on important issues and raise a new generation of leaders. The students who are selected and taught must have five key characteristics:

1. Having a true belief people can overcome any difficulty.
2. Having a spirit of independence in both thought and action.
3. Having eagerness to learn from other people’s experiences.
4. Having the ability to reject stereotyped thoughts.
5. Having the capacity to cooperate and with others.

When the Matsushita Government and Leadership Institute started with twenty-three students in 1979. By the end of the first year, the number of candidates entering the institute was 904. The main design of this institution is a reflection of Matsushita’s personal life. He said many times that hardships are useful for building character, establishing motivation, and establishing self-evaluation in an authentic way. The students organized their own curriculum because Matsushita believed that motivation would play a major and vital role in student success. Since the international perspective played an important role in the student’s education and the world economy, all students spent an education course outside of Japan in another country of their choice.

In conclusion

In the end, Matsushita’s biggest and most important contribution to the world of business is his 200-year strategic plan broken down into ten-year tactical plans. He took many risks, reflected on both success and failure, and learned the trait of listening carefully to learn from other business executives. Matsushita had both wisdom and humility, a great trait that many leaders now and in the future can embark upon in today’s hyper-competitive business environment.

About the Authors

Michael J. Provitera is an associate professor of organizational behavior at Barry University, Miami, FL. He received a B.S. with a major in Marketing and a minor in Economics at the City University of New York in 1985. In 1989, while concurrently working on Wall Street as a junior executive, Dr. Provitera earned his MBA in Finance from St. John’s University in Jamaica, Queens, New York. He obtained his DBA from Nova Southeastern University. Michael J. Provitera is quoted frequently in the national media.

Mostafa Sayyadi works with senior business leaders to effectively develop innovation in companies, and helps companies—from start-ups to the Fortune 100—succeed by improving the effectiveness of their leaders. He is a business book author and a long-time contributor to top management journals and his work has been featured in the top-flight publications.

References

1. Itagaki, H. (2004). Matsushita. In: Kumon, H., Abo, T. (eds) The Hybrid Factory in Europe (pp. 197–202). Palgrave Macmillan, London. https://doi.org/10.1057/9780230523654_11.

2. Matsushita, T. (2021). Electromagnetic Wave. In: Electricity and Magnetism (pp. 301–322). Undergraduate Lecture Notes in Physics. Springer, Cham. https://doi.org/10.1007/978-3-030-82150-0_12

3. Matsushita, T. (2021). Current Systems. In: Electricity and Magnetism (pp 197–222). Undergraduate Lecture Notes in Physics. Springer, Cham. https://doi.org/10.1007/978-3-030-82150-0_8

4. Matsushita, T. (2021). Current and Magnetic Flux Density. In: Electricity and Magnetism (pp. 133–168). Undergraduate Lecture Notes in Physics. Springer, Cham. https://doi.org/10.1007/978-3-030-82150-0_6

5. Matsushita, T. (2021). Electromagnetic Induction. In: Electricity and Magnetism (pp. 257–282). Undergraduate Lecture Notes in Physics. Springer, Cham. https://doi.org/10.1007/978-3-030-82150-0_10

6. Matsushita, T. (2021). Electromagnetic Wave. In: Electricity and Magnetism (pp. 301–322). Undergraduate Lecture Notes in Physics. Springer, Cham. https://doi.org/10.1007/978-3-030-82150-0_12

7. Kassemeier, R., Alavi, S., Habel, J. & Schmitz, C. (2022). Customer-oriented salespeople’s value creation and claiming in price negotiations. Journal of the Academy of Marketing Science, Vol. 50, No. 4, pp. 689–712. https://doi.org/10.1007/s11747-022-00846-x

8. Saavedra, C.A. (2016). Misinterpreting Customer Orientation. In: The Marketing Challenge for Industrial Companies (pp. 11–31). Management for Professionals. Springer, Cham. https://doi.org/10.1007/978-3-319-30610-0_2

9. Homburg, C. & Tischer, M. (2023). Customer journey management capability in business-to-business markets: Its bright and dark sides and overall impact on firm performance. Journal of the Academy of Marketing Science, Vo. 51, No. 5, pp. 1046–1074. https://doi.org/10.1007/s11747-023-00923-9

10. Kohli, A. K., & Jaworski, B. J. (1990). Market Orientation: The Construct, Research Propositions, and Managerial Implications. Journal of Marketing, Vo. 54, No. 2, pp. 1–18. https://doi.org/10.2307/1251866

11. Lemon, K. N., & Verhoef, P. C. (2016). Understanding Customer Experience Throughout the Customer Journey. Journal of Marketing, Vol. 80, No. 6, pp. 69-96. https://doi.org/10.1509/jm.15.0420

12. Shank, J.K. & Fisher, J. (1999). Target Costing as a Strategic Tool. Sloan Management Review. https://sloanreview.mit.edu/article/target-costing-as-a-strategic-tool/

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The Mechanics of Franchising

Franchising operates on a legal framework that defines the relationship between the franchisor (the company that owns the brand) and the franchisee (the individual or business purchasing the right to operate under the brand). The mechanics of franchising are structured through a formal franchise agreement, which outlines the terms and conditions for the relationship.

The key elements in the franchising system include:

1. Franchise Agreement: This legally binding contract is the foundation of the franchise relationship. It defines the rights and obligations of both parties, including the terms of how the franchise will operate, the initial investment required, royalty fees, and the length of the agreement. It also covers restrictions, such as the geographic area in which the franchisee can operate and how the brand can be marketed.
2. Franchise Fees and Royalties: The franchisee typically pays an upfront franchise fee to the franchisor in exchange for the right to use the brand and business model. In addition to the franchise fee, franchisees are required to pay ongoing royalty fees, which are usually a percentage of their revenue. These royalties help support the franchisor’s operations and the resources they provide to franchisees, such as training and marketing support.
3. Brand and Trademark Usage: A franchisee gains the right to use the franchisor’s established brand, logo, and trademarks. This brand recognition provides an advantage for the franchisee because it attracts customers who are already familiar with the brand’s reputation. The franchisor ensures that franchisees uphold the integrity of the brand by following established guidelines on how products or services should be delivered.
4. Operations Manual and Support: One of the main advantages of franchising is the franchisee’s access to a proven business system. The franchisor provides the franchisee with an operations manual, which includes detailed instructions on how to run the business, from managing inventory and marketing to customer service protocols. This standardized system ensures consistency across all locations and reduces the learning curve for new business owners. Ongoing support, including marketing campaigns, training, and troubleshooting, helps franchisees operate efficiently.
5. Training and Support: Franchisors provide initial training to franchisees to ensure that they understand the business model and can manage their location according to the brand’s standards. This training can include both in-person and online courses, depending on the franchisor’s requirements. Beyond the initial training, franchisees typically receive ongoing support to help with marketing, operations, and problem-solving as their business grows.

Benefits of Franchising for Business Owners

Franchising presents numerous advantages for business owners seeking to expand their brands and revenue. Here are the key benefits:

1. Rapid Expansion and Scalability: Franchising offers a unique opportunity for business owners to scale quickly and reach multiple markets without taking on the financial burden of opening and operating each new location. The franchisee invests their own capital, enabling the franchisor to expand rapidly. This is particularly advantageous for businesses that want to grow geographically, reaching new regions or countries with limited financial risk.
2. Lower Risk of Failure: One of the most significant advantages of franchising is that it reduces the risk for the franchisor. Since the franchisee is investing their own capital and following a proven system, the chances of failure are lower than if the business were to rely solely on corporate-owned locations. Franchisees benefit from the franchisor’s experience, established brand, and operational blueprint, which provide a higher chance of success compared to starting a business from scratch.
3. Revenue Growth through Royalties: The franchisor benefits from continuous revenue streams in the form of royalty payments from franchisees. These payments are often calculated as a percentage of the franchisee’s gross sales, providing a scalable income source that grows as the franchise network expands. These royalties can create a stable and recurring revenue model that is less susceptible to fluctuations compared to traditional sales-based business models.
4. Shared Marketing and Advertising: Franchisors typically invest in national or regional marketing campaigns that benefit the entire franchise network. Franchisees can tap into these marketing resources, reducing the cost and complexity of advertising on their own. This shared marketing pool often gives franchises an edge in terms of brand visibility and consumer trust, as the marketing efforts are part of a broader, coordinated strategy.
5. Access to a Proven Business Model: Franchisors provide franchisees with a tested and refined business model, which helps reduce the uncertainties that often come with starting a new business. Franchisees can avoid the trial and error process that comes with developing a business from scratch. This model includes everything from pricing strategies and supply chain management to employee training and customer service protocols, all tailored to ensure consistency and profitability.
6. Ongoing Support: Franchisors typically offer continuous support throughout the franchisee’s journey, helping them navigate challenges and optimize business performance. This ongoing assistance may include supply chain management, regular training updates, marketing support, and operational troubleshooting. Franchisees also benefit from networking opportunities with other franchisees, allowing for the exchange of ideas, best practices, and resources.

Risks of Franchising for Business Owners

While franchising offers substantial opportunities, there are inherent risks involved that business owners must be aware of before embarking on a franchising model:

1. Loss of Control Over Brand Execution: One of the main challenges in franchising is the loss of complete control over the day-to-day operations of each franchise unit. Franchisees are required to follow the franchisor’s operational guidelines, but there may still be variations in how individual franchisees manage their locations. Inconsistent execution of the brand’s standards, such as differences in customer service or product quality, can negatively impact the brand’s reputation and undermine customer loyalty.
2. Reputation Risk: A franchise network is only as strong as its weakest link. If one or several franchisees fail to uphold the brand’s standards, it can tarnish the overall reputation of the brand. A single franchisee’s poor service or operational failure can affect customer perceptions of the entire brand, even if other franchisees are operating successfully. This makes it crucial for franchisors to maintain strong oversight and support systems to ensure franchisees meet brand expectations.
3. Legal and Regulatory Risks: Franchising is governed by laws and regulations that vary by jurisdiction. The franchise agreement must be drafted carefully to comply with local laws, and franchisors must ensure that their operations meet all regulatory requirements. Legal disputes between franchisors and franchisees can arise, particularly around issues such as the termination of the franchise agreement or disputes over the allocation of fees. These legal complications can be costly and may damage the franchisor’s reputation.
4. Financial Dependence on Franchisees: The financial success of a franchisor is directly tied to the performance of its franchisees. If a large number of franchisees struggle to make a profit or close their businesses, the franchisor may experience a decline in royalty payments, which could affect their overall revenue. This dependence on franchisee success places a significant responsibility on the franchisor to ensure franchisees are adequately supported and that the franchise model is adaptable to changing market conditions.
5. Market Saturation and Competition: As a franchise network grows, there is the potential for market saturation, where too many franchises operate within the same geographic area. This can create internal competition among franchisees for customers, which can decrease profitability for all parties involved. Franchisees may feel that there is insufficient demand to support multiple locations, leading to tension and conflict within the franchise network.
6. High Initial Costs for Franchisees: While franchisors benefit from franchise fees and royalties, franchisees often face high startup costs, including the franchise fee, location buildout, equipment, inventory, and ongoing royalty payments. These costs can create financial strain for franchisees, especially if the business does not generate the expected level of revenue. Additionally, franchisees are often required to follow strict rules and restrictions, which may limit their ability to make independent decisions regarding the operation of their business.

Conclusion 

Franchising offers an effective way for business owners to expand quickly and efficiently while minimizing some of the risks associated with starting new locations. However, it is not without challenges. Business owners considering franchising must weigh the benefits of rapid expansion, brand recognition, and shared resources against the risks of losing control over operations, reputational damage, and financial dependence on franchisees. Ultimately, the success of a franchise model depends on strong relationships, clear communication, and the ability to maintain consistent brand standards across all locations.

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By Knut Haanaes and Julia Binder

In any given moment we have two options: to step forward into growth or step back into safety. This quote, attributed to Abraham Maslow, emphasizes the importance of change management. Change is never easy but companies that embrace change and its growing pains often create new competitive advantages.

Not all companies survive transformation, but those that do often redefine their industries. Neste, once a traditional oil refining company, faced a critical crossroads as the world moved away from fossil fuels. When Matti Lievonen took over Neste in 2009, the Finnish oil refining company faced strong headwinds, including a sharp fall in oil prices, market overcapacity, falling margins, and coming EU carbon emissions legislation. The company’s market value dropped 50% between 2008 and 2011. Instead of resisting change, the company made a radical pivot—shifting its core business from petroleum-based products to renewable fuels and sustainable solutions. This wasn’t a minor adjustment; it was a complete reinvention that required new technologies, new markets, and a new way of thinking about value creation. Today, Neste is the world’s largest producer of renewable diesel and sustainable aviation fuel, proving that embracing transformation can lead to both financial success and a leadership position in the global energy transition.

Neste’s transformation didn’t happen through strategy alone. It required bold decision-making at every level, a cultural shift that engaged employees and stakeholders, and the ability to execute at scale. Change of this magnitude isn’t just about having the right plan—it’s about mastering the head, heart, and hands of transformation. The head ensures that the strategy is forward-looking and well-defined, the heart creates the motivation and cultural buy-in necessary to move forward, and the hands ensure that change is implemented effectively and at scale. Even the best-laid plans fail to take root without alignment between these three dimensions.

A bold strategic vision alone is not enough; it must be matched with leadership that mobilizes people, drives cultural shifts, and ensures execution at scale.

What makes this kind of transformation particularly challenging is the unavoidable short-term versus long-term tradeoff. Companies in transition often face pressure to deliver immediate financial results while simultaneously making investments that may not pay off for years. Many organizations hesitate, fearing the short-term costs of change—whether it’s capital investment, shifts in workforce skills, or restructuring business models. However, those that delay transformation risk falling behind permanently, while those that take bold steps forward create new competitive advantages. Neste’s leadership understood that transitioning to renewable fuels required years of investment and an initial financial burden, but the long-term payoff—market leadership in a growing sector and alignment with global sustainability trends—far outweighed the short-term sacrifices.

Companies that aim to lead in sustainability or any large-scale transformation must learn from examples like Neste. Change is not just about adopting new goals—it requires shifts in thinking, leadership, and execution, all working in continuous alignment. This interplay can be visualized as an infinity loop, where strategy and leadership continuously reinforce each other.  A bold strategic vision alone is not enough; it must be matched with leadership that mobilizes people, drives cultural shifts, and ensures execution at scale. At the same time, leadership must remain adaptable, feeding insights back into strategy to refine and evolve it over time. Neste’s transformation exemplifies this approach—its shift to renewable fuels was not a one-time decision but an ongoing process where strategy and leadership worked in tandem, adjusting to market dynamics and technological advancements. Companies that embrace this continuous cycle create a self-sustaining mechanism for transformation, ensuring that change is not only envisioned but fully realized.

Strategy: A Blueprint for Resilience and Reinvention

For many organizations, strategy is treated too much as a one-time roadmap—an initial push in a new direction. But leading real change, particularly in sustainability, requires a dynamic and adaptive strategy, where each decision fuels further transformation. The companies that get this right don’t just react to external pressures; they proactively shape their own futures. This starts with breaking free from the limitations of the present. Too often, organizations are bound by short-term performance metrics or industry norms that no longer serve them. Leaders must resist the urge to optimize existing systems and instead design for the future, using tools like scenario planning and future-back thinking to anticipate what’s coming and position themselves accordingly. A critical link between strategy and leadership is that of crafting an aspiration. An aspiration differs from a vision, as it is time-bound and can be changed as the context changes. A good aspiration inspires people.

Some key strategic decisions define successful transformation. Companies that integrate circular economy principles, redesign their supply chains for resilience, or invest in regenerative business practices are not just mitigating risk—they are creating entirely new value propositions. Siemens is a strong example of this approach, embedding circularity into its operations and product lifecycle. By designing products for longevity, modularity, and recyclability, Siemens not only reduces waste but also creates new business opportunities, such as refurbishing and reselling industrial equipment rather than discarding it. The company has also embraced digital twin technology to optimize resource use and energy efficiency across its supply chain. Organizations that hesitate, waiting for perfect solutions, often find themselves left behind. Instead, companies that lead in sustainability experiment with emerging technologies, pilot alternative energy sources, and develop new service models that will give them a competitive edge when the market catches up.

Financial priorities must evolve as well. Traditional return-on-investment models often fail to capture the long-term benefits of sustainability. Organizations that integrate sustainability metrics into their financial decision-making, link them to investor expectations, and embed them in capital allocation are better positioned for the future. Sustainability must also become part of the broader business ecosystem. No company can tackle it alone. Successful businesses form partnerships—working with governments, NGOs, suppliers, and even competitors to drive systemic change rather than isolated impact.

These decisions don’t just dictate a company’s trajectory; they redefine the playing field entirely. But even the best strategic choices will falter if leadership fails to execute them effectively.

Leadership: Mastering the Human Side of Change

If strategy is about deciding what needs to change, leadership is about ensuring that change actually happens. This is where many organizations fail—not because their strategy is flawed, but because they underestimate the human factors that drive or block transformation.

Leading change requires leaders to redefine their roles, moving beyond traditional models of top-down authority to become architects of culture, mobilizers of action, and enablers of progress. Leadership is no longer just about making decisions; it is about creating the conditions in which transformation can take root and thrive. To do this, leaders must shift from command and control to influence and empowerment. People don’t follow change because they are told to; they follow it because they believe in it. Leaders must craft a compelling vision that connects sustainability to a broader sense of purpose, helping employees, investors, and partners see their role in building something bigger than themselves. A powerful narrative is essential—not just a set of facts and figures, but a story that creates urgency, meaning, and momentum.

At the same time, leaders must recognize that change is deeply personal. Fear, uncertainty, and inertia are natural responses to transformation, and ignoring these realities only deepens resistance. Trust is the foundation of any successful change effort. Employees and stakeholders need transparency, not just in the company’s goals but in the challenges and trade-offs along the way. A leader’s willingness to acknowledge setbacks, explain decisions, and engage in open dialogue can make the difference between skepticism and commitment.

Adaptability is another critical trait of leaders who successfully manage change. Organizations cannot afford to abandon their core business overnight, but they also cannot afford to stand still. Leaders must simultaneously operate in two modes: stabilizing current operations while exploring new frontiers. They must create environments where continuous learning is encouraged, where failures are treated as sources of insight rather than mistakes to be punished, and agility becomes a fundamental business capability.

The most forward-thinking leaders also recognize that sustainability and large-scale transformation cannot be achieved within the boundaries of a single organization. True impact requires systems leadership, where leaders look beyond their own company to shape change across entire industries, supply chains, and ecosystems. Collaboration with governments, NGOs, industry peers, and even competitors is becoming essential to driving systemic shifts. Whether it’s setting industry-wide sustainability standards, co-developing breakthrough technologies, or influencing policy, leaders must think at a systems level. Organizations that act in isolation may find their efforts falling short, but those that engage broader networks can accelerate transformation at scale. Beyond internal engagement and external partnerships, governance plays a crucial role in embedding sustainability at the highest levels of decision-making. Leadership must ensure that sustainability is not an isolated initiative but a core part of corporate governance. Boards must evolve to reflect this new reality, integrating sustainability expertise, redefining executive incentives, and holding leadership accountable for long-term impact rather than just short-term financial performance. Change also requires courage. Leaders who succeed in sustainability transformation understand that they will face resistance—not just from within their organizations but from investors, customers, and markets that are slow to adapt. Standing firm in the face of skepticism, making long-term decisions even when unpopular, and staying committed to sustainability even when immediate financial returns are uncertain are the hallmarks of leadership that drive meaningful change.

Standing firm in the face of skepticism, making long-term decisions even when unpopular, and staying committed to sustainability even when immediate financial returns are uncertain are the hallmarks of leadership that drive meaningful change.

The change at Microsoft provides a good example of such leadership transformation. Satya Nadella, who became CEO in 2014, has transformed the company by embedding a growth mindset, in parallel with shifting its focus toward cloud computing, artificial intelligence, and cross-platform solutions. He moved the culture from the mindset of knowing and judging to that of learning and development. He did that by promoting continuous learning, collaboration, and innovation. Nadella also underlined empathy as an important leadership principle, shaping a more inclusive and customer-centric approach. By embodying this shift himself, he inspired the organization, suppliers, and partners. This cultural shift has driven remarkable business success, revitalizing Microsoft’s competitive edge and solidifying its position as a more future-ready leader.

The Future of Change Leadership

Leading change for good—where sustainability and transformation become lasting advantages—requires a deep integration of strategic foresight and human leadership. The companies that master this balance, aligning strategy with leadership in a continuous loop, will survive change and define the future.

Change is not a one-time initiative; it is an ongoing journey. The organizations that thrive in this landscape are those that view strategy as a living process, not a static plan. They engage the rational and emotional sides of change, ensuring that logic, culture, and action move in unison. They see sustainability not as a challenge to be managed but as an opportunity to lead, innovate, and leave a lasting impact.

The future belongs to those who embrace change with vision, determination, and the ability to bring people along for the ride. The leaders who master this balance—between the head, the heart, and the hands—will be the ones who turn transformation into legacy.

Implications for Executives

• Accept the short-term cost to unlock long-term value – Transformations may require initial financial sacrifices, operational shifts, and even temporary instability, but delaying change risks losing competitive advantage in the long run.
• Treat strategy as a continuous process, not a one-time plan – Sustainable transformation requires ongoing adaptation, future-back thinking, and the flexibility to evolve as new challenges and opportunities arise.
• Lead with both logic and emotion – A strong business case (the head) must be matched with purpose-driven leadership (the heart) and clear execution (the hands) to drive lasting change.
• Create ecosystems, not just internal change – Collaboration across industries, supply chains, and regulatory bodies accelerates impact and ensures sustainability is embedded beyond the organization.
• Balance stability with innovation – Leaders must optimize their current operations while actively exploring disruptive solutions, ensuring long-term resilience without neglecting present needs.
• Build trust through transparency and shared ownership – Engaging employees and stakeholders early, communicating openly about trade-offs, and giving people a stake in the transformation fosters commitment and accelerates adoption.

About the Authors

Prof. Knut Haanaes is an IMD Professor of Strategy and Lundin Chair Professor of Sustainability.

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Prof. Julia Binder is Professor of Sustainable Innovation and Business Transformation at the Institute for Management Development (IMD).

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Prof. Knut Haanaes and Prof. Julia Binder are the editors of Leading the Sustainable Business Transformation, an IMD playbook for planning, executing, and showcasing corporate sustainability.
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References

1. Neste and IMD: Partnering for renewal. IMD. https://www.imd.org/solutions-for-organizations/clients/neste/impact-story/

2. See “Leading the Sustainable Business Transformation: A Playbook from IMD,” Edited by Julia Binder and Knut Haanaes, Wiley, December 2024.

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The e-commerce industry is more volatile than ever. The rise and fall of the global trends influence the e-commerce businesses’ decisions and the way they operate. The e-commerce landscape encompasses a variety of business models. What works for you is dictated by different factors. This article discusses it all and provides you with the ins and outs of global e-commerce. 

E-commerce has made it easier for us to buy our preferred products or services. We don’t need to go out to purchase things. We can buy anything that we need from the comfort of our homes. 

The rise of e-commerce has not only proven useful for consumers but also for aspiring entrepreneurs. You can leverage different business models to start your e-commerce journey and build your empire from the ground up. 

However, you can’t say that choosing the right business model would be easy. The global e-commerce trends may affect its implementation. 

We are here to help you understand different business models and learn about global e-commerce.  

So, without further ado, let’s dive in. 

Global E-commerce Trends 

Before we talk about the noteworthy business models, let’s go through the global e-commerce trends and see how they influence e-commerce. 

Mobile Commerce 

It was a pain to carry out e-commerce transactions through mobile devices back in the day. Businesses used to optimize their websites or platforms for desktops. So, mobile users struggled with a clunky experience. 

However, things are different now. Mobile e-commerce represents 60% of online sales around the globe. A key takeaway from this is that you should strive to offer a seamless user experience through mobile devices to ensure e-commerce success.  

The Rise of Social Media 

You can’t think of social media as a place to interact with your friends or family anymore. It has become one of the biggest sources of e-commerce transactions. 

We research brands through social media apps and seek the experiences of others to make smart buying choices. 

It serves as an opportunity for e-commerce businesses to leverage social media platforms that align with their respective niches to generate traction. 

Social media has over 5.04 billion users worldwide. So, having an active presence is a must if you seek success in the e-commerce industry. 

Digital Payments 

Paying for products or services online is becoming easier with each passing day due to the availability of diverse payment options.

E-commerce payments have moved beyond just credit card transactions. People are using their digital wallets and cryptocurrency to complete their e-commerce purchases. 

Businesses even use payment options to outmaneuver their competition. They offer a variety of options to stay ahead of the curve and engage the intended audience segments. 

AI-Powered Solutions 

Over the years, we’ve seen groundbreaking improvements in AI-fueled solutions. Leveraging them for e-commerce can help you boost audience engagement and your revenue-generating capabilities. 

You can significantly grow your business by providing personalized product or service recommendations to the intended target audience and increasing your conversion chances. 

AI can also fuel your customer support. You can use chatbots to cater to customer queries or concerns and ensure lasting relationships without having to onboard an army of customer service operatives. 

Improved Logistics 

The e-commerce landscape is changing with each passing day. E-commerce made it possible for us to sell our products or services to anyone in the world. However, even though we could receive orders from around the globe, fulfilling them was easier said than done. 

Thanks to rapidly improving logistics and payment options, we can expand our business operations beyond a certain diaspora and sell our solutions worldwide. 

Improvements in logistics and minimal trade restrictions allow us to scale our operations and grow our business across borders. 

Commonly Leveraged Business Models 

A business model showcases the way a company will operate and generate its revenue. There may be a variety of business models that you may consider when starting an e-commerce journey. However, we will be discussing the ones commonly used and worth mentioning.  

B2B 

The B2B business model encompasses business transactions between two companies. You don’t sell your products or services directly to the consumer but rather to the solution provider. 

If you’re a manufacturer of a particular product or service, you will be promoting and selling it to wholesalers and retailers rather than the end users. 

You can consider Alibaba as an example here. The company sells its products to businesses of all sizes all over the world, generating millions of dollars in revenue. 

B2B businesses generally accept orders in bulk. So, we’re looking at huge profit margins. However, starting such a B2B company may require a hefty investment and access to resources in abundance. 

B2C 

The B2C business model represents transactions between a business and a consumer. You pitch and sell your solutions to the end user. 

You can take Amazon as an example here or any other platform that accepts and fulfills orders received directly from its customers.

Subscription-based businesses, such as Netflix, also fall in this category and serve as a fitting example for B2C businesses. 

B2C businesses are easy to start compared to B2B. However, the average order value of a B2C company is far less than that of a B2B company.  

C2C 

Welcome to the digital equivalent of a global yard sale. The C2C model encompasses consumers selling products or services to other consumers. 

C2C transactions generally take place on free-to-access marketplaces or e-commerce platforms, such as eBay. Consumers also sell products to others through social media apps with marketplace features, such as Facebook.

It’s a fitting business model for small manufacturers or craftsmen with no budget to build an e-commerce site or willingness to leverage a premium third-party e-commerce platform.  

B2G 

The B2G business model is somewhat similar to B2B. The business requires comparatively more resources to start, and the average order value is high. 

The difference is that you sell your solutions to government institutions or agencies. Plus, there may be more legalities associated with the B2G business model compared to other alternatives. 

C2B 

Businesses often hire resources on a contractual basis. They post projects online and look for competent human resources who may be willing to work with them temporarily. 

If you happen to accept such projects, the services you offer to businesses likely fall in the C2B category. A renowned platform that facilitates such transactions is Upwork. 

The C2B business model also encompasses product-based transactions. For example, a software developer selling complete rights to a digital solution to a business serves as an excellent example of the C2B business model.

D2C 

Back in the day, businesses preferred collaborating with retailers to make their products available to the right buyers. Later down the road, they decided to cut the intermediary from the process and started selling directly to consumers. 

If you choose to go with this approach, your business will represent a D2C business model. All you need is an e-commerce platform to make your products accessible to your target audience. 

The D2C business model connects you with your customers directly. It becomes effortless for you to build a community around your brand and establish lasting relationships with your target audience. 

How to Pick the Right Business Model 

Choosing an appropriate e-commerce model is somewhat similar to selecting the ideal outfit for the occasion. What’s perfect for one may be entirely inapplicable to another. There are a number of factors that may come into play. You need to consider them in order to make an informed decision. These factors may include: 

• Target audience 
• Competitive landscape 
• Type of products or services 
• Business goals 
• Budgetary constraints 
• Operational capacity 

It all starts with knowing your audience and being familiar with their goals. Without a clear understanding of who you wish to serve and how you will do it, selecting a fitting business model will be a bit of a challenge. 

The competitive landscape also tells about your business model. It’s less likely for you to be a B2C company in an industry where the rest of the players represent a B2B business model. 

Your selection of a business model also depends on the type of solutions you intend to offer. For example, if you plan to sell an online course, business models that fit your needs can be B2B and B2C. 

The same goes for your business goals. Whether you plan on carrying out small-scale operations or seek accelerated growth often dictates your selection of a business model for your company. 

Your operational capacity and budget also come into play when selecting a business model at the start of your journey. When you’re a small company with a limited budget, you should pick a business model that’s easy to implement. 

One size doesn’t fit all. You need to do your research and carefully consider your options to see what aligns with your operations, budget, and long-term goals.  

Over to You 

The e-commerce landscape is constantly changing. The latest trends give rise to new opportunities and make it easier for aspiring entrepreneurs to step into the realm of online business. 

However, starting a business is not as easy as it sounds. There may be different models to choose from, but you must know how to make the right call. 

In this article, we discussed the noteworthy e-commerce trends and different business models for you to consider. 

If you’ve been wanting to start your e-commerce journey, the recommendation we provided may come in handy.

About the Author

Syed Balkhi is the founder of WPBeginner, the largest free WordPress resource site. With over 10 years of experience, he’s the leading WordPress expert in the industry. You can learn more about Syed and his portfolio of companies by following him on his social media networks. 

The post Business Models and Global E-commerce  appeared first on The European Business Review.

By Peter Weill and Stephanie L. Woerner

A domain-oriented company helps serve a customer’s end-to-end need by focusing on customer outcomes rather than only on the sales of products and services. In our global survey, the domain-oriented companies were top performers, achieving more than a 15 percentage point premium on revenue growth and net margin, compared to their industry average. However, taking a domain orientation requires a big mindset change in a company. In this paper, we describe what it takes to become a domain-oriented company and the performance premiums. We also illustrate a domain orientation with examples from Kaiser Permanente, Schneider Electric, Shopify, and Cemex.

Most executives view themselves as though operating in an industry like banking, retail, or manufacturing but their customers often think differently, focusing on journeys like buying a house (not just getting a mortgage), managing corporate energy efficiency (not just installing an HVAC system) or achieving wellness (not just going to the doctor). We propose that customer expectations and digital technologies are driving the breakdown of industry boundaries, which, in turn, enable companies to offer customers solutions that cross those boundaries, creating more value for both the customer and the company. These comprehensive offerings are designed to fulfill customers’ end-to-end needs in areas such as mobility, energy efficiency, wellness, and lifelong learning—areas we call domains.¹

In our global study, the companies we identified as domain-oriented were top performers, with a big premium on revenue growth and net margin. However, taking a domain orientation requires a big mindset change in the leadership and then the whole company. In this paper, we explore what it takes to become a domain-oriented company with examples from Kaiser Permanente, Schneider Electric, Shopify, and Cemex.

The Evolution of Companies’ Customer Focus

A domain-oriented company focuses on customer outcomes rather than on the sales of products and services.

We identified three ways companies focus on customer needs: inside-in, inside-out, and outside-in. Companies with an inside-in focus optimize internal capabilities to provide specific solutions to customers. They are product-centric and include traditional manufacturers, banks, and retailers. Companies with an inside-out focus analyze customers’ journeys and identify some parts of the journey where they can provide solutions. They are customer-centric, producing solutions they can fulfill themselves, such as a bank selling home mortgages and insurance and offering savings tools for homebuyers as part of the homeownership journey. Companies with an outside-in focus aspire to fulfill customers’ end-to-end needs. They identify a customer domain and then organize themselves and partner to service the entire domain outcome—such as searching for, acquiring, and living in a home, or running a small business. A domain-
oriented company has an outside-in focus – a more ambitious and for the successful, higher-performing strategy.

The Shift to Customer Outcomes and Curation

A domain-oriented company focuses on customer outcomes rather than on the sales of products and services. For example, the US-based health system Kaiser Permanente, with over 12 million members, provides value-based care, paying its healthcare providers based on patient health outcomes including quality, equity, and cost of care. The company’s value dashboard has four dimensions—membership, utilization, quality, and affordability—that track customer outcomes and that teams across four levels of Kaiser Permanente review regularly, including in a quarterly review by the executive team and the board. Kaiser Permanente is moving from providing health care to enabling member wellness.

Because fulfilling end-to-end customer needs requires combining multiple offerings that a typical company can’t provide on its own, a domain-
oriented company digitally curates products and services from different companies in different industries. For example, a company aspiring to serve a wellness domain would combine offerings from industries such as healthcare, insurance, retail, manufacturing, and technology. For example, as part of changing its orientation from a healthcare industry to a domain for wellness, Kaiser Permanente partnered with Samsung to offer cardiac rehabilitation at home with strong results including an increase in rehab participation for cardiac event patients from 50 percent to 80 percent, accompanied with a 27 percent drop in mortality rate.²

The Performance Premiums of Domain-Oriented Companies

To support a customer, whether consumer or company, on their domain journey, companies must help the customer achieve their outcome, not just sell them products. This involves understanding the customer’s goals and how they assess and track success. In addition, to support customer end-to-end journeys, companies typically need to partner outside their core industries. To better understand how many companies are domain-oriented and how they perform, we classified the 721 companies in our survey on two dimensions: (1) the percentage of revenues from customer outcomes, and (2) the percentage of revenues from outside a company’s core industry (see Figure 1).³

Figure 1. Domain-oriented companies meet customer needs by focusing on both customer outcomes and curated complementary products – and perform better

We identified four types of companies (listed in order of increasing performance):

• Product-oriented (66 percent of companies), focused on achieving product excellence.

• Outcome-oriented (10 percent of companies), focused on helping customers accomplish outcomes.

• Marketplace-oriented (11 percent of companies), focused on creating a marketplace of offerings as a one-stop shop, typically including their own products.

• Domain-oriented (13 percent of companies), focused on understanding the entire customer need, delivering on a chosen domain outcome promise, and curating offers with partners.

Domain-oriented companies were top performers with revenue growth and net profit margins of 20.2 and 16.7 percentage points above their core industry averages. In contrast, the revenue growth and net profit margins of product-oriented companies were 7.8 percentage points and 4.7 percentage points below their core industry averages. Extending a company’s core offerings in innovative ways with an outcome orientation, a marketplace orientation, or both helps financial performance.

For example, Schneider Electric SE is a €34 billion revenue company providing energy and automation digital solutions for efficiency and sustainability. Over the last decade, Schneider Electric has transformed itself from a seller of energy-related products to a digital leader in providing energy efficiency services helping customers understand, track and reduce their energy consumption – their outcome measure.

To implement this strategy, Schneider created EcoStruxure^TM, an IoT-enabled plug-and-play customer engagement system delivering energy efficiency as a service for use in customer sites such as buildings, factories, hospitals and data centers. The EcoStruxture system translates data into actionable intelligence by collecting structured (from sensors) and unstructured (from logs completed by maintenance people) data from the set of Schneider Electric products at a customer site and analyzing the data. This produces a set of real-time instructions that the system sends back to the customer site. EcoStruxure and other capabilities have enabled Schneider Electric to move from selling products to selling more services focused on customer outcomes. These services can make a big difference in helping customers achieve their goals; for example, companies using Schneider Electric’s energy efficiency services report a thirty percent reduction in energy consumption.⁴

The Domains

Focusing on the customer domain requires your company to stop thinking of itself as operating in its core industry and instead understand its customer domains. Companies have been operating in industries for many decades but domains are a relatively new idea and there is no playbook. To try and understand the key customer domains we have done a series of studies. We’re sure that the customer domains presented in this article are not the complete and final answer but they will make a good start for jumpstarting conversations about strategy in your companies.

To identify the key customer domains, we applied two criteria. First, we considered what customers ultimately care about as they solve specific problems or negotiate transactions in their life or business (the end-to-end need); and second, we selected a measurable outcome that was associated with the end-to-end customer need. Using this rubric, we identified fourteen domains. We then collected survey data, asking each company to identify the three top domains it served. (See Figure 2.)⁵

The top five customer domains by participation were: running a business, daily needs, security, energy efficiency and sustainability, and shopping. Interestingly, the most popular domains amongst the companies weren’t necessarily the ones with the highest innovation. Of the fourteen domains, the top five in terms of innovation—measured as a percentage of revenues from new products and services introduced in the last three years—were mobility, home, wellness, lifelong learning, and luxury. As you scan those domains, we suggest you ask two questions. Which domains does your company currently operate in now (Figure 2)? And where is your company now (see Figure 1) in terms of meeting customer outcomes and partnering outside your industry? Answering these two questions will help you answer the most important question – where should you be heading and how will you get there?

What It Takes to Become Domain-Oriented

Some companies are born domain-oriented, like Shopify. Its vision is to support the entire customer need of running an e-commerce business, including building a brand, creating an online presence, setting up a store, selling, marketing, and managing finances. To deliver, Shopify helps customers achieve outcomes such as growth and global expansion by partnering with developers, designers, marketers, warehousers, payment companies, and others. That Shopify has captured 10 percent of the US e-commerce market share in just a few years is testimony to the success of taking a domain orientation.⁶

But for most companies, becoming domain-oriented will be a journey, often from being product-oriented. And many companies will typically operate in more than one domain. Global building materials company Cemex, for instance, has a very successful product-oriented offering with Cemex Go, their digital platform that is a single point of contact for customers buying cement products. Cemex also runs successful outcome-oriented businesses like Arkik, a company that offers solutions for managing concrete plants and interactions with builders; and marketplace-oriented businesses, like Construrama, Cemex’s construction and building materials chain for small companies. Cemex is also becoming domain-oriented with Regenera, which provides recycling solutions for building material waste.⁷

That Shopify has captured 10 percent of the US e-commerce market share in just a few years is testimony to the success of taking a domain orientation.⁶

Fernando Gonzalez, CEO of Cemex, in a recent interview with us, explained Cemex’s journey. “We are in an industry that is not at the forefront of the use of digital technologies – construction materials. But we believe that using digital technologies creates the strongest opportunity to transform business models and business itself because of the way you are able to serve customers. The basis of our digital journey continues to be developing a superior customer experience”.

The mindset change to focus more on domains involves dealing with a lot of complexity, especially around customer outcomes and partnering. Gonzalez explained “I think the first challenge is imagination. At the highest level possible, you have to use imagination and understanding to identify what you can create for your company through the application of these digital technologies. I think the other challenge is knowledge or the lack of it. I like this definition of complexity. What is complexity? Complexity is a lack of knowledge. When you know how to do something, it’s not that complex.”

The mindset change needed to become a domain-oriented company is enabled by both specific management mechanisms and strong technology capabilities.  We found statistically that domain-oriented companies had leading capabilities in four areas, two management mechanisms and two technology capabilities.

Management Mechanisms

• A coach-and-communicate management style.

Domain-oriented companies typically operate in real-time and don’t have the time or need for employees to go up and down the hierarchy for approvals and guidance. Instead, senior executives set the vision and guardrails and then empower teams to make it happen.

• Effective use of dashboards.

Dashboards make data transparent so that employees throughout the company can monitor performance, including customer outcomes, and can assess when to course-correct.

Technology Capabilities

• A robust and flexible API service layer to support platform reuse.

A domain-oriented company connects in real time to the customer’s choice of channel and to the myriad of internal systems and partners that provide identity management, credit assessment, onboarding, customer data (often via the CRM), and back-office operations (often via the ERP) to process the transactions.

• Technologies for sharing information with partners

(e.g., blockchain, APIs). Enabling a domain orientation typically requires sharing pre-agreed information with partners in real-time so they can help make the customer journey seamless.

Interestingly, AI was not yet a statistically significant enabler for either axis in Figure 1. However, with the rapid development of generative AI tools, AI will be important for enabling both helping customers achieve their outcomes and partnering across industries. For example, Cemex has major AI initiatives in both of these areas.

Becoming a Domain-Oriented Company

Whether your company moves to become domain-oriented is a risk versus return decision. Helping customers achieve their outcomes requires a better understanding of customers’ needs, motivations, and goals, and is a value-adding step beyond selling products and services; thus, domain-oriented companies take on more risk. Seamlessly partnering with other companies outside of your core industry while being accountable when customer interactions involving those partners go awry also increases risk. But the returns for domain-oriented companies are stellar. Are you ready to become a domain-oriented company? If so, here are 3 action items.

1. 1. Articulate your vision for your customer. Is it inside-in, inside-out or outside-in? How will you implement this vision so it goes beyond intention and into action?
   2. Think customer outcomes and beyond your industry. Identify where your company is and wants to be on Figure 1 and which domain(s) to target (Figure 2) and measure your progress in real time. Some good metrics to track are the dimensions of Figure 1, revenues from outcomes and revenues from outside your core industry. For example, domain-oriented companies achieved 68 percent of revenues from customer outcomes and 70 percent of revenues outside their core industry whereas product-oriented companies achieved 15 percent and 18 percent on those metrics respectively.
   3. Develop new capabilities – including APIs, AI, and partnering – and new revenue models.

Taking a domain orientation is a huge opportunity for your company to be creative. Unlike industries which are well understood, documented and regulated, domains are relatively new. Defining a domain that will best suit your customers is a chance to leverage the knowledge and expertise of all your employees and domains, for now, will likely be defined differently by different companies. This is an exciting opportunity to rethink the customer experience leading to innovation, leapfrog competitors and potentially achieve top performance.

About the Authors

Peter Weill, PhD, is an MIT senior research scientist and chairman of the Center for Information Systems Research (CISR) at the MIT Sloan School of Management, which studies and works with companies on how to transform for success in the digital era. MIT CISR has approximately 75 company members globally who use, debate, support and participate in the research. Peter’s work centers on the role, value, and governance of digitization in enterprises and their ecosystems and has coauthored 10 books. Ziff Davis recognised Peter as #24 of “The Top 100 Most Influential People in IT” and the highest ranked academic.

Stephanie L. Woerner, PhD, is a Principal Research Scientist at the MIT Sloan School of Management and Director of MIT CISR. She is a renowned researcher and speaker, and coauthor of Future Ready: The Four Pathways to Capturing Digital Value and What’s Your Digital Business Model? Six Questions to Help You Build the Next-Generation Enterprise, both published by Harvard Business Review Press. Stephanie studies how companies use technology and data to create more effective business models as well as how they manage the associated organisational change and governance and strategy implications. Stephanie’s research has appeared in MIT Sloan Management Review, Harvard Business Review, CNBC, Forbes, Chief Executive, and CIO.

References

1. P. Weill, S.L. Woerner, and A. Diaz Baquero, “Hello Domains, Goodbye Industries,” MIT CISR Research Briefing, Vol. XXI, No. 1, January 2021, https://cisr.mit.edu/publication/2021_0101_HelloDomains_WeillWoernerDiaz and P. Weill and S.L. Woerner, “Top-Performing Companies Focus on Customer Domains,” MIT CISR Research Briefing, Vol. XXIII, No. 9, September 2023, https://cisr.mit.edu/publication/2023_0901_DomainOriented_WeillWoerner.

2. https://permanente.org/medical-excellence/value-based-care/ and Stephanie L. Woerner, Peter Weill, and Ina M. Sebastian, Future Ready: The Four Pathways to Capturing Digital Value (Boston, MA: Harvard Business Review Press, 2022).

3. MIT CISR 2022 Future Ready Survey (N=721).

4. Schneider Electric SE, “2020 Annual Report,” March 23, 2021, from the Schneider Electric website, https://www.se.com/ww/en/assets/564/document/235840/schneider-annual-report-2020-full-report.pdf.

5. In “Hello Domains, Goodbye Industries” we described ten domains based on our and others’ research at the time, but we anticipated that domains’ definition would evolve and that additional domain-oriented opportunities would arise. Our efforts to systematize our classification of domains, informed by interviews with companies as we presented the research, led us to revise our list from the previous ten to the present fourteen domains, and we continue to refine and add to them based on feedback.

6. Shopify, Q1 2023 Financial Results webcast presentation, “Leading the Future of Commerce,” May 4, 2023, https://s27.q4cdn.com/572064924/files/doc_presentations/2023/Investor-Overview-Deck-Q1-2023.pdf.

7. Cemex Go, Arkik, and Construrama are described in Woerner, Weill, and Sebastian, Future Ready: The Four Pathways to Capturing Digital Value. Regenera is described at “Regenera—Committed to Circularity,” Cemex S.A.B. de C.V., https://www.cemex.com/products-solutions/regenera.

8. Domain oriented companies were statistically significantly (at p<0.05) more effective at these 4 capabilities.

9. P. Weill and S.L. Woerner, “Dashboarding Pays Off,” MIT CISR Research Briefing, Vol. XXII, No. 1, January 2022, https://cisr.mit.edu/publication/2022_0101_Dashboarding_WeillWoerner.

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By Charles Haynes

The creator economy is maturing at an incredible speed. In 2025 we should expect to see a greater breadth of content creators having financial success, with those working closely with creators also benefitting, such as talent agencies and service providers.  

As industries go, the creator economy is barely out of its infancy. Compared to a trade as august as making automobiles, the creator economy is still being fed by the choo choo train. For those of us on the inside, the progress has been nigh-on breakneck. There are still tantrums and demands to stay up late, but we’re all a lot less bleary eyed than we were 10 years ago.  

In fact, the creator economy is predicted to represent nearly half a trillion dollars by 2027 and for many of us, this reflects the seismic shift we’ve all been experiencing. Uniquely, this growth is predominantly fueled by the millions of freelancers—professional content creators—who constitute the majority of the industry. In 2025, we’ll see creator success reach an inflection point.   

Growing the creator middle-class 

It’s creators who provide a litmus test of what’s possible in the industry. It’s not just the 0.1% of creator achievements, like MrBeast’s show Beast Games, or Logan Paul and KSI’s soft drink phenomenon, Prime. More broadly, it’s looking at the ‘creator middle-class,’ where the tide appears to have turned since Li Jin’s 2020 article documented the inequalities of the industry. 

The tools available today allow even modest creators to monetise their audience to a greater extent than previously. They might not be household names, but through online courses, digital and physical products, and events, even small creators are defying the otherwise shrinking middle class.  

Overall, we should expect to see more conspicuous and wholesale success from creators in 2025. 

Fueling creator success  

The wider creator economy has seen turbulence in recent years and those benefitting most from the increased competition have been creators. For a long time it was cheaper to be a larger creator: platform terms and service fees have penalised smaller operations. However, widening choice is leading to creators of all sizes retaining more of their margin.  

We can expect this to bolster the breadth of activities we see in the industry in 2025, with a continued emphasis on products and services, as well as an ongoing interest in physical events. As we move further from the memories of COVID and creators better understand the power of their influence, events like conventions, workshops, screenings and large-scale community meet-ups will become more commonplace. This includes the likes of Nick Zammeti’s Makers Central that brings the YouTube maker community together each year; uncarley’s commentary-rich, hilarious Twilight screenings in Toronto; or, Thomas Heaton’s landscape photography treks—but these are just a few of many other examples.  

This creates additional opportunities for talent agencies too. 

Evolving talent representation 

The creator economy is a broad church when it comes to talent representation. There are companies who work at scale and whose emphasis is on negotiating advertising deals and at the other end, boutique agencies who tend to specialise, representing a smaller roster but providing a broader range of expertise.  

Whatever their flavour, if 2025 represents greater opportunity for creators, this means for talent agencies too. The challenge for those firms emphasising advertising sales, though, is that a client with more choice also has freedom to not choose what they’re offering. Because of this we may see some smaller agencies stretched thin or choosing to work both sides of the deal, representing both brands and talent in negotiations. 

This might also contribute to a wider trend of mergers and acquisitions between talent agencies.  

Shifting dynamics  

The end of 2024 saw Night buying Bottle Rocket, Whalar buying Sixteenth and Underscore acquire-hiring End Card, all with very strategic purposes for the companies involved. We should expect to see this continue in 2025 with more founders looking for an exit as the industry matures and for others to see a merger as a means to realise what the market has to offer. 

The market is also becoming increasingly saturated where representation is concerned. More frequently talent are already represented or represented at an earlier stage, making it harder for new entrants and slowing growth for incumbent agencies. Perhaps another reason to see more acquisitions as companies look to grow by other means.  

These acquisitions also point to broader shifts in the industry, where three large, generalist agencies are acquiring genre-specific firms for their rosters, reputation, and expertise. 

For many influencer marketers, 2024 marked the year where the emphasis shifted significantly towards making a return. The metrics for a creator’s success became much more tightly defined along commercial terms, rather than striking a balance with creativity and brand awareness.  

With the value being placed on more niche and genre-specific rosters by larger agencies, perhaps we’re seeing an indication that entertainment-focussed creators are not providing the same return for marketers and agencies as they once were.  

This might be further exacerbated by the low barrier to entry entertainment content creation represents, providing an opportunity for marketers to more easily find cheaper alternatives to established talent. An emerging channel producing high-speed footage of explosions is harder to compete with when compared to a gaming channel recording their computer screen.  

Niche down 

This year has the potential to be one where we feel rather than just talk about the power of niching down. It’s a phrase that has perhaps become trite in its repetition among creators, but it describes an opportunity present in digital media—if you want to gain success, become more specialised rather than aiming for broad appeal.  

With the seemingly limitless potential for anyone to upload a video on any subject, audiences are empowered to enjoy whatever niche interest or subject they so wish. To the extent that larger agencies are willing to buy smaller firms to gain niche genre creators, and smaller creators are more able to hold on to the value they create, this advice might become more than just a truism in 2025.

About the Author

Charles Haynes is the founder and managing director of Ziggurat XYZ, a talent and creative agency working with digital content creators. 

The post For Creators, the Creator Economy is Just Getting Started in 2025  appeared first on The European Business Review.

By Sergey Gorbatov

In today’s world, virtual teams are no longer the exception – they’re the norm. Whether your team is fully remote or operating in a hybrid model, leading from a distance brings unique challenges. However, with the right approach, effective virtual leadership is not only possible but can also result in a more engaged and productive workforce.

Start With Your Team’s Needs

Good leadership hinges on understanding and addressing fundamental human needs¹. These include the need for attention and approval (or “getting along”), status and achievement (or “getting ahead”), and predictability (or “finding meaning”). When these needs are met, we are engaged and productive. Failure to satisfy them can lead to high levels of stress and anxiety among team members.

Good leadership hinges on understanding and addressing fundamental human needs.

Consider the example of Gennaro Arma², the captain of the Diamond Princess cruise ship, which was famously quarantined after 700 passengers were exposed to COVID-19. That’s an extreme example of a remote team; he could not have physical contact with those in his charge. Captain Arma’s leadership was a masterclass in meeting these human needs. He maintained morale by using humor and encouragement, giving crew members opportunities to step up, and keeping everyone informed with calm, consistent communication. His approach not only kept spirits high but also provided a sense of stability and predictability amid the chaos.

As a leader, it’s crucial to emulate these strategies in your virtual team. Here is how.

1. Get Along: Build Trust And Community

One of the biggest hurdles in leading a virtual team is building rapport. Without the natural, spontaneous conversations that happen in a physical office, team members can feel isolated, which can harm collaboration and morale.

To overcome this, prioritize regular check-ins that go beyond just work topics. These check-ins don’t need to be lengthy; even a brief round of personal updates at the start of a meeting can make a big difference. For example, our team used the “Sweet & Sour” technique, where we spent a few minutes at the beginning of each meeting sharing one positive and one challenging moment – whether personal or professional. This simple practice not only strengthened our connections but also fostered a greater sense of support and camaraderie.

Creating a sense of safety and community is key. I’ve always made it a point to check in with each team member individually – not just about work, but also about their personal well-being. These conversations reinforce that they are valued not just as employees, but as whole, unique individuals.

2. Get Ahead: Unlock And Celebrate High Performance

In virtual teams, a lack of clarity on “how we work” can be detrimental to productivity, much more so than when people are in the same location. But it doesn’t have to be so. The importance of established rules, norms, and processes cannot be overstated. Research³ reported in the MIT Sloan Management Review has shown that virtual teams can perform at levels comparable to co-located teams when they have well-established processes in place. For example, implementing standardized workflows in a remote customer service team not only maintained high customer satisfaction but also boosted team members’ confidence and performance.

Rules and norms can address a wide range of challenges in leading virtually, such as multitasking during meetings, which can reduce productivity by up to 40 per cent⁴. Setting expectations, like requiring cameras during meetings and discouraging multitasking, enhances focus and productivity. Additionally, avoiding micromanagement and focusing on outcomes rather than activities empowers your team to take ownership of their work. By providing clarity, support, and autonomy, you satisfy your team’s need for achievement. Celebrating that achievement, both publicly and in one-on-ones, boosts engagement even more.

3. Find Meaning: Point To Purpose

The human brain, as described by the cognitive scientist Daniel Dennett, is an “anticipation machine” that tries to make sense of the future based on known information. When information is scarce or ambiguous, anxiety can quickly take over. In times of ambiguity, the human brain seeks predictability and, without it, anxiety can set in. Make work more predictable by sharing what you know and being transparent about what you don’t, which also helps build trust and maintain calm. Over-communicate in a way that fosters safety and purpose, making sure your team understands how their work contributes to the bigger picture.

Ultimately, your job as a leader is to be a “meaning maker” for your team – helping them understand the broader impact of their work, aligning their efforts with the organization’s purpose, and guiding them towards a future filled with achievable goals and personal growth.

The Human Side Of Virtual Leadership

Leading a virtual team successfully requires a careful balance of structure, empathy, and adaptability. Your team looks to you for guidance, especially in challenging times, so leading by example is essential. Show empathy by actively listening to your team’s concerns and celebrating their victories, no matter how small.

Your team looks to you for guidance, especially in challenging times, so leading by example is essential.

Leading virtually is harder because it requires greater intentionality. So, it is an opportunity for you to get a career edge by doing it better than others. You’ll shine when you fulfill your teams’ fundamental needs for connection, achievement, and purpose. When done right, virtual teams can match – and even surpass – the performance of co-located teams.

About the Author

Sergey Gorbatov, Ph.D., is an accomplished consultant, educator, and thought leader in the field of talent management. With more than two decades of experience in prominent roles within multinationals such as AbbVie, PMI, and Shell, Sergey offers a wealth of knowledge in talent, executive development, and culture, which he skilfully applies to guide his clients towards sustainably high performance and growth. He teaches at IE University in Madrid, Spain, and at Porto Business School in Portugal. Renowned for his straightforward, optimistic, and practical approach, Sergey has earned the respect and appreciation of his coaching and consulting clients. Collaborating with Angela Lane, he has co-authored two influential books: Fair Talk: Three Steps to Powerful Feedback and Move Up or Move On: 10 Secrets to Develop Your Career, making the complex science of human behavior simple.

References

1. Socioanalytic theory: Basic concepts, supporting evidence and practical implications. 2018. APA PsycNet. https://psycnet.apa.org/record/2018-21508-005

2. Why the last man standing on the coronavirus cruise ship never gave up. 05 March 2020. CNN. https://edition.cnn.com/travel/article/diamond-princess-cruise-captain-coronavirus/index.html

3. How to Manage Virtual Teams. 01 July 2009. MIT Sloan. https://sloanreview.mit.edu/article/how-to-manage-virtual-teams/

4. Cognitive control in media multitaskers. 15 September 2015. National Library of Medicine. https://pubmed.ncbi.nlm.nigov/19706386/

The post “Does Everyone Hear Me OK?”: How to Lead Virtual Teams Effectively appeared first on The European Business Review.

By Ana Doval de las Heras, SVP at Amadeus

Want to know what really matters to your people? Why not ask them? That’s exactly what travel technology company Amadeus did, in an exercise to optimize their IT talent retention. Ana Doval de las Heras tells us what they found.

Unlimited time off? Working from the beach? Pizza Fridays? Ping-pong before lunch? Do professionals even care about perks? Do we now work in a post-perk world?

Every day, a new claim emerges that apparently tells us exactly what professionals care about. But how hard are they listening, and does it matter?

Well-run businesses are the sum of their people, and attracting and retaining the right talent is central to success. This is something my organization cares passionately about, which is why we commissioned an independent piece of research, asking 2,200 technology professionals in eight core markets what their priorities, concerns, and ambitions are.

For global businesses, this has never been more important. As the flow of resources and traditional market dynamics have been challenged, the technology industry has become increasingly competitive. For organizations looking to outpace their competitors, a central part of their business output will be determined by whether they can attract top talent and empower this talent to realize its potential.

For organizations looking to outpace their competitors, a central part of their business output will be determined by whether they can attract and empower top talent.

Innovating the Culture of Tomorrow: Exploring how global technology talent thrives¹ reveals insights that challenge preconceived notions of what technology professionals care about, alongside highlighting long-held truths like the importance of collaborative and people-centered workplaces.

This report has brought the central themes of innovation, flexibility, training, and inclusivity to the foreground, exploring what they mean for professionals and discussing how we as employers can listen more and build these insights into our workplaces.

Innovation Matters, A Lot

Throughout every stage of employment – before joining, during, and after – a company’s reputation for innovation stands out as the most powerful influence on a technology professional’s decisions to join or remain.

When choosing a potential employer globally, they ranked “being innovative” ahead of all factors, including salary, as the most important and decisive factor. Once at work, those working at self-defined innovative companies were over five times more likely (43 per cent) than those at non-innovative companies (8 per cent) to say they were “very happy”, whereas tech workers at companies not perceived as innovative were four times more likely to say they were considering leaving within the next year.

For some readers, the weight and importance attached to innovation could be surprising. However, looking at this against the technology industry as a driver of change makes more sense. James Berry, founder of the UCL MBA program and contributor to the report, explained it this way:

“For technology professionals, the only constant is change, from the problems they solve to the software they use – everything is continually evolving. Technologies, processes, and job titles once regarded as solid and unchanging have changed or even disappeared. And the technology industry is a driver of this change, which means that technology professionals are acutely aware that being at an innovative company promises greater security and longevity.”

In other words, amidst the winds of change, you’d rather be on the boat with the best sail. For organizations looking to attract and retain top talent, this highlights the importance of communicating your innovation credentials in a salient way.

Training And Development

To keep up with the pace of change, most technology professionals anticipate several career pivots and adjustments. While we’ve seen this trend in place for some time, it’s interesting to see it confirmed by the research to the extent that only 6 per cent of tech professionals don’t anticipate a career change or role evolution.

As a result, a premium has been placed on skills, rather than titles, and employees are increasingly seeking training and upskilling opportunities to stay ahead of the curve. Indeed, nearly half (48 per cent) of respondents cited access to training as a key factor keeping them at their current companies.

Training can look different in every organization; at Amadeus, we encourage internal mobility to promote learning and skill diversification. This has resulted in 27.4 per cent of our employees changing roles in 2023. We also offer access to 94,000 training courses and host development sessions within our Career Week, which we just celebrated in November this year.

In an employment market characterized by relatively high attrition rates², employers can leverage training to grow knowledge in their teams and as a retention tool. Upskilling can enhance agility at the employee and institutional level.

Back To Basics: Flexible, Functional Workplaces

Innovation can be an elusive concept with a myriad of competing definitions. Yet, when asked to picture an innovative workspace at a technology company, most people conjure an image of bean bags, table tennis tables, and Lego.

Interestingly, the respondents disagreed with this conception and said that “buzzy” workplaces with recreational spaces were the least conducive to fostering innovation. Instead, it was much more straightforward; respondents called for improved technology (56 per cent), physical tools like suitable desks and equipment (53 per cent), and a quiet space (49 per cent). These responses are refreshing after years of novel office-ware have been prescribed as an enduring solution.

However, what I found most interesting is that having access to facilities to meet with the team face to face to brainstorm and test ideas (48 per cent) is just behind.

Beyond the provision of the de facto spaces to collaborate in, organizations also have a duty to foster socially supportive spaces and create psychological safety. Creativity and, by extension, innovation are facilitated by spaces where people feel able to suggest new approaches and are actively encouraged to experiment. Using internal incubators or creating programs to experiment is one way to build a wider culture of psychological safety.

In an employment market characterized by relatively high attrition rates, employers can leverage training to grow knowledge in their teams and as a retention tool.

At Amadeus, our Nexwave³ and LIFT programs are a space for people to experiment, where ideas are incubated but don’t have to be perfect, and it is OK if they don’t all work out. We have seen some amazingly creative, unique solutions and technologies come from these programs where teams are provided the space to foster innovation. The freedom to innovate is invaluable to employees and delivers significant returns to organizations that enable it.

Real Inclusivity Means Responding To Your Employees

Technology professionals want to see diverse workplaces, and 79 per cent of them want their employers to evidence this. This reinforces the importance of communicating your activities and credentials internally, not least so that employees know what they’re able to access themselves.

Importantly, inclusivity – and what organizations need to offer to enable meaningful inclusivity – will continue to evolve. Organizations should therefore commit to being open, reflexive, and ready to develop new programs as demands arise. For instance, we’ve been an active participant in World Mental Health Day, and this year we have evolved from local events to run our first global Mental Health event, featuring expert sessions designed to support and equip our teams.

In line with this culture of inclusivity, we have vibrant Employee Resource Groups in Amadeus, which foster diversity and a sense of belonging. Our Amadeus Proud Network, for LGBTQIA+ employees and their allies, and our Amadeus Women’s Network, are well established and have chapters in many of our offices around the world. A relatively new group is Amadeus Fenix, which supports employees dealing with long-term illness, either personally or through their family members. Creating a supportive infrastructure that recognizes the complexities of our employees’ lives is crucial to meaningful inclusion and engagement. I believe that this commitment to being open and responding to our employees’ needs plays a role in our status as a Financial Times Leader in Diversity⁴ for the last six years.

The Way Forward

The world is constantly changing, and nowhere changes faster than the technology industry. The rate of change means that technology professionals prioritize being at an innovative company with scope to upskill, develop, and feel supported. And, if these requirements aren’t met, they feel empowered to leave.

We originally commissioned this independent report⁵ to give voice to talent in technology and, now that the results are in, we hope it helps to stimulate thought, discussion, and action amongst employers as we shape our workplaces in the image of the professionals of tomorrow.

About the Author

Ana Doval de las Heras is the Senior Vice President of People & Culture at Amadeus, leading strategy for over 19,000 employees globally. With 30+ years of international experience, she has held various leadership roles since joining Amadeus in 2002.

References

1. New study finds that 40% of global tech professionals expect to make at least three career changes. November 18, 2024. Amadeus. https://amadeus.com/en/newsroom/press-releases/study-priorities-technology-professionals.

2. The True Cost of Employee Turnover in Tech. bucketlist. July 17, 2024. https://bucketlistrewards.com/blog/the-true-cost-of-employee-turnover-in-tech/.

3. The secret sauce: Six changes that made Amadeus Nexwave a top business incubator in the travel industry. Amadeus. November 11, 2024. https://amadeus.com/en/blog/articles/six-changes-amadeus-nexwave-top-business-incubator.

4. Our Awards. Amadeus. https://amadeus.com/en/about/awards.

5. New study finds that 40% of global tech professionals expect to make at least three career changes. November 18, 2024. Amadeus. https://amadeus.com/en/newsroom/press-releases/study-priorities-technology-professionals.

The post What Does the Global Technology Workforce Really Want? appeared first on The European Business Review.

By Mostafa Sayyadi and Michael J. Provitera

Japanese companies such as Sony, Panasonic, Honda, and Toyota remain leaders in leadership development and process management. The structure and leadership model of these companies is unique among many other large and international companies.

Introduction

Japanese companies led by bureaucratic management have not stifled innovation. In fact, the rigidity of leadership functions has led to the management by objectives (MBO) style of leadership decision-making. MBO, while criticized for rigidity, works. Look at Chrysler under the leadership of Lee Iacocca, who led the way in the automotive industry during challenging times. Japanese companies have relied heavily on expertise-based management, which has led them to achieve amazing success. In these companies, leaders must learn to adapt to the local awareness and authentic leadership style necessary to meet the needs of customers worldwide. Our practice of training executives has led to applying management theories that work and abandoning theories that do not. Management fads come and go, but we feel that authentic leadership remains the heart of successful Japanese companies, and this must manifest itself worldwide to help organizations reap success. In this opinion article, we will look at Japanese companies’ organizational designs and leadership models and examine their advantages and disadvantages.

Japanese companies’ ultimate goals are to provide products and services to the market that make people’s lives better, safer, easier, and more enjoyable.

Japanese companies are known for their innovations in the design of efficient products with lasting durability.^1,2 Japanese companies’ organizational design and leadership model play an important role in their success.^3,4,5,6 The design of their structure maintained the expertise-based management and the MBO leadership model. In comparison with expertise-based management, which is based on the full delegation of authority to the functional units, MBO is a management system for leaders to measure employees’ performance against a set of key goals. These key goals are considered to be employee roles, which means employees need to achieve these goals in order to score high on their overall performance in their roles.^7,8

Although many of these companies, such as Toyota, Honda, or Hitachi, have grown more than 300 times larger and more complex since their inception, their organizational structure and leadership model are still influenced by a board of directors and no other general managers. Much of what we share in this article comes from our experience and observations as senior management consultants in more than 30 large Japanese companies in a wide range of industries located in Australia, Japan, the US, and the UAE. These findings can provide practical contributions to managers at all organizational levels across the globe.

Decoding the Secrets of Japanese Organizational Design

Organizational design in Japanese companies is based on expertise and full delegation of authority to the units responsible for each function. We see the management by objectives as proposed by Lee Iacocca at Chrysler shifted to more of an expertise-based organizational design. Japanese companies’ ultimate goals are to provide products and services to the market that make people’s lives better, safer, easier, and more enjoyable. At Toyota, this goal can only be achieved through continuous innovation, such as the handcrafted Urban Cruiser Hy Ryder model. In fact, this innovative model is the result of joint discussions, deep design expertise, and great attention to detail, which can only be achieved because of organizational design based on the best expertise in the world. Unlike MBO, expertise-based organizational design relies on the principle of delegating decision-making authority to the most specialized people. After this initial decision-making expertise, the torch is passed on to the next expert and the next one, like a torch in a champion race to the finish line. Since many Japanese companies such as Toyota, Honda, or Mitsubishi compete in a market where the rate of change and disruption is very high, intuitive decisions based on the experiences of the most expert employees play a vital role. Hence, relying on specialized technical experts instead of general managers has greatly increased productivity in these corporations. The experts make the decisions, and the general managers carry out these decisions without adding any changes.

On the other hand, the same problem with MBO exists in expert-knowledge-based decision-making in that the structures where the general managers of each department are the final decision-makers of that department, the commitment to short-term profit and reduction of operational costs is usually the main priority. Thus, carrying out the expert decision from senior management may lead to losses at the department level which the managers are then questioned about but cannot explain. This rigidly rears its ugly head, spreading from department to department while barely meeting cost deferment and revenue generation. Why? Because the rewards for best managers are usually based on financial numbers. Thus, the manager that can follow the expert knowledge and still cut costs or maintain efficiency in the budget is rewarded, and those that cannot are punished or rethreaded into management training. This constant pressure on the general managers of each department is a big obstacle to the development of innovation. Therefore, in an expertise-based structure, general managers have been removed from the structure, and teams consisting of the most specialized technical experts under the supervision of the most experienced specialist are responsible for final decision-making. The tadpoles that turn into frogs succeed and leave the rest of the fish behind. This does not mean that cost and income parameters are not considered. These companies go to great lengths to teach this knowledge to managers, but the corollary is that they still must meet and exceed the expert opinion of their leaders.

Decoding the Secrets of the Japanese Leadership Model

After working at the Industrial Bank of Japan for many years, we can say that Japanese leaders are equal to the world stage. They set up libraries in offices, think globally and act locally, and follow the Al Deming Total Quality Management (TQM) model. TQM is an integrative and organization-wide effort to continuously improve employees’ capabilities and the quality of products or services by various methods, such as Six Sigma, lean manufacturing, and ISO 9000.^9,10

After working at the Industrial Bank of Japan for many years, we can say that Japanese leaders are equal to the world stage.

Managers at every level are expected to include three important qualities in their leadership. As mentioned earlier, deep expertise means that managers go to all lengths to study, learn, and develop their craft. Authentic leadership is their second trait, as they are aware of details in everything they touch. Through collaborative discussions, they delve deeply into decision-making before accepting the optimum choice. When working at the Industrial Bank of Japan, Japanese executives drilled down to a penny when reporting profit and loss. One time at an executive meeting, one of our colleagues threw a $20 bill on the table of a bar with a Japanese executive and said, “Here is a $20 bill to eliminate your search for pennies when we close a business transaction.” The Japanese executive did not like that comment and our friend did not make vice president. Thus, deep expertise refers to the assumption that training specialists as managers is much better than hiring a general manager from the competition. Technical experts oversee the staff of each department. Only experienced technical professionals should manage. This leadership characteristic provides an expertise-based structure delivering innovative products to customers.^11,12,13,14

Furthermore, with a detailed awareness of the leadership, the technical expert managers can be fully aware of the unit under their management to make faster and more effective decisions. We found, after many years of management consulting for many American and Australian companies, that failure to pay attention to details causes slowness and ineffectiveness of decisions. This leadership tenet of many successful Japanese companies has led to their achieving one of the best ratings in terms of customer satisfaction with their products and the lowest number of complaints. For example, at Toyota, attention to the interior design of the Urban Cruiser Hy Ryder model itself shows careful attention to all the details that a driver needs. Thus, careful attention to detail has had an amazing impact on Toyota’s leadership. The third characteristic, collaborative discussions, complements the two previous characteristics, leading to leadership perfection.

When it comes to organizational charts, Japanese companies have hundreds of departments and specialist teams. Cooperation among them is necessary to innovate, even in a single car part. This requires the development of a systematic approach and is achieved through collaborative discussions among teams and specialists. CEOs, or their senior assistants, get involved only when necessary. Extensive horizontal collaboration requires close cooperation, and the weakening of this cooperation weakens the overall performance of the company. Professionals can express their views, but they must have strong arguments backing up their position and be ready to change their views in collaborative discussions with other teams and departments. Our consulting experience says that one of the biggest problems in many organizations is the lack of this systematic approach. Herein, the key takeaway for executives is that they must develop a culture of collaboration. This type of corporate culture, along with the development of teams consisting of employees from different departments, requires conducting workshops for both employees and executives, so that everyone is on the same page. Selecting appropriate vendors and training employees builds this systemic approach.

Collaborative discussions in Japanese companies are also very challenging but they play an important role in developing and creating new innovations. The basic principle of leadership in these companies is the principle of “good mess.” A “good mess” means that collaborative discussions cause teams and specialized departments to work better to achieve a common goal. The ideas of each section can be changed and modified by the arguments of other sections. This principle is the opposite of a “bad mess,” where common goals are undermined because of competition between departments and teams, and the overall performance of the company declines.

The Challenges Facing the Leadership Giant

Despite their successes, many Japanese companies have also had their challenges. For example, in Toyota, the increasing complexity and expansion of this company’s branches around the world have led to a lack of wheels on the ground. Selling cars at the manufacturer’s suggested retail price (MSRP) has led to a sense of unworthiness of the buyer to negotiate. The words themselves lead to a sense of reversed negotiation. Buyers feel that thousands of dollars can be added to this sticker price without consent from the customer. Recent decisions by Toyota’s top management to add machine learning and artificial intelligence to specialized areas with the aim of creating more effective structures is a confirmation of Toyota’s efforts to better respond to future threats. Have they responded to all future threats? No. Tesla technology is surpassing its rivals and Toyota must step up to meet these challenges or find itself with a smaller segment of the market share.

A “good mess” means that collaborative discussions cause teams and specialized departments to work better to achieve a common goal.

The second challenge is the lack of Japanese leaders overseas. Japan has always prided itself on homegrown leaders at the top and throughout its regions. However, being widespread lessens the availability to lead with this model. At the Industrial Bank of Japan, Japanese leaders trained for a few years and then left Japan. The overall outcome was success but when American leaders left, they lacked the authority to lead at senior levels in America. Thus, the pressure placed on leaders (or technical managers) to understand the details of their subordinate departments is lacking. Japanese companies should have reduced the expansion and scope of activities of specialized departments or greatly increased the number of leaders. In the absence of doing one or the other, these companies lose market share. To offset this challenge, many Japanese companies such as Toyota, Honda, and Mitsubishi stepped up by using the method of succession and hiring new staff, which quadrupled the number of technical experts in different fields in the period from 2011 to 2020. Efforts to align these newly hired technical specialists with culture and values have led to the inclusion of a new training program for them. This is yet to pan out and because of the speed of competition, skeptics feel that these companies may be further challenged in the electric car market if they do not step up further as leaders in the field of electric automobile technology.

Another challenge that Japanese companies are dealing with post-COVID-19 is the increasing need for time management skills. They are beginning to focus less on paying attention to all the details in the unit under their management and focusing on issues that are more important, such as electric vehicle technology. They are in the process of strengthening their supervisory roles to better meet the needs of the local customers, again attempting to expand globally and yet think locally. This challenge is another that is yet to pan out and skeptics feel that it will take time in the post-pandemic recovery.

Conclusions

We suggest that by adopting the Japanese approach to organizational design, the practice of leadership, and supportive collaborative discussions within organizations, executives can continue to prosper in the future. However, there are critiques of this style of leadership. In fact, we feel that if Japanese companies remain more bureaucratic and fall victim to less innovation in the market, coupled with the lack of alignment of decision-making with expertise, they will continue to lose market share. While the corporate life cycle is still vibrant in the growth stage, the leaders at the top must relinquish the carrot-and-stick MBO approach for a more authentic leadership approach. By knowing what works and what does not work and where to place emphasis, the problem of inertia will be dismissed for a more vibrant future for these companies.

About the Authors

Mostafa Sayyadi works with senior business leaders to effectively develop innovation in companies and helps companies – from start-ups to the Fortune 100 – succeed by improving the effectiveness of their leaders. He is a business book author and a long-time contributor to top management journals and his work has been featured in top-flight publications.

Michael J. Provitera is an associate professor of organizational behavior at Barry University, Miami, FL. He received a B.S. with a major in Marketing and a minor in Economics at the City University of New York in 1985. In 1989, while concurrently working on Wall Street as a junior executive, Dr. Provitera earned his MBA in Finance from St. John’s University in Jamaica, Queens, New York. He obtained his DBA from Nova Southeastern University. Michael J. Provitera is quoted frequently in the national media.

References:

1. Camuffo, A., Wilhelm, M. (2016). “Complementarities and organizational (Mis)fit: a retrospective analysis of the Toyota recall crisis”. Journal of Organization Design 5, 4. https://doi.org/10.1186/s41469-016-0006-6

2. Feng, K., Li, J. (2019). “Challenges in Reshaping the Sectoral Innovation System of the Chinese Automobile Industry”. In: Liu, KC., Racherla, U.S. (eds) Innovation, Economic Development, and Intellectual Property in India and China. ARCIALA Series on Intellectual Assets and Law in Asia. Springer, Singapore. https://doi.org/10.1007/978-981-13-8102-7_18

3. Wimmer, E. (2012). “Toyota: An Auto Giant Overcoming a Gigantic Crisis”. In: Motoring the Future. Palgrave Macmillan, London. https://doi.org/10.1057/9780230307810_3

4. Jacobs, A.J. (2017). “Introduction and Overview”. In: Automotive FDI in Emerging Europe. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-137-40786-3_1

5. Yamauchi, M. (2021). “Employment practices in Japan’s automobile industry: the implication for divergence of employment systems under globalization”. Evolutionary and Institutional Economics Review 18, 249–70. https://doi.org/10.1007/s40844-020-00188-9

6. Schulz, M. (2020). “The Future of the Japanese Automotive Industry”. In: Mez, L., Okamura, L., Weidner, H. (eds) The Ecological Modernization Capacity of Japan and Germany. Energiepolitik und Klimaschutz. Energy Policy and Climate Protection. Springer VS, Wiesbaden. https://doi.org/10.1007/978-3-658-27405-4_10

7. Tipurić, D. (2022). “Configurations of Strategic Leadership”. In: The Enactment of Strategic Leadership. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-031-03799-3_8

8. Schnellbächer, B., Heidenreich, S. (2020) “The role of individual ambidexterity for organizational performance: examining effects of ambidextrous knowledge seeking and offering”. The Journal of Technology Transfer 45, 1535–61 (2020). https://doi.org/10.1007/s10961-020-09781-

9. Gao, S., Low, S.P. (2014). “Case Study”. In: Lean Construction Management. Springer, Singapore. https://doi.org/10.1007/978-981-287-014-8_10

10. Gao, S., Low, S.P. (2014). “Conclusions”. In: Lean Construction Management. Springer, Singapore. https://doi.org/10.1007/978-981-287-014-8_12

11. Tipurić, D. (2022). “The Classic Ontology of Leadership”. In: The Enactment of Strategic Leadership. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-031-03799-3_1

12. Adarves-Yorno, I. (2018). “Authentic Leadership”. In: Farazmand, A. (eds) Global Encyclopedia of Public Administration, Public Policy, and Governance. Springer, Cham. https://doi.org/10.1007/978-3-319-20928-9_2198

13. Demont-Biaggi, F. (2019). “How ethical leadership is related to authenticity”. Leadership, Education, Personality: An Interdisciplinary Journal volume 1, 15–28. https://doi.org/10.1365/s42681-020-00006-1

14. Johnsen, C.G. (2018). “Authenticating the Leader: Why Bill George Believes that a Moral Compass Would Have Kept Jeffrey Skilling out of Jail”. Journal of Business Ethics, 147(1), 53–63. http://www.jstor.org/stable/45022362

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By Jacques Bughin

“In an avalanche, no snowflake ever felt accountable,”
– Voltaireⁱ

What makes successful digital business ecosystems? Beyond a common evolutionary vision, we discuss the success factors successful ecosystems have working for them.

The rise of business ecosystems 

What do Apple, Amazon, Alibaba, Netflix, Uber, TradeLens, and SAP have in common? In the contemporary digital economy, all are platform-based. In turn, platforms are the tip of the iceberg of a new market organization as the main orchestrators of so-called business ecosystems, – in which organizations interact co-dependently to increase, share, and maintain value. 

Ecosystems can facilitate collaboration and knowledge sharing, accelerating innovation.

In order to thrive, ecosystems have a shared common evolutionary vision, and each player contributes to the growth and robustness of the network. To paraphrase Moore, strong ecosystems are dynamic systems of diverse interactions, arrangements and partnerships between the leading center (orchestrator or platform), the network and peripheral players, to exploit complementarities. Through its strategic vision and ecosystemic relational skills, the orchestrator firm is key as it builds and governs ‘the most collaborative path possible around a strategic intention that allows the greatest number of people to adhere to the project. In that perspective, the orchestrator aims to have complements to grow, while constituents are there to maximize the benefits of participation, through critical mass and network effects. Other players, hub landlords or niche players—control localized nodes, and create mass and diversity to secure networks-effects.  

Digital changes everything 

Historically, ecosystems have been limited in number, but have been observed in multiple fields, such as ATM and payment services, telecom, or airline equipment (Boeing and Airbus in the early 2000’s). However, with the rapid evolution of digital and AI technologies, ecosystems have begun to “rule the world”. They have become increasingly important for several reasons: 

1. 1. Technology complexity: Developing and deploying tech solutions is complex and often requires specialized expertise and resources. Ecosystems can provide the necessary infrastructure, tools, and talent.
   2. Innovation speed: Digital technologies (think AI) are evolving rapidly, and businesses must be able to adapt quickly to new technologies and market trends. Ecosystems can facilitate collaboration and knowledge sharing, accelerating innovation.
   3. Scale and scope: Ecosystems can provide businesses with access to a wider range of customers and markets, enabling them to scale their operations and grow their revenue. In the context of digital technologies, marginal economics are often close to zero, making scale a concentration game.

In addition, digital architecture and the virtualization of practices have boosted the opportunities for large network effects, and hence ecosystems, namely: 

1. 1. Modularity: A classic example of the power of modularity was when PCs were built from standardized modules and semiconductor chips could be designed by one firm and produced by another. Companies that designed chips contributed to a substantial increase in semiconductor patenting and have since ushered in new technology and new client industries to build large ecosystems of connected cars, wearables, implants, cloud computing and Industry
   2. Data and Digital Transformation: The increasing volume of data is transforming business practices, and supports the effect of network economics and interconnected relationship business models.
   3. New appropriability mechanisms have come into life such as patent/licenses or Saas Models that sustain the interest of players to remain in the ecosystem.

A look at ecosystem performance 

Before the digital age, business ecosystems were considered a strange, but powerful idea, especially if they could impose standardization. For instance, IBM, HP and Seagate created business ecosystems for a new open format of linear tape technology in 2000 by using standardizations and succeeded in expanding the market for limited-time offers (LTO) drives. Media manufacturers such as Fujifilm, Sony, Hitachi, Maxell, and others, manufactured and sold their LTO media as complementary business ecosystem members. The LTO format share increased from 12% in 2001 to 77% in 2008 in the backup market of midrange and low-end servers. 

In digital, ecosystems have also become king. Today, the Apple Store, which launched by 2008 with 500 apps, now hosts more than 2 million apps, or a compound rate of more than 20% a year, for an ecosystem generating 1 US Trillion of yearly revenue, or bigger than the GDP of the Netherlands.  

Deepening on the evidence on how business ecosystems drive corporate performance, ecosystems are clearly influential: 1.) on Innovation Acceleration: 50% faster throughput, and 100% when it concerns radical innovation; on 2.) market access and extended customer reach. Through partnerships and collaborations, companies can tap into new markets, customer segments, and distribution channels, driving business expansion. The typical effect is large, in the range of 20% to 30% sales. In a study of the enterprise sales ecosystem with SAP, small software players enjoyed a 26 percent increase in sales after they became SAP certified. A study by this author had shown that platform ecosystem play may boost the sale/profit growth of participants, which was as large as many successful private R&D programs.  

Dependency on specific ecosystem partners for critical resources or capabilities may make a firm vulnerable to disruptions if those partners face challenges or exit the ecosystem.

Yet, there is never a free lunch in business. Against business ecosystems come along dependency risks. For instance, overreliance on an ecosystem can pose risks to firms. Dependency on specific ecosystem partners for critical resources or capabilities may make a firm vulnerable to disruptions if those partners face challenges or exit the ecosystem. Also, sharing knowledge and intellectual property within an ecosystem may lead to concerns about the protection of proprietary information. Finally, ecosystems also can be highly competitive, making it difficult for businesses to differentiate themselves.  

More crucially, recent studies have demonstrated that barely 1 out of 7 ecosystem play remains alive and flourishing after 15 years. And worse, from Symbian to eBay, ecosystems may collapse when unsuccessful.  

So what should you do?  

To play or not to play in digital ecosystems? 

To answer the question, the recent 15th G-20 Y at Evian-Les-Bains, of which this author is a leading member of the leadership group, has welcomed business leaders ranging from Tokyo, Kuala Lumpur, and Riyadh to Jo’burg or Chicago and Los Angeles, – to discuss how to best play in a business ecosystem where network effects have become the management foundations of the 21st century organization.   

To tilt toward success, and not collapse in business ecosystems, we have synthesized a checklist of 10 key success factors to monitor:  

1. 1. Users value creation. Users ultimately define value creation in ecosystems—technology can help to be direct to customers, while data and AI can build prediction and personalization. Ecosystems that thrive are obsessed by end users, to lure them into being prosumers, like in games and video ecosystems such as YouTube, or Netflix.  
   2. Role play. Don’t be obsessed with being the orchestrator—the main platform tends to be the one taking that role, given their end-user reach without mass. Being a node in an ecosystem is possibly as rewarding if you specialize without the obligation and integration/ maintenance requirements of the orchestrators. 
   3. Coopetition mindset. The traditional principles of strategy are rooted in concepts of competition—winning at the expense of, etc. In ecosystems, codependence and value sharing are as important as competition.  
   4. Beyond industry concept—In ecosystems, industry boundaries no longer hold—most platforms in digital blur payments, products and services together. Uber leverages a mobile network, and payment applications, plus location services, and offers end-to-end delivery of mobility services, including transport, but also food. 
   5. Creative versus operational capabilities – Ecosystems can be transactional, but also innovative. In an ecosystem, creativity, risk, agility, and exploration are core capabilities.
   6. Governance is king —A large portion of ecosystems fail because of weak governance design. In particular, governance rules must among many ensure that they:
      a)  Limit free-riding in favor of fair contribution
      b) Favor open rather than closed forms and vertical integration
      c) Favor extensive “flying wheels” to densify network effects
      d) Support transparency for benefits and duties of members in the ecosystem, in order to build trust
      e) Develop mechanisms of conflict resolution
   7. Control versus market. Control is a typical reflex as a way to ensure rents and participation—but in most digital business ecosystems, players often find that market excess demand prevails in assets such as skills, data, or models—in this instance, outsourcing through the network may be more agile, and the integration capabilities of those market access may build the participatory value, rather than own the assets. Most platforms are actually asset-light, “without mass”.
   8. Participation, but with a hedge. The risk of the collapse of an ecosystem invites caution. Firms should consider multihoming – providing a credible threat to leave the ecosystem if this does not grow, and because multihoming allows to maximize reach for niche players. 
   9. Ecosystem, not self-efficiency. Nature shows how the ecosystem maximizes efficiency. For instance, drafting allows geese to fly about 70 percent farther than they could on their own. Each goose will take the lead slot for about the same amount of time, and then spend the rest of its journey drafting behind other birds.
   10. Network economics. In ecosystems, network economics plays a crucial role. Two important points should be analyzed to understand the minimal economics of an First, check the strength of weak ties; and second, understand the players at the edge. In a network, the key is not direct links but the relays of those direct links, the indirect “weak” links. They must develop deep interdependence and dense links to support the viability of the network and its stability/robustness. In general, companies only look at direct vicinity players – the reflex should however be to look at higher-order interdependence.

Finally, the edge defines the structure of the network and the economics of belonging or not. By looking at edge players and how their performance is supported by ecosystems, companies may have a very good hint at the minimal attractiveness of ecosystems. 

About the Author 

Jacques Bughin is the CEO of MachaonAdvisory and a former professor of Management. He retired from McKinsey as a senior partner and director of the McKinsey Global Institute. He advises Antler and Fortino Capital, two major VC /PE firms, and serves on the board of several companies. 

References

1. Predators and Prey: A New Ecology of Competition. May-June 1993. Harvard Business Review. https://hbr.org/1993/05/predators-and-prey-a-new-ecology-of-competition.

2. Jose Jr, L. A., Brintrup, A., & Salonitis, K. (2020). Analysing the evolution of aerospace ecosystem development. Plos one, 15(4), e0231985.

3. Jose Jr, L. A., Brintrup, A., & Salonitis, K. (2020). Analysing the evolution of aerospace ecosystem development. Plos one, 15(4), e0231985.

4. Kuan, J., & West, J. (2023). Interfaces, modularity and ecosystem emergence: How DARPA modularized the semiconductor ecosystem. Research Policy.

5. Libert, B., Beck, M., & Wind, J. (2016). The network imperative: How to survive and grow in the age of digital business models. Harvard Business Review Press.

6. Awano, H., & Tsujimoto, M. (2021). The mechanisms for business ecosystem members to capture part of a business ecosystem’s joint created value. Sustainability, 13(8), 4573.

7. Guzman, J., Murray, F., Stern, S., & Williams, H. (2024). Accelerating innovation ecosystems: The promise and challenges of regional innovation engines. Entrepreneurship and Innovation Policy and the Economy, 3(1), 9-75.

8. Ceccagnoli, Marco, et al. “Cocreation of value in a platform ecosystem! The case of enterprise software.” MIS quarterly (2012): 263-290.

9. Jacobides, M. G., Cennamo, C., & Gawer, A. (2018). Towards a theory of ecosystems. Strategic Management Journal, 39(8), 2255-2276.

10. Why Do Most Business Ecosystems Fail? June 22, 2020. BCG. https://www.bcg.com/publications/2020/why-do-most-business-ecosystems-fail.

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By André Laplume and Sepideh Yeganegi

In the dynamic landscape of entrepreneurship, individual visionaries often hog the spotlight. Yet, beneath this glare lies a startling fact: the heroic garage or independent entrepreneur is mostly a myth. Research conducted over the last decade reveals that the most successful entrepreneurial businesses were actually spinout ventures, incubated in parent companies.

Knowledge and Networks

Spinout ventures are created when employees leave established organizations to form new businesses. What makes them successful? Spinout founders’ familiarity with the inner workings, industry nuances, and organizational intricacies of their parent companies provide them with a head start in navigating the entrepreneurial landscape, akin to having a secret map to uncharted territories.

In addition, within the halls of their former workplace, spinout founders are able to develop strong networks – former colleagues, mentors, and industry contacts become lifelines, offering support, introductions, and collaborative opportunities. These connections act as turbochargers for the spinout ventures, propelling growth.

Strong networks—former colleagues, mentors, and industry contacts—act as turbochargers for the spinout ventures, propelling growth.

For example, Zoom’s triumph owes much to the 40 engineers who migrated from Cisco, and Intel’s ascent emerged from a “brain drain” out of Fairchild. Ideas also fuel spinouts; consider Kik, originally a co-op project at Research in Motion (now Blackberry), which harnessed messaging innovations.

Expertise gained during their tenure becomes the spinout’s competitive edge. Whether it’s technical prowess, market insights, or operational wizardry, they carry specialized skills that set them apart in the entrepreneurial arena.

A Delicate Balance

Innovation seeds often sprout within established organizations. Spinout entrepreneurs recognize these latent concepts, nurturing them into full-fledged ventures. Yet, there’s a delicate balance. Spinouts can bask in the halo of their parent’s reputation, attracting customers, investors, and partners. But they also risk drawing negative attention—friction, legal skirmishes, or strained relationships—when they compete head-on or disrupt the status quo.

Nurturing Innovation Beyond Corporate Walls

Many business ideas remain untapped in parent companies due to resource constraints, strategic focus, or other limitations. These dormant ideas often find their escape route through spinout ventures when employees leave taking an idea, technology, or concept and transform it into a new venture. This mechanism allows rejected or underutilized ideas to flourish outside the corporate confines.

While spinouts are a natural consequence of organizational creativity, they sometimes raise ethical eyebrows. Critics argue that departing employees should leave their intellectual baggage behind. However, reality paints a different picture. Most venture capital-backed startups draw inspiration from their founders’ experiences within former employers. It’s a pragmatic dance between loyalty and ambition.

The Genesis of Spinout Ventures

Spinout ventures find their origins in diverse soil. Recent research reveals a series of nuanced factors that propel them beyond the corporate walls.

Strategic Disagreements

Some spinouts germinate from disagreements within the parent organization. When divergent visions clash—whether about which initiatives to pursue or the strategic direction—the entrepreneurial spirit seeks refuge elsewhere. These dissenting founders embark on their spinout journey, driven by a belief that their vision deserves independent cultivation.

Managerial Frictions

The soil of frustration nurtures many spinouts. When employees feel stifled by bureaucratic hurdles, rigid hierarchies, or uninspiring management, they seek greener pastures.

Interpersonal Conflicts

Sometimes, it’s not just strategy or management—it’s people. Interpersonal conflicts, simmering tensions, or clashes of personalities can push talented individuals toward the exit. The startup becomes an attractive escape, where they can forge their own path without the weight of office politics.

Ethical Triggers

Spinout founders often carry ethical compasses. They question the practices of their parent organizations. Consider the oil driller who turns geothermal well driller, seeking a more sustainable energy future. Or the social media leavers who build safer, more democratic alternatives.

Liquidity Events

Start-ups need fuel, and capital is their lifeblood. Liquidity events—such as IPOs or acquisitions—act as catalysts for spinouts. When eBay acquired PayPal, the corporate culture shift triggered a talent exodus.

Three Trends Boosting Spinout Ventures

Spinout ventures are gaining momentum due to several key trends:

The relaxation of restrictive covenants, especially non-compete agreements has significantly facilitated the process for departing employees to create their own startups. With reduced fear of potential legal repercussions, leavers can now pursue entrepreneurial endeavors more freely.

Spinout founders often carry ethical compasses, questioning the practices of their parent organizations.

The practice of open innovation has revolutionized the sharing of innovative components. Organizations are increasingly collaborating and exchanging ideas, technologies, and intellectual property. This openness accelerates the development of spinout ventures by leveraging collective knowledge.

Companies like Palantir exemplify the trend of fostering spinout ventures. The Palantir Pack, composed of former employees who have either launched their own ventures or invested in them, demonstrates how friendly parent organizations can encourage entrepreneurial initiatives and gain a reputation for incubating innovations.

Myth of The Independent Entrepreneurship

Generations of prospective entrepreneurs have indulged in the myth of the heroic garage or independent entrepreneur. Setting the record straight is important. Studies show that employee spinouts are more successful than other types of start-ups. Employee entrepreneurs should be heartened by this information. Parent companies, too, can benefit from understanding the true nature of spinouts. Once they embrace the concept of spinouts, incumbent organizations can differentiate themselves as workplaces that nourish innovation and support employee entrepreneurship. This creates a win-win situation for all.

About the Authors

Dr. André Laplume, co-author of SPINOUT VENTURES, is a Full Professor in Entrepreneurship and Strategy at the Ted Rogers School of Management, which is part of Toronto Metropolitan University. Laplume researches the intersections where new entrants and incumbent firms meet with the aim of breaking down the barriers facing entrepreneurs, while helping managers deal with entrepreneurial ambitions in their organizations. His research has appeared in top journals like Human Relations, Journal of International Business Studies, and Journal of Business Research, among others. He received his PhD in Management from the University of Manitoba in Winnipeg, and spent seven years at Michigan Tech, teaching in its MBA program. Earlier, Laplume was a business and information technology consultant, helping clients integrate businesses and automate units. He is a frequent judge at entrepreneurship pitch competitions and an experienced entrepreneur, having launched a startup while in Michigan.

Dr. Sepideh Yeganegi, co-author of SPINOUT VENTURES, is an Associate Professor in Strategic Management at the Lazaridis School of Business and Economics in Waterloo, Canada. She received her PhD in Management from the University of Manitoba in 2018. Yeganegi’s research centers on the intersection of strategy and entrepreneurship, especially employee entrepreneurship and spinouts. She has been studying spinout ventures, the focus of her PhD dissertation, for over a decade, investigating how enablers, like venture capital availability and work experiences, can propel employee entrepreneurs. Her projects also explore the barriers that employee entrepreneurs face (e.g., non-compete agreements). Yeganegi has interviewed dozens of spinout founders and reviewed the growing literature on private sector employee spinouts. Her research has been published in journals such as Research Policy and Journal of Small Business Management.

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By Filippo Frangi

In a world of continuous challenges, Open Innovation has become essential for companies, driving significant transformations and providing support during a period of crisis. It promotes Corporate Venturing and innovation, creating diverse value and stimulating new ventures. Effective KPIs are crucial to measure Open Innovation’s impact on corporate culture, skills, and strategic alignment, ensuring meaningful business outcomes.

Companies and startups cohabit in an environment constantly animated by new challenges, from fluctuating economies to geopolitical uncertainty, from ecological transition to demographic issues. In this context of “permanent crisis”, the adoption of digital and truly open innovation seems to be an important critical success factor. Digital and Open Innovation are in fact the paradigms on which the development of the last few years has been driven, particularly from 2020 onwards.

In a world of constant change, Open Innovation¹ has proven to be a catalyst for transformation. The experience gained in recent years has accelerated the adoption of this approach, becoming a common practice for most large companies. According to data from the Startup Thinking Observatory of the Politecnico of Milan², 86 per cent of large companies in Italy currently embrace Open Innovation, demonstrating a steady growth in recent years. The level of adoption is in line with the benchmark of comparable European economies. This is mainly done through “inbound” approaches, allowing companies to absorb external opportunities to enrich their internal innovation. However, “outbound” initiatives are also growing, representing an emerging and experimental phenomenon to which attention should be paid.

Companies have a strong need to rely on Open Innovation to quickly identify new solutions and opportunities that bring real business impact.

The Open Innovation phenomenon is giving rise to many forms of value creation and, in particular, is stimulating Corporate Venturing, that is the development of corporate mechanisms designed to accelerate innovation and the creation of new ventures originating within or outside the boundaries of a company. Corporate Venturing has undergone rapid evolution in recent years with an increasing heterogeneity of inbound and outbound models, such as Venture Clienting, Venture Building, corporate accelerators and incubators, Corporate Venture Capital, and partnerships with startups.³

Corporate Venturing is a strategic tool to enable companies to create, capture, and deliver innovation consistently, efficiently, and repeatably. It is also a relevant resource for the economy as a whole, because it can help, through the resources of large and medium-sized companies, to support new entrepreneurship such as that of the startup ecosystem. It is a positive stimulus to entrepreneurial culture that can reinvigorate the innovative capacity of more structured companies and facilitate technology transfer.

The level of maturity of companies in adopting Open Innovation approaches is thus growing, with a greater consistency with the companies’ strategic direction, and the ability to exploit different models and methodologies to respond to specific needs. If, until a few years ago, innovation in companies was aimed at exploring, experimenting, and opening up to external opportunities, today more and more companies feel the need to consolidate approaches and structure innovation, operating models that are able to bring concrete results. Companies have a strong need to rely on Open Innovation to quickly identify new solutions and opportunities that bring real business impact.

When it comes to measuring and monitoring the results and impacts that Open Innovation can have in a company, it is not an easy problem to solve. Firstly, because innovation projects are characterized by a highly uncertain outcome and, even in the event that this outcome is negative, they are able to generate useful contributions in the organization throughout all phases of development. For this reason, it is necessary to combine a set of indicators at both qualitative and quantitative levels, capable of capturing all the impacts of innovation, even those more difficult to quantify. Restraining the use to traditional indicators is not enough, because criteria such as ROI, which maximizes revenues and reduces costs, typically reward projects that use existing assets and models, thus limiting innovativeness.

KPIs must be able to support operational decisions, not limiting the development of innovation.

Large companies go through an initial phase in which Open Innovation is mainly a marketing and communication tool, with result indicators measuring, for example, the number of Call4Ideas or challenges held, the number of hackathons organised, the number of startups seen. This is followed by a phase of greater complexity, in which there is a perceived need to start an internal cultural journey and ecosystem creation, beginning to measure the advantages and disadvantages or the number of initiatives grounded. Companies are going through a phase of greater maturity where they begin to measure the business value generated.

It is therefore necessary to introduce KPIs to measure the impact that innovation, and especially Open Innovation, has on aspects such as corporate culture, people skills and engagement, and the know-how of corporate functions. KPIs must be able to support operational decisions, not limiting the development of innovation but rather acting as a push and a guide towards the strategic direction taken by the company.

As for any other process, having a scheme of indicators to measure results is necessary to take decisions, to verify that the defined objectives are achieved, to ensure that investments are deployed consistently, to identify possible areas for improvement, or to gather the information needed to implement the right corrective actions.

This logic can also support Innovation Managers in providing evidence, both internally and externally, of the results they are able to achieve thanks to Open Innovation, reinforcing its value and fostering greater investment. The combination of the terms “open” and “innovation” can thus be shown as a positive possibility to embrace the uncertain and scary future with boldness and vision, in a choral revolution that may change the world.

About the Author

Filippo Frangi – A Master graduate of the Politecnico di Milano in Management Engineering, Filippo Frangi is Senior Researcher within the Digital Innovation Observatories. Since 2017, he has been studying how innovation is managed and developed in large enterprises and SMEs. In particular, the empirical and theoretical research activity is focused on the study of organizational and operational models for innovation, adoption of Corporate Entrepreneurship activities, Open Innovation theory, and the role of startups.

References

1. Chesbrough, Henry William. Open innovation: The new imperative for creating and profiting from technology. Harvard Business Press (2003).

2. “Startup Thinking”. Startup Thinking Observatory Research. https://www.osservatori.net/en/research/active-observatories/startup-thinking

3. Gutmann, T. “Harmonizing corporate venturing modes: an integrative review and research agenda”. Management Review Q 69, 121–57 (2019).

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By Mireia Las Heras and José Pérez del Valle

Flat organizations are becoming popular across industries, emphasizing employee autonomy and responsibility. While these models promote transparency and purpose, they also face new challenges. However, proponents of flat structures say their benefits outweigh the hurdles.

Non-hierarchal companies are in right now. More and more organizations are ditching the traditional top-down management and opting for “flat” or “de-centralized” company models. This doesn’t necessarily mean getting rid of bosses altogether – at least not always. It’s a matter of restructuring a company so that each team works as an autonomous committee where responsibility falls on those closest to the task, instead of on a boss that’s far removed from day-to-day activities. Essentially, the idea is that every role is equally important. There’s no hierarchy, hence the name – and employees have more agency over their work.

But because it’s still a somewhat unconventional approach, these companies tend to be met with suspicion and false assumptions: It can’t work because it’s chaotic, there’s no structure, and decisions are impossible to make.

Based on our months-long research on self-managed companies, however, we’ve found that it can work – though not without its challenges.

Many Ways To “Flatten” A Business

Self-managed teams were first seen around 65 years ago in coal mines when the prevailing practice was to separate workers into teams responsible for different tasks – similar to an assembly line.

The trend toward non-hierarchal business models is being seen across industries and the world. In April, pharmaceutical giant Bayer announced it was getting rid of middle managers¹ and throwing out its corporate handbook, allowing nearly 100,000 employees to self-manage. Last year, Meta’s CEO Mark Zuckerberg noted in a company-wide email that “flatter is faster.”²

But these models are hardly new. Self-managed teams were first seen around 65 years ago in coal mines when the prevailing practice was to separate workers into teams responsible for different tasks – similar to an assembly line. Miners had to wait for the previous shift to finish their tasks before starting their own. As a response, miners reorganized into multiskilled, autonomous groups with minimal supervision that allowed them to work around the clock without depending on others.

While it happened organically as a way to increase efficiency, today’s flat companies are more likely to adopt this model for political or philosophical reasons. One of the terms that come up often within non-hierarchal organizations is “conscious capitalism,” which refers to the idea that companies should transcend mere profit-making and actively consider the well-being of its stakeholders, employees, the environment and society at large. These organizations recognize the unintended consequences of their business activities and therefore define a purpose beyond their economic benefits in order to create a virtuous cycle of higher purpose.³

Flat companies today are also much more complex than people expect them to be. It’s not a “one size fits all” – rather, each organization tailors its non-hierarchal structure according to its needs. This usually leads to purposeful and organized environments that empower individuals to take ownership of the tasks at hand.

Although each company has its own unique and complex system, most flat organizations can be separated into four prominent models: Democratic organizations, where decisions are made through voting and every employee has a say in shaping the organization’s direction and policies; holacracies, where decision-making authority is divided into autonomous teams instead of individuals; teal organizations, which doesn’t rely on a specific decision-making process but allows teams to self-organize; and sociocracies, which relies on consent-based decision-making within “circle structures”.

Transparency and Autonomy are Key

Without transparency, many flat companies wouldn’t work. It’s crucial to make sure employees make informed decisions – something they’ll have to do more often than in traditional firms because of the autonomous nature of their roles.

One example of the need for transparency is when employees review their salaries. At Basetis, a technology consulting company that transitioned to a teal organization in 2017, every employee’s salary is publicly posted. The idea is to avoid salary inequality – which, according to various research, has also been shown to shrink the gender wage gap.⁴ Salaries are not struck down by executive leaders – they are the result of a robust discussion between team members who take into consideration various factors, including experience and salaries in similar roles. Basetis also follows the Tinbergen Norm, which sets a 1:5 income ratio limit between the highest-paid employee and the lowest-paid employee. (In traditional companies, the income ratio tends to be between 1:20 and 1:30.)

Without transparency, many flat companies wouldn’t work.

Transparency was the main reason tech company Voxel changed to a sociocracy in 2017. It came about after the realization that, in a traditional hierarchy where only directors made important decisions, critical information stayed behind closed doors. By transitioning to a self-management model, that information was disseminated across the company – a key step in making sure both employees and leaders can make the best possible decisions regarding their work.

And transparency goes hand-in-hand with autonomy. In flat organizations, there is no top-down performance tracking system – managers don’t put pressure on employees to meet targets. Instead, every employee is responsible for their own tasks and goals – which they communicate to their colleagues in order to create a healthy level of group pressure. The belief is that motivation comes from meaningful work and collective success.

At Basetis, employees are required to ask for advice when trying to solve a problem – they are especially encouraged to reach out to those co-workers who may know best about that particular subject matter. However, the final decision is always made by the employee herself.

The company Eboca, which provides vending machines and coffee stations, adopted a philosophy that cedes responsibility to those closest to the task. The holacratic company organizes its employees in “circles” of teams responsible for decision-making and governance over their respective areas, giving employees a say in shaping the rules and guidelines of their work. Maintenance workers, for example, decide how often to check on the various locations where the company has set up machines – not the director of operations. The idea is that maintenance workers are the ones who best understand the machinery, so they should be the ones making those decisions, instead of a director who’s far removed from their daily activities.

Granting substantial control to employees over their work also echoes humanistic values that prioritize skill enhancement and conscious development. This is crucial in creating a clear sense of purpose, which elevates engagement and productivity because it allows employees to align their personal goals with organizational objectives.

New Model, New Challenges

No transition is without its challenges. In the past, flat companies have been accused of lacking diversity and causing power struggles.⁵ Criticism about the business model has also often focused on the need for centralized authority in quick decision-making processes.

But self-managed companies themselves will admit to their own shortcomings. At Voxel, CTO Manel Ibáñez says the hiring process is more time-consuming and costly than the average company. Because the end goal is to protect Voxel and its employees from hires who don’t fit in, there’s a strong emphasis on ensuring applicants align well with the culture. This means it can take many rounds of interviews before a candidate is deemed trustworthy enough to join the team – after all, trust is key in cultivating autonomous roles. At Basetis, they don’t even bother with job postings – only applications through referrals are accepted.

Basetis leader Marc Castells says the relationship between employees can be more complicated at their organization than in traditional firms. One side effect of having more transparency and room for discussion is that there’s also more conflict. However, the company works hard to mitigate discord and prioritizes constructive and non-violent communication, which can sometimes take time and effort away from day-to-day tasks.

These challenges can be even greater for companies that transition from a traditional model – as opposed to starting a flat company from scratch – which was the case for both Voxel and Basetis. Remnants of the previous model can persist over months or years, despite the effort to take on a new culture. But, across the board, the companies we spoke to believe the challenges of a flat structure are worth the struggle for the common good. To help with these obstacles, some organizations hire consultants or go on unconventional community-building activities like silent retreats.

Many self-managed companies also try to find a middle ground and take on a more hybrid approach: Alternative structures that aren’t completely stripped of hierarchies, but also stay true to the philosophy of shifting away from conventional productivity and profit-focus goals. After all, the non-hierarchal framework is mostly there to serve as a roadmap for creating and sustaining a self-management model. The key is for organizations to continually review and adjust their culture in order to align with their changing needs and aspirations.

About the Authors

Mireia Las Heras is a professor in the Managing People in Organizations Department at IESE Business School and the director of the International Center for Work and Family. She holds a degree in Industrial Engineering from the Universitat Politècnica de Catalunya, an MBA from IESE and a PhD in Business Administration from Boston University. She is an expert on work and family issues.

José Peréz del Valle is a research assistant at the International Center for Work and Family at IESE Business School. He holds a degree in Applied Psychology and is pursuing an MSc in Applied Statistics with Data Science. With experience in education, mental health and social care, he brings a practical and multidisciplinary approach to his research work.approach to his research work.

References

1. Pharmaceutical Giant Bayer Is Getting Rid of Bosses and Asking Nearly 100,000 Workers to ‘Self-Organize’ to Save $2.15 Billion. 11 April 2024. Fortune. https://fortune.com/europe/2024/04/11/pharmaceutical-giant-bayer-ceo-bill-anderson-rid-bosses-staff-self-organize-save-2-billion/.

2. Update on Meta’s Year of Efficiency. 14 March 2023. Meta. https://about.fb.com/news/2023/03/mark-zuckerberg-meta-year-of-efficiency/.

3. Transforming Business into a Place for Personal Growth. A New Paradigm? (Part 2). 8 August 2023. Voxel Group. https://www.voxelgroup.net/blog/en/transforming-business-into-a-place-for-personal-growth-a-new-paradigm-part-2/.

4. Why Pay Transparency Can Help Reduce the EU’s Gender Pay Gap. European Council. https://www.consilium.europa.eu/en/infographics/pay-transparency/.

5. Flat Structure Companies. 07 July 2023. The New York Times. https://www.nytimes.com/2023/07/05/business/flat-structure-companies.html.

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In today’s dynamic business environment, characterised by volatility, uncertainty, complexity, and ambiguity (VUCA), organisations face unprecedented challenges in achieving sustainable growth. To thrive in this dynamic environment, companies must adopt innovative management strategies informed by comprehensive internal and external environmental analyses. HeXie Management Theory (HXMT) emerges as a practical approach, offering a holistic framework to effectively address VUCA challenges. This paper delves into the principles of HXMT and explores its practical application within organisational settings.  

Volatility, Uncertainty, Complexity, and Ambiguity (VUCA) Remain a Pressing Reality  

We are still living in times of volatility, uncertainty, complexity, and ambiguity (VUCA) (Martinez-Moran & Dolan, 2024). These factors are inescapable realities for business leaders. Consequently, the contemporary business landscape demands a systematic analysis of the management environment and the formulation of effective response strategies. It is important to note that most corporate crises are not only predictable but also usually self-inflicted (Barnett, 2020). To thrive in a VUCA world, therefore, leaders need new, much more integrated, interdependent models for strategy, leadership, and management. These models must be grounded in scientific principles to address the challenges of this complex environment (Millar et al., 2018). 

Haier’s “Rendanheyi”: Thriving in a VUCA World 

In the context of the VUCA world, it is worth examining how China’s Haier Group, the world’s largest appliance manufacturer, fostered management innovation. Haier’s founder, Zhang Ruimin, is widely credited with creating a ground-breaking business model that seamlessly blends the essence of traditional Chinese culture with modern Western business practices. Under his leadership, Haier developed ​“Rendanheyi (人​单合一)” in 2005. This concept can be loosely translated as “integration of people and goals” or “the win-win model of individual-goal combination.” Rendanheyi is not a single practice, but rather a platform comprised of various management practices. Through this platform, Zhang transformed Haier from a traditional, hierarchical manufacturer into an entrepreneurial and agile firm that responds quickly to market changes (Millar et al., 2018; Fisk, 2016).  

The development of Rendanheyi at Haier was significantly influenced by both internal and external factors. Internally, elements like organisational structure, leadership style, and available resources played a role. Externally, the environmental context including competitive, technological, and institutional aspects also contributed. The Haier’s management model thus provides a valuable lesson: before introducing any new management innovation, managers must carefully consider the realities they face both internally and externally. 

HeXie Management Theory: A Practical Approach to VUCA Challenges 

Building on management innovation cases like Haier’s Rendanheyi, a robust theoretical framework exists to guide such endeavours: HeXie Management Theory (HXMT). HXMT provides “a pragmatic approach and toolkits to cope with a fast-changing and uncertain environment by integrating traditional Chinese philosophical intelligence and modern management science knowledge and techniques on problem solving” (Xi et al., 2010, p. 209). Developed by Professor Xi Youmin in 1989, HeXie Management Theory (HeXie [həˈʃieː], meaning “harmony” in Chinese) is first an emerging theory rooted in Chinese management practices (Cao et al., 2011). It emphasises achieving organisational harmony through dual mechanisms: optimised design and employee motivation. These mechanisms empower employees to contribute significantly to the organisation’s success. As a practice-based management theory, HXMT has benefited many top managers in Chinese companies who have applied its principles to their management practices and policy-making (Van de Ven et al., 2018). The following Figure 1. illustrates the framework of HXMT with its key components.  

Figure 1. The Theoretical Framework of HeXie Management Theory 

• E: Environment / O: Organisation / L: Leadership / S: Strategy / HT: HeXie Theme 
• HP: He Principle / XP: Xie Principle 
• HX: HeXie Coupling / P: Performance

Adapted from Cao et al. (2011); Xi et al. (2010)  

At its core, the theory comprises four key elements: HeXie theme (HT), He principle (HP), Xie principle (XP), and HeXie coupling (HX). HXMT first integrates the elements of environment, organisation, and leadership (E/O/L) to identify the tasks and challenges faced by the organisation, known as the HT. Here, the HT refers to the core problem or task that must be addressed within a specific period and context of a company’s development to achieve its vision and strategic theme (S). The organisation then selects the appropriate HP and XP based on the HT. The XP is a rational control mechanism designed to optimise operations and assumes that individuals will act rationally and follow established rules. On the other hand, the HP is an evolvement mechanism driven by the initiative and self-determination of organisational members. The interaction between HP and XP, centred around the HT, forms a HeXie mechanism and its corresponding operating state through HeXie coupling (HX). Within the HXMT framework, leadership is defined as the ability and influence to utilise various principles to drive organisational development. 

HXMT serves as both a methodology and a toolkit system. It has the potential to bridge the gap between micro and macro levels of management, offering a systematic approach to tackle organisational management challenges in an increasingly complex and uncertain world (Zhang et al., 2018). HXMT views that Eastern and Western cultures and wisdom are characterised by complementary principles. Oriental philosophy is represented by the HP, while Occidental thought is embodied in the XP. The integration of these Eastern and Western philosophies is manifested through the HT and HX. This is carried out in accordance with the mechanisms described in Figure 1. above.   

How to Apply HeXie Management Theory  

Taken together, HXMT offers a holistic and systematic approach to management problem-solving throughout its application. To put HXMT into action effectively, here are some key questions to consider and a step-by-step guide:  

1. What is the most important task (HT)? This step identifies the top priority. 
2. How can we fulfil the task (HP & XP)? This step explores actionable methods and practices, such as implementing new systems or boosting employee motivation, to address the identified HT. 
3. How well are we performing (HX)? This step involves measuring the effectiveness of the chosen methods and practices. 
4. What remains unfinished (identifying a next HT)? This step identifies any gaps or areas for improvement, and then sets the next most important task. 

Managers must ensure ongoing consistency and coherence among the four HXMT components for successful organisational implementation. 

In Closing… 

We envision HXMT, as a practice-based management theory, being widely adopted across industries to assist organisations in tackling their unique challenges and pursuing harmonious management practices. By doing so, HXMT will not only help entrepreneurs and managers to address emerging issues but also facilitate the continuous refinement and development of the theory itself.  This will empower industry leaders to manage more effectively and put the theory into practice. Through this dynamic interplay between practical application and theoretical evolution, HXMT will remain a highly adaptable framework for navigating the ever-evolving challenges of modern management.

About the Authors

Dr. Chang H. Kim is an Assistant Professor of Sustainable Business at Xi’an Jiaotong-Liverpool University. His research focuses on circular economy business models and product-service system (servitization). He is a member of the Circular Economy Working Group for the coffee sector at the International Trade Centre in Geneva, Switzerland. Additionally, he serves as a subject matter expert on the circular economy agenda for the Korean Environmental Industry & Technology Institute.

Dr. Peng Liu is currently an Associate Professor and Head of HeXie Management Research Centre at Xi’an Jiaotong-Liverpool University. His research interests focus on HeXie Management Theory, strategic transformation and innovation ecosystem, governance innovation and succession of private (family) enterprises, healthcare ecosystem.

Dr. Lei Liang is currently a Professor of Management at Xi’an Jiaotong-Liverpool University and the Dean of XIPU Institute of Strategic Human Resources. His primary research interests include organizational theory and strategic human resource management.

References

• Barnett, P. (2020, February 03). How successful leaders avoid predictable surprises. LSE Business Review. https://blogs.lse.ac.uk/businessreview/2020/02/03/how-successful-leaders-avoid-predictable-surprises/  
• Cao, X., Zhang, X., & Xi, Y. (2011). Ambidextrous organization in harmony: A multi‐ case exploration of the value of HeXie management theory. Chinese Management Studies, 5(2), 146–163. https://doi.org/10.1108/17506141111142799  
• Fisk, P. (2016, March 25). Market makers… Innovate your market, then innovate your business. The European Business Review. https://www.europeanbusinessreview.com/market-makers-innovate-your-market-then-innovate-your-business/ 
• Martinez-Moran, P. C., & Dolan, S. L. (2024, January 22). Revisiting HR challenges at the dawn of 2024. The European Business Review. https://www.europeanbusinessreview.com/revisiting-hr-challenges-at-the-dawn-of-2024/  
• Millar, C. C. J. M., Groth, O., & Mahon, J. F. (2018). Management innovation in a VUCA world: Challenges and recommendations. California Management Review, 61(1), 5–14. https://doi.org/10.1177/0008125618805111  
• Van de Ven, A. H., Meyer, A. D., & Jing, R. (2018). Opportunities and challenges of engaged indigenous scholarship—ADDENDUM. Management and Organization Review, 14(3), 647–647. https://doi.org/10.1017/mor.2018.46  
• Xi, Y., Cao, X., & Xiangli, L. (2010). A Chinese view on rebuilding the integrity of management research: The evolving He-Xie management theory. Chinese Management Studies, 4(3), 197–211. https://doi.org/10.1108/17506141011074101   
• Zhang, X., Fu, P., & Xi, Y. (2018). Promoting management education in China through developing practice-based management theories: An interview with practitionerscholar Youmin Xi. Journal of Management Inquiry, 27(2), 212–223. https://doi.org/10.1177/1056492617708056  

The post Bridging Theory and Practice: A Practical Framework for Leading in a VUCA World  appeared first on The European Business Review.

By Frank Cespedes and Ben Plomion

For years, digital ad spend was a steadily growing portion of marketing budgets, reaching over $601 billion globally in 2023 ¹ . But online advertising faces challenges that mean a transformative shift in digital marketing. Meanwhile, the so-called “Web3” has emerged as a medium that can change ad spend and how personal information is used and owned online, with implications for how companies, brands, and customers interact.

This article discusses why the online ad model has grown and its challenges, how companies are fusing Web3 with advertising, lessons for user engagement, and why this matters.

A History of Online Advertising

Since the internet’s emergence as a commercial medium in the 1990s, advertising has been its propelling force. Internet ads disrupted the business models of newspapers and magazines which relied on classified and print ads, while allowing Facebook, Google, Twitter, and others to offer their search and social networking services without charge to consumers.

“If it’s free, then you’re the product.”

At the heart of this revolution was and is the ability of centralized platforms to track people from site to site via code planted in web browsers – “cookies” – and use personal data to target prospects with relevant marketing. Hence the aphorism, “If it’s free, then you’re the product.”

That system is besieged by evolving privacy practices and regulations, growing costs, and diminishing returns for advertisers, and users’ disengagement from those marketing tools.

Privacy

The collection and trading of user data has generated regulatory and company changes. Google, Meta, and Amazon have accounted for about 60 per cent or more of US digital ad revenue for some years, with Google alone responsible for over 27 per cent in 2023 ² . Google has started to phase out third-party cookies from its Chrome browser and, as one observer noted, this privacy-first decision “marks not just the end of an era, but the beginning of a new, perplexing chapter in advertising.” ³

Meanwhile, Meta announced that it was retiring “detailed targeting options” due to privacy concerns and will move toward “broad targeting” which, as Meta itself explained, “essentially means that you’re relying on our delivery system to find the desired audience to show your ad to.” ⁴ Similarly, Google introduced an approach called Federated Learning of Cohorts (FLOC), which places people into groups based on their inferred interests. This may increase personal privacy, but brands lose transparency into whom they’re targeting and where their ads are running.

Moves like this respond to genuine user concerns. For example, Apple introduced a pop-up window for iPhones in April 2023 that asks people for permission to be tracked by different apps. Within three months, more than 80 per cent of iPhone users worldwide opted out of tracking, according to ad tech firms. ⁵ But a core value proposition of digital ad media, and a key driver of its adoption in marketing campaigns for the past 25 years, has been the ability to track users and increase return on ad spend (ROAS) versus less-targeted media like TV , radio, or print.

Costs

Even before this loss of targeting abilities, advertisers saw diminishing returns from digital marketing. With the pandemic, these channels became cluttered and expensive. Average cost per lead via Google Ads, for example, increased 20 per cent in 2021 and another 19 per cent in 2022, and even more in sectors like entertainment, travel, and household goods, while click-through rates declined.⁶

Further, a study analysing digital advertising in 45 countries found that more than one-fifth (22 per cent) of online ad spend in 2023 was lost to ad fraud – deceptive click, impression, and conversion practices and data. As the study noted, “Data provided by popular ad platforms … provide an incomplete picture of the success of advertising campaigns … failing to distinguish between how many clicks or views originated from legitimate users compared to click farms or fraudulent bots.”⁷

Hence, even as these platforms increase user privacy, advertisers need more transparency in order to achieve ROI, identify and minimise ad fraud, and get what they have paid for. These are inherently conflicting goals in traditional online ad models.

User Engagement

Researchers have long documented the reality of “ad fatigue”, when a company’s ads become so frequent that consumers become bored or annoyed. Ad fatigue can apply in any medium. But online ads are also susceptible to “banner blindness”, which has a similar result but a different dynamic peculiar to that medium. Banner blindness is when internet users stop noticing or even “seeing” ads on a web page.

With online advertising, brands are paying more but getting less, and have fewer ways to track effectiveness.

The psychology of selective attentiveness helps to explain the phenomenon.⁸ Over time, users can subconsciously identify and skip ads when they notice a block of text embedded in an image or a different font, colour, or format on the web page. Many people have accidentally clicked on an ad, losing their place and incurring time and hassle costs. Once burned, twice shy; when this happens, people tend to become more ad-averse in their browsing behaviour, whether or not they use ad blockers, which, according to Insider Intelligence, almost 40 per cent of internet users worldwide now do.⁹  Moreover, banner blindness tends to be more common among younger generations, who have spent more of their lives online¹⁰ and, ironically, are often the desired targets for online marketers.

With online advertising, then, brands are paying more but getting less, and have fewer ways to track effectiveness; and advertising even more via the medium in order to increase awareness can often reduce user attention and engagement. It’s reminiscent of Einstein’s alleged definition of insanity: “Doing the same thing over and over while expecting a different result!”

How Web 3 Changes Things

Web1 refers to the internet’s foundational stage, defined by information retrieval primarily through static web pages accessed by browsers. Web2 is the current era of social media and digital marketing built on that retrieval system. Web3 refers to technologies where people and brands can interact, shop in a virtual medium, and change how personal data is used, owned, and monetised.

Amara’s Law (attributed to the late Roy Amara of Stanford) states that we tend to overestimate the effect of a technology in the short run and underestimate its effect in the long run. This applies well to Web3, which was initially hailed and hyped as the “metaverse”, attracted much attention (and, often, confusion with cryptocurrency and non-fungible tokens like Angry Apes), and then subsided into semi-gimmicky status in most business discourse. But in areas where the traditional online ad model is faltering, Web3 is transforming how companies, brands, and customers interact.

Respecting User Privacy

Current digital marketing relies largely on centralised platforms that collect vast amounts of personal data to target ads. Web3 advertising, built on blockchain technology, is a more decentralised approach that offers end users greater control over their data. Users can choose whether they want to share transactional or browsing information in exchange for tailored ads and possibly rewards of various kinds (and how much of that information they’re prepared to share), create a specific address or identity just for that brand, or not share any data (similar to the “hide my email” option from Apple). For example, imagine putting up a digital sign that you’re in the market for a given type of product, receiving tailored offers during your buying journey, and then taking down the sign when you’ve purchased. In the Web2 system of cookies, the user is the product; in Web3, the user is the customer and gatekeeper of personal information.

Conversely, information in a blockchain wallet is public, anonymised, and includes transactional and community data, so marketers can identify and deliver ads and promotions to, for example, car enthusiasts. In this approach, advertisers need not choose between respecting the privacy of their customers and targeting them on an individual basis. Hence, a recent study found that 71 per cent of B2C marketers believed that having a wallet address is more valuable than an email address.¹¹

Companies are evolving marketing campaigns in this direction. Nike acquired RTFKT, a digital fashion and collectibles brand that uses Web3 to sell digital sneakers and other goods. This is a form of advertising, while opening up new revenue streams for Nike. Louis Vuitton has launched a Web3 mobile game to enhance its marketing beyond stores. McDonald’s has filed trademarks for a Web3 virtual restaurant that delivers food online and in person. Budweiser is exploring branding and consumer engagement approaches through these technologies.

Simultaneously, a supporting ecosystem is evolving. “Wallet relationship management” firms now offer turnkey services, while Web3 ad networks like Hypelab and Slise facilitate placing ads in decentralised apps and digital wallets, A/B testing, and measuring conversions and ROAS in real time – and generally at lower cost per click than current digital marketing media. PayPal used this method and found that digital wallet consumers are more receptive to its ads, according to Slise.

These initiatives epitomise a broader shift. Marketing here is not based on demographic profiles, but on tailored 1:1 offers without needing to know sensitive user data. It recognises a world where governmental initiatives like the EU’s General Data Protection Regulation enshrine privacy as a human right and where consumers also judge brands based on their data collection practices.

Better Advertiser – User Alignment

Like traditional TV ads, current digital advertising is a one-way street; brands spend money to target users who do or don’t buy their products. Its dynamic tends to consolidate control at the publisher or platform (e.g., Facebook feed, Google or Amazon search, New York Times homepage, etc.). Web3 allows brands and consumers more exchange possibilities and transparency about that spend while respecting user privacy.

Web3 can reduce fraud in digital marketing, which is estimated to be $84 billion globally.¹² Recording ad transactions on a blockchain makes it much easier to verify the legitimacy of ad clicks and the authenticity of a human audience versus bots and fake impressions. This capability is driving the creation and adoption of smart contracts for ad transactions, increasing tracking and trust that ads placed via programmatic methods are efficient and tamper-proof. Verasity, an open-ledger system for Web 3 advertising and payments, works with Amazon to provide advertisers with measurement tools and enhanced brand safety features.

In the future, we are also likely to see smart contracts for user consent. For example, a smart Web3 contract (perhaps framed as a promotion or trial subscription) can execute an agreement where users opt to view ads in exchange for a discount, reward, or micropayments, ensuring that targeting is based on explicit consent. This flips the script on current digital marketing methods; users control which types of data are shared and under what conditions, and they, not just the publisher or platform, can monetise that data. Conversely, brands see better ROI via this explicit opt-in process than traditional promotions, motivating a shift in where and how marketing money is spent.

Engagement

With Web3, recipients of ads become more active participants, not passive commodities. That enables new formats such as immersive ads in virtual worlds that offer unique ways to interact with their audience beyond the scope of traditional digital ads. Coca-Cola used Web3 technology to deliver a branded experience in Decentraland, a 3D virtual world where consumers could opt in and win digital collectibles. Although not a direct advertisement, it built brand engagement, creating significant buzz outside that medium – more than 110,000 Twitter impressions and 90,000 views, plus the 63,000 attendees at the event itself.¹³

With Web3, recipients of ads become more active participants, not passive commodities.

More diverse and creative gamification elements are likely as advertisers confront the limits of current digital marketing methods and the possibilities inherent in Web3. For consumers, these interactive approaches increase brand engagement via psychological ownership. Often called the “IKEA effect”, after the Swedish retailer that sells self-assembled furniture kits, psychological ownership increases when people invest time or effort in the product or brand. Studies indicate that this sense of active agency enhances customer satisfaction, brand loyalty, word-of-mouth referral and, often, willingness to pay.¹⁴ Most Web3 initiatives currently use token ownership to achieve this goal. But the ability for consumers to actively opt in, track use, and interact in novel ways opens up many other interactive and brand-community possibilities beyond tokens.

Marketers usually say they welcome customer engagement but, a decade ago, the thought of allowing users to freely post comments about a brand on social media, not highly controlled company media, frightened many marketers. Web3 dramatically increases the level of interaction and transparency and it’s not easy, especially for established brands, to cede more control. But that’s how brands get disrupted and, given the diminishing effectiveness of the current system, survivors will embrace the emerging realities and opportunities.

Why This Matters

The resources devoted to digital marketing make these changes a significant business issue. For context, the money currently spent on online ads is more than the $575 billion in two-way trade between the US and China in 2023. But it’s not just an issue for “Mad Men” and an oligopoly of tech platforms whose revenues are overwhelmingly dependent on ad revenues.

If online social media cannot rely on ad revenues, they will no longer be free. And in a world where so much communication, information, and human exchange depends upon online media, it’s the poor who will be increasingly shut out. Anyone who cares about equal opportunity should also care about the economics of digital marketing.

Privacy online is important, not only as one consumer preference among others, but also as a civic value. There are many examples of cancelling, hecklers’ vetoes, and other mob behaviours online (and offline), as well as increasingly intrusive governmental censoring of online opinions. This tendency is corrosive of free speech and advocacy. Web3’s enhancement of user privacy has wider beneficial impacts on social dialogue.

Finally, improving ad productivity has macroeconomic implications. As the global economy becomes increasingly services-driven, productivity has stagnated. One reason, as economist Dietrich Vollrath emphasises, is that in services “you are almost always purchasing people’s time and attention … the shift into services could account for almost all of the drop in productivity growth.”¹⁵ Remember this the next time you hear someone invoke the Davos manifesto about how “the purpose of a company is to engage all of its stakeholders in shared and sustained value creation”. Advertising is not only a core business activity; it’s also a social issue that affects growth and wider patterns of communication and culture.

About the Authors

Frank Cespedes teaches at Harvard Business School and is the author of Aligning Strategy and Sales and Sales Management That Works (Harvard Business Review Press).

Ben Plomion is Chief Operating Officer of Pearl AI, an AI start-up in the healthcare sector, and a Web3 Lead Educator at Gigantic.

References

1. https://www.emarketer.com/content/digital-ad-spend-worldwide-pass-600-billion-this-year

2. https://www.statista.com/statistics/242549/digital-ad-market-share-of-major-ad-selling-companies-in-the-us-by revenue/

3. Seb Joseph, “Nine questions to consider as Google starts its move away from third-party cookies,” Digiday (4 January 2024).

4. “Walled Gardens Aren’t Incentivized to Make Open Web Advertising Effective”: https://advertisingweek.com/

5. https://nytimes.com/2021/09/16/technology/digital-privacy-.html (updated 23 June 2023).

6. https://www.spiceworks.com/marketing/advertising/articles/decline-in-search-engine-advertising-conversion-rates/

7. Nicola Agius, “$84 billion of ad spend lost due to ad fraud in 2023,” WIX SEO Hub (28 September 2023).

8. Saul Mcleod, “Theories of Selective Attention in Psychology,” SimplyPsychology (11 June 2023): https://www.org/attention-models.html

9. https://www.emarketer.com/insights/ad-blocking/

10. https://www.outbrain.com/glossary/banner-blindness/#

11. State of Wallet Messaging, November 2023: https://www.holder.xyz/state-of-wallet-messaging?

12. https://www.prnewswicom/news-releases/vab-releases-report-offering-in-depth-look-at-the-hidden-costs-of-digi tal-ad-fraud-302025754.html#:~:text=Financial%20Risk%3A%20In%202023%2C%20the,(Source%3A%20Juniper%20Research

13. https://drive.google.com/file/d/1K3mEZlmBb7qvDVpcYqpXf76X47Knj5E3/view?usp=sharing)

14. See Li Jin, “Building Psychological Attachment – ​​Not Just Ownership – Into Web3,” HBR.org (4 April 2023).

15. Dietrich Vollrath, Fully Grown: Why a Stagnant Economy Is a Sign of Success (University of Chicago Press, 2020): 79.

The post Navigating the Future of Online Advertising with WEB3 appeared first on The European Business Review.

By Daniel Trabucchi & Tommaso Buganza

The platform revolution has already taken place, but we link the idea of platforms with Big Tech like Amazon or Meta and digital-native start-ups like Airbnb and Uber. In this article, we explore the concept of Platform Thinking, perceiving platforms as a tool to foster digital business transformation for established firms like Telepass, John Deere, and Klöckner.

Over the last two decades, the business landscape has changed radically. We can prove it easily with two lists:

• 2003: Microsoft, General Electric, ExxonMobil, Walmart, Pfizer, Citigroup, Johnson & Johnson, Royal Dutch Shell, BP, IBM
• 2023: Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta, Tesla, Berkshire Hathaway, Eli Lily, TSMC

These are the 10 companies with the highest market capitalisation in 2003 and 2023¹. We can get three main insights by comparing the lists: only one company remained in the Top 10 two decades later (Microsoft), and the industries had shifted quite clearly from product and energy companies to tech companies. Finally, of course, five out of the 10 companies in 2023 are “platform companies”.

The Big Tech MAGMA (Microsoft, Apple, Alphabet-Google, Meta, and Amazon) established their leadership by applying platform models and became, along with “younger giants” like Airbnb and Uber, flagship cases of the platform revolution. But what are platforms? Can we really compare these companies under the same label? And, more interestingly, is it all a matter of digital native companies? How can established – non-digital-native – companies exploit platform thinking and leverage the learning from (younger) digital companies?

What is a platform?

The question “what is a platform?” is not an easy one to answer. We recently wrote a book, Platform Thinking, which dedicates entire chapters to the peculiarities of the various typologies of platforms. Let’s start by defining what a platform is not. Not every value-creation mechanism based on a linear value chain is a platform. Porter described the linear value chain as a sequence of primary activities to transform raw materials from suppliers into finished products for the market, plus all the other activities needed to support these primary ones (e.g., training or hiring). This model easily applies to product or service companies such as General Electric, Johnson & Johnson, FedEx, and many others.

However, if we look at the aforementioned MAGMA cases, this definition doesn’t seem able to fully describe their value-creation mechanisms. We need to introduce the concept of platform (and, more precisely, different typologies of platforms) to describe their value-creation mechanisms.

Key features that allow us to define the concept of the platform: 1) the presence of two (or more) groups of interdependent customers and 2) the presence of cross-side network externalities that drive the growth and potential scale of platforms.

Microsoft (and, more precisely, the Windows operating system) is the typical case of an innovation platform² – and, indeed, one of the very first of these. Innovation platforms are technological systems open to two different customers: computer users on the one hand and “complementors” on the other. Complementors are organisations or individuals that can foster innovation on top of the platform, delivering their own products to the end users. In other words, Microsoft offers Windows to the final users but, at the same time, it offers its APIs and software development kits to software developers who wish to code on top of the operating system. In a nutshell, both the end users and the software developers (like Adobe or Autodesk) are customers in Microsoft’s eyes. Moreover, innovation platforms are subject to the so-called bidirectional cross-side network externalities³: the more users, the more value for software developers, and vice versa.

Amazon is a different and very varied case. It started off as a linear value chain company delivering books and, even now, still has important revenue sources managed as linear value chains, like AWS^4,5. However, if we focus on the Amazon Marketplace, we can see a perfect case of a transactional platform^6,7. We are clearly customers any time we log on to Amazon Marketplace to buy anything we need, from a book to a stabiliser, and we correctly perceive the merchant selling the stabiliser as a provider. From Amazon’s point of view, though, there are no customers and providers, but only customers and customers. People buying any product on Amazon are obviously customers, but companies selling those products are also Amazon’s customers. They receive the chance to reach one of the widest potential markets in the world, a delivery service, payment services, and much more. To underline their customer role, the sellers pay Amazon a fee for each product sold (if they were providers, they would be paid instead).

In this case, the platform is not the basis upon which to develop new and innovative products but rather an enabler of one-to-one transactions. There are two customers (buyers and sellers) and, again, bidirectional cross-side network externalities that make this platform so valuable; the more buyers, the more potential value perceived by the sellers, and vice versa.

Meta is the last platform typology we present. The reason we consider Facebook, as well as Instagram by Meta, a platform is mainly the presence of advertisers. Advertisers pay Facebook to reach as many viewers as possible and target them with incredible precision, thanks to the data generated by the users themselves. This makes Facebook an orthogonal platform^8,9. As in the previous cases, there are two customers (the end users and the advertisers) but, here, there is not a one-to-one transaction. On the contrary, the second side, the advertisers, see the first side as both a target for commercial purposes (but the transaction will happen somewhere else) and as a source of valuable information to target them more accurately. There are still externalities, but only unidirectional; the more end users, the more value for advertisers. The other way around (more advertisers, more value for end users) is just not verified.

These three non-linear value-creation mechanisms are very different, but they share two key features that allow us to define the concept of the platform: 1) the presence of two (or more) groups of interdependent customers and 2) the presence of cross-side network externalities that drive the growth and potential scale of platforms.

(Non-digital-native) established firms fostering innovation through Platform Thinking

So far, all the examples we have provided are Big Tech and / or digital-native start-ups mainly headquartered in Silicon Valley.

However, it would be a big mistake to think that these are the only companies that can benefit from platform-based value-creation mechanisms.

With the concept of “Platform Thinking“, we refer to the ability to foster innovation by seeing possible platform mechanisms everywhere. It might seem strange but, once unlocked, the platform way of thinking can foster innovation even in established, industrial, non-digital companies, as in the cases of Telepass (Italy), John Deere (USA), and Klöckner (Germany).

Telepass and Telepass Pay

From 1989, Telepass, once incorporated into Autostrade per l’Italia, the Italian motorway company, revolutionised the driving experience with its automated toll collection system.

The system enabled motorists to glide through toll stations, offering a seamless journey without the “stop and go” of traditional toll booths. Telepass is an example of how platforms can revolutionise the entire company’s value-creation mechanism¹⁰.

Initially, the Telepass service was a typical linear value chain, directly linking the company to the customer through a unique service offering.

This all changed in 2017, when Telepass expanded its horizons with the launch of Telepass Pay, a multiple-service smartphone app based on a transactional platform mechanism. Now, drivers could pay not only for tolls but also for parking, fuel, and even car services like washing or maintenance through a unified system. The introduction of Telepass Pay brought in additional customer groups – parking facilities, fuel stations, and service providers – and transformed Telepass into a platform enabling service transactions between them and drivers.

This strategic move turned Telepass into a multi-sided transactional platform leveraging cross-side network externalities; the more drivers, the bigger the value for service providers, and vice versa.

A start-up wanting to introduce a similar platform would encounter the so-called “chicken and egg” paradox: drivers are attracted by service providers who are attracted by drivers, but none of these sides are on board at the beginning. On the contrary, when launching Telepass Pay, Telepass already had 8 million users from the linear value chain service (toll payment) and had no paradox to face.

John Deere and the Operations Center

John Deere, founded in 1837, is well known for producing heavy-duty agricultural machinery. It’s an example of how incorporating Platform Thinking can extend the value-creation capabilities of a traditionally product-centric company relying on data¹¹.

Besides the obvious challenges of changing corporate culture, John Deere was able to leverage its brand, know-how with regard to agricultural equipment, and presence in approximately one-third of American arable acres. A start-up could hardly match these assets.

Initially, John Deere made its machinery “smart” by integrating sensors, GPS, and AI. Farmers used these sophisticated tools to collect detailed data, enhancing their agricultural productivity through “MyJohnDeere“. This smart equipment represented an advanced linear value chain, optimising activities like seeding and fertilisation through real-time data.

The transformative moment came when John Deere began seeing farmers not just as equipment users but as data providers. In 2013, Deere opened up MyJohnDeere through its “Operations Center“, a platform providing aggregated and anonymised farmers’ data to a number of third-party providers. This shift added a two-sided model with network externalities to the traditional linear value chain of the company (the production of heavy-duty agricultural machinery).

Previously, farmers used John Deere’s system to optimise seed planting. Transitioning to a platform model, John Deere managed to enable entities like Bayer to access a wealth of anonymised agricultural data. Bayer might analyse this data to create advanced seeds or fertilisers tailored to the identified conditions, establishing a feedback loop where farmers, utilising these products, enhance the platform’s collective intelligence.

This strategic move transformed John Deere into an orthogonal platform, allowing third parties to innovate using the aggregated data. It not only amplified the farmers’ capabilities but also catalysed a network effect, broadening the platform’s scope and attracting new participants to this knowledge-rich ecosystem.

Besides the obvious challenges of changing corporate culture, John Deere was able to leverage its brand, know-how with regard to agricultural equipment, and presence in approximately one-third of American arable acres. A start-up could hardly match these assets.

Klöckner and XOM Materials

Klöckner is an independent German producer-distributor of steel and metals. It operates between the big crude-steel suppliers, such as ThyssenKrupp and Tata Group, and the customers, such as construction companies, car makers, and phone and appliance manufacturers.

In the last decade, they have revolutionised a long-lasting and hard-to-change market with two moves.

In 2014, Klöckner launched Kloeckner Connect, a digital service allowing customers to make orders from any device, check on past orders, see what’s available in stock, look through the entire Klöckner catalogue, and place online custom orders. Although this represents a major innovation in the market, we can still consider it to be a (digital) linear value chain service.

The game-changer came with the launch of XOM Materials in early 2017. XOM is a transactional platform where Klöckner’s customers (later joined by many others) form the demand side, and the supply side is enriched not just by Klöckner’s products but also by offerings from various third-party vendors, competitors, and service providers^12,13.

This strategic move turned them from a metal producer and distributor into one of the leading steel service centre companies worldwide.

XOM Materials leveraged Klöckner’s established assets, like their extensive customer network, to generate cross-side network externalities. As more customers and suppliers joined, the value and efficiency of the network grew for all, demonstrating the potential of established companies to pivot into a transactional platform model even more successfully than start-ups.

Takeaways for Platform Thinkers

These six stories let us define platforms (Microsoft Windows, Amazon Marketplace, and Facebook) and how platforms can help established firms foster digital business transformation (Telepass Pay, Operations Center, XOM Materials).

At this point, we can leave behind the usual preconception about platforms. They are not just for digital native start-ups or Big Techs. We can, indeed, define Platform Thinking as the ability to use platform-based mechanisms to unlock digital business transformations¹⁴, and unveil the three key insights of this article:

1. “Platform” is a broken word. We need more labels – like “innovation“, “transactional“, and “orthogonal” – to capture the complexity of the value creation models around us.
2. Platforms are for everyone. Established traditional companies based on a linear value chain can also leverage Platform Thinking to foster digital business transformation.
3. Platform Thinking builds on established firms’ idle assets (like data, customers, brand, or existing relationships), opening avenues for value exploitation and innovation.

About the Authors

Daniel Trabucchi and Tommaso Buganza are, respectively, Senior Assistant Professor and Full Professor at the School of Management of Politecnico di Milano. They are featured in the Thinkers50 Radar list 2024. Their main area of research is Platform Thinking, which focuses on how platforms can be used to foster digital business transformation. They co-founded Symplatform https://symplatform.com/, the international symposium for academics and managers working on platforms, and Platform Thinking HUB, the observatory where the innovation leader community can explore innovation through platforms. They are the authors of Platform Thinking – READ the past. WRITE the future, published by Business Expert Press in 2023. You can find out more about their work on platformthinking.eu https://platformthinking.eu/.

References

1. https://en.wikipedia.org/wiki/List_of_public_corporations_by_market_capitalization

2. Cusumano, M. A., Gawer, A., & Yoffie, D. B. (2019). The business of platforms: Strategy in the age of digital competition, innovation, and power (Vol. 320). New York: Harper Business.

3. Katz, M. L., & Shapiro, C. (1985). “Network externalities, competition, and compatibility”. The American Economic Review, 75(3), 424-40.

4. For a detailed analysis of the evolution of Amazon as a platform: Trabucchi, D., & Buganza, T. (2023). Platform Thinking: Read the past. Write the future. Business Expert Press.

5. For a detailed analysis of Amazon evolution: Kenney, M., Bearson, D., & Zysman, J. (2021). “The platform economy matures: measuring pervasiveness and exploring power”. Socio-economic Review, 19(4), 1451-83.

6. Rochet, J. C., & Tirole, J. (2003). “Platform competition in two-sided markets”. Journal of the European Economic Association, 1(4), 990-1029.

7. Trabucchi, D., & Buganza, T. (2022). “Landlords with no lands: a systematic literature review on hybrid multi-sided platforms and platform thinking”. European Journal of Innovation Management, 25(6), 64-96.

8. Filistrucchi, L., Geradin, D., Van Damme, E., & Affeldt, P. (2014). “Market definition in two-sided markets: Theory and practice”. Journal of Competition Law and Economics, 10(2), 293-339.

9.  Trabucchi, D., Buganza, T., & Pellizzoni, E. (2017). “Give Away Your Digital Services: Leveraging Big Data to Capture Value”. Research-Technology Management, 60(2), 43-52.

10. Farronato, C.; Denicolai, S. & Mehta, S. (2021). “Telepass: From tolling to mobility platform”. Harvard Business Publishing Teaching Case.

11. Joachimsthaler, E. (2020). The interaction field: The revolutionary new way to create shared value for businesses, customers, and society. Hachette UK.

12. Joachimsthaler, E. (2020). The interaction field: The revolutionary new way to create shared value for businesses, customers, and society. Hachette UK.

13. Kominers, S. D. & Knoop C.I. (2020). “Klöckner & Co: Steeling for a Digital World”. Harvard Business Publishing Teaching Case.

14. Trabucchi, D., & Buganza, T. (2023). Platform Thinking: Read the past. Write the future, Business Expert Press.

The post Platform Thinking: What Established Firms Can Learn From Big Tech and Digital Start-Ups appeared first on The European Business Review.

In the second of a two-part series on aligning organisational ecosystems to be fit for purpose and high-performing, this article delves deeper into how firms must be mindful of the unique implementation challenges associated with this more complex form of organising work.

Please click here to read the Part A of the article series. 

Organising as an ecosystem(s) (or an organisational ecosystem, as we refer to it) bestows upon firms many benefits on paper. It enables firms to exploit economies of association and capitalise upon the resources and capabilities (think talent, technology, and knowledge) of a network of external partners (think other firms, institutions) to supercharge their innovation capabilities in ways not possible if relying upon internal resources alone.

However, most organisational ecosystems fail to deliver on their promise according to published research.¹ Part A of this two-part series of articles focused on the importance of strategically aligning organisational ecosystems to be fit for purpose if they are to succeed. It put forward a framework of three strategic choices, each of which is vital and should align closely to achieve high performance. First, managers should formulate a clear ecosystem purpose (a first-order choice); second, they should select the most appropriate ecosystem strategy (a second-order choice) from a range of options to fulfil that purpose.² 

This article, Part B, focuses on a third-order set of design choices: from a variety of options, which ecosystem structures and resources will enable firms to implement their chosen strategy best. No matter how much time is devoted to ecosystem purpose and planning, effective implementation makes or breaks how well firms can practically leverage external resources for value and avoid the pitfalls associated with this more complex form of organising work.

Third Order Choice — Which Ecosystem Structure?

A third critical choice for managers is to select the appropriate ecosystem structure to support the implementation of their chosen strategy. We define ecosystem structure as the combination of organisational ingredients (you could also say resources) that form the makeup of every ecosystem and which enable it to fulfil its stated purpose in ways intended by its chosen strategy.³

Like any form of organisation, ecosystem structure (or you might also say design) can be helpfully thought of in terms of required human capital (think skills, knowledge, and behaviours of people, including those residing within partnering organisations), social capital (think relationships, networks, and social methods of exchange, across the whole ecosystem) and organisational capital (think processes, cultures, and structures in which knowledge is objectified, both inside and outside an ecosystem’s focal organisation).⁴ We add a fourth category — technological capital — to this list. Technological capital includes the combined value of technology, including information systems, artificial intelligence, cloud computing, and others, for example.

The challenge for managers is that there is no one-size-fits-all design of an ecosystem that suits all purposes. Different ecosystem strategies require different varieties of each ingredient. For sure, some universal people characteristics, for instance, are valuable in all contexts, such as technical skills, basic competence, or industry-related know-how. However, different types of ecosystems require particular skills, competencies, and behaviours to be effective. The same is true with the closeness and strength of network ties or the type of technology required to support collaborative ways of working. All four forms of capital are important in every type of ecosystem, but each matters more or less as a priority according to the requirements for openness and horizontal integration.

Human Capital:

Closed horizontal ecosystems in the organisations we studied, such as IBM’s strategic partnership ecosystem, tended to emphasise investments in human capital. They were reliant upon the behaviour of key relationship managers at all levels of each strategic partnership to ensure effective collaboration and downstream delivery of novel market offerings. Horizontal collaboration involves more autonomous contributions by actors. For this reason, human capital is critical for this type of ecosystem. Human capital requirements do vary. For instance, closed vertical ecosystems tended towards individually focused work within a B2B transactional relationship, but with much less emphasis on human and social capital investments.

Social Capital:

The development of social capital was considered a priority in open and horizontal ecosystems, primarily to support the forming of connections between different groups through which serendipitous and open-ended innovations might occur. For instance, Sosei Group Corporation’s early entry into open, horizontal collaboration in the innovation ecosystem in the UK was due to the personal network with the local scientists of its founder, President Shinichi Tamura.⁵ Or consider the stated corporate values of ARM as a focal organisation presiding over a rich innovation network of thousands of partners. To support the types of horizontal interactions required to support cutting-edge microprocessor design, ARM emphasises customer and partner focus, constructive pro-activity, innovation, teamwork and selflessness as core values applying to all of its 7,000-strong workforce.⁶ 

Each value is supported by a suite of human resources intended to elicit those behaviours, including compensation systems (e.g. incentives), but also a heavy emphasis on personal development and network opportunities. The decline of in-person opportunities to forge new or maintain existing network connections during the COVID-19 global pandemic represented a challenge for many firms reliant upon strong partner and network ties through which to engage in serendipitous conversations, co-deliver complex propositions to market and create and exchange new knowledge for innovation purposes.

Organisational Capital: 

Closed vertical ecosystems are typically focused much more on organisational capital investments in the form of objective performance data, clear processes, and defined parameters. These are representative of vertical integration through hierarchical control mechanisms. Consider the example of mega-company NTT DATA (NTTD) and its payment ecosystem. Within Japan, NTTD has been leading the cashless payment system via its “CAFIS” platform for 35 years as a precursor to what is now a common payment method. CAFIS is a node that connects credit/finance card companies with various stakeholders, including finance institutions (e.g., banks), local governments, and millions of vendors and merchants both within Japan and abroad.

To manage this volume of transactions reliably at scale, NTTD has to date invested heavily in developing robust organisational capital in the form of elaborate business processes, targeted system optimisation, infrastructure development, performance measures, and development automation, all features of organisational capital development in which valuable knowledge and information are encoded as a standard and scalable management practice.⁷    

Technological Capital:

Open vertical ecosystems in our study were highly technologically driven, using digital platforms as the primary means of aligning network actor interests through, typically, microtransactions. Effective management of global value chains, a typical case of open vertical ecosystems, often relies upon digital technology platforms to manage thousands of individual transactions. Returning to the example of NTTD, it is innovating its CAFIS platform.

NTTD identifies three periods of development for its payment ecosystem — foundation, expansion, and transformation. CAFIS is entering the transformation period, having expanded significantly in recent years, especially during COVID-19, the vision for which is that it will cease to be purely a payment platform and become instead a customer ’’one-stop shop’’ in which digital technology supports ever greater levels of customer choice (of products and services) and personalisation through data mining, information cooperation, channel integration, and automation.

These are all features of digital transformation, or DX, as it is referred to by Ken Watanabe, General Manager within CAFIS. At the same time, digital technology alone cannot deliver the required business transformation. NTTD is also investing heavily in its values and organisational culture, including a pivot towards a “flat, bottom-up culture that emphasizes creativity and challenge”.⁸

Such ecosystem design choices are separate from the everyday tactical and operational decisions managers must make, such as which partners to choose, where to locate an ’’innovation outpost’’ or how much information to share. While both sets of choices (strategic and tactical) are essential, in our experience, the latter is made considerably easier if there is clarity around the former.

Consider for your organisation: which is the most appropriate ecosystem structure? Which variety of human capital is required? Or organisational capital? Again, it depends upon the strategy being pursued. Similarly, which form of capital is the priority to implement your chosen ecosystem strategy? Investments in any form of structural capital supporting ecosystem implementation are not mutually exclusive.

On the contrary, investments should be complementary. Human capital investments and capabilities should support technological capital and vice versa. And, finally, as resources, how are your people, networks, cultures, processes, and technologies best managed to deliver the results needed? Its structure is a key component of the ecosystem value chain and is where the rubber hits the road regarding implementation.

Ecosystem Alignment Challenges

Ecosystems pose unique and additional implementation challenges that managers should know to avoid being tripped up.

Misalignment is a perennial risk:

First, managers should always be conscious of the potential for misalignment. By virtue of their design, ecosystems are the most complex form of organising work. They consist of many moving parts, especially external actors with diverse interests, much more than the traditional internally focused hierarchical organisation, which typically prizes cultural homogeneity. Reconciling competing interests and assumptions between partnering firms and maintaining coherence are just some of the challenges involved. And, of course, in open and highly collaborative ecosystems, the potential for misalignment is even higher.

Consider again the example of the storied consumer electronics company Sharp mentioned earlier. Founded over a hundred years ago, Sharp was a major international player in designing and manufacturing innovative and high-quality electronics, ranging from televisions to audio. However, failure to keep pace with rapid technological change and international price competition, especially from new market entrants from China, placed it within a ’’commoditization trap’’ of declining performance.

Sharp embarked upon a strategy to enhance its openness to external innovation via collaborations with an ecosystem of partnering organisations. But despite concerted attempts to reorganise along ecosystem principles — to capitalise upon external resources to revitalise its products — it failed. A key reason was its failure to manage its ecosystem as a more complex form of work organisation due to its prevailing internally focused structure and culture. In other words, its structure was a poor fit for its chosen ecosystem strategy. Its competitor, Foxconn, eventually bought Sharp for a mere $3.8bn in 2016 (a considerable drop from its historic high).⁹

Complex organisations are more naturally prone to disintegration and entropy than simple ones – to return to an atomised state and to lose energy in the form of capital expenditure, whether financial, human, social, organisational, or technological, over time and at a rate commensurate with the state of alignment, i.e., highly misaligned organisations dissipate energy most quickly.¹⁰

Another consideration is the multi-level nature of the ecosystem working. IBM identifies four principal levels of working within its strategic partnerships: the top level, areas of focus level, individual opportunity level, and local application level. The top level is a strategic concern as to why two organisations would choose to partner. IBM also organises its top service partners into a Platinum, Gold and Silver ranking based upon the level of joint engagement, co-creation and revenue.¹¹ Each service partner is carefully selected for its complementary capabilities and represents an opportunity to deliver a joint technology or consulting outcome that would not be possible if either firm were to rely upon its own resources alone.

Each strategic partnership is then given an area of focus, the second level, which defines the desired co-delivered impact (e.g., sustainability, digital transformation, or social value innovation) and choice of target client sector. The individual-level opportunity describes how the strategic partnership will pool resources to win and deliver particular client outcomes. These considerations define joint ways of working to successfully finish a project. Finally, the local application level is how a collaborative project is delivered in different settings if a common client is a multinational corporation with different geographies, for example. Like the ecosystems they are a feature of, strategic partnerships must be aligned at all levels to deliver on their promise of a differentiated client outcome. Alignment within ecosystems is multi-faceted at multiple levels and over various periods (e.g., from client opportunity to client opportunity in the case of IBM and as the ecosystem itself matures).

Some types of ecosystems are harder to align than others:

Managing any ecosystem is not easy, but some strategies are more challenging than others. Our findings indicated that those ecosystems that were more open to external members and the most horizontally integrated were the most complex and the hardest to align. However, they also typically offer the greatest strategic advantage precisely because they are hard to emulate or replicate by competitors. Therefore, the managerial ability to align complex ecosystems and maintain their fitness over time becomes itself a factor in sustainable performance and competitive advantage. Ecosystem leadership development is a must, in other words.

The established view of strategic alignment is that organisations operate best when they are in a stable state, which, when punctuated by a period of change, is followed by the restoration of equilibrium.¹² For example, biological ecosystems, such as the human body, are considered to be optimally functioning when all physical, chemical, and internal systems, such as temperature and fluid balance, are homeostatic – operating in a steady state within required limits.

However, a feature of ecosystems is that they operate in a constant state of change by design. Research indicates that complex adaptative systems, such as ecosystems, exist naturally in states of disequilibrium or a “far-from-equilibrium” state and are characterised by non-linear flows of information and resources.¹³ This is especially true when they are more horizontally integrated (i.e., egalitarian) and open. For this reason, alignment is dynamic and cannot mean “fixed” or homeostatic in the usual sense.¹⁴

Consider the example of swarming drone technology. The United States Air Force is seeking to replace its existing fleet of aircraft with a “system of systems” family of manned and unmanned aircraft of different roles, shapes, sizes, and capabilities. These individual systems, or ecosystem actors, run the whole gambit from air and ground fighters, reconnaissance, command and control, electronic defence, transport, and aerial refuelling. The idea is that each system acting in concert can offer any mission commander “a continuum of platforms most effective to [any] given problem” according to real-time and emergent requirements on the ground and in the air.¹⁵

The unique alignment challenge for focal firm leadership is maintaining organisational coherence while providing opportunities for the delegated authority necessary — perhaps even deliberately stimulating ecosystem disequilibrium — to ensure reconfigurability around emerging requirements, such as changes in customer buying behaviour.

Some companies may need to manage more than one ecosystem simultaneously:

Another key challenge is to handle multiple and different forms of ecosystems simultaneously. The idea of ambidexterity is core to published innovation literature. It is most closely associated with the ability of firms to efficiently deliver short-term results while also developing longer-term innovations. In other words, to overcome the perceived trade-off between efficiency and flexibility and ’’do both’’ in the words of Inder Sidhu of Cisco Systems.¹⁶ 

But another perspective on ambidexterity is the alignment of multiple different types of ecosystems simultaneously, each serving a different purpose and acting in ways that are complementary and not in conflict. Returning to the example of IBM, even though the critical mass of IBM as an ecosystem is shifting to ever greater degrees of openness and horizontal integration between partnering firms, it will likely retain its closed vertical ecosystem of resellers in addition to its more open horizontal ecosystem of key project partners and strategic partnerships. Managing multiple types of ecosystems simultaneously puts a strain on the focal firm management. It must be capable of juggling multiple different and ever-changing strategies and structures over time whilst maintaining coherence as one overall aligned system.

Or consider the even starker example of the Toyota Motor Company (Toyota). Toyota is famous for its laser-like focus on operational efficiency and its ability to manufacture high-quality cars at scale. Toyota pioneered lean manufacturing and the Toyota Production System, which relies on a tightly managed supply chain of numerous external suppliers and partners. As a closed vertical integrated ecosystem, Toyota exerts strong supervisory influence over its supply chain, setting and maintaining standards and monitoring performance.

Contrast this with its designed community, Woven City, mentioned earlier. While both require the capitalisation of external resources, the two ecosystems — closed vertical and open horizontal, respectively — could not be more different. When competitors are not equally ambidextrous, it becomes a source of sustainable competitive advantage.

Ecosystems must be realigned as required, which may be constantly:

Of course, even if a state of high alignment is achieved, in practice, the requirements for openness and integration are a constantly moving target, depending upon the introduction of new technologies, disruptions, changing customer preferences, and the positioning of competitors. Managers must be prepared to realign their approach to their ecosystem to better fit changing external requirements.

For example, the IBM strategic realignment journey overall might be described in three phases. Phase 1 was the focus on the reseller network prior to 2019. Phase 2 is the current move since 2020 to capitalise upon strategic partnerships, retaining a focus on a relatively closed network of key collaborations (closed horizontal). Phase 3 is envisioned to shift the critical mass of its ecosystem towards greater openness to enable the company to work with more and different strategic partners, with a goal of tripling its ecosystem income by 2025.

Takeda, once holding its in-house R&D approach, turned to an open-horizontal R&D partnership in the late 2010s to reflect changing requirements.¹⁷ As noted, ecosystems differ from the traditional hierarchy in that they may exist in a permanent state of disequilibrium. The more open and horizontally integrated an ecosystem, the less likely strategic realignment will occur in episodes. Therefore, strategic realignment is a key capability requirement and a constant state of being in some cases. Again, one-size-fits-all prescriptions are unhelpful.

Summary

The study presented in this series of articles confirms that firms’ attempts to leverage external resources by adopting ecosystem principles can offer clear advantages over more traditional and inwardly focused forms of organising. But ecosystems pose age-old challenges and some new ones, possibly making achieving alignment harder and explaining the high failure rate. So, which steps should managers follow to improve their chances of success?

First, understand the purpose — the why — behind the choice to adopt ecosystem principles. Second, select the most appropriate strategy supporting that purpose according to requirements for openness and integration. There is no one-size-fits-all ecosystem strategy that works in all situations. Third, select the ideal ecosystem structure as a combination of different forms of human, social, organisational, and technological capital required to ensure effective implementation of the chosen ecosystem strategy. It is only when an ecosystem’s purpose, strategy, and structure are in alignment that it can be successful.

The decision-making framework helps managers establish a dominant logic that encompasses the why, the what, the how, and the how well of their organisational ecosystem. This logic should be expressed as a narrative to all stakeholders across the entire ecosystem because it provides a common definition of success and the rules of the game for all, no matter how dissimilar, to abide by.

Please click here to read the Part A of the article series. 

About the Authors

Jonathan Trevor is Professor of Management Practice at Oxford Said Business School, University of Oxford, UK.

Kazuhiro Asakawa is Professor of Global Innovation Management at Keio University Graduate School of Business Administration, Keio University, Japan.

References:

1. Reeves, M., Lotan, H., Legrand, J., & Jacobides, M. G. (2019). How Business Ecosystems Rise (and often fall). MIT Sloan Management Review, 60(4), 1-6.,
2. Trevor, J., & Varcoe, B. (2016). A Simple Way to Test Your Company’s Strategic Alignment. Harvard Business Review.
3. Trevor, J., 2022. Re: Align: A Leadership Blueprint for Overcoming Disruption and Improving Performance. Bloomsbury Publishing.
4. Nahapiet, J., & Ghoshal, S. (1998). Social Capital, Intellectual Capital, and the Organizational Advantage. Academy of Management Review, 23(2), 242-266.
5. Asakawa, K. & Osada, E. (2003), op cit.
6. https://careers.arm.com/life-at-arm
7. https://www.nttdata.com/jp/ja/data-insight/2021/0531/
8. https://diamond-rm.net/technology/75930/
9. https://www.wsj.com/articles/taiwans-foxconn-completes-deal-to-acquire-sharp-1470994207
10. Trevor, J. and Williamson, P., (2019). How to Design the Ambidextrous Organization. The European Business Review. March – April 2019, pp. 34 – 43.
11. https://newsroom.ibm.com/IBM-Expands-Routes-to-Growth-for-Partners
12. Snell, S. A., & Morris, S. S. (2021). Time for Realignment: The HR Ecosystem. Academy of Management Perspectives, 35(2), 219-236.
13. Guastello, S.J., Dooley, K.J. and Goldstein, J.A., 1995. Chaos, Organizational Theory, and Organizational Development.
14. Snell, S. and Morris, S., 2019. Time for Realignment: The HR Ecosystem. Academy of Management Perspectives, (ja).
15. Rogoway, T. (2020), Northrop Grumman’s Plan to Replace The MQ-9 Reaper with Stealthy Autonomous Drones, The Warzone, The Drive: https://www.thedrive.com/the-war-zone/37498/northrop-grummans-plan-to-replace-the-mq-9-reaper-with-stealthy-autonomous-drones
16. Sidhu, I., 2010. Doing Both: Capturing Today’s Profit and Driving Tomorrow’s Growth. FT Press.
17. Korine, H. & Asakawa. K. (2020) Takeda’s Strategic Transformation: How a Large, Healthy Listed Company Reinvented Itself. THINK at London Business School, January 13, 2020. https://www.london.edu/think/takedas-strategic-transformation

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Drawing parallels between the initial exuberance for Electric Vehicles (EVs) and Artificial Intelligence (AI), this paper argues for paying heed to learning from the adoption of EVs. It underscores the need for strategic foresight, ethics, and robust digital infrastructures following the ‘learn to walk before running’ manner that AI should take to be sustainable yet transformative.

“The two most powerful warriors are patience and time.” — Leo Tolstoy.

Two of the greatest things that will make great changes in our lives and work and help our planet are Electric Cars and AI. Both will bring about a great revolution with new technology, changing our world in a way that impacts how problems get solved and how businesses, among other areas, grow well. But, just to underscore how innovation does help shape the future, look at Electric Vehicles (EVs): they are leading the most sustainable way of mobility and are a perfect example of using consciousness to advance in technology. 

The Paths of Electric Cars and AI  

Significant technological progressions revolve around AI and electric cars. The initial wave of EVs generated excitement among the public, and with this enthusiasm for cars, many anticipated a swift adoption by the public. However, this expectation did not materialise as quickly as initially thought. It took a considerable amount of time before individuals started buying EVs. The public’s acceptance of cars did not align with sparkling projections. AI serves as a technology that replicates human actions on computers. It encompasses roles such as customer service representatives, virtual assistants and personalised recommendations. AI systems are driven by the increased access to data.

Electric Vehicles (EVs): Pioneering Sustainable Transportation

Electric Vehicles (EVs) have emerged as leaders in revolutionising 21st-century transportation, notably reducing environmental impacts. Modern EVs, with advanced technology, ensure efficient commuting experiences and significantly contribute to cleaner air by lowering greenhouse emissions ^[1]. However, challenges such as the high initial costs and environmental concerns over battery life and disposal persist.^[2] Yet, the expanding charging infrastructure highlights a move towards overcoming these hurdles. While we go through the change with EVs, a similar shift is happening with AI that impacts our lifestyle and business operations.

Artificial Intelligence (AI): Transforming the Fabric of Society

AI is reshaping our world in more ways than one, if not literally. A new development of such advanced technology is bound to drastically change our way of living. AI, mainly through intelligent assistants and automation, will just keep taking off huge chunks of our daily interactivity and jobs, making everything easier. It will improve essential fields, such as healthcare, with the help of people staying healthy. AI will give a chance to new opportunities by taking routine jobs so that humans can focus on creative and strategic pursuits^[3]. AI will power the service to make it more efficient and personalised by providing all services, hence meeting our needs and wants.^[4]

AI is an astonishing innovation that society needs to use efficiently to unleash human potential. Now, It becomes imperative to examine the lessons learned from the journey of Electric Vehicles (EVs).

What are the lessons learned from EVs for AI?

This brings us to the interweaving journey of Electric Vehicles (EVs) and Artificial Intelligence (AI) Competence, with findings and strategic recommendations arising from compelling narratives. The EV journey has been storying and has critical milestones and challenges to share learning that can deftly be applied to the domain of AI to chalk a roadmap that is both progressive and pragmatic.

• Advanced infrastructures and reliable networks

The charging systems of electric vehicles are being designed and made in such a way that they become convenient and accessible for people. This has been done so people are encouraged to use electric vehicles more frequently and find them convenient. The lesson of electric cars is to build all the systems and structures that would allow an electric vehicle system to spread and work at a large scale.^[5]

However, it might even slow growth or make it difficult to do business if systems were not put in place, such as the charging infrastructure for electric car systems that followed later. 

We should understand that investment in the digital core systems for AI can make it part of everyday running businesses. If the digital system is rightly put in place, then artificial intelligence will be incorporated and commonly used.^[6]

• Investments and availability gap

The other typical area would be in the cost discussion; one level above the debate on costs would be the discussion of long-term value^[7]. The former underlines their value in the long run, and the latter develops strategies that could bring those financial barriers down to the accessibility and attractiveness of technologies in the larger sense.[8] The other examples of closing the investment gaps for AI are the growing availability of small language models, cloud service, and off-the-shelf and data-as-a-service solutions ^[9].

• Consumers /Stakeholders’ trust, ethics, and regulatory

Electric vehicles and artificial intelligence both have complex challenges to deal with. For electric cars, some of the early concerns were about how far they could go on one charge and not having enough places to charge them. ^[10]

For artificial intelligence, some of the main concerns are about ethics, privacy, and people possibly losing their jobs but also getting better capabilities and skills. Like electric vehicles, it is imperative to be open and honest with people, teach them about artificial intelligence, and show them the benefits ^[11]. But again, it will also require working closely with groups like the government that make rules to ensure innovations with artificial intelligence do not happen faster than considering the ethical issues^[12] and ensuring employees, people involved, and society as a whole entity .

Learning from the challenge and associated strategies within EV adoption, AI companies can arm themselves with a repertoire of tools to help them begin to traverse the complexity of landscapes to drive technological innovation ^[13]with strategic foresight and ethical consideration, making the implementation impactful.

Conclusion: Hype vs Effective Adoption

There is the last point that regroups the above connections explained: Hype vs effective adoption. An opinion writer ( myself) would say, ‘Many people are now as excited about AI as they were in the beginning with Evs. However, business leaders need to learn that AI, like electric cars, initially had practical issues solving problems that slowed consumers from using them.’ In terms of integrating AI, leaders should come up with realistic plans with enough time and money to do things right^[14]. That would surely help in the sustainable benefits of AI among stakeholders rather than fizzing out when the hype has died down. If corporations have to use AI to their advantage, there are no shortcuts.

Companies that would like to adopt AI must learn from the slow transition time to popularise electric cars. Moving too fast with new technologies often comes with unexpected problems ^[15]. Instead, careful methodologies should be applied to design AI to solve business problems, not just the flashy technology innovations that don’t help much ^[16].

Bringing innovations like AI means that companies must learn to walk before they can run.

Figure 1- Parallel analysis of EVs and AI adoption paths

The main point is that though promising, AI needs careful management, which did not take place fully for EVs’. Promising innovations like AI take time, massive shifts that change many things. Realistic expectations and patience are the keywords, with progressive evolution from meeting immediate problems and opportunities while creating building blocks of benefits and performances^[17] for the future using AI systems. Moving carefully and tactfully is better than rushing forward without properly thinking it through.

About the Author

Luca Collina is a management and transformational consultant who has managed transformational projects and Automation internationally (Tunisia, China, Malaysia, Russia). He now helps companies understand how GEN-AI technology impacts business, use technology wisely, and avoid problems. He has an MBA in Consulting, has received academic awards for his research, and is a published author. Thinkers360 named him one of the Top Voices, Globally and in EMEA in 2023. Luca continuously upgrades his knowledge with experience and research to transfer it. He ecently developed interactive courses on “AI & Business” and “Human Centric AI”. 

References

1. Hawkins, T., Singh, B., Majeau‐Bettez, G., & Strømman, A., 2013. Comparative Environmental Life Cycle Assessment of Conventional and Electric Vehicles. Journal of Industrial Ecology, 17.
2. Cox, B., Mutel, C., Bauer, C., Beltran, A., & Vuuren, D., 2018. Uncertain Environmental Footprint of Current and Future Battery Electric Vehicles.. Environmental science & technology, 52 8, pp. 4989-4995 .
3. Lakhani, K.( 2023) “AI Won’t Replace Humans — But Humans With AI Will Replace Humans Without AI” HBR
4. Danaher, J., 2018. Toward an Ethics of AI Assistants: an Initial Framework. Philosophy & Technology, 31, pp. 629-653.
5. Straka, M., Falco, P., Ferruzzi, G., Proto, D., Poel, G., Khormali, S., & Buzna, L., 2020. Predicting Popularity of Electric Vehicle Charging Infrastructure in Urban Context. IEEE Access, 8, pp. 11315-11327.
6. Chatterjee, S., Chaudhuri, R., Vrontis, D., Thrassou, A., & Ghosh, S., 2021. Adoption of artificial intelligence-integrated CRM systems in agile organizations in India.
7. Rao, A. ,2021– Solving AI’s ROI problem. It’s not that easy.–com
8. Enholm, I., Papagiannidis, E., Mikalef, P., & Krogstie, J., 2021. Artificial Intelligence and Business Value: a Literature Review. Information Systems Frontiers, 24, pp. 1709-1734.
9. Alshamaila, Y., Papagiannidis, S., & Li, F., 2013. Cloud computing adoption by SMEs in the northeast of England: A multi-perspective framework. J. Enterp. Inf. Manag., 26, pp. 250-275.
10. Aduama, P., Al‐Sumaiti, A., & Al-Hosani, K., 2023. Electric Vehicle Charging Infrastructure and Energy Resources: A Review. Energies.
11. Ahmad, S., Rahmat, M., Mubarik, M., Alam, M., & Hyder, S., 2021. Artificial Intelligence and Its Role in Education. Sustainability.
12. Brendel, A., Mirbabaie, M., Lembcke, T., & Hofeditz, L., 2021. Ethical Management of Artificial Sustainability
13. Li, X., Wu, T., Zhang, H., & Yang, D., 2022. Digital Technology Adoption and Sustainable Development Performance of Strategic Emerging Industries. Journal of Organizational and End User Computing.
14. Chatterjee, S., Chaudhuri, R., Vrontis, D., Thrassou, A., & Ghosh, S., 2021. Adoption of artificial intelligence-integrated CRM systems in agile organisations in India. Technological Forecasting and Social Change.
15. Demirkesen, S., & Tezel, A., 2021. Investigating major challenges for industry 4.0 adoption among construction companies. Engineering, Construction, and Architectural Management.
16. Leesakul, N., Oostveen, A., Eimontaite, I., Wilson, M., & Hyde, R., 2022. Workplace 4.0: Exploring the Implications of Technology Adoption in Digital Manufacturing on a Sustainable Sustainability..
17. Tse, T. , Esposito, M., Goh,D. , Lee, P., 2024 – Why Adopting GenAI Is So Difficult-HBR

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By Jonathan Trevor and Kazuhiro Asakawa

In the first of a two-part series, we explore how firms are reaping the benefits of leveraging a network of external resources for enhanced performance and innovation, but only when their organisational ecosystems are strategically aligned and fit for purpose.

Managing organisations to be highly aligned and capable of implementing their chosen strategy is an age-old challenge. It has only become harder now that many firms and public sector organisations embrace ecosystem principles in their organisational design.

Because they are more open, flexible, and integrated than the industrial-age hierarchy, ecosystem-based organisations can leverage external resources (think partners) to offer customers enhanced value upstream (think novel product and service development) and downstream (think flexible delivery) than they ever could be if relying upon internal resources alone.¹ However, published research indicates that up to 75% of ecosystems are considered failures.² The leaders we spoke to acknowledge the considerable potential of ecosystem thinking for their businesses but also expressed concern over the complexity of organising along such lines.

We studied a sample of leading international and Japanese firms with a stated ecosystem strategy to understand how they strategically align their organisational ecosystems to be fit for purpose and high performing. Strategic alignment, in this context, refers to the careful arrangement of the different components of an organisational ecosystem — from its purpose (its raison d’etre) to its strategy and structure — required to leverage external resources for strategic value successfully.³ Each component represents a strategic choice. Ecosystem leaders must select from various options the one that suits their circumstances best. All components should be highly aligned, ideally.

Whether to create or participate in ecosystems, our study helps managers work through these critical strategic choices and improve their chances of success. First, we organise ecosystem purpose, strategy, and structure into first, second, and third-order strategic choices. Second, we present a practical framework to help ecosystem leaders choose between their various options at each stage. The first and second-order choices are the focus of this article, Part A. Third-order choices and the unique implementation challenges presented by organisational ecosystems are the focus of a second linked article, Part B.

Good choices establish an organisational eco-system (ecosystem) as a functioning equilibrium capable of high performance, regardless of field. Poor choices create misalignment and dysfunction, perhaps explaining the reported high failure rate.

First Order Choice – For What Purpose?

Firms within our study sought to leverage external resources for one or more of the following three strategic reasons:

1. Enhanced technical innovation,
2. Enhanced customer offerings in the form of product and service design and delivery, and
3. Enhanced channels to market. Broadly, these correspond to upstream and downstream innovation.

Consider the example of blue-chip multinational IBM. IBM has had a long journey with its ecosystem, now considered a single business division and its fastest growing. As part of a wider corporate realignment, IBM renewed its emphasis on its partner ecosystem and Kate Woolley to provide a single point of leadership. IBM also doubled down on technology and consulting services, spinning out its managed service business to form Kyndryl, arguably to allow it to focus on its ecosystem and to remove managed services as a business and avoid causing tension with prospective partners.

The IBM ecosystem serves three key purposes centred around exploiting external resources to achieve strategic outcomes that would not be possible by relying upon internal resources alone. These include partners selling IBM technology (via a channel business), partners building on or with IBM technology (project-based partnerships), and strategic service partners who use IBM technology to build a bespoke managed service solution for their clients or to enhance their existing service offerings. In other words, IBM has one ecosystem operating under one leader but actively pursues three different ecosystem strategies simultaneously.

For a long time, IBM has operated an external network in the form of its channel business (think reseller network). Comprising thousands of vendors, the channel business aims to provide an efficient channel to market for IBM technology products. As part of a broader corporate realignment, IBM has doubled down on creating strategic partnerships with other industry-leading firms to pool resources and offer new and enhanced services to the market. Woolley says, “I think of partner ecosystems as one of the most powerful forces in technology. That’s where companies come together to solve the toughest business problems”.⁴

Or consider the example of the Development Bank of Japan (DBJ), a wholly-owned subsidiary of the Japanese Ministry of Finance. Created immediately post-World War II to facilitate Japan’s economic and social reconstruction, DBJ occupies a unique role in Japanese society, and its remit extends internationally, with offices in London, Singapore, Beijing, and New York. Through loans, investment, asset management, and advisory services, DBJ supports the development of nationally important industries, infrastructure, technologies, and social concerns. For instance, during COVID-19 and the dramatic decrease in travel and the potential collapse of the inbound tourism sector, DBJ provided emergency loans to small and large businesses to help them weather the storm, even in cases where it was unprofitable.

In our experience, ecosystems are often referred to generically under a single concept. A better way is to recognise that there are different types of ecosystems, each representing a distinctive strategy with unique implementation challenges.

In the long term, a key role of DBJ’s financial experts is to create and support ecosystems between different industry actors to encourage economic development. For example, DBJ convenes various aviation industry players, from airlines, unions, manufacturers, airports, and regulators, to transform the sector to be more sustainable in line with stated national targets for compliance with UN Sustainability Development Goals. DBJ represents a focal organisation, sitting atop an ecosystem of potentially disparate industry actors and encouraging collective action to transform an entire sector to be more environmentally sustainable through aligned incentives, reduced information asymmetry, technological collaboration, and collective action.

However, Japan has a tradition of embracing ecosystem principles in all sectors. Shiseido, a leading Japanese cosmetic company, was a pioneer among the Japanese firms in creating its ecosystem back in the 1990s to tap into state-of-the-art French fragrance knowledge through informal collaboration with fragrance experts in France.⁵

Whatever the reason for adopting ecosystem principles, it should be clear and compelling to all concerned, including (perhaps especially) external stakeholders, partners and clients. Every year, IBM invests considerably in enhancing the value of its relationships and networks across its entire ecosystem to create alignment with its purpose. Its primary vehicle is an event, ‘‘IBM Think’’. Before COVID-19, the IBM Think conference hosted audiences of 40,000 people in one location annually. Today, it is a hybrid event, including a smaller global in-person event for 5,000 invited employees, partners, clients, and even competitors; and a ‘‘Think on Tour’’ series of events in key geographies designed to bring “IBM, partners and clients together locally in the market where they do business.”

IBM Think creates a ‘‘melting pot’’ environment for its stakeholders to engage with the technology company and its upstream and downstream ecosystems, including innovation partners, strategic partners, and an extensive reseller network. According to Simon Meredith, Principal in Strategic Partnerships at IBM, the “Assumption of protectiveness is misplaced”, even with competitors, because the explicit purpose is to engage, learn, and co-create. Therefore, trust is essential in an ecosystem working to develop strategically valuable social capital, reduce the transaction costs of collaborating with external parties at scale, and mitigate the risk of conflicting interests.

Consider four things about your own organization: Does relying upon internal resources, while simpler, represent a capability trap? Do you need to leverage external resources to be competitive? If so, for what purpose? Is it to develop a network as an additional marketing channel(s) (i.e., primarily a sales network)? Or is it to capture knowledge for upstream product and service innovation, as in the case of Shiseido? Or is it to develop downstream capability to deliver enhanced products and services to your customers and clients, such as IBM strategic partnerships? Of course, it can be all three.

Second Order Choice — Which Ecosystem Strategy?

Once an organisation has committed to embracing ecosystem principles, the second-order management challenge is to choose which ecosystem strategy represents the best option for going about doing so. In our experience, ecosystems are often referred to generically under a single concept. A better way is to recognise that there are different types of ecosystems, each representing a distinctive strategy with unique implementation challenges.

Within our sample of companies and wider research, we identified four principal ecosystem strategies according to their openness to external actors and whether they were vertically or horizontally integrated. A critical risk is that failing to recognise these different types may lead managers to sleepwalk into creating, maintaining, or participating in ecosystems that are suitable for their purposes.

Closed And Vertically Integrated Ecosystems

Are as the name would suggest, a designated group of specialised partnering organisations operating within a closed network under the supervision of a dominant focal organisation. The focal organisation appoints constituent members and coordinates efforts against explicitly mandated targets and standards. The purpose is to ensure efficient performance delivery against required standards in efficient and predictable ways.

The McDonald’s supply chain is a good example of this type of ecosystem in action. Serving over 70 million customers worldwide daily, it is vertically integrated into every link of its supply chain to ensure it efficiently matches supply with demand. Whilst there are thousands of third-party suppliers supporting McDonald’s operations around the world, the firm relies upon a closed network of several long-standing partnerships with key suppliers. For example, the Martin-Brower Company has formed a key part of the US supply chain, delivering supplies to all of McDonald’s 15,000 restaurant locations in North America for decades.⁶

Sharp’s “black box” strategy in the 1990s also falls into this category. The Japanese consumer electronics firm enjoyed a significant competitive advantage in LCD-TFT technology in the 1990s by internalising the production of its LCD-TFT TV and the LCD-TFT panels, including partner operations, inside the firm on its huge production site in Kameyama, Mie-Prefecture. Sharp created its own closed and vertically integrated ecosystem of technical innovation and manufacturing, which was designed to isolate itself from other rival firms to avoid technology leakage.⁷ Regardless of physical footprint, this type of “closed” ecosystem is well established, and partnerships are often long-lived and highly stable.

Closed And Horizontally Integrated Ecosystems

Focus closely on membership of their ecosystem but encourage many more horizontal connections between the focal organisation and network members and between network members directly. The role of the focal organisation is less supervisory, and the nature of partnering is less transactional. It is more about nourishing connections between ecosystem partners for upstream and downstream innovation purposes.

An early example of this type of ecosystem strategy is the fast-moving consumer goods company, Nestle. Nestle has pursued a strategy of acquiring complementary firms as well as setting up research and development centres worldwide to act as dispersed “antennas” to sense and source local market knowledge and creativity. Acting as a focal point for this distributed network is Nestle’s R&D coordination unit, which coordinates, exchanges, and encodes locally acquired new knowledge in its product innovation and then pushes new products out to sales and marketing functions in those same geographically dispersed end markets.⁸

One of the interesting challenges with closed horizontal ecosystems is that they may involve partnering between companies that might previously have been — and still can be — competitors. Such ‘‘Frenemy’’ (i.e., friends who are also enemies) arrangements are common in ARM (described later) and its close and long-term manufacturing relationship with its biggest competitor, Intel.

IBM’s key strategic partners include deep commercial collaborations with hyperscalers (think Amazon Web Services), infrastructure partners, and global consultancies such as Ernst & Young. All strategic partnerships operate under a single internal organisational structure, the IBM Ecosystem, and one leader, Woolley. To reduce competitive conflicts and greater freedom for ecosystem engagement, IBM divested itself of its managed infrastructure business, Kindryl, as mentioned previously. A second challenge is to find the right partners and invest in the resources necessary to form and capitalise upon productive relationships.

Open And Vertically Integrated Ecosystems

Are much more open than their closed-vertical counterparts, resembling marketplaces more than supply chains. The focal organisation acting as a platform maintains a dominant supervisory role within the ecosystem, but membership is much more open and scalable, with potentially many thousands of external actors interacting with the focal organisation and its customer, if not with each other.

One of the interesting challenges with closed horizontal ecosystems is that they may involve partnering between companies that might previously have been — and still can be — competitors.

The Apple App Store is an obvious example. The purpose is to draw upon the creative resources of many thousands of developers to offer Apple product users enhanced choice over applications available through the App Store and through which they can personalise the functionality of what would otherwise be a standardised (albeit smart) device. Apple, and Google, its main rival, control over 95% of the app store market outside of China, worth an estimated $6.3 trillion.⁹ Other platform firms, from Uber to the Amazon marketplace, also use digital platform technology to efficiently match supply (from many thousands of drivers or sellers, respectively) and demand from customers.

In the internal context, such arrangements are prevalent in the form of global value chains (GVCs), in which the different stages of production activities are performed across different countries, each of which may be its own supporting ecosystem made up of local partners, suppliers, and innovators, to match local market customer requirements. Firms often disperse value chain activities ranging from R&D, design, production, and marketing for this purpose.¹⁰

Extending the logic of openness even further, some ecosystems are highly decentralised and geared around tapping into the wisdom of the crowd. Consider the example of the Linux community, with its many thousands of contributors. Being a crowd-sourced development, the Linux computer operation system relies upon individual developers to contribute their time and expertise to a common endeavour for free. The incentive is to create something new, and participation is voluntary and collaborative. In that sense, Linux is open to a virtually unlimited external talent pool.

Compared with the first two “closed” types, this more open type of ecosystem is a recent strategy, and the subject of considerable focus, especially in terms of the digital transformation agenda.

Open And Horizontally Integrated Ecosystems

Are characterised by their openness to many diverse network actors and the horizontal nature of their connection. Horizontal Open ecosystems resemble communities, where the focal organisation provides the environment for the discretionary effort of the many associated partnering individuals and organisations to lead upstream and downstream innovation within a field of technology or industry.

Consider the example of the technology company ARM Holdings. ARM chips power 80% of the world’s smart devices, everything from phones to tablets to the emerging Internet of Things. Its strength is its ability to harness the power of its network resources, in the form of knowledge, human capital, technological expertise, and innovation capability, to design the most powerful and efficient (think low power consumption) chips available to the market. And yet, ARM employs only 7,500 people, mostly located at its headquarters in Cambridge, UK, where it originally started life in a converted farm building in the ‘‘Silicon Fen’’ cluster of high-tech start-ups around Cambridge University. But despite its modest headcount, ARM has over 20,000 external partners within its global innovation ecosystem.¹¹

The same principles can apply but in a physical location. Woven City is the Toyota Motor Company’s (Toyota) purpose-built innovation community located in the city of Susono near Mt Fuji, Japan. Analogous to Silicon Valley in the US or Silicon ‘‘Fen’’ in the UK, of which ARM is a product, Woven City is, by design, an open ecosystem integrating the delegated efforts of many thousands of partnering companies. They operate side by side, physically and virtually, to further Toyota’s goal of realising radical new mobility technologies.

Each form of ecosystem must be structured appropriately if it is to perform its strategic function capably as intended.

Sosei Group Corporation is a holding company of biopharmaceutical companies specialising in drug development. Sosei Group enters into license agreements primarily with US, EU, and Japanese companies to market the licensed drugs in Japan and find alternative usage for such drugs.  Sosei, in its foundation era, chose to locate itself in the UK to engage in R&D collaboration with local universities and venture firms to tap into the innovation ecosystem in the UK.¹² Similarly, Takeda, a leading Japanese pharma, adopted this type of ecosystem by deciding to engage in drug discovery through open partnerships worldwide.¹³

IBM’s “Collaboratory” strategy also falls into this type of ecosystem strategy, for the company engaged in open innovation even without setting up its own R&D labs through active collaboration with universities, government, and commercial partners within host country ecosystems. Open and horizontal ecosystems represent the most recent and the most complex type to emerge in theory and practice.

Summary

Each of the four ecosystem strategies presented here is distinctive in its own right. Each presents managers with unique strategic advantages. So, which is best? It depends upon requirements, of course. Consider, in your case, how open and integrated you need your ecosystem(s) to be.

If your purpose is to develop an efficient supply chain, a closed and vertical strategy may be most appropriate. Or, if it is to create a platform to fuel a market around your product or service, open and vertically integrated is the best option. Or, if it is to create an innovation community highly aligned with your product development cycle, a select group of highly integrated strategic partnerships might be best.

Whichever ecosystem strategy is chosen, each also presents managers with unique implementation challenges. Each form of ecosystem must be structured appropriately if it is to perform its strategic function capably as intended. Designing an ecosystem structure to be fit for purpose is an additional — and critical — alignment consideration and the focus of Part B of this series: Designing Organisational Ecosystems & Overcoming Barriers to Implementation.

About the Authors

Jonathan Trevor is a Professor of Management Practice at Oxford Said Business School, University of Oxford, UK.

Kazuhiro Asakawa is a Professor of Global Innovation Management at Keio University Graduate School of Business Administration, Keio University, Japan.

References:

1. Williamson, P. J., & De Meyer, A. (2012). Ecosystem Advantage: How to Successfully Harness the Power of Partners. California Management Review, 55(1), 24-46.

2. Reeves, M., Lotan, H., Legrand, J., & Jacobides, M. G. (2019). How Business Ecosystems Rise (and often fall). MIT Sloan Management Review, 60(4), 1-6.,

3. Trevor, J. & Varcoe, B., (2017). How Aligned is Your Organization? Harvard Business Review. 7 February. Harvard Business School Publishing.

4. https://www.ibm.com/blog/qa_kate_woolley/

5. Asakawa, K, & Doz, Y. (2002) Shiseido France 1998. INSEAD Case #4934.

6. https://www.allthingssupplychain.com/the-amazing-supply-chain-of-mcdonalds/

7. Murtha, T., Lenway, S. & Hart, J. (2001) Managing New Industry Creation: Global Knowledge Formation and Entrepreneurship in High Technology. Stanford Business Books.

8. DeMeyer, A. (2003) Nestle S.A., INSEAD Case, #2692.

9. https://www.businessofapps.com/data/app-stores/

10. https://www.oecd.org/industry/global-value-chains/

11. Trevor, J. (2022). Re: Align: A Leadership Blueprint for Overcoming Disruption and Improving Performance. Bloomsbury Publishing.

12. Asakawa, K. & Osada, E. (2003) Sosei (A) & (B), Keio Business School Case, #20030712J.

13. Korine, H. & Asakawa, K. (2019) Takeda: The Governance of Strategic Transformation (A) & (B), London Business School Case. #LBD Ref: CS-18-24/25; HBP: LBS222/223.

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For all organisations, there is the need for ESG reporting to be interoperable because it impacts the ability of organisations to streamline their reporting processes and communicate what is being done to their stakeholders, effectively. 

In October 2023, the EU defeated an attempt by some of its Members of the European Parliament (MEPs) to water down the requirements regarding its European Sustainability Reporting Standards (ESRS), thereby ensuring that, through the incorporation of double materiality, it would achieve its ultimate goal of giving non-financial and financial reporting total parity. Following this news, the Global Reporting Initiative (GRI) claimed that “a high level of interoperability between the new ESRS and the GRI Standards – already widely used by thousands of organizations in Europe and around the world – [had] been achieved.”¹  Although the GRI acknowledged that ESRS is mandatory and the GRI voluntary, their claim nevertheless called attention to the issue of fungibility, implying that the GRI stood alone in providing organisations with a truly global reporting standard. Our view is that the issue of fungibility is more complex and nuanced than that, while appreciating the value that the GRI brings to the table.

Increasingly, standards set by the largest trade and political blocks such as the EU have a degree of extra-territoriality. In the case of the EU, this means some laws apply in specific contexts beyond the jurisdiction of member states. This will be the case with the new ESG reporting standards. ESRS, for example, will apply to all non–EU companies that were previously in the scope of the Non-Financial Reporting Directive (NFRD), which was the predecessor to the CSRD. As the London Stock Exchange has noted, this includes Companies with securities, such as stocks or bonds, listed on a regulated market in the EU; Companies with annual EU revenues exceeding €150 million and an EU branch with net revenue of more than €40 million; and Companies with annual EU revenues exceeding €150 million and an EU subsidiary that is a large company, defined as meeting at least two of the following three criteria: more than 250 EU-based employees, a balance sheet above €20 million or local revenue of more than €40 million.²  

Even within member states of the EU, there is cultural and legal diversity. Across the world there could be orders of magnitude more difference and complexity. How large organisations address these differences in their supply chains and international subsidiaries will have significant implications for their own reporting and for the success of ESRS itself. We should not expect comparable reporting across the globe to be achieved by asking the same questions and scoring the answers against a common set of exemplars. Instead, we should encourage reporting organisations to interpret the quantitative data through a qualitative lens that acknowledges cultural, political, and geographical differences. Metrics that in western Europe, for instance, could be seen as poor or failing could be evidence of succeeding and progressing in another part of the world.

The professional judgment of auditors may well prove sufficient to map the differences in data and interpretation across the developed world in much the same way that judging materiality in financial reporting allows for qualitative analysis alongside the strictly quantitative assessment of accounts. However it is done, we should not expect specific data points plotted on a common scale to sufficiently describe compliance to ESRS. We must allow room for a four-dimensional analysis; the landscape that surrounds the data now, in the past, and in the future. Progress from a low base is still progress, especially if it is achieved in adversity.

Nothing in this approach should be taken as excusing the inexcusable: modern slavery is abhorrent wherever it is found; corruption is pernicious in any circumstances. Instead it is about finding meaningful contexts with which to draw a moral equivalence. 

A thought experiment should illustrate that point. Let us consider a fashion brand with a European head office and distribution, and outsourced manufacturing across the globe. One such factory is in Bangladesh. The enterprise has publicly stated a commitment that no employee will be paid less than the living wage. The living wage for the most junior staff in the distribution hub in rural Netherlands is €20,700pa³, the living wage for a Bangladeshi textile worker in urban Dhaka is €2,565pa⁴. The enterprise can audit both sites and establish if the living wage is being paid. However, the living wage in the Netherlands is lower than the legal minimum wage of €23,940pa⁵. No one should be receiving less in the Netherlands. While the minimum wage in Bangladesh is €1,258.50pa⁶, almost half that of the living wage in Dhaka. Is it enough that Dhaka workers are paid roughly a tenth of the income of workers in the Netherlands? Are the Netherlands workers simply lucky that the statutory wage limit is set higher than the living wage? Or is the enterprise obligated to uprate the Bangladeshi incomes by a similar proportion?

Other examples can be found throughout the scope of the standard, such as power generation. While many of the countries most dependent on coal-fired power have plans to phase down coal, if not to phase it out altogether, many are still bringing new coal-fired power stations online. It is estimated that somewhere between 170 GW and 270 GW of capacity will be built in upcoming years⁷, making many countries´ phase down plans look ambitious and pushing eventual phase out further into the future. Enterprises select international locations and venture partnerships for compelling business reasons outside of power generation but will now have to think of its consequences within the supply chain and what mitigation measures could be meaningful.

It is questions like these that enterprises must grapple with in addressing the requirements of ESRS reporting. It is not just data, but what the data means and what it says about the enterprise, its values and its impact on society and the environment.

About the Authors

Tim Bovy has over 35 years of experience in designing and implementing various types of information and risk management systems for major law firms such as Clifford Chance; and for international accountancy firms such as Deloitte. He has also developed solutions for organisations such as BT, Imperial Tobacco, Rio Tinto, the Kuwaiti government, The Royal Household, and the US House of Representatives. Tim is an elected member of The Royal Institute of International Affairs, Chatham House, an Independent Think Tank based in Central London, and holds a BA degree, magna cum laude, from the University of Notre Dame, and MA and C.Phil degrees from the University of California, Davis.

Ian Hodges has worked in a variety of information management roles over a twenty-year career. He has designed and implemented records and information management systems at a national scale, developing parts of the digital archive at The National Archives (UK). At a corporate level he’s undertaken information management projects with The Royal Household and Her Majesty’s Treasury. Ian also has information rights expertise developing policies and procedures for Freedom of Information and Data Protection compliance and working as a Data Protection Officer. In addition to CISM, CIPP/E and CIPM certifications, Ian holds a BA degree from the University of Southern Queensland, a postgraduate diploma from Deakin University, Melbourne and an MA from Birkbeck, University of London.

References

1. GRI, “Final Adoption of ESRS a ‘Game Changer’ for Mandatory Reporting,” 18 October 2023, available at https://www.globalreporting.org/news/news-center/final-adoption-of-esrs-a-game-changer-for-mandatory-reporting/
2. Elena Philipova, “How Many Companies Outside the EU are Required to Report under its Sustainability Rules?”, LSEG, June 02, 2023, available at https://www.lseg.com/en/insights/risk-intelligence/how-many-non-eu-companies-are-required-to-report-under-eu-sustainability-rules
3. Netherlands Enterprise Agency https://english.rvo.nl/topics/csr/living-wage#what-is-the-living-wage%3F accessed 18 January 2024.
4. Global Living Wage Coalition https://www.globallivingwage.org/living-wage-benchmarks/urban-bangladesh/ accessed 18 January 2024.
5. Government of the Netherlands https://www.government.nl/topics/minimum-wage/amount-of-the-minimum-wage accessed 18 January 2024.
6. Trading Economics https://tradingeconomics.com/bangladesh/minimum-wages#:~:text=Minimum%20Wages%20in%20Bangladesh%20remained,12500%20BDT%2FMonth%20in%202023 accessed 18 January 2024
7. Anadón L D, Nemet G and Verdolini E (2023). The Future Costs of Nuclear Power using Multiple Expert Elicitations: Effects of RD&D and Elicitation Design. Environmental Research Letters. 28 April 2023.

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The rise of viral trends on platforms like TikTok has completely transformed the industry, particularly in sectors such as fast fashion, fast jewellery, and fast beauty. These industries rely on quick production to capture the attention of the younger generation. Shein, for example, is known for its ability to bring designs from concept to production within days. It is projected that their sales will reach nearly $60 billion by 2025, highlighting the immense power of this social media-driven market (FT, Feb 2024). 

The appeal of the fast-paced world is undeniable. It has managed to mesmerise people with the notion that more and cheaper items are somehow cool. The trendy and affordable clothing, jewellery, and beauty products offered by these companies, along with frequent new arrivals, easy returns, and free shipping options, create a sense of novelty and excitement. In turn, this gives people a rush of dopamine that is hard to resist. When combined with effective social media marketing strategies, it becomes clear that this approach does not encourage mindful consumption or prioritise quality over quantity. 

Concerns about ethical and environmental practices in the “fast industry” have been raised before. The sustainability of their business model is being called into question due to these concerns. 

During a recent sustainability roundtable discussion, I couldn’t help but express my frustration and inquire about the sustainability of this fast-paced business model. I even wondered if government intervention might be necessary. The growing addiction to this type of consumption and our inability to break free from it are major concerns – especially considering that Gen Z and Zillenials are often regarded as the most mindful and environmentally conscious demographics.  

I’m coming to realise that this may be true when it comes to food choices or certain lifestyle decisions but not necessarily when it comes to fast fashion. On platforms like TikTok and some fast fashion websites, the constant stream of new arrivals coupled with a sense of scarcity can create a compulsive desire to buy out of FOMO (fear of missing out). These platforms exploit certain psychological tendencies in young consumers, and older ones too. Additionally, the easy accessibility of online shopping and frequent discounts lead to impulsive purchases that exceed both needs and budgets. 

As the negative consequences of the “buy, use, discard” cycle become increasingly apparent, is it time for businesses to explore alternative models that optimise for planetary boundaries not just the bottom line?   

There are reasons to be hopeful. Retailers like Bijenkorf and Selfridges are leading the way by setting ambitious targets for circular transactions. By 2030, they aim for 30% of all purchases to involve recycling, renting, resale, refilling, or repair. This means that in just six years, one out of every three items bought will fall into these categories. While this may seem like a daunting task, it is not impossible. 

In fact, the market for second-hand apparel is thriving. According to Statista (Statista, Nov. 2023), the global Second Hand Apparel market was valued at USD 33002.0 million in 2022 and is projected to grow at a compound annual growth rate (CAGR) of 15.41% until 2028 when it is expected to reach USD 77981.3 million. This data proves that there is a significant demand for sustainable fashion options. 

This is where trading comes into play. Trading is the oldest form of commerce, and in a time when many people have an excess of “stuff” but limited budgets, this may be the perfect opportunity to revisit this new-old business model.  

Imagine a world where individuals can easily exchange pre-owned items – from clothes and books to electronics and collectibles – instead of constantly buying new ones. 

You don’t need to work very hard to imagine it. In the USA, trading is emerging as a scalable and viable solution to address the issue of overconsumption. People are starting to gravitate towards brands that offer better quality products that can be traded in the future. The new EU legislation on producer responsibility mandates that products should be repairable, which inherently means they need to be of better quality. 

Companies like Sibs App are at the forefront of this shift towards trading. Often referred to as the TikTok of trading, Sibs App provides a platform for individuals to trade their items and give them a second life. The app not only facilitates trading but also promotes a much-needed change in mindset by encouraging users to view their possessions as valuable resources. 

While platforms like Depop, Vinterior, Facebook Marketplace, and Nextdoor are successful destinations for buying pre-loved items, they do not focus as much on trading. 

As businesses and consumers embrace trading, it has the potential to become the business model of the future. This shift would enable companies to achieve their circular economy goals while breaking free from the cycle of fast fashion, fast beauty, and fast jewellery. Ultimately, trading promotes a more responsible and mindful way of living – one that allows for an unlimited wardrobe without the negative environmental impact of constant production. 

So while challenges persist and economic uncertainties loom large in the fashion industry, there are signs of economic prosperity ahead – but this will require new thinking and a shift in mindset towards resourcefulness and longevity.  

About the Author

Diana Verde Nieto, is an entrepreneur, author and prominent business leader. Diana has a remarkable track record of over 20 years of experience in guiding companies towards sustainable economic growth and innovation. She established one of the world’s pioneering sustainability communication consultancies in 2002, which she exited in 2010. In 2011, she co-founded Positive Luxury and spearheaded the enterprise until 2022, continuing to sit on the board. Diana serves as an advisor Sustainnovate, The British Beauty Council, La Praire and The United Nations Department of Economic and Social Affair. Diana has recently released a book- Reimagining Luxury: How to Build a Sustainable Future for Your Brand.

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As globalisation increases, corporations around the world seek better ways to address their global customers. The geographic-area model that served firms so well when customers confined their operations to individual countries is inadequate for customers that operate globally. In this article, we present four alternative approaches to develop organisation structures that enable companies to better implement global strategies.

Consider the following dilemma, based on a real occurrence:

As part of its European operations, a major U.S. corporation, Firm A, operates wholly owned subsidiaries in, among other countries, both Germany and France. All country managers are expected to meet or exceed aggressive P&L targets. Recently, the German subsidiary has been successful in selling several expensive machines to an important customer, Firm B, for its production operations. These machines have been delivered and successfully installed, and Firm A’s German subsidiary has booked the revenues. As part of the contract, Firm A’s German subsidiary management has agreed to provide Firm B with ongoing service for the next five years.

One year after machine installation, following a production rationalisation exercise, Firm B decides to transfer the machines to its French factory, just a few miles across the border from its German location. Firm B requests reinstallation assistance and ongoing service, as previously agreed with Firm A’s German subsidiary. For a variety of reasons, not the least of which is lack of language skills, Firm A’s French subsidiary would have to provide needed services. The French country manager refuses to provide the needed services. When asked to explain his decision, he states:
“I have the solemn responsibility to maximise profits in France, for the benefit of the company and its shareholders. If I take on reinstallation and ongoing service for Firm B’s machines, my expenses will increase significantly, and profits will fall. Furthermore, service is a core strength in France, but I run a very tight ship on service personnel; I would have to hire more people and get them up to speed. My German colleagues have suggested they would transfer funds to France, but we have very different ideas on these amounts. They have also raised the possibility that their service personnel would continue to service Firm B in France, but that would violate territorial boundaries, not to speak of language difficulties and a host of other problems.
“Frankly, I do not approve of the service arrangement with Firm B. In order to make the original sale, my German colleagues gave away the farm on servicing the machines. The contract is very open-ended, including significant liability for parts. My French organisation is being asked to assume a major cost drain. It would be one thing if we had sold the machines and received the revenues in France, but all revenues went to Germany. I’m not going to do it. I can’t risk the viability of the French subsidiary, and our ability to serve the corporation.”

In such a situation, the European vice president would have to intervene, so that service to an important European customer, Firm B, did not atrophy, with serious consequences for long-run revenues.

This illustration is just a single incident, but as firms increasingly operate outside their home countries, inter-country incidents like this have grown substantially. Furthermore, in this illustration, both countries – France and Germany – are the responsibility of the European VP. But had the countries been Portugal and Brazil, or the Netherlands and Indonesia, any resolution between country managements would have been intercontinental, and far more difficult.

It is axiomatic in management circles that structure follows strategy. The firm contemplates its environment, formulates objectives, then develops strategy by securing and allocating resources in pursuit of those objectives. The firm constructs an organisation structure that allows strategy implementation.

Background

Following the Second World War, U.S. firms developed aggressive revenue-growth objectives and related strategies for entering foreign markets.¹ They faced the challenge of constructing organisation structures to support these efforts. The academic leader in understanding these efforts was Harvard Business School professor Raymond Vernon.²

Vernon described an organisation progression from export department to international division, to either a product-division or geographic-area framework. In business-to-business (B2B) markets, the geographic-area structure (GAS) was the most popular. This approach proved highly successful in allowing U.S. (and European) firms to make significant progress in penetrating foreign markets.

In geographic-area structures, the firm typically divides the world into several areas/regions. For a U.S. firm, a typical structure comprises four components: North America; Latin America (including Mexico); Europe, Middle East, and Africa (EMEA); and Asia. Other firms employ somewhat finer-grained approaches; for example, Tetra Pak, the European packaging firm, employs a structure comprising nine geographic areas.

Country managers are responsible for objectives, strategy, and implementation for their countries, including meeting P&L targets. Country managers direct multifunctional teams. Revenue responsibility is universal; sometimes country managers also direct operations/manufacturing. They may also import products from sister geographies, often by means of complex transfer-pricing mechanisms. In some corporations, country managers report to powerful regional vice presidents (RVPs). In other firms, as a holdover from an international-division structure, the RVP role may be largely ceremonial; country managers effectively report into corporate. Regardless, this organisational form drives local performance attainment in specific countries; it discourages cooperation across countries.

The poster child for the geographic-area organisation was IBM. As IBM launched its groundbreaking System 360 (and later System 370) mainframe computers, it expanded globally via individual country subsidiaries in each major country it entered: IBM France, IBM Italy, and so forth. These subsidiaries operated semi-independently and were, in many ways, just smaller clones of the parent organisation. The wholly owned geographic subsidiary approach, under the IBM World Trade umbrella, was very successful in allowing IBM to penetrate foreign markets, globally.

As many firms have sought to grow foreign revenues, and the world has grown increasingly flat,³ the GAS has proven very successful and highly durable. U.S., European, and Asian companies alike have gravitated to this organisation structure. This geographic framework is a fine way to organise when individual customers operate within their home countries, and do not venture abroad. Problems arise when customers operate in multiple countries, and cross-border interactions are frequent.

Indeed, a half-century after Vernon’s groundbreaking work, corporations that seek revenues in many country markets around the world are discovering that the GAS, once so effective in addressing global markets, no longer functions effectively and efficiently. A combination of successful international activity by customers and environment change, has led to strategic evolution that requires a serious rethinking of this organisational approach.
That is the situation faced by Firm A in the opening vignette.

Managing Global Customers

The problems raised by the vignette have vastly increased during the past quarter-century. Suppliers seeking revenues from their products globally have discovered that individual customers do not operate in just one, or even a few, geographically proximate countries. Rather, they have bases in many countries around the world.

Global customers want to be treated similarly in the various countries where they operate. They want to be able to access similar (if not identical) products worldwide; in some industries – high tech, for example – global compatibility is the key requirement. Customers want similar levels of service and consistency in contractual terminology. They want the same (or at least similar) prices in their different country locations. In cases where prices are different country by country, they want to understand why. Typically, explanations based on cost differentials are acceptable; explanations based on local competitive activity or the exercise of monopoly power are not.

As regards procurement, customers may be fully decentralised; each country organisation makes its own decisions. Or they may centralise many purchases in a single location. If a customer operates globally, yet with a decentralised procurement operation, there is little value for a supplier in treating this customer in a global manner. Far better to address such customers via a classic multi-country geographic structure.

Regardless, many firms have moved, and continue to move, to centralised global procurement. Centralisation offers significant advantages: focused procurement expertise, the opportunity to access the best suppliers globally, standardisation, discounts on bulk purchases. Many global firms are adopting this approach, at least for some categories of spend. For this reason, an approach to customers that relies solely on salespeople/account managers reporting through a single country organisation is no longer sufficient or appropriate.

As one way to address this evolving customer environment, suppliers have evolved their sales efforts via the appointment of global account managers (GAMs). Frequently, for a firm’s most important global customers, suppliers appoint individual GAMs to focus exclusively on a single customer; an individual GAM may also assume responsibility for several smaller customers. The critical organisation-structure decision concerns GAM reporting relationships, and their degree of responsibility/authority for the entire supplier-customer relationship.

The opening vignette illustrated the deficiencies of the traditional GAS in addressing global customers. The critical challenge is to construct an organisation structure that allows the firm to grow revenues from its global customers. Solving this challenge is critical as, for most firms, global customers are the “20” in the 80:20 rule that describes most firms’ revenue distributions. To state this fact somewhat differently: global customers are frequently the firm’s most important, most strategic, and largest customers.

Essentially, there are four approaches: GAM-integrated geographic-area organisation; market-integrated global account organisation; global-customer division.

Each of these approaches has, at least theoretically, one major benefit frequently sought by customers: a single point of contact. In addition to the supplier’s various country organisations managing local geographically focused interfaces with customers, the supplier assigns to a single GAM responsibility for managing the overall, global supplier-customer relationship. Hence, customers now have not only a single point of contact, but also a clear escalation route for addressing issues that cannot be solved locally.

Across the four organisational options, the nature of the relationship between the GAM and the local salesperson/account manager varies markedly. In some situations, the local salesperson/account manager reports directly, solid-line, to the GAM. In other cases, the relationship is a formal dotted line; the local salesperson/account manager reports solid-line into the country organisation. In the weakest form of GAM-local relationship, the salesperson/account manager reports solid-line into the country organisation, and a formal relationship with the GAM is totally absent. Lacking direct authority, the GAM’s only option is to manage without authority.

Organisational Approaches for Managing Global Customers

We now discuss four organisational approaches to address global customers, each with its pros and cons.

GAM-Integrated Geographic-Area Organisation (GIGAO)

Global firms often adopt the GIGAO approach to address global customers when they realise that the traditional geographic-area organisation is inadequate to implement their global strategies, as in the opening vignette. The impetus to introduce this organisational approach typically derives from some combination of the firm’s desire to focus sales responsibility in a single location, and customer requests for a single point of contact.

In the prototypical arrangement, the supplier’s local account manager in the customer’s home country, frequently the greatest revenue source, assumes global customer responsibility. Overnight, the local account manager’s responsibility shifts from local to global, as their title shifts to global account manager (GAM). Typically, the firm reinforces the new GAM role by enhancing sales quota requirements from local – individual-country-based – to global.

Along with the two customer benefits noted previously – focused attention via GAM appointment and single point of contact – this organisational form has one significant advantage over the other three approaches described below: organisational continuity. The geographic-area organisation remains intact. Country managers and regional VPs maintain their fields of authority and responsibility. Top management does not have to deal with discontent in the ranks caused by organisational change.

Notwithstanding this non-trivial advantage, GAM integration into the traditional geographic organisation has several disadvantages. First and foremost is skill deficiency in newly appointed GAMs. Managing an important customer domestically requires one set of skills; the skill requirements to manage an important customer globally are quite different, and more extensive. To a certain extent, training and coaching can address this issue, but specific recruiting for GAM positions (internal or external) may be necessary.

A second area of difficulty concerns job requirements and the ability to secure resources to be successful. Concerning GAMs, not only must they develop and maintain good relationships at customer headquarters, they must also direct and manage local salespeople in those countries where the customer does business. But these GAMs, typically, have no formal authority to execute this task. Indeed, the strong advantage of organisational continuity militates against GAMs. With no line authority over geographically based colleagues, it’s very difficult to establish a consistent approach to a single customer around the world. The GAM requires significant skill to manage without authority. Indeed, because local salespeople report through their country organisations, GAMs may find it difficult to accomplish needed tasks, particularly if they are untrained.

An especially serious issue is pricing. Regional VPs/country managers typically set prices in their own areas of geographic responsibility. Frequently, coordination among countries/regions in setting prices is minimal. Customers wonder why prices for similar products differ from country to country (region to region) for no apparent reason! Faced with this problem, in the absence of formal line authority, the GAM has immense difficulties in developing coherent price schedules globally.

Implementation of the GIGAO structure causes country managers a serious problem in securing and allocating resources. By assigning global responsibilities to previously domestically focused account managers, in the extant geographic-area organisation, country managers lose a portion of their top account managers’ time and effort. In addition to focusing on their core customer(s) domestically, GAMs have global responsibilities. In particular, a GAM may believe that travel abroad to work with local salespeople in other geographies is important in order to better serve the customer. Regardless of the value of such travel, hopefully to assist in increasing revenues, the GAM’s country manager will not benefit; revenues will increase in other countries! To rub salt into the wound, the GAM’s trip expenses must be paid by the home country organisation. If the country manager refuses to pay, the trip does not occur, and potential revenues for the firm are foregone.

A related issue concerns the quality of local salespeople/account managers assigned to work locally with foreign-based global customers. Charged with maximising profits in their specific geographic areas, country managers most likely assign their best people to direct and manage their major domestic customers. The local operations of major global customers may not be served by the most competent local employees.

There are, of course, ways to ameliorate some of these problems. First, the firm can run two sets of books for each country. One set includes only real revenues. The second set includes duplicated revenues (“dupes”). Revenues earned from the GAM’s customer abroad are duped to the GAM’s home country. From the perspective of the country manager, this arrangement justifies allowing and funding foreign travel.

The firm may also address expenses for foreign travel by setting up a separate budget for all GAMs, managed by a GAM programme office. This office may also attempt to address the sorts of inter-country issues highlighted in the opening vignette. The seriousness with which the firm addresses global accounts may be judged by the organisational level of the programme office’s director.

Although duped-revenue systems and expense offsets may ameliorate structural problems with the GAM-integrated geographic-area organisation, the critical measure for the GAM’s boss is in-country revenues and profits. Notwithstanding corporate stock and stock-option awards to country heads, designed to reward behaviour that improves overall corporate performance, the core task of these executives is to hit their in-country numbers. In most firms, failure to succeed in this regard is not mitigated by superb global performance of directly reporting GAMs.

In some corporations, the CEO chairs a committee of regional VPs. This committee serves as a means of keeping top corporate officers up to date with company fortunes globally, and as a means of sharing best practice. At firms that have seriously committed to managing global accounts, by appointing a senior executive as head of the programme office, this person sits on the committee as a full member. In this manner, regional VPs face subtle pressure to cooperate with the global programme.

Another organisational approach to facilitate the GIGAO structure is to introduce two new organisational positions: regional account manager (RAM) and headquarters account manager (HAM). The purpose of the RAM is to support GAMs by providing a global counterweight to the dominant country-level geographic organisational focus and help resolve inter-country issues.

The HAM has a quite different focus. Situated at corporate, the HAM provides GAMs with information about company-wide issues that would not otherwise reach GAMs though the GAS. The HAM may be located in the global programme office.

The GAM-integrated geographic-area organisation has the feel of inserting a square peg into a round hole, but with the ability to sand the peg down for a better fit. As noted earlier, the geographic-area organisation is designed to separate country-level organisational units geographically. Yet the fundamental requirement of global customer management is to integrate efforts across geographies. GAM integration is possible with the GIGAO approach but, arguably, other approaches deserve serious consideration.

Market-Integrated Global Account Organisation (MIGAO)

This MIGAO form addresses the core problem with the GIGAO approach head-on. The firm downgrades its country-level geographic focus by reducing the responsibility and authority of country managers. The basic approach is for the firm to select a limited number of important global customers to place in a newly formed market-integrated global account organisation. The firm serves these customers with a group of specifically selected GAMs, recruited internally and/or externally, to direct and manage relationships with global customers. Frequently, newly selected GAMs undergo specific training for these roles. Indeed, some firms construct GAM certification programmes.⁴

Typically, each GAM assumes responsibility for a single global customer, but an individual GAM may also direct activities at several smaller global accounts. These GAMs report directly, solid-line, to a head of global accounts. If the firm serves customers in multiple industries, GAMs may be grouped into industry sectors, with or without large domestic customers.

The GAM directs and manages regionally and country-based personnel around the world. Country-based managers direct and manage local salespeople/account managers responsible for day-to-day customer contact. Typically, local personnel report solid-line into their country organisations, but dotted-line to the GAM’s regional managers. Regional managers typically report solid-line to the GAM, dotted-line to the region. Typically, the solid-line/dotted-line decision is made by the GAM. Notwithstanding the benefits of solid-line reporting relationships, some GAMs prefer dotted-line to solid-line relationships. They believe dotted-line relationships are preferable for securing access to local resources, and to enhance the career prospects for regionally and locally based personnel.

The market-integrated global account organisation solves the problem of inconsistent pricing in different geographic areas for a single customer. In advanced programmes, GAMs have pricing authority globally. For various reasons, a GAM may depart from totally standardised prices in all geographies but, nonetheless, make pricing decisions from a global standpoint. The GAM has the authority to ensure that these prices are implemented. Even if pricing authority is maintained within product divisions, GAMs ensure that the firm takes a global perspective across the geographic landscape of their customers.

This organisational form also avoids the problem of insufficient selling effort at the local level around the world. But it does not avoid a similar challenge for service delivery. Service should be provided by local country organisations; after all, these organisations receive revenue credit for sales to global customers in their geographic areas of responsibility. If global customers are insufficiently well treated locally, GAMs may have to escalate serious problems, possibly via an executive sponsor programme.

This MIGAO approach gains significant teeth from quota arrangements. The global account programme head and each GAM must deliver on serious quotas. One-year revenue quotas are ubiquitous, but profit quotas and long-term (three-year) quotas – to emphasise investment in customers – are not unusual. Typically, each GAM partitions the global total among geographic and/or product-focused team members. To ensure equitable quota management, revenues earned locally from global customers in different geographic areas are typically duplicated to GAMs.

As noted above, in advanced programmes, to enhance their ability to be highly customer-responsive, GAMs are given pricing authority. Accordingly, senior management must fully comprehend the importance and difficulty of the GAM position. GAMs are responsible for generating long-term revenues from the firm’s most important global customers. Successful GAMs should be well rewarded, not just by salary and commissions, but also by stock awards and stock options. Their success drives shareholder value; they should participate in those value increases. Furthermore, the GAM job is difficult. Customers speak different languages and live in different time zones. And if the firm’s product causes a customer problem, that issue must be addressed, no matter where or when it occurs.

In directing this type of global customer-management programme, the firm faces a difficult dilemma regarding GAM time in position. Long-term productive relationships between the GAM and key customer executives are crucial to long-term success. This reality argues for long-term customer assignments for GAM appointees. On the other hand, some successful GAMs may have career aspirations beyond their GAM positions. Senior management must carefully balance the best interests of the GAM programme with the career goals of its critical members – GAMs.

Global-Customer Division (GCD)

The global-customer division was pioneered by Cisco as the Global Enterprise Theatre (GET). Faced with a changing global environment, Cisco developed GET from a pilot programme – Segment One. Initially, Cisco selected a group of five of its most important US-based customers with which it had strong relationships; hence, mistakes would be tolerated. Cisco assigned account directors to each Segment One customer and gave them the responsibility for speaking for Cisco globally. The Segment One goal was to better align to, and advocate for, the customer within Cisco. Cisco provided account directors with flexibility in resource allocation, cross-functional leadership, accountability, and final-decision-making authority. To make Segment One work effectively, Cisco carefully selected account directors, strongly branded the programme within Cisco, and involved senior leadership in customer relationship-building.

Within Cisco, Segment One was viewed as a significant success. Customer alignment improved, joint marketing programmes expanded, wallet share grew, and customer satisfaction scores increased. Client directors were able to present a single Cisco face to the customer, by masking the complexities and inefficiencies within the Cisco organisation.

Having successfully designed and implemented Segment One, Cisco’s challenge was to build on its success. Cisco’s goal was to develop a critical mass of major customers that would benefit from the new approach. In doing so, Cisco would modify internal systems and processes to better serve major customers and achieve enhanced resource allocation. To achieve these goals, and protect the initiative from unhelpful systems and processes, Cisco set up the Global Enterprise Theatre (GET).

GET comprised 27 major customers, headquartered in the US, Europe, and Asia, based on global Cisco revenues and closeness of inter-firm relationships. Cisco essentially sidestepped the geography problem by placing its global accounts in a totally separate organisation. Previously, Cisco operated a conventional three-region GAS to manage its global business: Americas; Europe, Mid-East, and Africa (EMEA); and Asia. Cisco simply added a fourth region: GET. To form GET, the 27 global customers were simply transferred from their existing geographic regions into GET.

The introduction of GET followed a previous organisational innovation by Cisco as it developed a strategy to enhance its global presence in developing countries. In the early 2000s, Cisco modified its organisational approach by removing 140 countries from its traditional GAS to form, and place in, a single Developing Country organisation. Several years later, following successful penetration of many less-developed country markets, Cisco closed this organisation down, and folded the countries back into their traditional geographic regions.

In the market-integrated global account organisation (MIGAO), local salespeople/account managers mostly report solid-line through country management, and dotted-line to GAMs. By contrast, in the GET programme, in countries where Cisco earned substantial revenues, such local employees were part of GET. In smaller-revenue-generating countries, GET worked out sharing arrangements with local country management. Furthermore, in addition to local salespeople/account managers, locally based service personnel also worked for GET.

The GET programme avoided the geographic problem without directly impacting the authority/responsibility of country managers. Some country managers were completely unscathed by the introduction of GET. Others were affected indirectly; they lost responsibility for (and revenue contributions from) those customers transferred into GET. These transfers significantly impacted some countries, notably the US, which lost several customers, more than others.

At Cisco, the GET programme was viewed as highly successful. Customer satisfaction continued to improve and wallet share increased.

Country Global Enterprise Model (CGEM)

Cisco’s next challenge was to find a way to extend the benefits from GET to increased numbers of global, yet smaller, customers. The core dilemma was that the increased transfer of additional customers to the GET programme would weaken already denuded regional/country organisations that had already lost large customers in setting up GET. Furthermore, within Cisco, some geographically based managers resented resource allocations to GET; a sense of “haves” and “have nots” was developing. All the while, customer expectations were rising.

Cisco’s response was to transition GET into a new country global enterprise model (CGEM) programme. Essentially, Cisco closed GET and folded its entire global operation back into its three geographic regions (headquarters): Americas (New York), Asia (Singapore), and EMEA (London). However, Cisco placed 134 customers in its new CGEM (Americas – 64, EMEA – 47, Asia – 23) – a significant increase from the original 27 GET customers.⁵

Critically, Cisco maintained and expanded the GET infrastructure around the world for both sales and service functions. Hence, for an Americas-based customer, both the GAM and local sales and service personnel reported directly into the Americas region, not to the local regional (or country) organisation in which their responsibilities lay. Accordingly, in addition to managing operations in the Americas, the Americas RVP also manages operations for Americas-headquartered customers in Asia and EMEA. Similarly, Asia and EMEA RVPs direct their own global operations in, respectively, the Americas and EMEA, and the Americas and Asia, for major global customers headquartered in their regions. Accounting systems permit P&L measurement for individual customers, and hence for the CGEM in its entirety. This structure remains in place today. Client response regarding the CGEM is overwhelmingly positive.

Cisco continues to evolve its global coverage model to strike a balance between exceeding customer expectations and directing an efficient sales and service expense model. A local salesperson who calls on CGEM customers in one or more countries around the world reports through the CGEM organisation via the GAM(s) to a VP for Premier customers, and ultimately to the RVP – Americas, Asia, EMEA. In smaller countries, where revenues are insufficient to justify a whole salesperson, the CGEM organisation develops sharing arrangements, one geographic CGEM organisation with another – similarly for service.

This article was originally published on 02 October 2022.

About the Authors

Noel Capon is RC Professor of International Marketing, Columbia Business School, New York. Professor Capon is well known as a key/strategic global account management expert, and is the author of several influential books. Capon serves as Strategic Account Management Association (SAMA) board member, and is founder and chair of Wessex Press. He is also Honorary Dean Marketing, Innovation College, Beijing.

Mark Heil is the Vice President of Global Enterprise Sales, Premier Area. Mark and his team are responsible for the overall relationship with several of Cisco’s largest global customers that are headquartered throughout the United States. His team drives account strategy, customer satisfaction, and business alignment with these clients. Mark’s ability to align a client’s business objectives with Cisco’s transformational solutions has been a key to his success. He has an excellent reputation for accelerating revenue generation and exceeding customer expectations. His passion is supporting and mentoring sales teams, inspiring them to think big and bold.

Gus Maikish worked as a Strategic Account Manager at IBM for 37 years. His last position was Managing Director with responsibility for the global relationship with Citigroup. Since retirement, he has worked on projects with the Insight Group, been a guest lecturer and served as an Adjunct Professor at the Lubin School of Business in New York City.

References

1. See, for example, Jean-Jacques Servan-Schrieber, The American Challenge, New York: Scribner, 1968.
2. Raymond Vernon and Louis T. Wells, Jr., Manager in the International Economy (4th ed.), Engelwood Cliffs, NJ: Prentice Hall, 1981.
3. Thomas L. Friedman, The World Is Flat: A Brief History of the 21st Century, New York, Macmillan, 2005.
4. Noel Capon and Gus Maikish, Customers Win, Suppliers Win: Lessons from One of IBM’s Most Successful Strategic Account Managers, New York: Wessex, 2022.
5. Cisco classifies customers by type – Enterprise, Commercial, Service Providers (sell to and sell through); and by size – Premier, Key, Major accounts. Most (but not all) Premier accounts are in CGEM.

The post Organising to Address Global Customers appeared first on The European Business Review.

A lot can be said for the popular Management by Objectives management system that operates on the principle of SMART goals. However, organisations interested in developing employee motivation around service-oriented performance will do well to combine the Objectives and Key Results and Management by Missions management systems to achieve their goals.

New management systems emerge regularly, bringing with them innovative and promising ideas that can make a difference in the productivity of an organisation and the meaning employees experience at work. Management systems define how an organisation manages the interrelated parts of its business to achieve its goals. As they are linked to a variety of practices around the organisation, those management systems, in the end, develop a cultural narrative that ends up being taken for granted and spread, often unconsciously, by the members of the organisation. Probably, the most pervasive management system in our contemporary business world is Management by Objectives (MBO). For more than five decades, MBO has spread the SMART (Specific, Measurable, Achievable, Relevant and Time-bound) principles to companies around the world.

Two recent examples of management systems that aim to “enlighten” the MBO system with new and updated principles are “OKR” for “Objectives and Key Results” and “MBM” for “Management by Missions”. Based on more than 10 years of research and consulting on management systems development in various countries, we analyse the narratives of OKR and MBM to highlight their strengths and potential complementarity.

Objectives and Key Results (OKR) is a management system designed to focus efforts on what “we as a team agree deserves special attention, and what really matters”.¹ The development of OKRs is based on five principles or “superpowers”: focus on priorities, alignment for teamwork, commitment to transparency, tracking for accountability, and stretching for surprising results (FACTS). The system relies on setting objectives at all levels “typically longer-term, bold and aspirational” and key results that “are aggressive, but always measurable, time-bound and limited in number”.²

One example of OKR use is Netflix, a prominent player in the streaming service industry. Netflix’s CEO, Reed Hastings, implemented Objectives and Key Results (OKRs) to help the company regain its customers’ trust following a period of subpar customer service and loss of customers. Netflix, a company known for its elite sports team culture and emphasis on results, has implemented OKRs tracking software, focusing on goals in three crucial areas: customer experience, growth, and culture.

By analysing data from customer surveys and interviews, Netflix has identified areas of improvement in customer experience. From those insights, they have created OKRs centred around enhancing customer email and phone interactions, as well as ensuring comprehensive training for employees in handling and resolving customer complaints within a 48-hour timeframe. Similarly, by analysing data from surveys and interviews with employees who left the company after a tenure exceeding two years, Netflix learned that many employees quit due to a lack of support or appreciation from their managers, as well as limited opportunities for growth within the company’s structure. This led Netflix to develop and track other OKRs to address those gaps.

Management by Missions (MBM)³ is a methodology that integrates the purpose of the organisation into the management system to provide an inspiring direction to the people of the organisation. The development of MBM is based on three principles: personal purpose—encouraging people to find the “why” of their work, unity—promoting the connection between the personal and organisational purpose, and self-management—giving people the freedom to shape their aspirations at the intersection of personal and organisational purpose^.4The MBM system is based on missions, defined as the contribution towards the main stakeholders of the company (customers, employees, suppliers, shareholders, and society). In MBM, missions are established at all levels of the organisation -corporate, teams, and individuals-, and are the basis for defining employee performance.

One example of the MBM is the Danish company International Service System´s (ISS) facility services.⁵ Through a training programme, they encourage their employees from different areas (cleaning, maintenance, catering, etc.) to find their own purpose in the workplace. Thus, employees are invited to craft the service-oriented meaning of their work and link it with the purpose of the company: “connecting people and places for a better world”.

Both OKR and MBM are applied throughout the organisation: at the corporate, team, and individual levels. Both systems promote the empowerment and autonomy of people and encourage frequent conversations between “contributors” and managers to talk openly about progress, difficulties, personal development, supportive feedback, etc.

Underlying narratives

Despite their similarities, there is a fundamental difference between OKR and MBM: the perspective on the meaning of work, what we might call the “gaze”. The gaze can change the reality we observe and therefore the motivational capacity of what we do. While Objectives in OKR focus employees´ attention on “what I want to accomplish”, Missions in MBM focus attention on “what I want to do for others” (see Figure 1).

Despite their different nature, these two narratives can lead to similar results. For example, “reducing the world’s carbon footprint” can be both “what I want to accomplish” and “what I want to do for others”. The difference is not the goal per se, but the narrative behind the goal.

In fact, “wanting to accomplish something” and “wanting to do something for others” are not the same thing. They are not exclusive, but they are different. Missions and objectives provide a distinct narrative of the “why” of work. In MBM, missions transcend the narrative of accomplishment: “What I want to do for others” comes first, and accomplishment is contingent on being a means to better serve others. OKRs, however, focus employees’ aspirations on “what I want to accomplish” and contingently, serving others is a means to achievement. In this sense, the risk with missions is that they may not define the specific outcomes necessary for the organisation to succeed. On the other hand, the problem with accomplishments is that they can become detached from purpose and easily become an end in themselves. With the accomplishment narrative, you can hit the target but miss the point. For example, you may meet the short-term sales goals, but ultimately undermine your relationships with customers by selling defective products.

The following examples illustrate the OKR and MBM in practice (see Figure 2). The first is an objective developed by John Doerr when he worked at Intel Corporation. The second is a mission created by an ISS janitor at a school in Denmark. In both cases, the employees define their aspirations, but their underlying narratives are quite different.

Combining missions and objectives

In our experience, missions and objectives are potentially complementary: “An objective without a mission is a blind objective, but a mission without objectives is a dead mission.”¹⁰ By combining their narratives, missions can be the answer to the “why” of objectives. Objectives, in turn, can help streamline and operationalise the missions. This is why, in our work with companies, we have found that many organisations practice a combination of OKR+MBM.

This is the case, for example, at Alpha Omega (AO), an Israeli company that makes high-tech medical devices that help treat brain disorders such as Parkinson’s disease. Employees combine OKR and MBM systems. When setting their goals, employees first define their missions and then set specific objectives and key results for each of their missions (see example in Figure 3).

Every quarter, AO´s management agrees on the objectives to be achieved that serve its missions towards the different stakeholders (company, customers, and employees). Then each team or department, based on their own shared missions, sets their objectives and key results, and then each employee sets their objectives and key results in line with their own personal missions at the service of their team and the company´s missions on behalf of its stakeholders. In this way, they connect the personal mission and the corporate mission of each employee at AO.

As Imad Younis, the company’s founder, explains, “In my view, MBM and OKR complement each other. It is not ´either or´. MBM focuses on why I am trying to accomplish certain objectives, and OKRs is a way to assist the management and the employees to define objectives or measurable key results that help everyone in the organization (each person, each team and the entire company) see clearly what everyone is striving for. Thus, each goal has a reason. There are no abstract goals.
Every goal ends up serving someone or something, otherwise there is no point in trying to achieve it. There is a big difference between meeting sales targets because you want to win, or because you want to improve more lives. In both cases the motivation is related to a sense for challenge, but the sense of purpose in them is very different.”

Electing your management narrative

From more than 50 years of research¹¹, we know that achieving goals can be a very important source of motivation. For example, the competition to be the first to develop a COVID-19 vaccine was critical to solving the problem. Impressive results can be achieved through a motivation for achievement. The difficult and challenging can motivate great commitment and have a great impact on society, especially when that achievement is directed towards high-impact missions. However, the intrinsic value of achieving goals does not always have a positive impact. A dramatic example is the excellent technical coordination of the transportation structures that brought millions of Jews to the concentration camps. It was a technically very sophisticated organisation but with disastrous goals.

On the other hand, we know from research that the need of others can also be a very powerful source of motivation in itself¹². A dramatic example is the free choice of hundreds of firefighters who approached the World Trade Centre after the terrorist attack on September 11, 2001, knowing that they were risking their lives. Another example is the patriotic defense of Ukraine, and the efforts of its citizens to continue working, despite the risk, to sustain the country’s economy.

From a practical perspective, OKR and MBM may seem very similar, but their narratives are different. Both models have a place in organisations, and both can have positive results. It is best for each organisation to choose the narrative that best suits its purpose. If you want to focus employee motivation solely on performance, you don’t need to go beyond the OKR. But if you want to develop employee motivation around service-oriented performance, a combination of OKR and MBM may be the way to go. The choice you make will lead you to the success you want.

About the Authors

John Almandoz is a professor in the Department of Managing People in Organisations at IESE Business School and holds the Juan Antonio Perez Lopez Chair. He holds a joint PhD in Organisational Behaviour and an M.A. in Sociology from Harvard Business School/Harvard University. Almandoz teaches courses in leadership, human resources, organisational behaviour, and self-management in the MBA, Executive MBA, and Global Executive MBA programmes.

Carlos Rey is a professor of Strategic Management and Director of the Chair Management by Missions and Corporate Governance at Universitat Internacional de Catalunya (UIC Barcelona). Founder of DPMC, he has collaborated as a consultant in the development of purpose with companies such as Coca-Cola, Sony, Repsol, ISS Facility Services and Bristol Myers Squib.

References

1. Doerr, J. (2018). Measure What Matters: The Simple Idea that Drives 10x Growth. Penguin UK.
2. https://hbr.org/2018/05/how-vc-john-doerr-sets-and-achieves-goals
3. Cardona, P., & Rey, C. (2022). Management by Missions: Connecting People to Strategy through Purpose. Palgrave Macmillan (Open Access).
4. Rey, C., Velasco, J. S. C., & Almandoz, J. (2019). The New Logic of Purpose within the Organization. In Purpose-driven Organizations (pp. 3-15). Palgrave Macmillan (Open Access).
5. Rey, C., Chinchilla, N., & Pitta, N. (2017). Objectives are SMART, Missions are WISE: Employees with Purpose. IESE Insight, 33, 45-51.
6. Cardona, P., & Rey, C. (2022). Management by Missions: Connecting People to Strategy through Purpose. Palgrave Macmillan (Open Access).
7. https://hbr.org/2018/05/how-vc-john-doerr-sets-and-achieves-goals
8. Rey, C., Chinchilla, N., & Pitta, N. (2017). Objectives are SMART, Missions are WISE: Employees with Purpose. IESE Insight, 33, 45-51.
9. Example of OKR developed by John Doerr at Intel Corporation presented in the book: Doerr, J. (2018). Measure What Matters: The Simple Idea that Drives 10x Growth. Penguin UK, (p, 27).
10. Cardona, P., & Rey, C. (2022). Management by Missions: Connecting People to Strategy through Purpose. Palgrave Macmillan (Open Access).
11. Locke, E. A., & Latham, G. P. (2019). The Development of Goal Setting Theory: A Half Century Retrospective. Motivation Science, 5(2), 93.
12. Grant, A. M., & Berry, J. W. (2011). The Necessity of Others is the Mother of Invention: Intrinsic and Prosocial Motivations, Perspective Taking, and Creativity. Academy of Management Journal, 54(1), 73-96.

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This is where business process diagrams come into play. In this exhaustive guide, we’ll delve into what business process diagrams entail, elucidate their significance, and meticulously outline the steps to craft one from inception to completion.

What Constitutes a Business Process Diagram?

A business process diagram embodies a visual depiction of a series of activities, tasks, or steps undertaken by a business or organization to attain specific objectives or outcomes. These diagrams elucidate intricate processes by dissecting them into manageable steps and elucidating how various elements interact. Business process diagrams manifest in diverse formats, with the most prevalent types including making a flowchart, swimlane diagrams, and process maps.

Why are Business Process Diagrams Indispensable?

Business process diagrams bequeath an array of advantages that substantially enhance overall efficiency and the triumphant culmination of organizational objectives:

• Lucidity: They bestow clarity and structure, aiding employees in comprehending their roles and responsibilities.
• Communication: They function as a universal language within an organization, guaranteeing that all stakeholders share a common comprehension of process dynamics.
• Efficiency: By identifying bottlenecks and inefficiencies, these diagrams optimize operations, thus diminishing wastage.
• Perpetual Improvement: These diagrams serve as an ongoing reference for process analysis and amelioration.
• Training and Onboarding: New employees assimilate information swiftly, thus escalating productivity, courtesy of process diagrams.
• Risk Mitigation: Business process diagrams facilitate the identification of potential hazards and vulnerabilities, enabling proactive precautionary measures.

Steps to Prowess: Crafting a Business Process Diagram

Devising a business process diagram necessitates adherence to a sequence of steps. We shall escort you through the process utilizing a commonplace diagram type – a flowchart.

Step 1: Preamble – Purpose and Scope Clarification

Before embarking on the creation of your diagram, ascertain its purpose and scope. Interrogate your objectives as follows:

• What process are you intending to document?
• What are the precise goals or outcomes of this process?
• Who constitutes the designated audience for this diagram?

Step 2: Identifying Core Components

Identify the pivotal elements of your process. These might encompass activities, tasks, decisions, inputs, outputs, and stakeholders. Compile them into a comprehensive list to obviate any inadvertent omissions.

Step 3: Selecting the Ideal Diagram Type

Elect the most fitting variety of business process diagram for your specific requisites. The ubiquitous types encompass:

• Flowcharts: Apt for delineating sequential processes replete with decision junctures.
• Swimlane Diagrams: Ideal for illustrating processes involving multiple departments or roles.
• Process Maps: Suited for portraying the flow of activities within a broader context.

Step 4: Pencil the Blueprint – Create a Preliminary Sketch

Prior to concretizing your digital version, sketch out a rudimentary draft of your diagram on paper or a whiteboard. This preliminary sketch facilitates a visualization of structural and procedural dynamics sans digital tool commitment.

Step 5: Commencing the Diagram’s Fabrication

Embark upon the creation of your diagram by initiating a new document or canvas in your chosen tool. Here is an all-encompassing guide to the creation of a flowchart:

1. Inaugurate with a Terminator or Oval Shape
   This shape signifies the inception or termination of your process. Label it suitably, e.g., “Start” or “End.”
2. Infuse Process Steps
   Employ rectangular shapes to denote each process step or activity. Interconnect them with arrows to delineate the transition from one step to the next. Furnish each step with a concise, comprehensible descriptor.
3. Assimilate Decision Points
   For decision-making junctures within the process, utilize diamond shapes. Adorn them with a question that encapsulates the decision’s essence. Depict the potential outcomes based on the decision through arrows.
4. Connectivity – Connectors and Arrows
   Connectors (small circles) and arrows elucidate the process’s flow. Ensure that arrows possess explicit origin and terminus points to preclude confusion.
5. Inclusions – Inputs and Outputs
   Leverage parallelogram shapes to signify inputs and outputs affiliated with each process step. Bestow them with suitable designations.
6. Envisage Collaboration – Incorporating Swimlanes (if required)
   For processes involving diverse departments or roles, deliberate upon the use of swimlanes. These demarcate and attribute responsibilities effectively.

Step 6: Scrutinize and Refine

Post diagram completion, subject it to a meticulous review. Evaluate its precision, comprehensibility, and comprehensiveness. Effectuate requisite revisions to ensure faithful process representation and ease of comprehension.

Step 7: Dissemination and Collaborative Engagement

Share your business process diagram with pertinent stakeholders for invaluable feedback and input. Collaborative efforts can engender salient insights and refinements.

Step 8: Documentation and Sustenance

Upon finalization, comprehensively document your process diagram, inclusive of all associated information and documentation. Rigorous maintenance is indispensable to its utility, in light of evolving processes or alterations.

Aesthetic Efficacy: Crafting Effective Business Process Diagrams

To create business process diagrams that are perspicuous, informative, and comprehensible, contemplate these efficacious practices:

• Symbolic Consistency: Abide by standardized symbols and shapes to ensure universal intelligibility.
• Simplicity as a Virtue: Eschew gratuitous complexity, with simplicity and clarity as the cherished ideals.
• Judicious Labeling: Unambiguously label each diagram component – activities, decisions, inputs, outputs, and roles.
• Uniform Formatting: Inculcate consistency in font sizes, colors, and line styles across the diagram’s expanse.
• Contextual Elaboration: Encompass a title, date, and version number within your diagram. Supplemented by a succinct description or key elucidating symbol usage.
• Comprehension Verification: Subject your diagram to individuals unacquainted with the process to ensure its ready apprehension.
• Sustained Currency: Adhere to the diagram’s persistent review and updating to reflect evolving processes or enhancements.

Conclusion

Business process diagrams form the bedrock of organizational optimization, effective communication, and streamlined operations. By adhering to the stepwise process outlined in this guide and espousing best practices, you can craft cogent and impactful diagrams that galvanize a comprehensive understanding of your organizational processes.

Bear in mind that the cardinal key to efficacious process diagrams lies in their capacity to ease comprehension and encourage teamwork. Whether your ambition is the enhancement of extant processes, expeditious onboarding of new personnel, or the fostering of innovation, a well-crafted business process diagram can prove an indispensable asset in your pursuit of these goals. Always recall that the pursuit of progress is underpinned by processes, and the apt depiction of these processes is the harbinger of success.

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Understanding the Role of Microservice Reporting in Businesses

In a modern business environment, data is the bloodline powering critical decisions. This has given rise to microservice reporting, a platform that has well-defined services within a business to optimize the use of data. Wondering what is a microservice reporting model? It’s the decentralized approach to managing data in a business.

The microservice reporting model improves the overall data processing time, increasing the speed at which businesses make informed decisions. The decentralized nature of this model helps prevent system-wide crashes from a single point of failure.

Microservice reporting encourages every service in a business to run independently while communicating with each other. This, in turn, boosts performance and scalability across a broad spectrum of business systems.

Embracing microservice reporting provides businesses with an opportunity to scale systems independently. This means that the performance of one system is not linked or reliant on another, providing a more efficient, responsive, and fault-tolerant enterprise.

Strategy To Boost Business Communication Through Streamlined Methods

Communication is as crucial as data in a business. Inefficiencies in communications can slow the decision-making process, impacting the productivity and profitability of an enterprise. In response, business leaders are slowly shifting to streamlined communication modes such as Avaya solutions.

Partnering with the right telecommunications providers, such as an Avaya business partner, ensures a robust suite of communication services, supporting seamless data sharing, messaging, video conferencing, and much more. This, in turn, promotes collaboration among employees to deliver better results.

Streamlining communication unites a workforce, fosters coordination, and improves the quality of services. It reduces misunderstandings and increases productivity, and ultimately the overall performance of an enterprise.

A more connected workforce spurs creativity, improves problem-solving, and facilitates effective coordination across all levels of an organization. Hence, leading to greater productivity and an inclusive business culture.

The Importance of Streamlining Communication in Business

Effective communication ties together every aspect of a business. Understanding its importance and implementing tools that promote seamless communication can result in a more productive and cohesive team.

Choosing reliable communication tools helps reduce miscommunication and promotes the understanding of instructions, responsibilities, and objectives. This drives quicker decision-making, faster execution of projects, and improved business output.

Business leaders must ensure ongoing training and support for employees to grasp new communication tools. This helps to get the most out of these tools while ensuring every team member can effectively communicate with the tools available.

Streamlined communication ultimately brings a sense of belonging among employees, fosters trust and makes information accessible to everyone. This builds a stronger and more united team driving the success of a business.

Understanding is the first step, but implementing is where real results emerge. Proper training and transitioning strategies will help your team adapt to these new tools and technologies relatively seamlessly.

With a clear understanding of these key business aspects, you’re empowered to make decisions that propel your enterprise to greater heights. The future of enterprises lies in technologies that simplify their processes, foster collaboration, and drive decision-making. Don’t be left behind, take the leap and revamp your business operations today.

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With a sophisticated algorithm and a knack for user experience, Google forever changed how we find knowledge online. But the search engine celebrates its 25th anniversary under unfamiliar pressure from antitrust cases and AI competitors.

“”How do you cut a pineapple?” 

It wasn’t that long ago when finding the answers to simple questions like this wasn’t all that simple. You might call a friend or family member who was handy in the kitchen, or hope that a cookbook at home had some instructions”. 

With these words, Google celebrates its invention, Google Search, which has forever changed how we find knowledge online.

Over its 25-year existence, ‘to Google’ has become a verb as ingrained in everyday language as terms like  ‘to search’ or ‘to think’.

Google is – as Forbes puts it – the brainchild of the two founders, Larry Page and Sergey Brin. They started working together as doctoral students at Stanford in 1995 with an interest in opening up the World Wide Web. 

“We both found each other obnoxious,” Brin recalled to Wired in 2005. But they would also quickly become close friends with complementary skills and personalities: Page, with a visionary approach, focused on long-term goals and big-picture thinking, and Brin, charismatic and hands-on, championed innovation and managed day-to-day operations.

After meeting in 1995, they founded Google 25 years ago, on the 27th of September, 1998, when they moved from Stanford to a rented garage in Menlo Park, California. They brought with them a meticulously crafted recipe for success.

The idea sounds simple today but was revolutionary at the time. The pair wanted to create “a search engine that used links to determine the importance of individual pages online”.

A tweaked algorithm paved the way for search dominance

Brin and Page wanted to bring order to the fragmented internet of the 90s by determining the relevance of each individual page. Their central invention for that purpose was the algorithm ‘PageRank.’ Named not for the idea of ranking web pages but after Larry Page himself, PageRank revolutionized search by treating links between pages as votes of confidence. The more links a page had pointing to it, especially from other reputable pages, the higher its rank. This was a radical shift from the pay-to-play models of other search engines of the time. 

Instead of prioritizing advertisers in the hierarchy of search results, their refined algorithm emphasized user experience. Unlike earlier search engines that ranked pages by the highest bidder, Google’s system considered factors like page quality, content, inbound links, and, importantly, relevance to the user’s query.

Add that Google was five to ten times faster than its competitors, and you had the recipe for long-lasting search dominance. Google out-competed MSN Search, Yahoo!, and AOL Search in 2002, when they became the most used web navigator in the so-called ‘search engine wars’.

It took 20 years to shake their comfortable position as unchallenged search leaders – this time in a hybrid between a search engine- and an AI war. We’ll return to that.

Expansion in years of ‘adult supervision’

Around the turn of the millennium, founders Brin and Page quickly discovered that they’d need to bring in a CEO with a talent for business strategy. That became Eric Schmidt, hired in 2001, who is said to have given “adult supervision” to the gifted but young and fun-loving founders.

Schmidt is also known to have had a vital role in the business development of Google, emphasizing fostering partnerships, exploring new revenue streams, and prioritizing user-centric innovation. His supervision is said to have helped transform Google from a search-centric company to a global tech powerhouse with multiple successful product lines.

Under Schmidt’s direction, Google successfully expanded into other arenas of information technologies, finding a market dominance not too different from what the original product did: from Google Docs and Gmail to Google Maps, Google Play, and Android. Schmidt was also instrumental in overseeing key acquisitions, including the $1.65 billion purchase of YouTube in 2006.

The majority of Google’s earnings, 58.1 percent in 2022 to be exact, come from selling ads; primarily on the search engine, but also on additional products like the aforementioned Gmail, Google Maps, YouTube, and Google Play, added to the portfolio under Schmidt’s supervision.

Google’s market dominance is also reflected in numbers. Alphabet, Google’s parent company, is the biggest tech company in the world, leading in front of other giants like Apple and Microsoft, with a market value of 1.34 billion dollars.

But the company’s global dominance is a double-edged sword. 

Google: an antitrust case magnet

In 2018, the European Commission fined Google 4.24 billion Euros for “illegal practices regarding Android mobile devices to strengthen dominance of Google’s search engine”. Commissioner Margrethe Vestager accused Google of imposing restrictions on Android device manufacturers and network operators to ensure its search engine’s dominance. 

The fine they got for that is, by far, the highest given by the European Commission in antitrust cases. 

A year before, the same commission had fined them 2.42 billion Euros for “abusing dominance as search engine by giving illegal advantage to own comparison shopping service.” In total, the European Commission has fined Google a whopping 8.25 billion Euros.

Currently, they’re the center of another antitrust case, this one in the US. Here, the Justice Department has filed an antitrust lawsuit against Google, accusing it of monopolizing digital advertising technologies. 

But the antitrust cases aren’t the main reason that Google, as of 2023, looks shakier than what we’ve been used to seeing since they became synonymous with search. 

AI Wars: Making Google Dance

“I want people to know we made them dance,” Microsoft’s CEO Satya Nadella recently said about Google. While Google has long been a leader in AI research- and product development, the fresher and more risk-ready OpenAI was the fastest to make a broad, public launch of a generative AI. With Microsoft’s investment in OpenAI, Microsoft has gotten privileged access to integrate OpenAI’s crown jewel, ChatGPT, into its products.

The events unfolding over the past year have made people suggest that the future of search might not look like Google’s ‘10 blue links’. Maybe it’ll look more like the results we get when interacting with generative AIs like OpenAIs ChatGPT.

That’s a long-term threat to Google’s main revenue stream – ads in search. AI successfully integrated into other search engines is a threat in the short term.

This is what Microsoft has done with the long-ridiculed search engine Bing, which was mostly known to be unable to compete with Google. Until this year, it seems. Now, with ChatGPT integrated, a new AI-driven search war seems to have started. 

According to Statista, from May 2023 to July 2023, Google’s global market share on desktop searches fell by 4,16 percent. In the course of the same two months, Bing’s went up by 2,38 percent. With other search engines in the statistic having less than three percent of the market share and showing little fluctuations, most of Google’s loss translates to Bing’s win.

But the fact that Google is perceived as being behind on AI-related products is not because of lack of foresight or AI initiatives. 

AI First

Sundar Pichai took over from Eric Schmidt, from 2015 being the CEO of both Google and its parent company Alphabet. Pichai steered Google from a ‘mobile first’ to an ‘AI first’ approach in 2016. Prior to that, under Pichai’s direction, Google acquired DeepMind, a leading innovator in AI, in 2014.

DeepMind has since been involved in a number of AI projects at Google, from gaming to science to how to reduce costs and carbon footprint at data centers.

DeepMind’s advancements in AI is said to have the potential to be integrated into various Google services, from enhancing search algorithms to improving voice recognition in Google Assistant. Earlier in 2023, in what some read as a desperate decision, DeepMind merged with another of Google’s AI research teams, Google Brain, together forming Google DeepMind. 

Just like Google has Google DeepMind, Microsoft has OpenAI. And a number of new serious competitors might show up in this moment – where it seems like everything from search to the future of technology is being negotiated. Just like it seemed in the 90s when Google started.

Therefore, Google can celebrate its 25th anniversary amidst an intense AI rivalry that has seen them to push launches of products like Bard – their generative chatbot – and Magi – their AI-powered search tool, not yet publicly available – earlier than what they had initially planned. The speedy launches from Microsoft, Google and other AI companies makes critics fear that ethics and careful consideration will be backgrounded as the race for future AI- and search dominance will be the priority for both companies.

So at 25 years, Google is at once the biggest tech company in the world and a company that is right in the center of domination, but also a company that – for the first time in two decades – dances to the tunes of its competitors.

And Page and Brin? After leaving most of the responsibility to a leadership team directed by Sundar Pichai, the new AI competition has seen the two return to central roles in the company they founded 25 years ago.

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The hype about NFTs might be over, but when carefully deployed, they remain a viable tool for brand engagement, customer reward, and revitalising a fading product.

Arthur Clarke’s aphorism still applies: for some time, a new technology is “indistinguishable from magic.” Witness the hype cycles concerning the metaverse, cryptocurrency and, most recently, ChatGPT and other machine-learning technologies. Executives know these developments are potentially too important to ignore. But the problem with magic is that, in business, you must distinguish reality from illusion— opportunity from fad —to allocate resources wisely.

This is especially true with Non-Fungible Tokens (NFTs), which attracted high-profile investors until the market collapsed. During May 2023, the NFT market trading volume was $293 million. Just a year earlier, in one day (May 1, 2022), 118,577 NFTs were sold for $780.4 million. The NFT hype is over. But brands continue to launch marketing campaigns in this medium, and there are lessons about identifying value-added use cases for new technologies from how NFTs are changing loyalty programmes and consumer engagement.

NFTs and Collectibles

During the hype phase, most commentary about digital tokens focused on gamers using Fortnite, Roblox, and similar platforms. But the collectibles market is twice the size of the gaming market and with more diverse products and customers, comprising jewellery, sports/trading cards, watches, fashion apparel, toys/figurines and other items. Digital collectibles (aka NFTs) were $15 billion in 2022 and are expected to grow 40% annually to about $200 billion by 2030¹ because NFTs are a natural extension for brands to engage consumers in online environments.

In collectibles, there are “profile picture NFTs” like CrytoKitties, Doodles, and Moonbirds, which are images that can be displayed on owners’ social media profiles. But more interesting are “utility NFTs” which enable firms to improve customer experience and gather insights, while aligning the brand and consumers’ interests. Here are some examples and lessons learned.

Rewards and Promotions. Adidas introduced in 2021 its “Into the Metaverse Community Token,” which provides community members with access to exclusive merchandise and live events. Adidas generated about $22 million from primary sales and a community of 19,500 fans², and the merchandise linked to the tokens has become collectible. Tareq Nazlawy, Senior Director, Digital Strategy at Adidas, notes that the NFTs create additional ways “for us to connect, create and belong” with consumers. Hence, in May 2023 Adidas invited its “Into the Metaverse” community to upgrade their existing NFTs for a new token that unlocks an interoperable avatar that can be used in a growing number of interactive experiences.

This example should resonate with many other brands that now face steeply rising customer acquisition costs (CAC) in digital marketing channels. There has been an estimated 60% rise in CAC via digital channels over the past 5 years—a trend accelerated by the pandemic —accompanied by a decline in click rates and less customer information as Apple, Google and others restrict the ability to track users using third-party cookies.³ Firms pay more, get less, and are increasingly reliant upon coupon codes to increase the odds that a customer will purchase rather than abandon the cart. But traditional coupon codes are also seeing diminishing returns, while NFTs have better effects. G-Star Raw, a Dutch clothing company, introduced its G-No Community Token, which provides merchandise such as PHY-G the Rhino (G-Star’s mascot logo) and access to events. The benefits have included better returns on digital marketing initiatives and brand enhancement: as its Chief Marketing Officer (CMO) emphasises, the NFTs are “an art project that brings our story to life [and] we’re able to be in the spaces where [our customers] are.” ⁴

Engagement. NFTs can be both content and enablers of marketplaces that drive brand engagement. “Top Shot,” licensed by the NBA, allows basketball fans to buy, sell, and trade NBA-themed digital collectibles. Each has a unique serial number that guarantees its authenticity, and the NFTs feature events like a winning three-pointer or a dunk shot by a favourite player. In effect, Top Shot is a next-generation trading cards market but without the friction inherent in selling and shipping cards plus a level of engagement that allows fans to interact with the game in novel ways. Top Shot generated over $1 billion in sales in 18 months, and 13 Top Shots have sold for more than $100,000 each.⁵

Provenance. Many companies issue credentials to customers, but traditional means (centralised databases or paying third parties) are expensive, slow, often frustrating to use and subject to stolen log-in credentials and other security risks. NFTs address these issues in a customer-friendly way that helps to develop the relevant market and brand differentiation. With NFTs, customers control the credentials, privacy is enhanced, ongoing brand value is more transparent, and engagement possibilities increase.

For example, watches are prominent collectibles. Some high-end watches routinely get 200% of firsthand prices in the secondhand market. In fact,3 preowned watch sales are growing faster than new watches, seen as a viable alternative asset class for investors seeking to diversify their portfolios (outperforming the S&P 500 index from 2018 to 2023), and players like Watchbox, Watchfinder, and Chrono24 focus on higher-priced preowned watches. Buyers tend to be younger (mostly millennials and Gen Z)7 and use online community forums to exchange information (and bragging rights) about brand acquisitions.

Luxury watches have long come with certificates of authenticity and international warranty; these credentials are an important part of the heritage storytelling inherent in a brand’s identity, especially in social media channels. But the industry has always wrestled with ways to track certificates and service history, and thus the risk of brand dilution if the seller cannot authoritatively vouch for the authenticity of the secondhand product. Breitling now offers an NFT passport for its timepieces. With certification stored on the Blockchain, the passport verifies the origin of the watch, a timeline of repairs, and ongoing information about the history of the watch, its owners, and significant events. In the future, Breitling may offer insurance and other products through this platform.

Tokenisation as a Service. Like many products and services, collectibles are plagued by issues like fraud and high transaction costs in buying, selling, shipping, and insuring valuable items. Creative and user-friendly applications of NFTs can address many of these challenges, and help to monetise brand equity via secondary sales. A business model known as “Tokenization-as-a-Service” (TaaS) is growing in response to the opportunities.

TaaS helps brands, collectors, and intellectual-property holders convert physical items into digital assets that can be bought and sold on NFT marketplaces. Moreover, the owners can have the physical asset associated with the NFT shipped to them or stored in a secure vault, enabling the authenticated transfer of ownership while minimising the need to physically transport rare and delicate items through the mail or other delivery services. Brands and large IP holders like Disney and MGM are using what they know and control in their physical collectibles to enter Web3 and engage with current and new customers in novel ways.

Questions You Should Ask and Answer

Collectibles are an early-adopter market of NFTs because the benefits are especially relevant to assets that are traded and must be authenticated to retain value. But many other types of goods can be tokenised and, in the process, create better connections between brands and consumers. To get started, here are two key questions to ask and answer:

Has your product stalled with your customers? Its original intent was to be the “Third Place”, but Starbucks recognised that over time its locations became a place where people are alone together. The company introduced Starbucks Odyssey, a Web 3.0 loyalty programme featuring items representing its Siren logo and found a dynamic secondary market for these items. Then in March 2023, Odyssey released its first limited edition NFT called “Stamps”. These items sold out in 18 minutes, paving the way for customers to become stakeholders in the brand and, via trading opportunities, enhancing the brand’s original assertion of community.

Are you capturing the full value of your product’s life cycle? HBO’s “Game of Thrones: Build Your Realm” uses NFTs to enable fans to build a realm by collecting customisable avatars inspired by characters from the series. As well as new ways for fans to interact with the stories, the NFTs open other opportunities for HBO to increase the lifetime value of its intellectual property.

Two decades ago, many firms were disrupted by online platforms because they did not realise that, as well as reducing transaction costs, those market spaces provided important connections for consumers. Connections are the essence of a brand and lifetime value, and NFTs are the next iteration.

About the Authors

Frank Cespedes teaches at Harvard Business School and is the author most recently of Sales Management That Works: How to Sell in a World That Never Stops Changing (Harvard Business Review Press).

Ben Plomion is an experienced marketing executive and Chief Marketing Officer of Dibbs.

References:

1. “Collectibles Market and NFT Market Size, Statistics, Growth Trend Analysis and Forecast Report”: https://www.marketdecipher.com/report/collectibles-market and “Global Non-fungible Token Market Report 2022-2030,” https://www.businesswire.com/news/home/20220524005651/en/Global-Non-fungible-Token-NFT-Market-Report-2022-2030-Growing-Demand-for-Digital-Art-and-Growing-Use-of-Cryptocurrency-Globally-Drives-Market-Demand
2. https://www.entrepreneur.com/business-news/adidas-first-nft-drop-rakes-in-more-than-22-million/403713
3. “New Study Reveals Customer Acquisition Cost has Elevated by 60% in the Last Five Years” Digital Information World: https://www.digitalinformationworld.com/2022/08/a-new-study-reveals-customer.html#:~:text=August%2010%2C%202022-A%20new%20study%20reveals%20Customer%
   20Acquisition%20Cost%20has%20elevated%20by,in%20the%20last%20five%
   20years&text=New%20research%20by%20an%20eCommerce,in%20the%20past%20few%20years.
4. https://hypebeast.com/2022/3/g-star-raw-debut-nft-collection-info
5. “NBA Top Shot Reaches $1B in Sales Amid NFT Market Downturn” Front Office Sports: https://frontofficesports.com/nba-top-shot-reaches-1b-in-sales-amid-nft-market-downturn
6. https://www.bcg.com/publications/2023/luxury-watch-market-trends
7. Raynor de Best, “NFT Ownership in the US,” Statista, 2022: https://www.statista.com/statistics/1265821/us-nft-user-demographics

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To stay relevant and achieve resilience, company leaders need to focus not only on speed but also innovation. In this article, the authors discuss how the right combination of these two parameters will make your company a top performer.

In the many workshops that the MIT Center for Information Systems Research (CISR) conducts with senior executive teams globally, we often hear senior leaders say “If only we could go faster.” So we decided to research what happens if a company goes faster, and the answer was surprising: speed alone doesn’t differentiate performance much. In our research, companies that were top performing in both growth and margin relative to their industries not only went faster to market but also innovated more effectively.

The Need for More Than Speed

To better understand the impact of speed on performance and what it takes to get there, we surveyed 721 companies at the end of 2022. We asked a series of questions regarding speed and innovation and the technologies (for example, APIs and automation) and management mechanisms (such as management-style dashboards and data access) that companies used. We adjusted for industry differences and ran a series of regressions and other statistical analyses to create a management framework illustrating how top performers operate.

The management framework divides companies into two dimensions: innovation and time to market. We measured innovation based on the percentage of companies’ revenues from new products and services introduced in the last three years; respondents self-assessed speed, based on time to market, relative to competitors. We found that companies in our survey fell into four quadrants, which we named somewhat provocatively: Slow and Steady (32% of companies), Innovative but Slower (17%), Fast but Incremental (24%), and Fast and Innovative (27%). The Fast and Innovative companies performed much better with 9.8 and 11.6 percentage points higher on net profit margin and revenue growth respectively, compared to industry averages. The worst-performing companies were the Slow and Steady group, with 4.8 and 8.2 percentage points of growth and margin respectively, below their industry averages.

Surprisingly, the Fast but Incremental companies performed only marginally better than their Slow and Steady counterparts. And the Innovative but Slower companies performed significantly better than the Slow and Steady companies, with performance around the industry average on both growth and margin suggesting not only that speed is not enough but that innovation is typically more important.

The Drivers of Being Fast and Innovative

To better understand what enables a company’s pursuit of both innovation and speed, we looked at the enabling technologies and management mechanisms used most effectively by the companies in each quadrant in our framework. Statistically, we found four drivers of top performance:

In a digital world, no company can thrive on its own. Companies that are above average on innovation and speed collaborate more effectively, contributing to growth; and they are very effective at creating value from ecosystems and getting above-average revenues from channel partners. To keep innovation flowing, they provide suppliers with access to real-time data. They perceive a greater threat from digitisation, which drives them to innovate faster and focused on creating more value with digital for and from their customers.

Additionally, these companies have simplified work and organisation to succeed, shifting their management orientation from the more traditional command and control to coach and communicate. They understand there is no longer time to pass decisions up and down the hierarchy and instead empower local teams to make decisions within guard rails, with accountability supported by shared dashboards. The dashboards articulate value creation goals, identify the current levels of capabilities to achieve them, and measure if they are achieving them – for all to see so that when needed, people can make course corrections.

High Performance at Mercedes-Benz

Mercedes-Benz is a premier luxury car brand with a heritage of employing leading-edge technology. Mercedes-Benz’s strategy is focused on building dedicated electric vehicles, developing leading in-car software, and adhering to the highest standards of operational excellence. Following this approach, in 2022, Mercedes-Benz Group AG increased its earnings before interest and taxes by twenty-eight percent year-over-year and showcased the technical feasibility of a 745-mile-range electric vehicle with the company’s Vision EQXX car that relied on a less than 100kwh battery. Mercedes-Benz aims to be the leader in luxury mobility and to achieve this along with some of the most ambitious sustainability goals in the industry. The top management team is focused on the four drivers identified in this research—but with a Mercedes-Benz flavour.

Leadership while Simplifying Work

Leadership around technology at Mercedes-Benz is focused on creating digital mastery and entrepreneurial accountability to deliver on both speed and innovation. For all of its digital roles, Mercedes-Benz has established specific training paths to help people excel and continuously improve on their way to achieving expert status. As becoming a digital company requires more than employing experts, Mercedes-Benz has built communities of practice throughout the entire company, including for the production teams, to ensure digital fitness. The company accomplished this by moving to a coach-and-communicate leadership approach, which was especially necessary as the communities of practice are not reflected in the formal organisational structures.

Providing clear direction on what should be done is good—but explaining the why of doing things that way is better because it creates entrepreneurial accountability. At Mercedes-Benz, people are encouraged to think beyond the boundaries of their own responsibilities to care about and contribute to the overall result. Mercedes-Benz is in the process of introducing a product orientation for everything in the digital space. Going forward, work will be focused not only on project input parameters such as timelines and resources but also on the outcomes of the digital products, with the product owner fully accountable and empowered. This new orientation has thus far enabled Mercedes-Benz to implement a full-fledged online commerce suite for more than forty markets in less than one year—an innovation that is driving revenue. The company set the ambition for its online commerce suite of “five clicks to buy, three clicks to finance,” which requires that the suite is backed by a significantly streamlined business model.

Leading-Edge Technology

Everyone talks about cloud technologies, and yet they are often referring to a narrow application of cloud focused on hyper-scale infrastructure. Mercedes-Benz, by comparison, employs cloud native as a technical ecosystem to develop and run software.

To achieve advanced software capabilities, Mercedes-Benz relies on modular applications rather than monolithic, inflexible systems to allow for more flexibility and maintainability. The company also uses highly automated tools for the delivery of new code to facilitate continuous deployment. To additionally enable speed and innovation via enhanced software capabilities requires on-demand infrastructure, which provides computing power that can scale as required; and reliability, by leveraging scaling to create redundancy so that faulty components do not become a single point of failure.

In a cloud-native environment, one team is in charge of development and operations (DevOps), producing an end-to-end understanding and accountability. This is the driver for simplifying and automating business processes—which in turn drives speed and innovation. Mercedes-Benz’s cloud-native approach to digital shop floor management enables a high level of resilience in production, even with an increasing number of disruptions in global supply chains. Every impact is displayed in real-time dashboards, supporting a zero-delay production programme. During the worldwide bottlenecks of certain semiconductors, these capabilities enabled Mercedes-Benz to optimise its production within a very short time, focusing on high-margin vehicles and thus protecting profits.

The Mercedes-Benz Operating System (MB.OS) allows for frequent updates to the in-car software, both for control units and entertainment features. All updates go through one cloud-native vehicle backend, which not only verifies the technical viability and release conformity of the update but also ensures compliance with different certification requirements in different countries. In addition, the cloud-native vehicle backend gathers data from vehicles in the field, allowing for feature or quality improvements. Under GDPR governance and provided that the customer has given consent, vehicle data can also be used to directly enrich the customer experience through additional digital services.

Data as the Guide

Mercedes-Benz uses data in various ways, including to make better decisions based on comprehensive data—targeting the development of predictive action (for instance, predicting maintenance needs for capital-intensive shop floor equipment) and the creation of improved customer services through knowing customers better—while observing all relevant data protection principles. For example, having customer data available at every touchpoint, whether physical or digital, allows Mercedes-Benz to make a “next best offer”—an action identified using predictive analytics—which contributes to revenue growth. Mercedes-Benz can use data from a customer’s interactions with the company and the telemetry of their vehicle to predict and notify about the car’s maintenance needs. For example, if you are a sporty driver, they can contact you at a less-than-standard interval to visit a Mercedes-Benz repair shop to change your tyres or brake pads. Mercedes-Benz’s customers decide for themselves which services they want to use and which data to pass on to the company and not.

Also, Mercedes-Benz is establishing a comprehensive digital representation (a digital twin) of vehicles throughout their entire life cycle, starting with the order of the vehicle and extending from production through recycling of the used vehicle. The target is to radically speed up the time to market, reduce costs in development and operations, and further enhance the customer experience. For example, when developing a quick or even predictive reaction to potential issues on the road, the digital twin can help Mercedes-Benz go faster and innovate. Mercedes-Benz’s ambition is that the first physical vehicle built will be the one used for certification.

An Innovation Ecosystem

Mercedes-Benz has created an ecosystem around its customers. The company combines the data from sources such as online and offline touchpoints and car usage to not only make the next best offer but also to interact with customers more often, in particular through the Mercedes me connect app or other digital services based on MB.OS. These interactions create even more data that help in many ways including a first-class charging-and-driving experience. By aggregating all available vehicle data like state of charge and energy consumption, including environmental information such as wind speed, a whole new level of individual range prediction can be achieved. Additionally, Mercedes-Benz has partnered with a number of other companies, such as hotels, to create special offers for Mercedes-Benz customers. Customers can rely on the fact that data protection is of great importance to Mercedes-Benz and that the company ensures a responsible and transparent handling of data.

What It Takes to Succeed

We found that in today’s digital world, top performers are both faster to market and innovating to generate new revenue. We suggest you have a conversation about where your company is today and where you’d like to be on our 2×2 framework. Being excellent at both enabling technologies like APIs and management mechanisms like value-tracking dashboards was common in the top-performing companies in our research. Digital enablement of both speed and innovation is a great opportunity for you to reinvent how your company does business—to become the company you have always wanted it to be.

This article is based on “Going Faster Is Not Enough; Add Innovation To Outperform,” MIT CISR Research Briefing, April 2023 by Peter Weill, Jan Brecht and Stephanie L. Woerner.

About the Authors

Peter Weill, PhD, is an MIT Senior Research Scientist and Chairman of the Center for Information Systems Research (CISR) at the MIT Sloan School of Management, which studies and works with companies on how to transform for success in the digital era. MIT CISR has approximately 75 company members globally who use, debate, support and participate in the research. Peter’s work centres on the role, value, and governance of digitisation in enterprises and their ecosystems and has coauthored 10 books. Ziff Davis recognised Peter as #24 of “The Top 100 Most Influential People in IT” and the highest-ranked academic.

Jan Brecht presently serves as the CIO of Mercedes-Benz Group AG and Mercedes-Benz AG, overseeing global IT operations across divisions, brands, and markets. Prior, he held roles at Adidas Group, culminating in CIO and Head of Global Supply Chain. Beginning at Daimler-Benz AG in 1997, he’s led various IT roles, including management positions in automotive sales, financial services, production, and engineering. Brecht holds a Master’s in Communications Technology and is associated with the German National Scholarship Foundation. Outside work, he’s a family man who enjoys hiking, skiing, and 20th-century novels.

Stephanie L. Woerner, PhD, is a Principal Research Scientist at the MIT Sloan School of Management and Director of MIT CISR. She is a renowned researcher and speaker, and coauthor of Future Ready: The Four Pathways to Capturing Digital Value and What’s Your Digital Business Model? Six Questions to Help You Build the Next-Generation Enterprise, both published by Harvard Business Review Press. Stephanie studies how companies use technology and data to create more effective business models as well as how they manage the associated organisational change and governance and strategy implications. Stephanie’s research has appeared in MIT Sloan Management Review, Harvard Business Review, CNBC, Forbes, Chief Executive, and CIO.

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At one time, it was believed that all a business needed to succeed was a good idea, or a quality product. These remain valuable assets, but with changing consumer expectations, evolving market conditions, and greater competition than ever before, businesses must also continually evolve to prove their longevity.

Being agile, willing to change, and innovate has become crucial for businesses across all sectors, regardless of their size or industry. In the hospitality sector, for instance, it would be easy to assume that the tastiest food and drink would attract the most customers, yet the most successful food brands rely on constantly evolving branding, engaging loyalty programs, and changing menus that follow food trends to establish their status. 

But why are agility and innovation so important for businesses? For one thing, being agile and adaptable enables businesses to respond quickly to changing market conditions, which has been proven essential by the unpredictability of market conditions in recent years. 

So, what does it mean for a business to be agile?

Building a foundation of agility

Agility has become a critical element of a winning business model. Whether big or small, businesses need to be able to adapt quickly and effectively to changing market conditions and unforeseen challenges. The key to rolling with the punches is to foster a comprehensive culture of agility that is built around manageable goals, continuous improvement, and regular reviews of targets and processes.

The COVID-19 pandemic provided a vivid example of the importance of agility in business. While over 400,00 UK businesses went under in the space of just twelve months, some businesses were able to pivot successfully to the new normal. 

Retail businesses that quickly shifted to ecommerce, offices that rapidly adopted remote working, and hospitality establishments that pivoted to takeaway and delivery services were better equipped to weather the storm and stay afloat. With The success of these businesses throughout the pandemic was largely determined by how well they adapted to their new ways of working.

In order to become an agile business, it is important to commit to continuous improvement, experiment and take calculated risks, and foster a culture that values innovation and collaboration. By creating that culture, businesses can respond quickly and effectively to new opportunities and challenges and achieve greater success.

Technology and innovation

Innovation allows businesses to continually evolve and improve, and embracing technology is a powerful tool to make this change possible.

The most fruitful avenue is data – all businesses generate some form of customer data, and analysing this data can reveal insights about users’ behavioural patterns. This data can be leveraged to create personalised promotions for loyal customers or even help dictate the direction of future campaigns. 

Meanwhile, harnessing the data generated by a business’ own operations can also be helpful in identifying problem areas, minimising needless waste and increasing efficiencies. 

Peckwater Brands uses data to analyse customers’ takeaway orders in specific areas to determine demand for food types that is being underserved, then select the optimal virtual food brand for a partner kitchen in that area to take advantage of that gap in the market. 

Digital platforms are also important tools for businesses looking to increase revenue and growth. A robust digital ecosystem that can incorporate elements like loyalty programs, personalised payment solutions and ensure superior customer experience for end users can add value to a business’ offering. 

Quick to change, quick to succeed

An agile business model empowers a business with the ability to continuously improve every element of its offering and overcome challenges. Ultimately, technology-driven innovation is the best means of fostering an agile culture and bringing about positive change.

No matter the sector, the customers, or the business – having both the willingness and capacity to adapt to whatever challenges or obstacles stand in your way is vital. At a time when consumer spending is down and many businesses are struggling, it is the most agile and innovative players in each sector who will find the ingenuity to overcome and succeed.

This article was originally published on May 14, 2023.

About the Author

Sam Martin is the co-founder and CEO of Peckwater Brands (PWB), the delivery franchising experts. PWB helps restaurants and kitchens of all sizes benefit from the fullest demands of the market by streamlining the process of embracing virtual brands and multiple-franchise solutions. Working with partners across the hospitality spectrum, they can transform any kitchen into a multi-franchise operation, integrating with their existing operations and opening them up to vastly increased demand across different brands and cuisines. Sam worked in executive positions at Uber and Amazon before co-founding PWB in 2019.   

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Understanding the Rapid Prototyping Model

The Rapid Prototyping Model is a development methodology that emphasizes the swift creation of prototypes to test and validate design concepts before full-scale production. Unlike traditional sequential models, the Rapid Prototyping Model focuses on iterative cycles, allowing for rapid refinements and improvements based on user feedback and changing requirements. One company known for its expertise in this area is ARRK Asia, which specializes in providing advanced prototyping and product development solutions. 

Key Principles of Rapid Prototyping

Rapid Prototyping is a software development approach that is guided by several key principles to ensure its effectiveness. These principles help shape the way the development process is carried out and how prototypes are used to achieve project goals. Here are the key principles of Rapid Prototyping:

Iterative Process

The model involves a series of iterations, where each iteration refines the prototype based on feedback. This iterative approach ensures that the final solution aligns closely with user needs and expectations.

Quick Turnaround

Rapid Prototyping aims to reduce development time significantly. The focus is on quickly building functional prototypes to validate key features and design elements.

User-Centric

User feedback is central to the model. Prototypes are shared with stakeholders and users early in the process to gather insights and validate assumptions.

Collaborative Approach

Cross-functional teams collaborate closely throughout the development process, ensuring that different perspectives contribute to the prototype’s evolution.

Benefits of the Rapid Prototyping Model

The Rapid Prototyping Model, also known as the Rapid Application Development (RAD) model, is a software development approach that focuses on quickly building and iterating prototypes of a system to gather feedback, refine requirements, and create a final product. This model offers several benefits:

Accelerated Time-to-Market

By rapidly creating and testing prototypes, organizations can bring products and solutions to market faster, gaining a competitive edge.

Reduced Risks

Early user feedback helps identify potential issues and shortcomings, reducing the risk of developing a product that does not meet user expectations.

Enhanced Communication

Prototypes serve as tangible communication tools, facilitating clear and effective discussions among team members and stakeholders.

Flexibility

The model allows for adjustments and changes at various stages, accommodating evolving requirements and technological advancements.

Implementing the Rapid Prototyping Model

The Rapid Prototyping Model is not just a theoretical concept; it’s a practical framework that can be seamlessly integrated into your development process to accelerate innovation and improve solution outcomes. In this section, we’ll outline the step-by-step process of implementing the Rapid Prototyping Model, ensuring you harness its potential to the fullest.

Requirement Gathering

Understand user needs and define the scope of the project, identifying key features and functionalities.

Prototype Creation

Build a preliminary prototype based on the gathered requirements. This prototype can be a low-fidelity version focusing on key aspects.

Feedback and Iteration

Share the prototype with stakeholders and gather feedback. Use this feedback to refine and improve the prototype in subsequent iterations.

Validation and Testing 

Test the prototype thoroughly to ensure it meets user expectations and functional requirements.

Finalization

Once the prototype aligns closely with the desired solution, proceed with full-scale development and production.

Real-World Applications

The Rapid Prototyping Model is a versatile and powerful approach that finds application across various industries and sectors. Its ability to accelerate innovation, gather user feedback through a dedicated user feedback platform, and refine designs makes it an invaluable tool in today’s fast-paced and competitive landscape. Let’s explore some real-world applications where the Rapid Prototyping Model has made a significant impact:

Software Development

Rapid prototyping allows designers to swiftly iterate on tangible item designs, optimizing form and function, from electronic goods to industrial machinery.

Product Design

From consumer electronics to industrial machinery, Rapid Prototyping enables designers to quickly iterate on physical product designs, optimizing form and function.

User Experience (UX) Design

UX designers use prototypes to test user interactions, ensuring a seamless and intuitive experience for digital products and websites.

Architectural Design

Architects utilize Rapid Prototyping to visualize and refine building designs, exploring spatial layouts and structural elements.

Conclusion

The Rapid Prototyping Model has revolutionized the way organizations approach innovation and solution development. By embracing an iterative and user-centric approach, this model empowers teams to rapidly create and refine prototypes, resulting in products and solutions that better align with user needs and market demands. As technology continues to evolve, the Rapid Prototyping Model will remain a cornerstone in driving efficient and effective development processes, ultimately leading to greater success and satisfaction for both creators and users.

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Sneakers (or “trainers”, as they are known in the UK) are big business – and leave a heavy environmental footprint. But new business models are looking to disrupt the footwear industry and bring sustainable change through the combination of material innovation and product-as-a-service subscriptions.

In 2022, global footwear market revenue reached $381 billion, with estimates that it will eclipse $450 billion by 2027.¹ But of the 23 billion pairs of shoes manufactured every year, 90 per cent are believed to end up in landfill.² And once in a landfill, it takes between 30 and 40 years for just one pair to decompose, and a common sneaker midsole made from ethylene vinyl acetate (EVA) can last up to 1,000 years.³

Wedged between rapid industry growth and mounting concern over the industry’s environmental impact, bids for sustainability riff on the basics: material innovation, clean-tech-enabled manufacturing, transparent supply chains, and circular design models.

Looking to crack the code of sustainable footwear, Swiss running brand On⁴ is the latest athletic apparel company to enter the race – with one notable difference: its Cyclon product line will feature fully recyclable shoes, made chiefly from castor beans, and is only available via a monthly subscription. Through the combination of material and business model innovation, On believes it could be on the verge of a closed-loop product life cycle, ushering in a truly circular and sustainable footwear market.

The shoe you will never own

For $29.99 a month, On’s subscription model allows consumers to send back their worn-out shoes and receive new ones. The Cloudneo⁵, On’s first footwear under the Cyclon product line, is engineered for approximately 600 km, the average distance a dedicated runner covers in about six months, translating to roughly two pairs per year.

Driving sustainability through material innovation

Most footwear is made from problematic materials like nylon, synthetic rubber, and plastic. They are shaped by energy-intensive processes such as injection moulding, foaming, and heating, and then bound together with environmentally damaging chemicals.

On’s Cloudneo uses an innovative material called Pebax Rnew from Arkema SA (a French speciality materials company), which is derived from castor beans. Pebax Rnew can be modified during processing to provide bounce in the sole, as well as comfort and support in the upper. In other words, it is the only material used in the Cloudneo, thus reducing complexity in recycling.

In addition to using this new material, On has an internal life cycle assessment (LCA) team working to quantify the environmental impacts of the new programme. The On company estimates that a pair of Cloudneos generates 20 to 30 per cent less carbon dioxide than the 18 kilograms emitted by a typical pair of its shoes, but the benefit could increase if the proportion of recycled material rises over time.⁶

Closing the loop through business model innovation

Ultimately, On wants to achieve full circularity, so that discarded clothing items are completely reused to create new ones. Potentially by the end of the decade, On executives aim to bring back 90 per cent of its products for recycling.⁷ But, as other brands have explored this vision, they’ve hit roadblocks. For example, in 2018, Adidas released the Futurecraft.Loop, a “100 per cent recyclable” performance running shoe. Yet soon after its launch, Adidas publicly shared that its Futurecraft.Loop pilot struggled (reaching only a 10 per cent recycle rate), because consumers wouldn’t send the shoes back in time for Adidas to generate the next batch and keep the circle in motion.⁸

Redesigning the way consumers “purchase” shoes could be the key to closing the circularity loop. According to François-Xavier Dosne, On’s head of innovation business strategy, “The hurdle to circularity [that’s] facing the industry is that people are not sending shoes back to recycle them… The subscription automates that process.”⁹

By selling kilometres used rather than shoes, On shifts its sales incentive from selling as many shoes as possible to making shoes last as long as possible. This transformation can be likened to Michelin tyres’ performance-based model, where the company focuses on maximising the tyres’ lifespan and efficiency rather than the quantity of tyres sold.¹⁰

The subscription model offers customers convenience and potential savings. With less decision-making and hassle, customers can focus on enjoying their shoes, knowing they will be replaced when worn out.

Circular economy or subscription fatigue?

The unique combination of material and business model innovation could give On a leg up in the sustainable-footwear wars. However, competition is fierce, with industry frontrunners like Adidas and emerging startups like Allbirds, who are also developing more sustainable shoes. In addition to its Futurecraft.Loop programme, Adidas teamed up with the NGO Parley for the Oceans in 2015 to release the first performance shoe with an upper made from marine plastic waste and illegal deep-sea gillnets (fishing nets that are hung vertically so that fish get trapped by their gills).¹¹ In terms of pure carbon footprint, Allbirds recently unveiled M0.0nshot, a sneaker with a net footprint of 0.0 kg of CO2 emissions. Rather than achieving this feat through controversial carbon offsetting, the shoe relies on three materials that Allbirds says are carbon-negative: regeneratively farmed merino wool, a sugarcane-based EVA foam, and a bioplastic made from methane by US startup Mango Materials.¹²

Faced with several sustainable-footwear options, On’s subscription model risks only appealing to power users or consumers willing to pay a premium. Keep in mind that On’s assertion of “wearing the shoes out” involves running an ambitious 25km per week – a significant commitment for many casual runners. At 25 km per week, On’s Cloudneo would retail at $180, translating to an economical $0.30 per kilometre, well in the range of their closest (non-sustainable) competitors, the Nike Infinity at $0.23/km¹³ and Adidas Fresh Foam at $0.26/km.¹⁴ However, any delay in reaching the 600km lifecycle can turn into a costly affair. Each additional month drives up the cost by $0.05 per km, with customers footing the bill.

Despite the initial hype, it’s important to recognise that circular subscription models are still in the early stages of experimentation. Nevertheless, circular subscriptions are rapidly becoming commonplace across several consumer goods categories. Mud Jeans has launched its “Lease A Jeans” programme¹⁵, Swapfiets identifies as a “bicycle as a service” company¹⁶, and Fernish offers rentable, maintained furniture. But given the rise of subscription fatigue, it remains to be seen how many subscriptions consumers are willing to spring for. Nevertheless, the race for sustainable consumer products is on and may well be shaped by transforming consumption habits towards circular subscriptions.

About the Authors

Patrick Reichert, Associate Director and Research Fellow at the elea Chair for Social Innovation, IMD. Patrick conducts research at the intersection of entrepreneurship, finance, and social impact, with a particular focus on the mechanisms and practices that investors use to seed investment in social organisations. He is the associate director at the elea Chair for Social Innovation.

Oscar Vosshage, Research Associate Intern at the elea Center for Social Innovation, Masters Student E4S. Oscar is a Master of Science in Sustainable Management and Technology candidate at E4S, a joint master programme of IMD, EPFL and UNIL. He is also project lead for a Lausanne Global Shaper project aiming to raise awareness of the heart attack gender gap.

References

1. https://www.statista.com/forecasts/976367/footwear-market-size-worldwide#:~:text=In%202022 percent2C%20the%20global%20footwear,billion%20U.S.%20dollars%20by%202027
2. https://www.theguardian.com/fashion/2020/mar/21/some-soles-last-1000-years-in-landfill-the-truth-about-the-sneaker-mountain
3. https://www.theguardian.com/environment/2009/aug/23/repair-trainers-ethical-living
4. https://www.on-running.com/en-us/
5. https://www.on-running.com/en-us/products/cloudneo-42cloudneo/mens/undyed-shoes-42.98711?queryID=ff59d7717fd3e5649f3eea3135a7d080
6. https://www.wsj.com/articles/the-100-recyclable-running-shoe-thats-only-available-by-subscription-11657188000
7. https://www.wsj.com/articles/the-100-recyclable-running-shoe-thats-only-available-by-subscription-11657188000
8. https://qz.com/quartzy/1747230/adidas-says-it-successfully-recycled-its-first-batch-of-futurecraft-loop-sneakers
9. https://www.fastcompany.com/90850232/on-creates-circular-system-to-recycle-running-shoes
10. https://www.iotworldtoday.com/iiot/a-look-at-michelin-s-product-as-a-service-strategy
11. https://news.adidas.com/running/adidas-and-parley-for-the-oceans-unite-sporting-communities-across-the-globe-to-run-for-the-oceans/s/0621eb8e-fe22-426f-8bf3-4980347c184f
12. https://www.voguebusiness.com/sustainability/allbirds-says-its-net-zero-carbon-shoe-is-here
13. https://www.solereview.com/nike-react-infinity-run-flyknit-3-review/
14. https://www.solereview.com/new-balance-fresh-foam-1080-v12-review/
15. https://mudjeans.eu/pages/lease-a-jeans
16. https://swapfiets.com/
17. https://fernish.com/

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