The Business Design Cube

Converging Markets, Society, and Customer Values to Grow Firms Competitive in Business

Rajagopal Rajagopal

• Publisher: Business Expert Press
• Year: 2021
• ISBN:
  9781637420171
• Topic: Betriebswirtschaft
• Subtopic: Marketingforschung

This book discusses the three facets of the design-cube identified as design-to-market, design-to-society, and design-to-value through theoretical foundations, design arguments, managerial analysis, and best practices of companies.

The design-to-market concept has been critically examined for customer-centric companies with focus on the current trend of coevolution and crowdsourcing approaches that drives the companies to practice critical thinking.

CHAPTER 1

The Concept Map

Overview

This chapter delineates the concept of design-cube comprising design-to-market, design-to-society, and design-to-value constituents. Discussions on various aspects of changing business ecosystem, value system in society and market, and transformation in the business processes explain the concept map of the designcube and its applications in the business modeling. This chapter presents many corporate examples that are in line with the design-cube concepts. There is a discussion included on systems effects of systems thinking on business performance. This provides a new vision to understand embedded elements and their role also in transforming corporate philosophies from conventional wisdom to contemporary strategies to gain competitive leverage in the marketplace.

Business Ecosystem

Business today is founded on a triadic elements of market, society, and customer values. The core and contextual attributes in a business form the ecosystem of a business, which is a strategic perspective of managing business in a competitive marketplace. The notion of business ecosystem addresses the relative concepts of collaboration and competition, such as customer-centric and market-led strategies of business, in both predetermined and dynamic business systems. Broadly, the extrinsic attributes of a business ecosystem include innovation (social and market-based), a competition constituent (opportunity mapping, elements of oligopoly and monopsony, and market taxonomy), and social business philosophies of companies (Parente et al. 2018). Traditional firms considered macro elements in the business as exogenous drivers of business ecosystem and focused on controllable variables like organizational design, work culture, and marketing mix. The exogenous elements like competitors, suppliers, stakeholders, and business partners have become endogenous management factors of the business ecosystem. Technology plays a major role in the business ecosystem today, which has evolved from an internally focused factor to customer-facing attributes, leading to agile business development. The bilateral factors in the business ecosystem include government, business partners (manufacturing, logistics, and marketing), financial institutions, and information technology providers.

Many companies have developed integration capabilities to establish upstream and downstream alliances through technology platforms. In conventional firms, the integration points are often static. The dynamic business ecosystems allow bilateral connections with a small, preselected group of partners and large firms in production and business operations such as manufacturing, distribution, and marketing activities. Successful business ecosystems develop operational networks between intra-organizational (across functional divisions) workstations and market players. Companies with such functional networks are able to integrate required elements of business ecosystem. Nonetheless, new enterprises struggle to collaborate with the upstream market players and compete in these markets. Such efforts of new ventures demand strategic thinking to leverage a firm’s resources and capabilities to establish strategic alliances. Strategic thinking helps new entrants adjust ecosystem with the socioeconomic, cultural, and market-led factors that influence one another and stimulate the management of the design-cube comprising design-to-market, design-to-society, and design-to-value. The business ecosystem is fundamentally based on these triadic design pillars. Large companies tend to explore radically new technology to disrupt existing markets, while the new entrants focus on pursuing value-adding improvement in the existing products and technologies on the frugal innovation platform. In this process of orchestrating business ecosystems, multinational companies and joint ventures follow an integrative and long-term perspectives in business embedding business goals and strategic interests in decision making. Such strategic business goals help these firms develop backward and forward linkages with suppliers and buyer-groups to develop operational integration (Zahra and Nambisan 2012).

In the competitive business environment, large firms operate with open ecosystems to gain competitive leverage by commercializing open-innovation and reverse-innovation products. This strategy helps firms in delivering high customer value and inculcate perceptions among customers on collective creativity. Consequently, firms can retain the loyalty and support of ecosystem partners and stakeholders to ensure their continued performance in the marketplace. Continuous learning and exploring ways to catch-up with changes in the industry drive firms to stay agile with the dynamic business ecosystems. Industrial marketing firms have moved today from relationship-management goals to ecosystems-orchestration process. Business environment today is hierarchically arrayed within industry with transitional multimodal business system across large firms. Large firms within industries (such as pharmaceuticals) develop business consortiums, and focus on collaborative strategizing, and expanding the key partners geographically. The changing business ecosystems today drive greater flexibility in strategic partnership by allowing firms to develop collaborations contextual to the collective intelligence, social values, and benefit-spread across the stakeholders (Reeves et al. 2015).

Most virtual business players like Amazon, Google, Alibaba, and Uber have adapted to technology-focused ecosystem as hubs within the networks of customers, suppliers, and producers. These hubs develop backward and forward functional linkages to support the core and peripheral functions to orchestrate the business ecosystem. However, a single or predetermined ecosystem does not support businesses of all firms due to variability in business attributes of each firm. For example, while Google has been a successful and profitable enterprise, Spotify and Uber are struggling continuously to make adjustment with the business ecosystem. But regardless of how successful they prove to be, they are adopting a different set of strategies than the traditional firms engaged in doing business under the contemporary business ecosystem (Birkinshaw 2019). Companies needs to understand the business ecosystems and exploit opportunities in the following ways:

• Identify a keystone contribution.

• Develop employee engagement, accountability, and internal consistency in managing revenue streams with global-local business partners.

• Explore the advantages of the ecosystem to innovate and renew the keystone contribution.

Keystone contribution of a firm is a distinguished activity or a process that provide unique business proposition to the firm and enable it to own and control its operations. Such keystones are considered as essential constituents of the business ecosystem to create value for customers. The unique product designs of original equipment manufacturers (OEM) in manufacturing telecommunication chips constitute keystone contributions. The ownership and control of chip makers restrict the mobile phone instrument manufacturers to switch to designs from an alternative supplier. The OEMs establish tollgates to control the flow of revenue through license fees, royalties, or commissions on transactions besides the quality checks on products within the ecosystem. Firms draw advantages from the ecosystems toward new and incremental innovations. The business ecosystems help firms in text mining, and analyze collective intelligence. Alibaba, Flipkart, and Amazon aggregate and analyze user data from multiple websites as a part of their decision-making ecosystem on shopping preferences and consumption patterns (Williamson and De Meyer 2019). Dynamic business ecosystems demonstrate customization against standardization (personal computers, 3D printers etc.), closed-loop decision processes, asset sharing (infrastructure, brand, supply chain network), collective knowledge pool, and collaborative ecosystem to optimize the business performance of the firm a collaborator. No specific business model of a firm has displayed all the aforementioned elements in the dynamic ecosystem, but having a higher number of dynamic attributes of business ecosystem usually correlates with a greater chance of success by business transformation (e.g., Kavadias et al. 2016).

In the changing business trends today, a firm is no longer an independent strategic actor; it is dependent on collaborations and strategic alliances. Its success depends on collaboration with stakeholders and market players, and strategic alliances with other firms in a multisectoral ecosystem. Such transformations in business ecosystems are focused on following the strategic decision attributes toward:

• Moving from market-oriented to customer-centric strategies with focus on creating value among collaborators. Such business strategy helps the collaborating firms take initiatives on customer-centric innovations,

• Determining the role of principal and collaborating firms in pursuing the design cube comprising design-to-market, design-to-society, and design-to-value perspectives in transforming business ecosystems

• Drafting the terms-of-reference of collaboration among the partnering firms, and providing the task or project governance options. The terms-of-reference would guide the accessibility of collaborative firms within the ecosystem and describe the exclusivity in roles,

• Developing appropriate inter- and intra-organizational scenarios to design approaches for cooperative competition (coopetition). The ability to collaborate with partners can shift according to the intrinsic and extrinsic factors embedded in the business ecosystem, and

• Managing multiple ecosystems based on the organizational capabilities, competencies, and market requirements.

Some orchestrators are able to manage multiple ecosystems successfully by covering different parts of the collaborative tasks leading to diverse business expansions. For example, General Electric (GE) has many channel partners and system integrators in various business divisions. Channel partners constitute the GE Digital ecosystem and play catalytic role in sales and value creation regardless of whether they act as an extension of the GE Digital sales team or distribute GE Digital products independently (Jacobides 2019).

Business ecosystems are becoming complex by developing pro-environment products for consumer and industrial use as firms are addressing global sustainability challenges including climate change, resource depletion, and ecosystem loss. Transformations caused due to the sustainability perspectives in business is being successfully managed by some companies through effective collaborations. Large firms are developing long-term value propositions to collaborate with business partners in new ways that treat fragile and complex ecosystems as a whole. For example, apparel coalition led by Nike, Patagonia, and Walmart describe new collaboration models that create shared value and address environmental protection across the value stream. However, the partnership ecosystem is not always favorable for the cross-country business expansions. The executives of Bharti Airtel, India’s largest mobile services operator, during its business expansion in African countries, discovered some unwarranted challenges including cultural differences between their Indian and African employees, an infrastructure poorer than expected with higher-than-anticipated costs, a monopolistic distribution network, strong competitors, a weak partner ecosystem, and a market unresponsive to tariff cuts. These challenges have significantly disrupted the predetermined business ecosystem of the firm and its collaborators (Palepu and Bijlani 2012).

Incubation of innovations has emerged as a new model of startup facilitation in most developing economies. Venture capitalists review the incubators and assess the projected growth and profitability in businesses to invest. The venture capitalists review the incubators to diversify risky investment portfolios, while the prospecting entrepreneurs approach the incubators to review the economically viable and technologically feasible support for startup projects. Innovation incubators of the firms face challenges and opportunities to grow competitive in the marketplace. However, there exists the embedded investment and entrepreneurial risks. Broadly, there are five incubator archetypes such as the university incubator, the independent commercial incubator, the regional business incubator, the company-internal incubator, and the virtual incubator (Carayannis and von Zedtwitz 2005; Rajagopal 2020a). Strategies like enhancing the capability and competence; investment in internal research and development; and globalization through strategic alliances, and mergers and acquisitions push local enterprises toward helix effect. These enterprises not only succeed in local markets over time but can also build global value chains. New ventures can improve their business ecosystem to ensure effective business performance with the collaborators by reinforcing the following considerations (e.g. Kanter 2012):

• Converging knowledge pool (collective intelligence and entrepreneurial education) with organizational culture to create new venture, partnerships, and business goals

• Bridging creativity and marketing strategies to implement new ideas into market-ready enterprises

• Linking small and large enterprises to promote the growth of new entrants in the industry and develop strategic alliances with the large corporations though innovation enterprises

• Improving the match between entrepreneurial education and entrepreneurial opportunities

• Stimulating public policies to link knowledge-creativity-innovation and markets within an industry

• Developing transformational leadership across sectors to develop regional strategies and produce scalable business models.

It is often challenging for the small companies to adapt to a structural business model over the traditional family-based organizational structure. Such business confinement needs small firms in emerging markets to coevolve with large firms and catch-up with them to improve the manufacturing and marketing processes, and the productivity rather than engaging in frugal innovations for niche markets.

Shifts in Business Philosophy

Major structural shifts in the global economy are creating new opportunities in transaction banking, particularly in trade finance. International trade is growing faster than global GDP, and Asia is now the center of global expansion, driving trade growth in other emerging markets and in developed economies as well. The global economy faces significant challenges as it continues to integrate high levels of public debt in Europe and North America that is causing the fear of a negative impact on GDP growth. Companies intending to go global exhibit two apparent objectives: to take advantage of opportunities for growth and expansion, and survival in the business amidst growing competition. However, firms that fail to pursue global opportunities eventually lose their domestic markets and may be pushed aside by stronger and more competitive global firms. One of the revolutionary business dynamics at the grassroots has been the rapid mergers and acquisitions of family businesses with equal-size or larger firms within the industry. Such shifts among family firms have shown vertical or horizontal expansions. In addition, the intergenerational succession of firms also influences the expansion of family businesses through mergers and acquisitions. The effect of succession also develops transformational leadership in family bus...

Table of contents

• Cover
• Half-Title Page
• Title Page
• Copyright
• Dedication
• Description
• Contents
• Preface
• Acknowledgments
• Chapter 1 The Concept Map
• Chapter 2 Design-to-Market
• Chapter 3 Design-to-Society
• Chapter 4 Design-to-Value
• Chapter 5 The Helix Effect
• About the Author
• Index
• Backcover