Our Guide to the Spring 2021 Issue
These summaries will help you navigate our spring 2021 lineup.
Topics
Competing on Platforms
Donato Cutolo, Andrew Hargadon, and Martin Kenney
In the past decade, digital platforms have profoundly reorganized markets and redefined the dynamics of value creation and competition. As they have prospered, other businesses have felt compelled to join the platform economy, viewing participation as necessary for growth and even survival.
But platform-dependent businesses must recognize the power dynamics and risks intrinsic to platform-controlled markets. These include experiencing pricing inflexibility, being bundled to appear alongside competitors, and being kept at arm’s length from customers. Doing business on dominant internet platforms requires companies to develop strategies that leverage a platform’s resources while mitigating its power over them.
There are four steps companies can take to navigate the risks: experiment with changing channels, use the platform to market themselves, game the system of algorithms that govern the platform, and diversify their income streams. Businesses can also engage with their governments to argue for new regulatory frameworks to mitigate platforms’ power.
How Healthy Is Your Business Ecosystem?
Ulrich Pidun, Martin Reeves, and Edzard Wesselink
Companies that start or join successful business ecosystems — dynamic groups of largely independent economic players that work together to deliver coherent solutions to customers — can reap tremendous benefits. Ecosystems can, for instance, provide fast access to external capabilities that may be too expensive to build within a single company.
However, less than 15% of ecosystems end up being sustainable in the long run. Drawing from a database of more than 100 failed ecosystems (including B2C, C2C, and B2B platforms; social networks; and marketplaces), the authors compared failed ecosystems with their successful counterparts. They identified key success metrics and red flags that indicate emerging challenges in each of the ecosystem’s four life cycle phases: at its launch, when it’s scaling, at maturity, and as it evolves. Paying attention to the issues that can arise during each phase can help organizations decide whether they need to try to reorient their ecosystem — or even abandon it.
Platform Scaling, Fast and Slow
Max Büge and Pinar Ozcan
Rapid scaling is a core element of platform strategy, where speed in capturing market share has been considered the decisive factor for success. But in some cases, a slower, more incremental approach works better. This is especially the case in markets with high degrees of regulatory complexity and regulatory risk. As scrutiny of platform businesses mounts in Europe and the U.S., and as more companies in a greater variety of sectors and markets seek to capture the benefits of platforms, those factors are likely to become much more important for strategists to consider.
The authors analyzed a variety of platform businesses, examining their scaling strategies and the regulatory obstacles they encountered. They explain how companies in certain regulatory environments can adopt a slow-scaling strategy that includes analysis of the macro environment, careful risk management, investment in stakeholder trust, and incremental geographic expansion.
What We’ve Learned So Far About Blockchain for Business
Mary Lacity and Remko Van Hoek
It’s understandable why many businesses have been slow to invest in blockchain. Executives have been cautioned about blockchain’s hype and hidden vulnerabilities. But doubts about the shared software applications that create records of transactions are fading: In a Deloitte survey, more than half of senior executives placed blockchain among their top five strategic priorities.
A study of companies already using blockchain identified five insights: Successful applications are based on business-led collaborations, with blockchain as the backstory; enterprises are choosing private blockchains over public blockchains, although that may change; trust is established with immutable proof that events occurred, not by sharing a lot of data; enterprise applications do not eliminate trusted third parties and in fact often introduce new ones; and first-generation solutions will need to evolve, moving from applications that operate as islands to ones that are interoperable across platforms.
How Culture Gives the US an Innovation Edge Over China
Carl Benedikt Frey
China’s success at managing the COVID-19 pandemic is seen by some as putting it on a course to eclipse the United States as the world’s largest economy. With the U.S. and China engaged in fierce competition for global economic dominance, discussion of the rivalry has often centered on differences in policy and government — and less attention has been paid to how underlying, deep-rooted cultural and psychological traits may affect the countries’ comparative advantages.
Scholars argue that many Asian nations have been shaped by a long history of social cooperation required for successful rice farming, and, as a result, value collectivism, which offers an advantage in industrial production. In contrast, medieval church teachings in Western Europe are seen as loosening kinship ties and promoting individualism, which may have an advantage in driving growth through innovation. Although collectivist cultural traits are helpful for directing a coordinated response to a pandemic or facilitating mass production, the traits of command and control can slow innovation, which calls for breaking the rules, not abiding by them. Nations built on collectivist cultures have often leapfrogged ahead in economic growth on the strength of production but may ultimately lag if they are unable to generate the innovations required for new growth.
Does Your C-Suite Have Enough Digital Smarts?
Peter Weill, Stephanie L. Woerner, and Aman M. Shah
Executive teams that understand how to wield the power of digital technologies are rare, but they deliver significant premiums in corporate growth and valuation. Research conducted by the authors found that large enterprises with digitally savvy executive teams outperformed comparable companies without such teams by more than 48% based on revenue growth and valuation.
However, digital savviness remains in short supply in the C-suite. A 2020 study of large global companies found that only 7% had digitally savvy executive teams. Overall, only 17% of individual team members were rated as digitally savvy. And it matters where in the C-suite digital know-how resides: Companies with digitally savvy executives in five roles — CEO, CFO, head of marketing, head of corporate communications and investor relations, and head of compliance and legal — have the strongest statistical link to high performance.
Companies that want to address this challenge need to first assess the level of digital expertise among members of the top management team. They should then work to first deepen the knowledge of those in key roles, before moving to develop digital capability more broadly across the C-suite, targeting at least 50% of top team members.
The Four Fatal Mistakes Holding Back Circular Business Models
Johan Frishammar and Vinit Parida
The urgency of the climate crisis is driving some of Europe’s leading manufacturers to adopt circular business models, where they collaborate with ecosystem partners to create, capture, and deliver sustainable value. The goal of these business models is to better manage the life cycles of products and parts to achieve environmental benefits — while still meeting profit targets.
Companies on this path have faced four major challenges: aligning incentives and motives among ecosystem partners, looking beyond existing ecosystem relationships, involving customers deeply, and planning for extended implementation. To combat these challenges, leaders need to be vigilant about recognizing two common biases: the fallacy of the wrong level, which is the tendency to think of a circular business model as company-centric; and the endowment effect, which is a tendency for companies to overvalue their own internal capabilities and needs. Leaders also need to grapple with a resistance to cultural change as they move from a company-centric mindset to an ecosystem-centric mindset.
Picking the Right Approach to Digital Collaboration
Paul Leonardi
Digital collaboration tools are designed to help people work together and learn from one another by facilitating knowledge sharing — and they can also provide a window into who knows and does what in the organization. As these tools proliferate, it’s important to understand the specific capabilities they offer, because people who collaborate regularly and those who collaborate sporadically have different needs and require different types of tools.
Regular collaborators benefit most from tools that help them see what coworkers are doing day to day and why they have made certain decisions. These tools also help employees build networks across projects. Tools that “broadcast” information about employees’ expertise and internal resources help sporadic collaborators create a roster of distant connections that can be activated as needed. Regardless of the type of digital collaboration tools used, their value will grow over time as employees’ activities are recorded and useful content is added.
How Good Citizens Enable Bad Leaders
Anthony C. Klotz, Mark C. Bolino, and M. Ghufran Ahmad
There’s a human tendency to balance virtuous acts with behavior that is less honorable, such as cheating after buying environmentally friendly products. People also engage in vicarious moral licensing, granting themselves leeway to do bad things after good deeds are performed by friends or colleagues.
Leaders are not immune to these entitlements. Some psychologically free themselves to engage in unethical behavior after taking credit for their teams’ good citizenry.
Two factors tip the scales toward this conduct: narcissistic feelings and close identification with team members. Employers can be on the lookout for trait narcissism when hiring and promoting and search for signs of empathy, which narcissists tend to lack. They can look for balancing traits that reduce unethical behavior, such as a strong moral identity.
Why So Many Data Science Projects Fail to Deliver
Mayur P. Joshi, Ning Su, Robert D. Austin, and Anand K. Sundaram
Organizations can gain more business value from advanced analytics by recognizing and overcoming five common obstacles: an infatuation with data science solutions that plays out as “a hammer in search of a nail”; unrecognized biases embedded in the raw data; a lack of synchronization between data science and the priorities and processes of the business; a failure to consider user experience early on; and a rocky “last mile” in the implementation of data-driven solutions.
The authors’ research found that these mistakes occur at the interfaces between the data science function and business functions. This suggests that leaders should be adopting and promoting a broader conception of the role of data science within their companies — one that includes a higher degree of coordination between data scientists and the employees in business units who are responsible for problem diagnostics, process administration, and solution implementation.