Wirtz,SJ

1. 3 pillars of meaning based strategic management ( building co-operative ecosystems integrating knowledge from the service encounter management ) by Stephan J. Wirtz M.A, Dipl.oec, MBA, DDA h.AssociateProfessor Corvinus University, Budapest Adjunct Professor, EM Lyon, Shanghai Campus Associate Professor, GBS Geneva The 4th Conference Customer Strategies for Sustained Growth INSEAD, Fontainebleau, France, 20-21 June 2013 Wirtz,SJ

2. An old statement is more and more right and applicable: According Karl E Weick “The teaching of organization theory and the conduct of organizational research have been dominated by a focus on decision-making and the concept of strategic rationality. However, the rational model ignores the inherent complexity and ambiguity of real-world organizations and their environments.” His research is about how the `sensemaking' process shapes organizational structure and behavior. The process is seen as the creation of reality as an ongoing accomplishment that takes form when people make retrospective sense of the situations in which they find themselves. The challenge is how to do this pro-actively creating ecosystems.

3. According to Christensen,C, Gregersen,H 2011 one suggests to emphasize Discovery driven skills in the context of network over delivery driven Discovery-driven • Associating • Questioning • Observing • Idea networking • Experimenting Delivery-driven • Analyzing • Planning • Self-disciplined • Detail-oriented implementing Wirtz,SJ

4. Most leaders are using frameworks that were designed for a different era of business and based on a single dominant idea: -that the purpose of strategy is to achieve a sustainable competitive advantage. Once the premise on which all strategies were built, this idea is increasingly irrelevant. Instead, organizations need to forge a new path to winning: capturing opportunities fast, exploiting them decisively, and moving on even before they are exhausted, this leads to a notion of transient competitive advantage. Rita Gunther McGrath, 2013 Wirtz,SJJ

5. Before we start let us set the situation context: A business model is basically the answer to 2 questions: Customers want Product/ service should be What ? to Deliver to Finance/ generate revenue How ?

7. Strategic Management looks into the 3 dimensions of innovations: - technolgy is a constant innovation driver, that makes markets out of sync and disrupt business models - inside the company and its readiness to pro-actively change to market-driving relation instead of being market driven,reactive Technology Industry/Market dynamic Company - markets are source of supply and demand of resources, solutions and challenges, often attracting government to intervene

8. Strategic Management looks into the 3 dimensions of innovations: - technology is a constant innovation driver, that makes markets out of sync and disrupt business models - Technology Industry/Market dynamic • Company has to manage the interface with market • - reactively: many company • Pro-actively: alerted company • Driven by markets: outside- in , innovative company • Driving markets: commanding market change through innovations that become standards or benchmark in market- (segment ) companyin command Company

9. Technology Technically possible Product and service innovation Process innovation Assess interdependence risks of coordinating with complementary innovators in your ecosystem Innovation Strategy Set performance expectations and determine target market. Assess initiative risks of managing the focal project. Modify performance expectations. Assess integration risks of having the solutionadopted across the value chain.

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11. Context: • Customer experience management become more and more a differentiation activity • In agile markets were new market profiles arose and are co-created the customer approach has to be integrated in any activity a company gets involved with partners as • - building trust • - creating mutual understanding of moving targets in emerging industries and • - considering the service encounter attitude and treatment as • applicable to people and companies alike • being in co-operation network. • The ecosystem approach can indicate some of the strategic issues one has to address in strategic management • It implies and somewhat applies that the term sustainable competitive advantage will be transformed into • Transient as well as co-constructed competitive advantage as in emerging markets become the new concepts a priori concepts may fail as a paradigm shift happens. • - Achieving a significance ( DipaK Jain), making a difference instead of differentiation, is to road to ensure the righting of the things we do in order to assure viable outcomes and complete the market space. (Haque,U, 2012) Wirtz,SJ

12. Approach: • Part one: • Look at companies orientation about its environment in emerging markets • Part two: • Extend the integration of important elements into the strategic management • Part three: • Construct building blocks and stepping stone • Part four: Highlight finally what this has to do with meaning based Wirtz,SJ

13. Part 1: The company links the inside performance with the market performance Leadership insideoutside Meaning based People Promotion Production Product/Service Positioning Materialisationbased Place Process Price Efficiency based Strength and Weakness SW OT Opportunity and Threat Wirtz,SJ

14. There two genuine strategy development processes with implication for strategic change managementA. Prescriptive model of business strategy The prescriptive strategy process Lynch, 2008 Options Environment Purpose Options Choice Implement Resources Options is the usual approach and neglects often the limitations that an existing organisation and its culture limits the strategic options

15. B. Emergent model of business strategy The emergent strategy process – based on Quinn 1990, Senge 1990, Argyris 1977, Mintzberg 1987 and others Environment Strategy development and implementation Purpose Keypoint: creative, experimental, more difficult to describe but essential according Lynch, Resources

16. What is strategic change management?One approach to emergent processes Strategic Change Management issues to open the company towards networking Environment Strategy development and implementation Purpose • Emergent theories include: • Survival-based • Uncertainty-based • Human resource-based • Innovation and learning- based Resources ,

17. Current wave of business model: e.g. Osterwalder: Consider important environment issues but more as impact on the company than stepping stone

18. The environment needs also to be perceived as constructed and playground for creating emerging markets through co-creation with other companies considering them as lead customers7partners Wirtz,SJJ

19. SOWT Analysis In emerging markets a SWOT analysis should be extended highlighting the evaluation, estimation process by regrouping SWOT into a: inside outside Strengths Opportunities Over- Estimate Under- Weaknesses Threats We genuinely underestimate our weakness and threats to our organization. We have difficulties to embrace vagueness, ambiguity and enter into co-operation without contractual arrangements and wishful outcomes

20. SWOT Analysis % PROBABILITY P E S T E L Strengths Opportunities IMPACT Weaknesses Threats We could also differentiate again for each SWOT according to favorable and deteriorating industry context

21. SWOT Analysis Eco-system % PROBABILITY P E S T E L Strengths Opportunities IMPACT Weaknesses Threats 3-21

22. Referring to emerging markets, ecosystems and leading to co-operation networks: • The Cynefin Framework is used to understand and take action in different types of systems confronting decision makers. • Cynefin is a sensemaking framework in theoretical form: • -to operationalize the framework, it needs the domains, sub-domains and boundaries to be defined by fragments (such as day-to-day experiences of people) • to create context that is relevant to the organization and • Four tables Contextualisation. • The purpose is to define and create dynamic capabilities as an organization’s ability to reconfigure internal and external competencies to address rapidly changing • Sometimes just emerging corporate environments.( Teeceet al.1997). Wirtz,SJJ

23. Exploring emerging environment and create meaning based activities The cynefin framework Watch the explaination: http://www.youtube.com/watch?v=N7oz366X0-8 The leaders of tomorrow’s successful organizations will no longer be held hostage to the idea of a ‘sustainable’ competitive advantage. Rather, they will be energized to compete in a” transient advantage economy.” Rita McGrath 2012

24. Simple, in which the relationship between cause and effect is obvious to all, the approach is to Sense - Categorise - Respond and we can apply best practice. Complicated, in which the relationship between cause and effect requires analysis or some other form of investigation and/or the application of expert knowledge, the approach is to Sense - Analyze - Respond and we can apply good practice. Complex, in which the relationship between cause and effect can only be perceived in retrospect, but not in advance, the approach is to Probe - Sense - Respond and we can sense emergent practice. Chaotic, in which there is no relationship between cause and effect at systems level, the approach is to Act - Sense - Respond and we can discover novel practice. The fifth domain is Disorder, which is the state of not knowing what type of causality exists, in which state people will revert to their own comfort zone in making a decision. That comfort zone including organizational ones can be the biggest hurdle for process driven innovation Wirtz,SJJ

25. A complex system, in our a case evolving ecosystems, has • no repeating relationships between cause and effect, • is highly sensitive to small interventions and • cannot be determined by outcome based targets, • hence the need for experimentation. • When dealing with complex systems there is the need for experimentation. Creating co-operation networks can be done building small miles stone events. • Safe-fail Probes are small-scale experiments that approach issues from different angles, in small and safe-to-fail ways. • The intent of which is to approach issues in small, contained ways to allow emergent possibilities to become more visible. Cynefin framework is helpful to create and reach new frontiers, beyond CEO execution and efficiency driven management interest Wirtz,SJJ

26. Product centered management is still somewhat restricting companies to improve customer-focused services and grow with new service business models. Many organizations have set the target to launch and develop new customer services as a key element in their strategy. According to P. Moore ( 1993) In order to adapt to the fast changing customer needs, delivery of the services requires an ecosystem of organizations.. In many large organizations there is a strong tendency to seek for the clarity of old clear product and organization focused operating models. The value chain thinking and connecting as well connected leadership models can create an extended ecosystem approach A holistic change is needed in order to design and implement an operating model that enables integrating and managing a set of contracts, indicators and measurements aiming to efficiently adapt a network of organiztionsfrom sales to operations to fulfill customer needs and manage customer expectations. By leveraging ecosystems, companies can deliver complex solutions while maintaining corporate focus but it has to be concerned to contribute to the ecosystem construction as well.

27. The idea is that each business in the “ecosystem” affects and is affected by the others, creating a constantly evolving relationship in which each business must be flexible, adaptable and open to new partnerships and evolving networks

28. Part 2:Extend the integration of important elements into the strategic management The idea is then that each business in the “ecosystem” affects and is affected by the others, be it companies, individuals, trendsetters research organization, governments and certain socio-economic events like ageing of society, obesity.. creating a constantly evolving relationship in which each business must be flexible, adaptable and open to new partnerships and evolving networks

29. Communication based sense making and receptivity Thought-concept Z The 3 pillars are the axes x,y,z, Resource based corporate Strategic Management X Y Co-operation based Strategic Management Wirtz,SJ

30. Communication based sense making and receptivity Z The 3 pillars are the axes x,y,z, 4 reference platform focus on 4 strategic elements Resource based corporate Strategic Management X Y Co-operation based Strategic Management Wirtz,SJ

31. Communication based sense making and receptivity The 3 pillars are the axes x,y,z, 4 reference platform focus on 4 strategic elements: Z Connected and connecting leadership Focus on technology and related innovation Market management Resource based corporate Strategic Management Industry/Arena specific identity X Y Co-operation based Strategic Management Wirtz,SJ

32. Communication based sense making and receptivity Z This will lead to 64 activity blocks differentiated according strategy concept and strategy execution Concept Execution Concept Execution Concept Execution Concept Execution Concept Execution Concept Execution Concept Execution Concept Execution Concept Execution y4 z4 z2 z1 x3 x4 x1 z3 x2 Resource based corporate St.M X Concept Execution y1 Concept Execution Concept Execution y2 y3 Y Co-operation based St.M Wirtz,SJ

33. Communication based sense making and receptivity Z Resource based corporate St.M Customer/ User - ware X Tech-ware Hard-ware Soft-ware Y Co-operation based Strategic Management Wirtz,SJ

34. Communication based sense making and receptivity Z Resource based corporate St.M Customer- experience mgt. X Technology other than used What industries arena one is in How solutions commercialized Y Co-operation based St.M Wirtz,SJ

35. Communication based sense making and receptivity Z Resource based corporate St.M Industry codes, symbols, slogan Customer- experience mgt. X Technology other than used What industries arena one is in How solutions commercialized Content Content Delivery Competing companies in the same arena, e.g. coffee are very different how they commercialize and address customers/users: Nescafé, Starbucks, illy and how they expand their eco-system, focusing also on co-operation in content and delivery, manipulating, breaking industry communication codes and symbols Y Co-operation based St.M Wirtz,SJ

36. Communication based sense making and receptivity Z Resource based corporate St.M Industry codes, symbols, slogan Customer- experience mgt. X Technology other than used What industries arena one is in How solutions commercialized Content Content Delivery This is the standard strategic management approach, based on a company focused control-equity with limited out-side in orientation and seeing costumer experience management slowly as differentiation opportunity, cost reduction in outsourcing delivery and insourcing improved content Y Co-operation based St.M Wirtz,SJ

37. Communication based sense making and receptivity Z Eco-system 1, traditional collaboration based mostly on company strength and perceived opportunity Resource based corporate St.M Industry codes, symbols, slogan Customer- experience mgt. X Technology other than used What industries arena one is in How solutions commercialized Content Content Delivery This is the standard strategic management approach, based on a company focused control-equity with limited out-side in orientation and seeing costumer experience management slowly as differentiation opportunity, cost reduction in outsourcing delivery and insourcing improved content Y Co-operation based St.M Wirtz,SJ

38. Communication based sense making and receptivity Z Eco-system 1, traditional collaboration based mostly on company strength and perceived opportunity Uncontrollable social media already disrupts and makes ecosystem 1 additionally volatile Market-com, social media Resource based corporate St.M Industry codes, symbols, slogan Customer- experience mgt. X Technology other than used What industries arena one is in How solutions commercialized Content Content Delivery This is the standard strategic management approach, based on a company focused control-equity with limited out-side in orientation and seeing costumer experience management slowly as differentiation opportunity, cost reduction in outsourcing delivery and insourcing improved content Y Co-operation based St.M Wirtz,SJ

39. Communication based sense making and receptivity Expanding to ecosystem 2.0 Z Uncontrollable social media disrupts and makes ecosystem 1 volatile Eco-system 1, traditional collaboration based mostly on company strength and perceived opportunity Market-com, social media Resource based corporate St.M Industry codes, symbols, slogan Customer- experience mgt. X Technology other than used What industries arena one is in How solutions commercialized Content Content Delivery This is the standard strategic management approach, based on a company focused control-equity with limited out-side in orientation and seeing costumer experience management slowly as differentiation opportunity, cost reduction in outsourcing delivery and insourcing improved content Y Co-operation based St.M Wirtz,SJ

40. Expanding to eco-system 2.0 According to James Moore 1993: Successful businesses are those that evolve rapidly and effectively. They must attract resources of all sorts, drawing in capital, partners, suppliers, and customers to create cooperative networks anticipate the managerial challenges of nurturing the complex business communities that bring innovations to market: Expansion Bring the new offer to a large market by working with suppliers and partners to scale up supply and to achieve maximum market coverage. Leadership Provide a compelling vision for the future that encourages suppliers and customers to work together to continue improving the complete offer. Self-Renewal Work with innovators to bring new ideas to the existing ecosystem Wirtz,SJJ

41. Expanding to eco-system 2.0 • Consumers are adopting increasingly active roles in • -co-creating marketing content with companies and their respective brands. • In turn, companies and organizations are looking to online social marketing programs and campaigns in an effort to reach consumers where they ‘live' online. • However, the challenge facing many companies is that although they recognize the need to be active in social media, they do not truly understand how to do it effectively, what performance indicators they should be measuring, and how they should measure them ( Hanna R et all 2012 ) Wirtz,SJJ

42. Expanding to eco-system 2.0: • Ecosystems are larger, more diverse, and more fluid than a traditional set of bilateral partnerships or complementors. By leveraging ecosystems, companies can deliver complex solutions while maintaining corporate focus: • Six keys to unlock ecosystem advantage: • pinpointing where value is created, • defining an architecture of differentiated partner roles, • stimulating complementary partner investments, • - reducing the transaction costs, • facilitating joint learning across the network, and engineering effective ways to capture profit. • ( P.Williamson, A. de Meyer 2012) • Not ignoring three fundamental types of risk: • -initiative risks • —the familiar uncertainties of managing a project; • -interdependence risks • —the uncertainties of coordinating with comple-mentaryinnovators; and • -integration risks • —the uncertainties presented by the adoption process across the value chain. • ( Ron Adner 2006 ) Wirtz,SJJ

43. Some of the best guidance in creating global network and ecosystems can be derived from Y.Doz,K.Wilson (2012) using there three graphs highlighting: knowledge complexity and dispersion: Meaning full knowledge can be created by exploring new co-operations network and integrate it into ecosystems Wirtz,SJ

44. Creating these co-operation networks one can make excellent use of Y. Doz, approach collaborative innovation project: Through a funnel of collaborative efforts arise an evolving ecosystem based on co-operative network. Wirtz,SJ

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46. Expanding to eco-system 2.0: • Consumers are adopting increasingly active roles • in co-creating marketing content • with companies and their respective brands. • In turn, companies and organizations are looking to online social marketing programs and campaigns in an effort to reach consumers where they ‘live' online. • However, the challenge facing many companies is that although they recognize the need to be active in social media, they do not truly understand how to do it effectively, what performance indicators they should be measuring, and how they should measure them. (.see also Joachimsthaler,E, 2008 ) Wirtz,SJ

47. Expanding to eco-system 2.0: Moore describes the evolutionary stages of a business-ecosystem as forms of cooperative challenges Birth Work with customers and suppliers to define the new value proposition around a seed innovation. Expansion Bring the new offer to a large market by working with suppliers and partners to scale up supply and to achieve maximum market coverage. Leadership Provide a compelling vision for the future that encourages suppliers and customers to work together to continue improving the complete offer. Self-Renewal Work with innovators to bring new ideas to the existing ecosystem.

48. Part three: Construct building blocks and stepping stone Communication based sense making and receptivity Expanding to ecosystem 2.0: Four additional areas of focus are added Z IMC, gurus brand identity, Trendsetters ITC, tele-matic, Graphics, EsRP Market-com Social media Resource based corporate St.M Industry codes, symbols, slogan Customer- experience mgt. X Technology other than used What industries arena one is in How solutions commercialized Content Content Delivery Standardization Virtual company network Y Co-operation based St.M Wirtz,SJ

49. Communication based sense making and receptivity Expanding to eco-system 2.0 Z Integrated market communication addressing inside and outside of companies, instrumentalization of gurus, Brand Identity of joint service, people connected leader IMC, gurus brand identity, Trendsetters ITC, tele-matic, Graphics, EsRP Market-com Social media Resource based corporate St.M Industry codes, symbols, slogan Customer- experience mgt. X Technology other than used What industries arena one is in How solutions commercialized Content Content Delivery Standardization Virtual company network Y Co-operation based St.M Wirtz,SJ

50. Communication based sense making and receptivity Expanding to eco-system 2.0 Z IMC, gurus brand identity, Trendsetters The ITC is both enabler and biggest hurdle creating cooperate networks, incompatibility ,EsRP that is too company focused, telematic as a language, lack of engineers, execution control via access level to IT ITC, tele-matic, Graphics, EsRP Market-com Social media Resource based corporate St.M Industry codes, symbols, slogan Customer- experience mgt. X Technology other than used What industries arena one is in How solutions commercialized Content Content Delivery Standardization Virtual company network Y Co-operation based St.M Wirtz,SJ