Strategy for a Networked World

The following sections are included:

• Dedication
• Contents
• List of Figures, Boxes, and Tables
• Foreword
• Author Biography

Box 1.1: Chapter 1 at a Glance

This chapter explains how strategy today is about designing effective offerings. The offerings articulate systems of interactions where actors co-create different forms of value. We outline the book’s argument — that this calls for a more contemporary strategy framework than that which conventional constructs such as “value chains” and thinking of firms as within given “industries” convey. In the strategy framework which this book is about, value creating systems (VCS), one attends to how value is created, not only by one party in the offering but by all parties in the offering. As opposed to the conventional view of value creation, where a supplier only produces and “offers” and a client only buys and “uses” in the view of value creation offered (sic!) by this book, the so-called “users” are taken to have more than one role, and centrally are also seen as value creators. They enter into an offering relationship only if they see the co-creation it entails as helping them to create value, for themselves, and with and for others.

We illustrate our argument with two cases. The first one contrasts Myspace and Facebook. The second case concerns the World Economic Forum (WEF).

This first chapter sets the scene for this book, which is about how designed co-created value, manifested in offerings, enables strategists to bring forth VCS fit for a networked world.

Box 2.1: Chapter 2 at a Glance

Business environments and opportunity spaces are becoming more interrelated, and the relations occur in ever shorter time frames. The construct of “industry” as a focal area for strategy is giving way to inter-industrial blurring, where systems thinking becomes a more helpful framing to understand what is going on. In such situations, many strategists feel that their business environments are becoming increasingly complex. To more productively engage complexity and to better access resources, collaborative business models are becoming more important for success.

This chapter assesses not only why but also how a more systems-based view and framing for strategy today is becoming more effective for strategists’ work. The transition from chains to systems, in turn, calls for a shift from a strategic frame centred upon conventional “neoclassical” economics, focusing on predictable uncertainties and “neat” solutions. Strategists realise that these do not work when the very definition of a “problem” is elusive and the situations are “wicked” in the sense that the oversimplified so-called “solutions” may worsen the situation.

In such circumstances, strategists would be well advised to let go of dangerously limiting models of stable sectors or industries, shifting their stance to a “socio-ecological” view of strategic planning. The focus with such a strategy frame is on engaging complex systems and unpredictable uncertainties, by reframing and redesigning value and value creation.

The socio-ecological stance for strategists also allows them to work with a frame that seeks to reconcile multiple values that cannot be given a single metric, so strategy moves well beyond securing just financially calculable value. The socio-ecological systems frame also invites dropping increasingly outdated, increasingly inapplicable, and increasingly irrelevant conceptual constructs such as the “value chain”, the “industrial sector” or “industry”, or the “end” or “final” customer — all derived from neoclassical economics.

Box 3.1: Chapter 3 at a Glance

There is a better alternative to the familiar, inherited idea of value. In this chapter, we review the history of how value has come to be thought of, as well as an alternative conceptualisation of value as interaction, as co-created, and as plural: comprising many types of values.

We critically review notions of value inherited from the logic and metaphors of industrial manufacturing. We contrast those notions with the view of value as co-created.

In reviewing the history and the implications of viewing value as co-created, we consider how value creation is designed by strategists in an era of complex networks of interaction.

We find strategists situated in contexts exhibiting access to highly distributed information with substantial powers to analyse it and deploy it, becoming capable of interacting more effectively.

Box 4.1: Chapter 4 at a Glance

The value creating system (VCS) view offers a way to understand how value is co-created in business and societies today. As we saw in Chapter 3, the VCS framework considers value and values from an outcomes (and also, expected outcomes) perspective, a perspective that is always from the point of view of an actor who is acting to create value — for the self, and for and with others — and who is using what other actors do to help create value. This chapter on effective designs for VCSs presents the VCS framework as a conceptual construct, and explores what constitutes effective designs of such systems. Also, the chapter describes the methodological approach to strategy that has emerged based on use of the VCS framework, and which makes VCS a distinctive strategy approach. Lastly, the chapter suggests when the VCS framework and approach to strategy are timely and effective to use, and under which conditions other strategy approaches might be more suitable.

Box 5.1: Chapter 5 at a Glance

The offering is the core unit of analysis in this book. It is a rich construct, both conceptually and in terms of practice, and it is also paradoxical. The offering manifests the relationship of co-creation between actors, and in joining them, distinguishes them from each other in terms of roles and — typically — also in terms of values. In the value creating systems (VCSs) approach to strategy, strategists design, create or change offerings that act as the organising “links” that manifest how interacting actors co-create value. With an offering, an actor is linked to another, and they act together in concert to mobilise resources in ways that enable the creation of both value and values. In VCSs, there are two kinds of offerings; configuring offerings that organise the VCS, and support offerings between two actors within the system. Offerings can be static or more dynamic and open to change by their co-creators. In a networked world, this frame poses challenges (and also new offering design tasks) for strategists. We describe five elements required to be designed into an offering: people, process, technology, information, and a risk-sharing formula. This chapter is centrally concerned with defining, describing, and analysing how offerings work and the choices involved in designing them.

Box 6.1: Chapter 6 at a Glance

This chapter articulates our thinking on how to use Actor-Network Theory (ANT) — actually, more a methodology than a theory — to “reverse engineer” an existing Value Creating System (VCS) to determine its design, so that it may become capable to redesign it and transform it. We show how the use of the ANT methodology helped the French energy utility EDF to distil common elements in many different (“pluralistic setting”) situations it had experimented in, to be able to develop a coherent strategy for electrifying the billion inhabitants of the planet not connected to the electricity grid in the late part of the 20^th and early part of the 21^st centuries. The complex web of interrelations that were brought together to design and create different alternative electric VCSs by EDF professionals across the globe were analysed with ANT. These designs were compared using the same VCS configuring and support offering design patterns we discuss in this book; and conclusions were drawn from this experience. ANT, its history and development, and its use as a methodological approach to understand the original designs of VCSs and their development is described in detail in Appendix B.

Box 7.1: Chapter 7 at a Glance

In this chapter, we assess two of the key roles scenario planning can hold when assessing the viability of existing value creating system (VCS) designs and as a support in the designing of new VCSs. We very succinctly review the thinking and practice of scenario planning, and we relate it to the business idea and to the design of offerings. Scenario planning redirects attention to contexts — which is particularly useful when these might become uncertain. We articulate our reasoning as to why collaborative strategy becomes at least as important as competitive strategy, in uncertain contexts where scenario planning is of help. We review two applications of scenario planning. The first is the design of new, collaborative, inter-organisational forms with the express purpose of decreasing the turbulence (particularly, the aspects pertaining to unforecastable uncertainty and complexity) that would buffet the organisations if they did not come together. The second application is the use of scenario planning to support the design of technology and competence roadmaps and the new VCSs that these investments allow.

Box 8.1: Chapter 8 at a Glance

This chapter outlines methodological guidelines for designing new value creating systems (VCSs). The design process and its approach can include ANT analyses and scenario planning and also other iterative steps. Sometimes the VCS that a strategic team designs is entirely new (such as the one that put a human being on the moon, and returned him home safely), but often a new VCS is set up to capture newly understood opportunities, or to address threats or shortcomings that an existing VCS cannot engage, but which can include aspects of an existing VCS design. The argument in this chapter follows and develops the business design approach described by Normann in his 2001 book Reframing Business. After overviewing this background, five main components are described. The first is a historical overview of the shaping factors of the VCS context and distinct competences of the organisation that aims at designing the new VCS. This is followed by analyses of VCSs, including all co-creators, whether they are denominated customers or hold other roles, and assessing what potential invaders (typically from other fields or “industries”) might enter that space. The next stage involves exploring opportunities as well as challenges for the VCS design to define the strategic intents and the first version of the configuring and support offerings manifesting these. Chapter 9 describes the fifth stage — building strategic pathways and preparing for governance. The chapter uses several references to the global companies SCA and Scania, who are leaders in their fields, and users of VCS approaches to continue pioneering these fields.

Box 9.1. Chapter 9 at a Glance

This chapter recounts some of the main challenges of thinking about, analysing, designing, prototyping, piloting and realising new value creating systems (VCSs) — or making changes to existing ones. The challenges are based on research — our own and that of others — and on the experiences of strategists with whom we have worked. The chapter also offers guidance on how strategists can effectively handle these challenges.

We discuss seven different challenges to realise a new VCS:

• 1. Letting the design vision guide, but not define the design.
• 2. Redirecting management attention into VCS thinking.
• 3. Creating organisational ownership of VCS changes.
• 4. Step-by-step realisation of a new VCS.
• 5. Understanding value creation as multiple and contingent.
• 6. Learning as a stepping stones process.
• 7. Avoiding value chain push backs.

Box 10.1: Chapter 10 at a Glance

In this chapter, we review how value creating system (VCS) thinking is steadily growing and replacing the obsolete value chain thinking. Although the early optimism of Normann and Ramírez (1994) has taken some time to be realised, obstacles are now being overcome. We can understand the delays by analysing why the older system could persist. First, the value chain idea is still useful in many situations. Also, the new forms of business practice have come to widespread importance only quite recently. Even now, most managers have been trained on the old tools and do not easily abandon them. However, with the realities of our current business environments, it is now time to change thinking, from structure to process, and from chains to systems. With this book, we hope to help that happen.

Box A.1: Appendix A at a Glance

Many of the ideas we present and relate to each other in this book have long pedigrees, often stretching over several hundred years.

We believe it is of help to readers who want to use these ideas to know where they came from, and what “baggage” in the forms of connotations and relations they carry with them.

So this appendix overviews the historical development both of “value creating system (VCS)” thought and of “offerings”.

In doing so, the appendix proposes to situate the book as another step in an unfolding story — a story that is still being written, alongside several other intellectual initiatives described and analysed in this book.

So another purpose of this appendix is to acknowledge the building blocks from which our thinking is derived, and to help practitioners who want to use our proposed approach to develop business to be capable of relating them to other practices, traditions, and approaches.

Box B.1: Appendix B at a Glance

This appendix gives a more extensive description of Actor-Network Theory (ANT), which we use to explore the emergence of an existing value creating system (VCS) design, as described in Chapter 6.

ANT started out in France as the so-called “sociology of translation” (Callon, 2001; Latour, 2005; Law, 2009). Its proponents sought to understand how the managers in one company (or “actor” as sociologists would call it) attempt — and often succeed — to “translate” the role of any one other “actor” with whom they interact to develop what these sociologists refer to as an “actor-network” — composed in effect of many such enrolments with several actors. Their “actor-network” is what we call a VCS in the strategy terms of this book.

The following sections are included:

• Bibliography
• Glossary
• Index