We all know what business is and most of us have at least a vague ‘High School Biology’ idea what an ecosystem is but is there any merit in putting them together or is it just another example of a lame metaphor being stretched, pulled, plucked and pinned to make it applicable to business?
Where did it come from?
The term business ecosystem was coined by James F Moore in an article titled ‘Predators and Prey: A New Ecology of Competition’ which appeared in the Harvard Business Review in 1993.
The article won the McKinsey Award for best article of the year, no doubt encouraging Moore to write a whole book on the subject – The Death of Competition: Leadership and Strategy in the Age of Business Ecosystems.
But what does it mean?
According to Moore a business ecosystem is, ‘an economic community supported by a foundation of interacting organizations and individuals – the organisms of the business world. The economic community produces goods and services of value to customers, who are themselves members of the ecosystem. The member organisms also include suppliers, lead producers, competitors, and other stakeholders.’
A biological ecosystem is made up of various species, the relationship between those species, the health of the species and how they interact with and affect each other, as well as how they are affected by the environment etc. Business ecology is supposedly similar, only the species are customers, markets, products, processes, businesses, stakeholders and governments.
However, as with most business jargon when you really think about the phrase or term it almost always states the obvious. Business by definition is a collection of people, processes, resources and other businesses that come together to create value and deliver a product or service. Sure, it may be marginally similar to a biological ecosystem which explains a community or network of living organisms and non living components that interact as a system but it’s tenuous at best.
Moore does his best to extend the metaphor by urging business to seek ‘symbiotic’ relationships and to ‘coevolve’ both in terms of their capabilities and roles but also in terms of their environment and other businesses. He stresses that, ‘the particular niche a business occupies is challenged by newly arriving species.’ Well no shit Sherlock!
Where can I find a business ecosystem?
Initially you could find this little nugget of wisdom in mainstream business but numbers of executives willing to look like a muppet are dwindling. Today the term has retreated to the rarefied atmosphere of IT where the term itself has coevolved and become widely adopted by the high tech community. A shift greatly assisted by economics professor J Bradford DeLong’s explanation that ‘business ecosystems’ describe ‘the pattern of launching new technologies that has emerged from Silicon Valley’.
He went on to define business ecology as ‘a more productive set of processes for developing and commercializing new technologies’ that is characterized by ‘rapid prototyping, short product-development cycles, early test marketing, options-based compensation, venture funding, early corporate independence’.
On one hand this redefined interpretation of business ecology is certainly more definite and potentially useful to at least some parts of business but what the new definition of business ecology actually has to do with the accepted understanding of either business or ecology is less obvious.
Are there any ways I can make use of the term?
Not many! Because of the change in meaning over time it’s probably safer not use it at all. Besides it’s just pretentious!
Business by definition is the coming together of suppliers, distributors, customers and processes as well as the navigation of competitors, regulators and governments to deliver value. Most people in business already know that so giving that a new name beyond ‘business’ seems completely unnecessary.
That said, if your ethical compass is more than marginally off true north and you want your business to look a little ‘greener’ that it really is then it may be a useful phrase to hijack!
While some environmentalists have used the term as a way to talk about business sustainability and the environmental impact of business rather than a metaphor to describe the increasing complexity of relationships inside and outside business other environmentalists believe the use of the word ecosystem is just a smokescreen and a copout. Instead of taking environmental concerns seriously many believe that the use of ‘business ecosystem’ simply allows business executives to pretend they lie awake at night worrying about the polar ice caps when all they are really doing is cashing in on the environmental and sustainable gravy train.
For many defenders of the English language this poor, unsuspecting word is the grandfather of nouns converted into verbs for the convenience of business. But should we allow it to continue to be pimped out to the dim and lazy or at least try to rehabilitate it as a noun?
Where did it come from?
It was Archimedes who said, ‘Give me a lever long enough and a fulcrum on which to place it, and I shall move the world.’ Archimedes was an ancient Greek mathematician, physicist, engineer and inventor credited with the explanation of the lever and the invention of a screw pump still used today – the Archimedes screw.
Clearly, he was a smart guy and he’d probably be spinning in his grave like a ceiling fan if he knew his wise observation had been corrupted by mediocre business executives intent on looking more competent than they really are.
When it made its way into business speak is unknown, and who we should blame for it is equally obscure.
But what does it mean?
Leverage is used to imply an assisted or additional advantage. In the same way that Archimedes could move something immovable with the help of a strategically positioned lever, business believes it can move profit upward by a strategically positioned ‘leveraged’ advantage. Or at least the executives in question believe a rousing speech on leveraging assets might help.
In many ways it’s a tautology like ‘added bonus’ or ‘free gift’. A bonus is by definition added or extra so the addition of added is meaningless. A gift is by definition free so the addition of free is unnecessary. Using leverage to explain the exploitation of a strategic or tactical advantage in business is also meaningless and unnecessary because by definition that’s what business is supposed to be doing in the first place. If a business has a nifty IT system, a patented design or particularly smart engineers surely it would be plain stupid not to take advantage of those things.
That said, leverage is also used as a specific finance term for any technique to multiply gains. Also known as gearing, it usually involves borrowing money to buy additional assets in the hope those assets will yield more profit than the cost of borrowing the money. Obviously this doesn’t always pan out so the losses rather than gains are often multiplied.
This dichotomy of meaning leads to the utterly ridiculous possibility of leveraging the leverage!
Where will I find leverage used?
This particular gem of business jargon is extremely versatile and can be found in meetings, reports and presentations across business, from finance (where it may actually be a meaningful term) to marketing, strategy and even shareholder meetings. It needs to be stamped out.
For example, when a CEO addresses a shareholder meeting and expresses his intention to, ‘leverage our significant investment in IT infrastructure across all the business units to drive profits and increase market share’, rather than nodding enthusiastically at this gibberish the shareholders should throw a few eggs and respond, ‘well I should hope so, otherwise why make the significant investment in the first place!’
How can I leverage my advantage?
The ‘beauty’ of the word leverage and the reason it is so popular in business is that it sounds good but means very little. It can be used to replace just about any activity verb. And, like so much of the worst business jargon it’s passive. It’s therefore easy to see why it’s wheeled out so often.
So if you have a report to write but you’ve not really done what you were supposed to do by the time you were supposed to have done it then ‘leverage’ is a fantastic little word that can get you off the hook. If you are ‘leveraging a project’, the reader has no way of knowing whether you’ve barely started it, almost finished it or palmed it off to someone else who is ignoring it! It’s particularly useful for speculative documents such as business plans and project proposals because it’s so vague. Plus it’s almost always accompanied by the unspecified ‘we’ not the specified ‘I’, thus enabling its user to abdicate all responsibility or accountability for the actual leveraging.
As a result of these special obfuscatory qualities the word leverage is incredibly useful for corporate minions eager to look good but do as little as humanly possible. It allows for non specific, passive inference of action occurring without saying what that action is, who is taking that action or when said action will be completed, and therefore implied value realised. In practical terms it allows subordinates to report on progress while still allowing the realities of a project to actually run the project. So much so that if you see a report, update or article that contains the word leverage you can pretty much guarantee that nothing is happening or that whatever is happening is happening a great deal slower than anyone could have thought possible.
Unless you are specifically talking about financial leverage or borrowing money to capitalise on an opportunity that could increase value then avoid the term. At the very least ‘leverage’ should remain a noun (as in ‘to apply leverage’) and not be pimped out as a passive pseudo-verb (as in ‘we are leveraging our infrastructure’). And whatever you do don’t do what one company did in 2001 when it made people redundant and told them the business was ‘leveraging their synergies’.
Finally the weather seems to be warming up, but just as the rest of us are merrily digging out or shorts and flip-flops the newspapers decide they need to put a stop to our fun. Apparently mosquitoes are becoming increasingly prevalent in urban areas (it’s our water-conserving water butts that are to blame it would seem). So how can you avoid getting bitten and what can you do about it if you’re unfortunate enough to be feasted upon by one of these pesky biters?
Herbal expert Barbara Griggs notes that if your bedroom isn’t mosquito-proofed (e.g. with a screen or a mosquito net), you’ll need to wear an effective repellent. Many people dislike deet-based ones because of the smell or the harsh chemicals. You can buy a natural, delicious-smelling herbal moisturiser called Alfresco, which contains a range of essential oils formulated by a clever lady who once worked at London’s Chelsea Physic Garden and passed rigorous testing at the London School of Tropical Medicine. Numbers of film stars working in bug-ridden locations have sworn by it – including Mel Gibson when filming Braveheart in the midge-ridden moors of Scotland.
The essential oil of lavender works both as repellent and bite-soother: a few drops on your pillow or in a burner will repel the mozzies, and you can apply it neat to bites and stings. (If you’re off on holiday, by the way, that bottle of lavender oil should be wrapped up tight in cling film before packing unless you want your entire holiday wardrobe to smell of lavender.)
Infinite Ideas’ armoury of natural mosquito-banishing substances also includes products containing citronella. Derived from a type of lemongrass, products made using this repellent include candles, incense sticks and body lotions. Not only does it smell pleasant, it’s efficacy has even been proved in scientific studies. Just remember not to apply the essential oil neat to your skin – put a few drops in a neutral base oil such as almond before massaging it on to exposed areas.
Most important of all though – enjoy the summer!
In the second of an ongoing series of explorations of key business ideas we investigate a much-abused and little understood term. Core competency is one of those over-used business phrases that often sneak out in high level meetings or when someone is trying to look a little more interesting than they really are. But is it useful or is it just stating the obvious?
Where did it come from?
The phrase core competency was coined by Coimbatore Krishnarao Prahalad, more commonly known as C. K. Prahalad (for obvious reasons) and Gary Hamel – both US based management ‘gurus’ and business authors. It was first referenced and described in a 1990 article they published in the Harvard Business Review called ‘The Core Competence of the Corporation.’
Both Hamel and Prahaled have been consistently regarded by major business publications such as Business Week, The Wall Street Journal and Fortune magazine as amongst the most influential business thinkers in the world.
But what does it mean?
According to Prahalad and Hamel core competency is a concept in management theory that relates to the specific attributes or factors that a business considers as central to the way it operates. A core competency is only a core competency when it meets three criteria:
- It’s not easily replicated by competitors.
- It can be widely used and re-deployed for many products and markets.
- It contributes to the customer’s experienced benefits and the value of the product or service.
Core competencies are particular strengths relative to the competition which provide added value in the eyes of the customer. They can relate to anything from technical expertise to processes and procedures to strong working relationships to innovation to customer loyalty. For example Apple’s user interface is a core competency. People who use Apple products love that they are intuitive and easy to use. So much so that people who are converted to Apple rarely leave Apple. Even though the products have their faults (such as low battery life) and are significantly more expensive than the competition their customers are passionate and loyal about Apple, something that’s not easy to replicate. Their intuitive operating system and user interface also translates across product categories and markets and definitely contribute to the customer’s experienced benefits and perceived value of the products.
Where will I find ‘core competency’ used?
Those who actually know what it means and understand Prahalad and Hamel’s definition use it to describe the ‘collective learning across the corporation’. This collective learning is only possible with outstanding cross-functional cooperation, and a willingness to coordinate and integrate diverse production skills and multiple technologies. Few companies are likely to create world leadership in more than five or six fundamental core competencies.
Those who don’t know what it means but like to throw the term around to impress people and look more knowledgeable than they are often simply use it to describe something a company is particularly good at. But being good at something does not necessarily mean that it’s a core competency. It’s only a core competency when it manifests into core products that serve as a link between the competency and the end user. For example 3M enjoy a core competency in the manufacture of substrates, coatings and adhesives that manifest as a product range that is being added to and developed all the time.
Basically core competency is just Darwin’s theory of evolution but applied to business. As a business grows and evolves it should get better at certain things that help it survive. Those evolutionary improvements that ensure the survival of the fittest should emerge from the collective efforts of the business not just from the individual strengths of the people in the business. That way, they are ‘baked into’ the business. The reality however is often very different: the core competencies within a business are, frequently, actually the core competencies of certain individuals within the business. When those individuals leave, so does the competency.
What’s my core competency?
Most businesses don’t operate around core competencies – they operate around business silos or a portfolio of independent businesses. As a result there is little incentive to share knowledge, experience and competency between the units. Prahalad and Hamel suggest this is an error and actively stops business from developing a significant competitive advantage.
Plus they argue that unless a business understands its core competency it is in danger of losing it without even realising what it’s lost until it’s too late. For example US manufacturers divested themselves of their TV manufacturing business in the 1970s because they believed the market was mature and low cost imports from Asia would render the sector obsolete. In doing so they lost their core competency in video which later handicapped them when everything went digital. Motorola divested itself of its semiconductor DRAM business at 256kb only later to realise they had divested a core competency in electronic data storage and were unable to get back in to the 1Mb market alone. Had they recognised their core competency and the time it took to develop and build it they would have made better strategic choices.
To identify what your core competencies are or could be you need to answer the following questions:
- Is there any part of your manufacture or delivery of your product or service that strongly influences your customer’s willingness to buy? If not it’s probably not a core competency.
- Is the value-adding competency difficult to imitate?
- Is the competency relevant and useful across different products and markets?
As a strategic exercise it is essential to identify and foster core competencies. Not only will this knowledge help direct resources and assist decision making but it will also help to avoid expensive strategic mistakes such as those experienced by the US manufacturers and Motorola.
Unless you’ve been living under a rock for a few years you will have heard of Big Data. But is it all hype and hyperbole or will it really change the world?
Where did it come from?
The term Big Data was probably coined by John Mashey, chief scientist at Silicon Graphics. In the 90s if you were a Hollywood producer looking for cutting edge special effects or an intelligence agency looking for state of the art video surveillance you went to Silicon Graphics. The company was dealing with a huge amount of a new type of data and Mashey frequently gave talks on how this data would change the future, including one with the snappy title ‘Big Data and the Next Wave of Infrastress’.
Big Data gathered traction, especially in tech circles (i.e. people who actually knew what ‘infrastress’ meant). For the rest of us – it took a little longer. In 2012 Big Data burst out into the mainstream – it was a featured topic at the 2012 World Economic Forum in Davos, Switzerland. The US federal Government announced $200 million in funding for Big Data research programs and even the satirical cartoon Dilbert had something to say about Big Data.
Basically Big Data is the term used for the collection of very large, often very complex data sets that can now be analysed in non-traditional ways to provide insights that were unheard of a decade ago.
To give you an idea of just how big, Big Data is … if you take all the data that was created in the world from the dawn of civilization until the year 2010, the same amount of data will soon be generated every minute.
This explosion of data has come from advances in technology. The smart phone in your pocket is now more powerful than your desktop computer was just a few years ago and is capturing data all the time, including where you are (via GPS sensors). Whenever you are connected to the internet, via your phone, tablet or computer, data is being gathered about what are you doing – playing an app, listening to music, using the internet or social media. Every time you share a photo, tweet, update your Facebook page, shop online, walk past CCTV, call a recorded customer service line, send an email, use an e-reader, watch Netflix or upload video you’re adding to Big Data. There are 30 billion pieces of content uploaded to Facebook and eight years of video uploaded to YouTube every day! In fact there are now nearly as many bits of information in the digital universe as there are stars in the actual universe.
But it’s not the volume of data that is the potential game changer – it’s our ability to store, combine and analyze it.
Where will I find Big Data being used?
Big Data is everywhere and its impact can be witnessed in everything from sport to health and fitness to medicine to entertainment to crime prevention and business.
There are now smart TVs that remember your viewing preferences and use face recognition to ensure children can’t access age inappropriate material. Book e-readers are gathering data about your reading habits. There are wearable devices that track your activity, calorie intake and heart rate to help keep you healthy. You can get smart carpet which can raise the alarm if your elderly mother doesn’t make her usual morning cuppa. You can even get a smart nappy which will send a tweet when the nappy needs changing! Obviously a swift sniff of the offending backside would do just as well but there are sensors in the nappy which can check the contents for signs of infection. Sensors in a baby’s mattress which measure breathing and heart rate could herald the end of cot death.
Not only are we gathering information and data that we simply didn’t have access to before but vastly improved computer processing power and complex analytics is allowing us to combine large, messy and previously unconnected data sets to find out everything from the bizarre to the life saving. For example the US retailer Wal-Mart combined in-house sales data with external weather data and discovered that the sale of Pop-Tarts jumped as soon as there was a hurricane warning! No one knows why but the beauty of Big Data is that you don’t need to know why because the data does the talking. Now Wal-Mart move the Pop-Tart display to the front of the shop when a storm is approaching and Pop-Tart sales skyrocket. The FBI has also combined data from social media, CCTV cameras, phone calls and texts to track down criminals and predict the next terrorist attack. There are apps that alert police to gunfire in real time. It’s also now possible, based on their twitter posts, to predict which mothers will suffer from postnatal depression. Professional sport is using big data analytics to find talent and improve performance and politicians are using it to figure out where they need to campaign to win elections.
Can I use Big Data?
It is easy to be overwhelmed by Big Data especially when you consider that most businesses don’t even use the small data they currently have access to never mind harnessing the potential of Big Data.
There is already a backlash as people increasingly question just how useful it’s really going to be. It’s certainly true that most businesses will never be able to compete with the Big Data giants like Amazon, Facebook and Google. Luckily they don’t need to.
The trick for turning the hype into practical business savvy insights is to be really clear on your strategy, work out what questions you need to answer in order to deliver that strategy and focus on collecting and analysing only that data. Unless you’re an analytic powerhouse, collecting too much data is as useless as collecting too little.
Plus you don’t need to have Big Data to benefit from Big Data. It’s now possible to source external data to cross reference with your own internal data. For example many retailers are combining their own sales or loyalty card information with weather data or GPS data to send out targeted promotions.
Like most innovations Big Data has potential but only if you don’t allow yourself to get bamboozled by the media furore and wacky stories of futuristic ‘smart living’. Find out what you need to know in order to be better and establish what combination of traditional data and Big Data will help you to deliver that outcome.