Today’s Challenge

Today´s business context requires leaders to realize that their livelihood depends on an interdependent ecosystem of stakeholders. For their leadership to shift from focusing only on their own organization’s outputs to focusing on a whole ecosystem, they need to shift their mindset. Our research shows that leaders who are successfully leading in ecosystems have a flourishing mindset. A transactional mindset won’t get you there. And, it is possible to make this shift.

A company’s continued existence depends on its ability to differentiate itself, create a competitive advantage, and create barriers to protect its competitive positioning. Or does it? How a company creates that “advantage” has shifted over the past fifty years, continuously increasing in required complexity (Figure 1). From understanding business models in the early 20th century to sustained profitability and efficiency by mid-century. Then profitability within a set of competitive forces attacked those profits, in the late 1970s. Then reengineering in the late 1980s to leverage operational excellence. Then the triple bottom line and ESG to positively impact society and the planet, with sustainable profits across an interdependent value chain, where “collaborative” advantage is becoming the secret sauce to enduring success. This all leads to today’s ecosystem focus, where a company’s ecosystem of stakeholders is better off because of the company’s presence; and the company´s vitality is ultimately dependent on powerful partnering relationships; much greater complexity amongst a greater set of tradeoffs. How to find the simplicity on the other side of this complexity?

Companies that consciously work on generating a healthier ecosystem, to support their survivability, evolve to see this as an integral part of their purpose.

This article describes what companies are learning about how to meet this ecosystem-level requirement and the competitive advantage it provides.

A company depends on its ecosystem for its lifeblood, the revenue with which it covers its costs and investments in providing products or services in that ecosystem. The healthier a company is the more it can invest in its competitive advantage, in how it differentiates itself within its ecosystem. How a company understands and aligns its competitive advantage with its ecosystem health determines how the company can foster a culture of interdependent collaboration to the benefit of all ecosystem partners.

The ability to craft a value chain of collaborative ecosystem partners, each one bringing its respective dosage of competitive advantage, requires a fundamental mindset shift. From the independent mindset where organizational leaders act as heroic achievers defending their business interests to the interdependent mindset where leaders act collectively as catalysts of a powerful coalition.

Company Health: Survivability of a flourishing ecosystem

To frame a company’s competitive advantage, we start with how it defines its continued health. There are four levels of a company’s ability to continue to exist, each building on the previous level (see Table 1). At the most basic level, a company focuses on its continued viability, and its ability to extract enough resources from somewhere to survive another month, avoiding the risk of imminent death. At the next level, companies can focus on the stability of their critical business resources, developing systems of transactions that sustainably generate more inflows than outflows, avoiding the risk of unpredictable instability in their business model. The next level builds resilience on top of this stability, innovating how they generate higher and higher value, transforming their business and what it offers, and avoiding the risk of obsolescence. The highest level we have found focuses on its survivability over the long term, continuously evolving how it supports flourishing across its changing ecosystem, avoiding its extinction, and promoting the health of its symbiotic relationships. As an organization moves up through these four levels, it requires different capacities, structures, and processes.

The healthier the ecosystem is, the higher the probability that the ecosystem will have the fertile nutrients the company needs to survive. A healthy ecosystem is a platform the company uses for its continued existence.

Ecosystem Health

A company is affected by those stakeholders that have a material impact on the organization. The set of material stakeholders forms an ecosystem for that company, a set of ongoing relationships that influence each other over time. The healthier the ecosystem is, the higher the probability that the ecosystem will have the fertile nutrients the company needs to survive. A healthy ecosystem is a platform the company uses for its continued existence.

Companies that consciously work on generating a healthier ecosystem, to support their survivability, evolve to see this as an integral part of their purpose: the way they work to provide their produce or service strengthens their ecosystem. The ecosystem is healthier because of the company’s existence. Consciously generating a healthier ecosystem in the process of one’s work comes easier with the interdependent collaborative mindset. The independent competitive mindset does not seem to nurture a set of stakeholders toward a healthy ecosystem.

Research Evidence

Our global surveys of over 130,000 groups from 126 countries show that companies flourish within healthier ecosystems. We observed this by looking at what most companies do, and comparing that with the thousands of high-performance, flourishing companies we have identified. When we consult industry peers and ecosystem partners about the characteristics of these high-performing companies, they are recognized as being far more effective, more efficient, more innovative, and more sustainably profitable than their peers, operating with less cohesive ecosystems. They also tend to stand out as strong partners, as great places to work, and as admired, global citizens.

To test the link between the company’s health and the health of its broader ecosystem partnerships, we are measuring the total value generated (TVG) by a company in its ecosystem. This entails working with each stakeholder group to identify how they define value, considering objective outcomes and subjective experiences. The TVG establishes a baseline and the ability to determine the value of relationship factors that each company generates above that baseline. Examples of subjective measures include their level of flourishing, their experience of the work environment, the health of the agreement structures they have, and the rituals that they use to acknowledge and continuously strengthen their culture.

Companies that consciously work on generating a healthier ecosystem, to support their survivability, evolve to see this as an integral part of their purpose.

Our current research is gathering vast amounts of data within a large company in the financial services industry. This provides a natural experiment. Our initial survey data and interviews show that many of the hundreds of offices of this large financial institution operate from a focus on transforming and flourishing, as described in Table 1. On the other hand, a significant number operate with a focus on transactions. This distribution of levels of focus allows us to look at the health of the ecosystem of the distinct offices to identify the factors that contribute to the health and performance of offices and their respective ecosystem partners.

The research design is based on an initial strategic systems mapping to identify the key stakeholders, how they each define subjective and objective value in their ecosystem of organizational relationships, and the core dynamics influencing their interactions. Based on these values, a survey was designed, pilot tested, calibrated, and used in the first wave of data gathering. The insights gained from the first wave convinced leadership to collect this data every six months, to have a sense of the total value generated across the company, and the total value generated in the ecosystem of its local offices. Starting with the second wave, we are combining the subjective data gathered in the surveys with detailed output data across the ecosystem from the company’s administrative database. This will allow us to test the relationship between the culture, structures, and processes of the company and its stakeholders and the outputs they each generate, linking the company’s health with the ecosystem’s health.

Differentiating Factors

What have we found so far? From the thousands of groups we have studied previously, combined with the research program described above, we have identified a set of seven factors that differentiate higher levels of company and ecosystem health. As companies move to higher levels of strategic focus and evolve from the transactional towards the flourishing approach, they generate the healthier ecosystems that they need to survive:

• They know who their ecosystem of stakeholders is.
• They have healthy relationships with them via active and ongoing engagement.
• They know how their stakeholders define value, subjectively and objectively.
• They know how they work and influence those stakeholder values.
• Their stakeholders are better off, each period, because of their interdependent relationship.
• They evolve together with the stakeholders in their ecosystem.
• This provides a healthier ecosystem for their continued survival and the health of every ecosystem partner.

Case Studies

Let´s look at how this plays out in the context of the branches that we have been studying in the financial services industry.

The Transactional Approach. The leadership and staff in this office focus fully on getting their expected results to stay alive. It is all about productivity, getting far more done with less resource expenditure. The employees are paid well and expected to be competent and efficient at their specific jobs. The long hours and monotony of calling lots of customers every day and entering the client data in the computer results in high fatigue, disengagement, and higher-than-normal turnover. Wearing the same uniform promotes the brand and the competitive nature of the group. Intellectually, people are expected to know their job, which is not very complicated, and do it.

When looking at their mindset and how they work together, the organizing principle is around productivity, requiring people to make their contribution by doing their job, fast nowThey focus almost exclusively on generating much more output, increasing the number of customers and amount sold per customer. The low trust, hierarchical environment leads to little sharing of employees’ questions or insights. Group processes focus on achieving and documenting outputs. Customers are numbers to increase cross-selling of products that they will most likely purchase regardless of whether they genuinely benefit the organization. Working this way may well lead to strong financial results in the short term. However, there is little evidence of setting the client up for success in the medium- to long-term.

The Flourishing Approach. The leadership and staff in this office focus on evolving to serve their deeper purpose in ever more efficient and effective ways. The processes focus on seeing the new potential for client-partners, pathways to manifest that potential, and getting the feedback to adjust and improve how they achieve the purpose of self-empowerment for at-risk women through access to financial access. The total benefits received by the women go beyond typical market conditions and are nuanced to address the specific needs of each collaborator, with the expectation that everyone contributes their best and fullest every day. The interdependent team-level engagement motivates the collaborators as they see the real, immediate, and long-term effects of their work in the communities, one person at a time. This results in high engagement, retention, and good physical and mental health. Team rituals and rituals with the clients give deeper meaning to the work, reinforcing that they are stronger together. Even the company uniform is perceived as a point of pride and team building, giving a sense of family. Intellectually, the collaborators are continuously learning, individually and as a group.

When looking at their mindset and how they work together, the organizing principle is around service, seeking the inherent creativity in each collaborator and client, and developing the capacities to regenerate success throughout the community. Time is spent on seeing possibilities, testing them, getting feedback, and implementing them, to be able to scale the efficiency, effectiveness, and innovation with which they serve their purpose. This is the essence of “total value generation” across the ecosystem. Customers are part of the design process, adapting the service offering to their real needs in the short, medium, and long term. Working this way leads to constantly being high performers who are scaling the most cost-efficient processes and structures for achieving the deeper purpose of communities of self-empowered women through microfinance.

Checklist of What to Do

What can a company’s leaders do to strengthen the ecosystem that it depends on for its continued existence? They can assess where they are, compare that with where they want to or are being required to be and shift their company in that direction.

Assessment. They can assess:

• Their level of focus, from viability to survivability, as described in Table 1
• The total value generated by their existence in their ecosystem
• The degree to which the current state of focus and total value generated agree with what they and others require of themselves

Shifts. The company can:

• Determine their required impact, in terms of the ecosystem health
• Define their required level of focus to ensure enduring success
• Identify the practices used by groups at the desired level and how they may be applicable
• Pilot test one of those practices in part of the company, using agile processes to test, learn, adjust, implement, and scale the generative ecosystem practices

Once an organization is aware of the level of its focus, it can choose how it consciously engages in determining the level of its organizational health and the health of the ecosystem that provides its lifeblood. This is how the company can make sense of and engage the complexity of its ecosystem and collaborative advantage.