Creating value in ecosystems: establishing a 3-level approach to strategy

Title: Creating value in ecosystems: establishing a 3-level approach to strategy
Author: Philip Boxer
Category: Working Paper

A socio-technical ecosystem is a community of managerially and operationally independent organizations interacting with each other and with their environment. For example, an orthotics clinic operates independently within the context of a healthcare ecosystem composed of primary and secondary care organizations supported by a whole menagerie of suppliers. The complex network of relationships within these ecosystems differ from the traditional “closed-world” relationships between a single enterprise and its markets, in which the markets have attributed to them an existence independent of the contexts giving rise to them. This “closed-world” view based on the single enterprise is characteristic of the early work on socio-technical systems, in which the sustainability of the enterprise’s identity is dependent on its engaging in its primary task, defined in terms of its relationship to this market environment.
But defining this relationship becomes increasingly difficult as the turbulence of its environment increases. Thus from a distance, it looks as if the orthotics clinic is delivering orthoses into a market for orthotic treatments. And for the routine supply of the plasters demanded by orthopedic practice this may be an adequate simplifying assumption. But many of the patients of the clinic will need treatments that are unique to their condition as it unfolds within the context of their lives. The turbulence that this variation in demands creates for the clinic is characteristic of ecosystems, in which the variety of demands arise from the large numbers of managerially and operationally independent entities within them that are constantly evolving, have no centralized control, themselves have many heterogeneous elements, and which give rise to demands that are inherently conflicting and unknowable.
This paper will argue that in order for an enterprise to sustain its identity within the dynamic environments created by such socio-technical ecosystems, it needs to change the way it understands how it creates value, in order to include its role within the larger ecosystem. In the case of our clinic, becoming more efficient and cost effective in the delivery of treatments is a necessary but not sufficient condition. The clinic also has to be able to delivery over time exactly those changes in treatment that a patient’s condition warrants. This involves going beyond the direct value created in engaging in its primary task of delivering treatments, and giving consideration to the indirect value its behaviors support within the larger ecosystem, in this case through its impact on the quality of the patient’s life.

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