The Lost Art of Business Symbiosis

In recent years, and under the influence of a complexity explosion of business and technology, as well as the imperative for efficiency and competitiveness imposed by the ongoing financial crisis, we are witnessing a new powerful trend: The rise of symbiotic ecosystems of companies. These ecosystems are leveraging on both strategic and opportunistic synergies to improve their collective competitiveness, engaging in a new model of collaborative value co-creation.

The Shareholder Value Maximisation Dogma

If we were to single out one guiding principle that bears the most influence upon managers, especially top level ones, that would be the “shareholder value maximisation” principle. The shareholder value maximisation is, by law and substance, the “raison d’être” of any corporation. It requires from every corporate officer to act in such a way that her actions will maximise the “shareholder value”.

Although this principle seems obvious, and to most managers self-evident, it is not. In fact, and counter-intuitive as that might sound, working towards shareholder value maximisation can, in many cases, lead to the exactly opposite result: destruction of value.

The Industrial World vs. The Interconnected World

To shed more light into the paradox of shareholder value maximization, we need to understand the contextual assumptions behind it. In a typical Industrial-age framework, each corporation is a self-contained entity that interacts with other entities, be it physical persons or other legal entities, and aims to maximize its short-term and long-term profitability and thus its own shareholder value.

In that setting, optimizing the shareholder value can be very successfully achieved by “squeezing” the value appropriated by the other entities with which the corporation is interacting: customers, suppliers, even employees. Increasing the margin in sales, decreasing the labour cost, decreasing the margin of the suppliers: all these are effective tactics in the Industrial World where “shareholder value maximization” is king.

In our post-industrial era, a lot of long-lived and glorified rules are swiftly becoming less and less relevant and, in certain cases, even flat misleading. This is the case for the shareholder value maximization as well. In the Industrial World, maximizing shareholder value could be performed within the insulated micro-environment of the company and the “side effects” of this maximization, be it on employees, suppliers or customers, were easily contained and managed.

However, in the Interconnected World, the key assumption of “isolation” is no longer valid; thus, optimizing for value becomes a much larger and more complicated problem.

Network connectivity

The key characteristic of the era, the one that re-defines the business rulebook, is the concept of “connectivity”. In effect, companies are now operating in a complex network where each node is connected to a large number of other nodes, a property know as high connectivity.

Moreover, the role of each connection is no longer static and well defined: a company that is our supplier in one project might very well be our partner in another or even our client in a third one. Furthermore, even the traditional role of the “employee” is now extended to include outsourcers, freelancers, near-shorers, off-shorers and the likes.

This high connectivity, that is increasing exponentially along with the complexity of the social, financial and technological environment, is turning the idea of localized value maximization obsolete. In simple terms, trying to maximize value for one single node in an open and strongly interconnected system is next to impossible.

Squeezing business value from the “neighbouring” nodes, through an essentially competitive process, creates unpredictable non-linear phenomena that, more often than not, lead to value destruction both at the node level and at the network level.

Business symbiosis

A fascinating way to create and appropriate value in our highly networked world is by embracing the concept of “business symbiosis”.

The world symbiosis comes from Greek “σ�

ν-”, that denotes “with”, and “βίος” meaning “life”. Symbiosis is a term extensively used in ecology to describe two or more organisms that “live closely together” in a way that is typically advantageous to both counter-parties. Although symbiotic organisms tend to stick together, they can easily walk their separate ways if and when the need arises.

Business symbiosis should not be considered a synonym for “strategic alliance”: strategic alliances are an old trick of the trade, as old as doing business itself, and is a key component or sub-category of symbiosis. However, the term “business symbiosis” encompasses a much larger and wider repertoire of business strategies and tactics.

In essence, business symbiosis is about creating an environment of active collaboration with all the neighbouring nodes within our business network. This collaborative business neighbourhood should include our customers, our suppliers, our employees and, under certain conditions, even our most fierce competitors.

The explicit aim of this symbiotic environment, is to jointly and collaboratively create more business value for all the nodes involved. In what follows we will explain how the idea of competition and conflict of interests can be smoothly accommodated within this framework.

The “Split the pizza” vs. “Grow the pizza” dilemma

Imagine a group of hungry people, with no special emotional ties between them, that are left with one medium sized pizza to eat. Social etiquette aside, all of them will try to secure for themselves the largest piece possible, alas leaving their colleagues with the smallest ones. This situation is the epitome of a competitive landscape and a setup that will produce conflict “by design”.

The conflict in the above case rises from the description of the problem per se: in essence, we have a fixed amount of food that needs to be partitioned to the different parties. This in game theory is known as a “zero sum game”: the only way I can gain something is if you lose the exact same something.

Fortunately, the business reality is much more juicy than the zero sum game just described. The pizza is not finite, although it definitely appears like that at times. By actively collaborating with the other players / nodes in our local business ecosystem we can extend our pizza, almost indefinitely!

Characteristics of a high value symbiotic ecosystem

The key characteristics of a successful business symbiotic ecosystem are:

Multiple parties with different roles: A symbiotic ecosystems thrives on diversity - you can typically collaborate with good suppliers, with customers, with employees, with providers of supplementary services or products. Even competitors can be candidates for collaboration assuming that you have some areas of product / service complementarity or operate in different geographies or can create meaningful joint ventures, usually aiming to mutual cost reduction.
Flexibility on tactics: Although strategic synergies are always welcome, symbiosis can also be promoted through a structured pursuit of opportunistic value co-creation. Also, all parties should be clear to the multitude of different roles that they can enact: for example, Company A can act as a supplier for Company B and, at the same time, Company B can act as a sales channel for Company A in order to promote its product / service.

Labelling our collaborators with a priori roles can be limiting since we fail to see other opportunities with them thus leaving significant value on the table.

Openness: One of the most crucial success factors for a strong symbiotic ecosystem is openness. This does not mean full disclosure or transparency, especially when dealing with potential competitors. It means establishing a clear set of rules for the collaboration framework and following these rules in good faith. Even an opportunistic collaboration with a traditional competitor can prove surprisingly fruitful when embedded in a structured and open framework.
The role of the employee: Considering employees and contractors as “human resources”, essentially as static company assets, is obsolete and ineffective. Nowadays, the employee is building her own career and the concept of loyalty is limited. Therefore, we should engage with employees and contractors within the overall concept of the ecosystem, always seeking strategic and tactical opportunities for mutual benefit and value co-creation.

This thinking should be also driving our evaluation and recruiting systems: we are looking for people that are able to create value for the company and we acknowledge that these people are ultimately trying to build value for themselves.

Negotiation-driven collaboration: A symbiotic business ecosystem is dynamic, ever changing and thus based on constant negotiation between its parties. As the business environment evolves, so should the relationships and interactions between the different constituents of the ecosystem. Every parameter of the collaboration, even the very roles of the companies within it, are constantly open to negotiation and optimisation.

It is therefore becoming a strong imperative for every manager to build strong skills in advanced negotiation, as this can be a “make-or-break” attribute in the symbiotic environment.

Implementing a symbiotic ecosystem

Having analysed the theoretical framework behind business symbiosis, we will now deal with the practical tips for a real-life implementation.

Rule #1: Re-frame all interactions

The most important step for a manager is to re-frame all the interactions of his company, even the ones pertaining to its own employees, into a symbiotic mind frame and semantics. Some practical examples:

Forget about sales and treat your customers as your natural allies. Especially in professional services, turning the sales pitch into a joint problem solving session with the client can prove invaluable. Let the client express her real objectives and jointly explore the potential for value co-creation. Talk on value and not on products / services / offerings.
When it comes to recruiting, forget about “job profiles” and recruit for value. Try to explore with the candidate ways to move your company forward while also promoting the candidate’s career. Don’t investigate too hard into “job hopping” since it is the new norm; instead, try to ensure that your candidate will provide maximum value while on the job.

Be open to discuss any form of collaboration and be creative about it; remember that your objective is to recruit the best talent money can buy and not to merely fill the “senior accountant” position.

The same applies to employee performance management: focus all your scorecards and evaluation criteria to real value provided and not to adherence to corporate etiquette. Be open to negotiate any arrangement that makes sense for the company and for the employee; remember that the aim is to create value.

Rule #2: Negotiate

The single most important rule: everything is open for creative negotiation. Negotiation is not about appropriating a disproportionate value for you or your organisation; good negotiation is about problem solving and extending the solution space in order to create more value for all involved parties.

In the pizza example, a good negotiator is someone who can figure out the recipe for creating the largest pizza given the available materials and not the one that can trick or bully the others into accepting smaller pieces.

Also, realise that the business dynamics are changing constantly and, therefore, re-negotiating and revisiting already negotiated agreements is only natural and beneficial.

If you have not done so already, do take negotiation trainings and classes. Ask your team to do the same. The importance of having skilled negotiators in any organisation cannot be overstated.

Rule #3: Be good

Establish a set of ethical rules that will guide your behaviour and that of your team. Be firm about these ethical rules and firmly decline to interact with any individual or organisation that does not respect them. No matter how good a business opportunity might seem, it is not worth compromising your business values.

This rule is particularly important since it establishes a fantastic platform for building your symbiotic ecosystem: you are willing to discuss and negotiate a value co-creation formula with any business or individual that shares your ethical rules and values.

Rule #4: Reach out

Having said all the above, the most important part of building, or participating, in a business ecosystem is reaching out. Set aside a significant part of your time for meetings with other people, within and outside your organisation, and for jointly brainstorming with them on potential synergies. Make that a habit and a high priority task for yourself and all senior members of your team.

The Lost Art of Business Symbiosis

The Lost Art of Business Symbiosis

The Shareholder Value Maximisation Dogma

The Industrial World vs. The Interconnected World

Network connectivity

Business symbiosis

The “Split the pizza” vs. “Grow the pizza” dilemma

Characteristics of a high value symbiotic ecosystem

Implementing a symbiotic ecosystem

Rule #1: Re-frame all interactions

Rule #2: Negotiate

Rule #3: Be good

Rule #4: Reach out

Further reading