Richard Straub has drawn his ample experience of leadership and management from a 32-year career at IBM during which, among other things, he was instrumental in developing IBM’s PC business in Austria and Europe. Over the past decade, he and his wife Ilse have built up the Peter Drucker Forum. Its aim is the continuous improvement of the practice of management in business and in society. Today, the Drucker Forum is recognized globally as a leading management conference. This is reflected in strategic partnerships with the likes of the Harvard Business Review, the Financial Times and the City of Vienna. In recognition of the impact and reputation of the Drucker Forum, Richard Straub was awarded the Grand Decoration of Honor for the Republic of Austria in early 2019.
The topic for the 11th Global Drucker Forum is The Power of Ecosystems – Managing in a Networked World. Can you tell us about why ecosystems have become such an important part of the business landscape?
According to a 2019 World Economic Forum report, excitement over digitally enabled ecosystems is on the rise. While most of the focus has been on macroeconomic implications (for example, McKinsey research speculates that by 2025 over 30% of global economic activity could be mediated by digital platforms), what gets less attention is what this era of ecosystems means for the practice of management.
As much as workplaces have adopted the vocabulary and metaphor of the ecosystem, there hasn’t been much information about how management approaches and behaviors should evolve in response. What leadership styles will be effective in getting others aligned and making the system work better? What new structures, tools, and processes will managers now need to enable broader coordination and keep progress on track?
So that’s what we are doing – bringing together the leading thinkers to give us their deep insights.
Drucker himself talked about social ecology as a discipline…
For Drucker, social, as opposed to biological, ecology, was about a new, man-made ecology of organizations and institutions. And it had a practical aim: to craft a balance between continuity on one side and change and innovation on the other. By spotting emerging trends, managers could act on and shape these forces to the benefit of wider society.
As usual, Drucker was ahead of the game. But the game has moved on as digital technology reshapes, resizes, speeds up and “complexifies” the networks that make up the ecology we exist in today.
As we struggle to make sense of these developments, the concepts of ecology and ecosystems can be doubly helpful. First, they give us a new means of plotting what is happening to organizations and industries as technology dissolves traditional boundaries and forges new links between them. A whole new research literature is growing up to describe and theorize this.
So ecosystems thinking is a new way of making sense of the turbulence around us?
The first essential in this new world is to establish a common language with robust and widely accepted definitions. For global consultancy McKinsey, an ecosystem is “a complex network of interconnected businesses that depend on and feed on each other to deliver value for their customers, to the end users, and their key stakeholders”.
Taking it further, in a recent article John Fuller, Michael Jacobides and Martin Reeves speak of multi-entity groups of companies not belonging to a single organization. They involve networks of shifting, semi-permanent relationships, linked by flows of data, services and money. The relationships combine aspects of competition and collaboration, often involving complementarity between different products and capabilities (for example, smartphones and apps).
Finally, in ecosystems, players co-evolve as they redefine their capabilities and relations to others over time. Clusters, groups of partly competing, partly collaborating small firms in the same area and industry, may have been the first identifiable proto-ecosystems.
Apple’s IOS app community (now a multibillion-dollar business) showed how fast an ecosystem could scale from a digitally enabled platform, paving the way for many others.
Mobility, in which cars are one small on-demand component of the business of getting people from A to B, or C to X, is a much-discussed current example along with health, education and other services that meet the basic needs of individuals and organizations.
Over time, McKinsey sees traditional industry groupings and value chains collapsing into a smaller number of “multitrillion-dollar-large ecosystems with a few large orchestrators, big winners, and a huge shift of wealth and value creation”.
Surely that is dangerous for society?
Whether natural or social, ecologies can develop pathologies or run out of control; whether we like it or not, they need managing, and in the case of man-made ones, managing them to minimize the bad and maximize the good is a moral duty.
We already perceive some of the emerging dangers. The network effects that underpin developing ecosystems to the benefit of both consumers and producers drive a self-reinforcing winner-takes-all dynamic that has already resulted in a few huge firms dominating swathes of the digital economy.
The ecological lens tells us that an entity that cannot stop growing at the expense of others is cancer that eventually kills the larger system it is part of. Could the same lens help us to develop smart regulation that would manage network effects without throwing the baby out with the bathwater – allowing the rapid scaling that is intrinsic to its value at the same time as preserving and promoting the vibrancy of a diverse ecosystem?
What does this mean for the practice of management?
One of the laws of ecology is that there is no free lunch and all debts have to be paid. Human beings with their emotions, aspirations, dreams and idiosyncrasies do not take kindly to being treated as cogs in a machine; the price paid at the organization level is disengagement, distrust and poor performance and at the level of the individual in stress, unhappiness and unfulfilled potential.
The rationalist dream of truly scientific management is a mirage. Recall Drucker’s definition of management as a “liberal art” – a far cry from the dry technocratic discipline of management research and education.
What applies at an individual level also holds good as we move up the system’s ladder. This is an unfamiliar and challenging territory for most managers. Yet it is at the higher system levels that the greatest prizes beckon.
For example, an economy will function better as a system if incentives, regulations and the social technology of management are aligned with the interests of the broader society – which is manifestly not the case when the stock-market ecology in which large corporations operate is oriented wholly to shareholders at the expense of other stakeholders.
More tangibly, much attention these days focuses on the idea of innovation ecosystems, conceptualized as a kind of man-made evolutionary process. Fast-growing, constantly evolving internet giants such as Amazon, Facebook, Google, Alibaba and Tencent embody this idea. Yet “analog” and manufacturing firms are also learning to play on the terrain, leveraging brand and reputation assets to pivot towards ecosystems-based opportunities. Apple, Haier and BMW are good examples.
As in natural ecology, mid-sized and smaller firms can profitably create their own unique niches within the larger ones, using specialization and deep skills to outflank the data-based, algorithmic brute force of the giants. At the regional level, Silicon Valley is the innovation ecosystem that every country would like to emulate, so far with varying success.
But the examples of Shenzen in China and Tel Aviv in Israel show that epicenters for innovation can be nurtured in very different environments. “Smart city” initiatives to improve the lives of citizens are springing up everywhere.
Understanding and building the capabilities to direct these novel entities is a formidable challenge for management. It demands a multi-stakeholder effort – an ecosystem in itself, in which the Drucker Forum is determined to play a part.
So people should head over to Vienna later this month if they are interested in learning more…
What we’re saying is in the end it is not regulators and bureaucrats who will save the world but innovators and explorers in business, universities and the public sector aligning with society to shape a balanced, dynamic, social ecology for everyone to flourish in, not just wealth for a few – a historic challenge that we cannot afford to flunk. This conference is part of that process.
Thanks so much for your time.
INTERVIEW by Christian Sarkar