Read just about any book on management or leadership and you will eventually come across the term ecosystems. It may not sound very exciting but is essential in understanding the complexity of modern organizations! The concept of ecosystems in an organization stems from a biological model. In nature, an ecological community coexists together within its environment. Many things can affect the ecosystem. For example, conflicts between species can influence an ecosystem. The introduction of an outside species can alter or change an ecosystem. Moore uses this analogy to define a business ecosystem as “an economic community supported by a foundation of interacting organizations and individuals.” This is in concert with an understanding of general systems theory. The bottom line is that other organizations and institutions within our society do influence today’s businesses and their environment. Rapid changes in science, technology, knowledge and changing social norms compound these influences.
Galagan defines a business ecosystem as a “system in which companies work cooperatively or competitively to support new products, satisfy customers, and create the next round of innovation in key market segments.” I believe the five competitive forces as presented by Michael Porter help to define at least part of an ecosystem we face in the business community. These forces shape and influence competition within most industries. They are:
- The risk of new entry by potential competitors
- The degree of rivalry among established companies
- The bargaining power of the buyers
- The bargaining power of the suppliers
- The threat of substitute products
These many competitive influences make the role of leadership more complex and challenging. It is important to understand the linkage between an organization as an ecosystem and leadership strategy. I will discuss what I believe are major linkage qualities.
A leader attempts to motivate other workers into action toward a goal or various goals. Leaders can do this by providing vision, and explaining how the purpose of each activity is designed to dovetail into the larger picture of an overall strategy. In other words, their role in the organization is important and valued by the entire organization. Providing direction by conveying a clear vision of what is necessary to get a task completed and how to proceed in that direction is vital. Acquiring and using your analytical skills is essential since an ecosystem can change quickly. Culture also plays a major role in the linkage between ecosystems and leadership strategy. An organization’s goals and values will be under constant attack both internally and externally. Its culture must be cohesive to withstand negative pressures and influences from many directions. Leadership strategy must include the objective of gaining and sustaining the active support of the organization’s people and resources.
Complementing sound internal analysis is the creation of an effective feedback loop structure. You need to know how decisions and actions are affecting various parts of the organization. A superior feedback system is essential to success. In an open system, the external environment intermingles with the internal environment. Jennings and Zandbergen comment that a system functions properly “when a variety of negative and positive feedback loops are in place.” However, they admit a problem exists for the leader. The problem is that these “effects through feedback may take a long time or be indirect.” In other words, the effects may take place in only one area of the ecosystem before they are felt elsewhere. As Hill & Jones emphasize, the feedback loop should indicate to leaders that strategic planning is an ongoing process. The execution of a strategy must be monitored to effectively gauge if activities and objectives are being achieved. Furthermore, Hill & Jones add that as the feedback loop passes back to the corporate level it “should be fed into the next round of strategy formulation and implementation.” Rummler contends that organizational outputs are produced through processes. Using the analogy of an “x-ray”, he stresses that critical performance variables include “job responsibilities and standards, job design, feedback, rewards and training.”
Good leaders must provide motivation by rallying the willingness of subordinates to work toward the corporate goals and objectives. Rewards rather than punishments should almost always be used to achieve this within the organization. Developing a mutual trust and respect for each other, including the organization’s shared values, enhances this motivating principle. Another linkage is both honesty and openness in communication. Many leaders will find that sustaining continued effectiveness might be very difficult. Many subordinates may have been successful for many years, almost to the point of being taken for granted. A sudden change in the ecosystem may necessitate a change in strategy and this may cause confusion or discouragement among formerly contented workers. Understanding an ecosystem teaches us that we must continually grow, adapt, change, and become stronger to survive. Dealing with rapid change is difficult. Nevertheless, we must never be satisfied with our current level of achievement. Often a new leaders first job is to create an integrated attitude that fosters cooperation, harmony and effective results among the stakeholders.
I believe strategic planning is essential for success in any modern organization. Here are some of the reasons why. Strategic planning provides a vision of the organization’s goals and mission. It analyzes the external environment to identify threats and opportunities for the organization. The strategic planning process helps the organization to select strategies to build on its own strengths, and correct or minimize its weaknesses. This allows the organization to take advantage of external opportunities and to counter external threats. This process can assist the organization in creating a strategy implementation process that designs appropriate structures and control systems to put its chosen strategy into action. If we don’t chose and implement our own strategy, we will become a victim of someone else’s!
In contrast, the lack of strategic planning places the organization’s future at risk for failure. It often times will lack a clear delineation of its goals and mission. It is not prepared for external threats to the organization and is not often prepared to take advantage of opportunities. It does not often recognize its own strengths and weaknesses and is not in a position to select strategies to deal with these important internal matters. The end result of no real organizational strategy or a misguided strategy will most likely lead to failure. In essence, the lack of a leadership strategy places the organization in the role of a victim in a changing ecosystem. Using an analogy from nature, who wins when a slow moving caterpillar walks into the path of a preying mantis?
Another important linkage is the example of ethics demonstrated by the leadership of an organization. Hill & Jones place the importance of values in a succinct manner. “The values of a company state how managers within the company intend to conduct themselves, how they intend to do business, and what kind of a business they want to build.” This is true for both modern business and the military. Business decisions do have an ethical component that can effect strategy! Hill & Jones continue by stating that “the purpose of business ethics is not so much to teach the difference between right and wrong as it is to give people the tools for dealing with moral complexity, tools that they can use to identify and think through the moral implications of strategic decisions”. More than ever, in a rapidly evolving ecosystem, leaders must deal with complex moral decisions that do have an impact on the organization’s strategy.
Regarding ethics, a leadership strategy should attempt to establish a climate that emphasizes the importance of ethics. Creation of this climate should include three steps. First, top managers or officers must use their leadership role to incorporate an ethical dimension into the values they want to stress. Secondly, for a business, these ethical values should be incorporated in the company’s mission statement. For the modern military, it is incorporated in a code of conduct. Third, these ethical values must be endorsed and respected. A sound leadership strategy should include incentive systems that highlight the importance of respecting and acting upon ethical values in strategic decision-making.
The linkage between an organization as an ecosystem and an effective leadership strategy is a process. A leader can shape an organization’s culture in many ways. The leader’s personal influence can be demonstrated as part of a strategic leadership team and modeled individually. This influence can occur primarily through a combination of socialization tactics. These can include unique myths, stories, rites, ceremonies, and organizational rewards. Leadership strategy should encourage an adaptive culture that allows for innovation and rewards initiative for lower and middle-level managers. This can result in a greater ability to exploit new opportunities. A leader also understands that excellent organizations create an incentive system that motivates and reinforces desired behaviors. Rewards for individuals may include piecework plans, commission systems, bonus plans and promotion. Rewards for groups may include a group-based bonus system, profit sharing system, employee stock option plan and organizational bonus systems. By the way, don’t forget the most basic need all of us need in the workplace. It is respect, dignity and appreciation for a job well done!
A good leadership strategy should make an investment in the business to become a learning organization. Learning organizations are those that are structured to learn rapidly and use additional knowledge to become even more effective. In this environment the desire to learn is encouraged and proper resources are allocated for training and education. The values of learning are embedded into the culture. A leader’s strategy can encourage a culture that accepts reasonable risk taking by cultivating values that tell subordinates they should perform their jobs in creative and innovative ways. Leadership can have a powerful impact on an organization’s culture. John Masters, the President of Canadian Hunter has stated, “Leadership committed to excellence, the proposition of team work, team support by management and values are essential to team management”.
In conclusion, the effective linkage of an ecosystem and leadership can be difficult. A leader must recognize there are numerous environmental influences and attempt to control them. The leader must gain an expansive knowledge of human psychological, social and physiological needs. The leader must understand the broad spectrum of organizational development. This is a lot to require from any one individual or small group of individuals! For this reason, I believe this linkage should be a shared leadership approach tapping into the skills and talents of many.
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About the Author:
Frederick Weiss has over 20 years of management experience including 14 years at an executive level. Mr. Weiss is the Vice President of Finance & Administration at Vita-Mix Corporation, a privately owned manufacturing company. He has been a driving force in changing the culture of Vita-Mix from a small-family-leadership style to a professionally managed company during its growth from $5 million to over $60 million.
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