What to do when a business is in danger?

Business Network Transformation

Philip Lay and Geoffrey Moore are managing directors in TCG Advisors, a prominent strategy consulting firm that seeks to shape and act on the CEO’s agenda within leading technology-based companies. Moore is also the author of several bestselling business books that include Inside the Tornado, Crossing the Chasm, and Dealing with Darwin. They have identified “Seven Early Warning Signs” that an organization and/or its business network is under attack, encountering serious disruption, and in imminent danger:

(1) Someone’s eating your lunch, but you’re not sure who, (2) New players are entering your marketplace and capturing business with your customers, (3) Even your established trading partners are becoming competitors, (4) You have lost touch with your supply chain and do not become aware of some developments until it is too late, (5) You cannot see what’s happening in your demand chain, (6) Others’ business model innovations have become a serious threat, and (7) Power is migrating to new roles in your business network.

What to do?

Lay and Moore acknowledge two different types of business networks: the collaborative network (i.e. has a peer-to-peer structure in which each member of the network has direct access to every other member) and the coordinated network (i.e. has a back-to-front structure that it inherits from an earlier instantiation of this model as a value chain). Each type has different “sweet spots.”

Collaborative Network: Target next-generation green field market opportunities to develop new markets and exploit high-value umbrellas; drive standards and interfaces to enable modular development in parallel with downstream systems integration; pursue market-specific solutions to increase customer value, reduce market risk, and decrease complexity to reduce integration risk; and meanwhile struggle to accept commoditization and move on, entrusting to partners non-core processes that are mission-critical.

Coordinated Network: Target low end of mature complex systems market to enter new markets and exploit high-price umbrellas; drive commoditization to lower base prices to drive down overall cost of offer and grow volume operations to scale; pursue mass customization to recapture margin and retain low-cost efficiencies; and struggle to collaborate to enter new markets and get downstream visibility in existing networks.

Those who wish to learn more about these and other issues are urged to check out Business Network Transformation: Strategies to Reconfigure Your Business Relationships for Competitive Advantage, edited by Jeffrey Word. Lay and Moore contributed one of the eleven articles.

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