Here is an excerpt from an article written by Wouter Aghina, Steven Aronowitz, and Caitlin Hewes for the McKinsey Quarterly, published by McKinsey & Company. To read the complete article, check out others, learn more about the firm, and sign up for email alerts, please click here.
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For most organizations, the clear boundaries of who is “in” and who is not are becoming blurred, and what seemed like bright line differences are now becoming like concentric circles, where the types of people and organizations working together to create value vary widely, and system participants exist along a spectrum.
Consider some vendors in a value chain ecosystem who – in every other way but being on a company’s payroll – act like employees. Are they part of the organization or external? In today’s world, perhaps the answer is not such a simple either/or. It might be more helpful to see some participants as neither at the inner core, nor fully external.
Defining the “who” matters because it can radically expand or contract your focus when evaluating whether your operating model will deliver on your strategy. We believe companies should increasingly have strategies for how they deal with “quasi-employees” and other participants in their system who are neither traditional “inner core” employees, nor fully external.
Leaders have an opportunity to take control of their ecosystems and shift from passive subjects to deliberate architects of a much broader range of participants in the organizational system. Taking a holistic, systemic approach to operating model design and including the broader ecosystem as part of the solution space can deliver real opportunities for value creation.
To ensure organizations can deliver on their strategic value agenda in an increasingly complex world of opportunities, we believe leaders must incorporate ecosystem design into the operating model design process and pressure-test old boundaries, become more expansive in the scope and aspirations of the redesign, and explicitly create more flexible organizational perimeters that effectively utilize the concentric circles of people and organizations within an ecosystem.
An insightful example of this is the ubiquitous credit card company Visa ™. When the credit card business exploded onto the banking scene in 1966, the initial impact was chaotic. The systems for managing sales drafts, data entry and clearing of sales were primitive; each merchant-signing bank accepted all transactions regardless of the issuing bank, and reimbursed itself by drawing a draft on each issuing bank through the Federal Reserve system. The clearing draft was then posted to a suspense ledger while waiting for the merchant bank to send them through the U.S. mail. And that is only half of the utterly complex, siloed process that effectively led to hundreds of millions of unprocessed transactions and, ultimately, provided opportunities for criminal activity.
Dee Hock, a bank official, was involved in organizing regional committees to help address these major issues. Hock would eventually go on to found Visa™ by shifting from a passive subject to a deliberate architect of the banking ecosystem in which the credit card idea was born. While there is nothing simple about the processes and structures that had to be developed to deliver on the ultimate goal, Hock understood early on that no one bank or financial institution could own the credit card (or resolve the myriad problems it produced) and developed an idea of a self-organizing, networked organization that could evolve, organize and invent itself. Rather than design the organization, Hock came up with some basic principles of organizing that would facilitate the complex self-organization of the committees that had already been created.
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Here is a direct link to the complete article.