How to scale value creation by building eco-systems

Can ecosystems be engineered, or are they, by default, out of the control of individuals? Can companies be founded on the explicit intent to nurture ecosystems of value creation? How do you counter disruption and turn it into a force for company growth rather than a ticking time bomb of eventual corporate demise?

From brands to ecosystems

The opportunity facing companies today is to realize the competitive advantages not just of strong products, but the opportunities that strong networks, communities and cultures can bring around a brand and its products. The ‘traditional’ advantages of a strong company and trademark can be:

  • product (strong, recognizable product that meets consumers’ needs)
  • quality (reliable, dependable and works as planned)
  • service (convenient and trustworthy, makes me feel valued)
  • information (proprietary information, knowledge and advice on using the product)
  • access (availability of product, service and information)
  • innovation (ability to innovate and maintain relevance)
  • marketing and PR (strength in messaging and reach)
  • inside information and proprietary knowledge and patents
  • trusted marketplaces and sales channels

I deliberately use the word trademark instead of the brand because a company can own its trademark (logo). Still, a brand is something that only comes alive in the hearts and minds of consumers and thus cannot be ‘owned’ in the traditional sense.

The image above illustrates the opportunity facing brands: finding ways to enlist the empowered consumer, not as a passive consumer where in return for products, the consumer hands over money – but additional and deeper sources of value beyond money. For instance, the empowered consumer may contribute effort in various forms, from trouble shooting to communicating (word of mouth etc.), ideas, enabling new production, and strategies, opening up new networks and unlocking new commitments that can all help create more sustainable growth for the company. The incredibly one-dimensional view of the creation and transfer of value is holding back companies in the 21st century from re-inventing their business to harness the disruption in their favour. When connected and empowered consumers begin to form networks and communities, eventually, ecosystems surrounding brands can additionally provide the following

  • product extensions and hacks (richer product universe, add-ons and improvements)
  • peer-to-peer service (advice, support and events by passionate users for each other)
  • crowd-sourced troubleshooting (solution finding, input for new product development)
  • secondary market and resale (second-hand products as another asset class, continued relevance beyond product cycle)
  • lead user innovation (community of experts for ideas and input)
  • new routes to market (new partnerships, channels, networks)
  • word of mouth (the most authentic form of marketing, recommendation by a friend you respect)
  • community defence of original product (fend off copycats)
  • higher barriers of entry (recruit new users, convert existing users)
  • and more

The unavoidable question then becomes whether communities and ecosystems are the unavoidable side-effects of the rise of the connected and empowered consumer I wrote about in an earlier post, or something that companies can deliberately engineer through careful strategies. The work of a dear colleague and friend at the LEGO Group, Tormod Askildsen, Head of Community Engagement and Events (CEE) would suggest this is indeed the case. Some publications he has collaborated on shed a more profound light, such as this one from the MIT Sloan Management Review and this seminal book Groundswell: Winning in a World Transformed by Social Technologies.

While much has been written about communities and co-creation, this recent book by Yves Morieux, offers a fresh perspective of the key principles that govern value creation. The book was initially intended to address the growing complexity in companies by describing the principles needed to re-engineer companies to be more like adaptive networks and communities than the rigid inflexible structures that breed silo-ed decision-making, sub-optimisation and disillusioned employees.

Reading this, it struck me that the principles outlined in the book are equally valid when analysing what governs communities and ecosystems that create value around brands. I argue that these principles can be used proactively to grow ecosystems for value creation. Below is a TED talk by Morieux that summarises his 6 Simple Rules effectively. Whenever he talks about companies, think of communities.

Summarising the 6 Rules and applying the community and eco-system angle

1. Understand What People Do

What jobs do people enlist your product to do outside the company? Theodore Levitt, from Harvard, pioneered this thinking, famously stating that people don’t buy a drill but instead a quarter-inch hole. Clayton Christensen has expanded on the jobs-to-be-done framework and argued that simply understanding what people need isn’t enough, especially not by segmenting users based on age, gender, location, job etc. By making the unit of analysis the jobs to be done, he argued that it would help us define products and services much better.

I want to take it further to argue that the jobs to be done also change with the level of affinity consumers have for a company. When looking at products such as milkshakes and fast food, consumers’ affinity for a brand may be low, and thus jobs to be done is a highly appropriate way to look at solutions. Stephen P. Anderson ‘s UX Hierarchy of Needs (below) shows the progression where at the bottom of the pyramid, the jobs to be done are a helpful way to understand the purpose for which products are enlisted, and the emphasis is on objective, quantifiable outcomes. Moving up the pyramid, the objective, quantifiable outcomes do not disappear but are further supplemented by increasingly subjective and qualitative requirements. Moving higher in this pyramid, an affinity for the brand also grows, and users higher in the pyramid are more likely to contribute value to the community and ecosystem beyond simply consuming, additionally are more likely to engage in positive word of mouth, buy more, more frequently and help innovate around the product or brand.

Stephen P. Anderson’s UX Hierarchy of Needs

Understanding what people do is thus as much understanding the jobs to be done as it is understanding the emotional aspects involved and finding ways to support both.

2. Reinforce Integrators

Find those in the community who are connectors, forming user groups and referenced by other users. They are at higher levels of consumer affinity and actively contribute value to the community and, by association, the company. They are connecting empowered consumers to the company. Inside companies, find those going across departments, connecting the dots with the consumer in mind rather than the internal company mindset. Lead user innovation is highly dependent on the integrators in being able to reach the innovators to involve in projects (sometimes they are the same) and also securing communication and exchange of value reaches

3. Increase the Total Quantity of Power

Recognise and appreciate the community – give them a platform, celebrate their work, empower them to use their judgement and contribute to the community. In the company, connect parts of the company to the community, and create win-win situations where the company can meet its goal through a strong collaboration with the community. As Yves Morieux says – you must give people more cards so they have the critical mass of cards to take the risk to cooperate to move out of the insulation. Otherwise, they will withdraw. In both cases, think about what you can do to give people the power and interest to make others cooperate. For our LEGO fans, we have Certified professionals, a program for those who have made LEGO creations their professional career, and an Ambassador program where annually the community vote for their representatives, who help bring the voice of the community to us, as well as connect users in the community to user groups. The LEGO Community team are the integrator between the fans and the company.

4. Increase Reciprocity

Remove the buffers that make us self-sufficient. Morieux says, ‘When you remove these buffers, you hold me by the nose, I hold you by the ears. We will cooperate.’ The example he gives is families arguing about what TV program to watch. Instead of agreeing, the family buys another TV. This ‘self-suffiency’ removes reasons to co-operate. Remove the second TV, says Morieux. Identify the barriers that prevent reciprocity; often, it is easier to do things yourself than collaborate with others to make it happen, yet usually, greater value can be created, on a larger scale, through collaboration. Therefore, proactively engineer reasons for reciprocity.

5. Extend the Shadow of the Future

Create feedback loops that expose people to the consequences of their actions. Air BnB have used this to help us get around the most significant issue, welcoming strangers into your home, typically when you are not even there. This idea is entirely counterintuitive to everything we have grown up believing about our most intimate space, home, and strangers. Yet, by extending the shadow of the future: Air BnB hosts rate their guests and vice versa, positive behaviour dominates, and a new value can be created for hosts to realise the value of their unused space, for guests to find welcoming spaces to stay and Air BnB for matchmaking between the two. In earnest, Air BnB, of course, didn’t pioneer the power of ratings but has undoubtedly proven that applying the power of the shadow of the future can be powerful enough to encourage positive behaviour even in the circumstances most deserving of our mistrust and doubt, thereby opening up the opportunity of value creation for all.

6. Reward Those Who Cooperate

You need to reward those who cooperate and blame those who don’t cooperate. Jørgen Vig Knudstorp, our past CEO at the LEGO Group, says that blame is not for failure but for failing to help or ask for help. And as Morieux puts it, It changes everything. Suddenly it became my interest to be transparent about my real weaknesses because I know I will not be blamed if I fail, but if I fail to help or ask for help.

This approach also creates another reinforcing mechanism for an ecosystem and how we align ourselves with an active community. We must earn our place at the table with our consumers; we can only do that by empowering employees to be in those conversations, to have an interest in learning about the needs of the consumers and making everyone accountable for supporting the ecosystem – also the community.

Some examples

There are great examples of the above, not just by the LEGO Group but also by many others. We have had some great experiences working with the LEGO community on LEGO Mindstorms; the countless fantastic ideas contributed on the LEGO Ideas platform are another example, LEGO Architecture is yet another example of fan innovation. I would argue that any company, like Air BnB, that leverages its community as part of value creation already uses the above rules to create growth. The above makes it possible to do so proactively and design shared value creation from the beginning rather than let it become a disruptive force in the future.

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