The strategy ceiling

by Philip Boxer

It is only with the full relational form that the ethos of action learning has to pervade the enterprise as a whole. Up to that point, the assumption the enterprise makes is that it can rely upon Faustian pacts with individuals operating at its edges to deal with demands that go beyond the complexity of its own business models.

An enterprise differentiates its behaviors in relation to its environment to create value, while at the same time trying to sustain its identity through retaining some form of competitive advantage. How successful it is depends on the kinds of competitive asymmetry it can sustain, which in turn depends on its ability to integrate differentiated behaviors. The strategy ceiling is a way of thinking about how an enterprise does this.

The strategy ceiling is that level above which it is “none of your business” how an enterprise competes – the assumptions above the strategy ceiling are the tacit taken-for-granted basis on which the enterprise determines its behavior built into the way the enterprise operates at ‘design-time’.[1]  Thus the four forms of ‘causal texture‘ described by Emery and Trist (1965) demand a progressive differentiation of layers of behavior for which there needs to be a corresponding progressive articulation of ‘run-time’ assumptions about how to differentiate behaviors, and therefore a progressive lifting of the strategy ceiling imposed at ‘design-time’. Tacit assumptions have to be made explicit and dynamically responsive to demands differentiated at ‘run-time’.
ceilings2
These layers stratify the relation between the enterprise and demand, and as these layers are progressively articulated, so the means of integrating the behavior of these layers needs to be progressively articulated.[2]  The result is the following five-by-five, in which each move to the right is an increasingly differentiated response to a demand for behavior at ‘run-time’.  And each move to the right  involves a lifting of the strategy ceiling.  The result is four different organizations of the relationship between the enterprise and its competitive environment, the last of which is further divided by the nature of the good that it serves [3]:

  • operational integration – how, for whom and why things are done as they are remain unquestioned.  It is sufficient to focus is on operating the business model as it is.
  • professional integration – bodies of know-how have to be developed for how things are done in order to scale efficiencies, but the customer is still defined by these ways of doing things.
  • positional integration – different types of demand from customers are defined by the different market positions through which the enterprise chooses to compete based on assumptions it makes about the WHY of competitive advantage. The WHAT, the HOW and the WHO-for-WHOM of the enterprise model are varied dynamically to achieve maximum competitive advantage in those chosen markets.
  • relational integration – all aspects of the way enterprise competes are capable of being aligned to particular demands, including the way the enterprise competes. This form of integration is distinguished from positional by the ‘squiggly line’ because to be effective, the enterprise has to move from a N-S dominant approach to one that is E-W dominant.

Of course the level of the strategy ceiling reflects the basis of authority assumed by those in control of the enterprise.  So each move to the right involves a different balance of power. In all but the last two columns, therefore, top management reserves unquestioned ‘sovereign’ rights over these assumptions. In the last two columns, what remains are assumptions about how the domain of relevance is defined for the enterprise.  For top management to put the good of the enterprise over that of its clients is defined here as the supplier’s private good. [4]

Considering just the middle three columns, a specific version of these strategy ceilings is described in Meeting the Challenge of Health Care Reform.  The progression is from a professional (treatment-centric) through a positional (episode-of-care-centric) to a relational (through-the-life-of-the-condition-care-centric) approach, the changes in the way differentiated behaviors are integrated being expressed in terms of architectures.

Footnote
[1] ‘Design-time’ is distinguished from ‘run-time’, the latter being the time of the dynamic operational interactions of the enterprise with its environment. Where there is a strategy ceiling there is an a priori constraint placed on the way the enterprise competes imposed at ‘design-time’ constituting the strategy of the enterprise as a whole. This is taken up latter in tempo, entanglement and east-west dominance.
[2] These strata emerge as a way of understanding the relationship of an enterprise to its edges – see finding the edge. They are further elaborated in the series of postings linked to by ‘So you say you want to put your clients first…’.
[3] Simon Western refers to ‘eco-leadership’ as an emerging characteristic of asymmetric leadership in his book on discourses of leadership. While he approaches leadership from the perspective of different kinds of social zeitgeist, eco-leadership is also a response to the leadership demands made by the need to sustain a relational culture, where the unit of analysis has to become the ecosystem and not the enterprise per se.  His other forms of leadership can usefully be seen as responses to the leadership demands of the lower strategy ceilings:

  • ‘controller’ leadership responding to the ‘operational culture’, instituting a taylorism applied to the way management is itself organised;
  • ‘therapist’ leadership responding to the resultant professional culture, in which the central concern becomes the ways individuals are able to take up their roles within the business model; and
  • ‘messiah’ leadership responding to the ‘positional’ cultures that emerge from sustaining the competitive advantage of business models with respect to their market positioning, the point being that to transform and realign these cultures to new definitions of ‘market’ is ultimately a center-driven choice.

Of course the only reason for an enterprise to increase the differentiation of its behavior is on order to maintain congruence with its environment. Thus while Simon approaches the discourses in terms of their progressive emergence in society, the above relates them to the particular way identities are invested in the enterprise .
[4] Later versions of the ceilings includes another row at the top for the domain of relevance (see why is a stratification not a universal hierarchy). Whether or not this level is open to questioning or not depends on whether the good of the enterprise is put before or after the good of the client. This is the distinction between ‘guild ethics’ (the good of the enterprise comes first) and ‘professional ethics’ (the good of the client comes first) respectively. See, for example, Kenneth Pope’s address: The Code Not Taken: The Path From Guild Ethics to Torture and Our Continuing Choices

A Categorial expression of Demand Asymmetry

by Philip Boxer

Some papers sent to me recently by James D. Smith, II at Carnegie Mellon’s SEI set me thinking about how demand asymmetry might be expressed in Category Theoretic terms. Work by Nick Rossiter et al uses category theory to establish a natural basis for interoperability, comparing functors representing the constructs under which an enterprise organizes its data.    This work argues that the conditions for semantic interoperability between systems depend upon their functors commuting at all levels.  Heather et al use this to argue the need for a global enterprise:

Modern information systems operate at every level: from data held in a single purpose fixed device, through common PCs at home or mobile computing with business systems of an SME, to databases, intra-acting locally and at national level, inter-acting between nation states and even then open to wider global systems outside of Europe. This interoperability requires global coherence which in synecdoche correlates with the interoperation of the EU itself.

Semantic interoperability defined in this way cannot accommodate the pragmatics of demand that involve going beyond the perimeter of a single sovereign enterprise.   The enterprise may be forced to deal with demand asymmetry.

Let us say that an enterprise is an enterprise context, defined by the existence of a natural transformation between the functors representing its sub-contexts i.e. its functors commute at all levels. These sub-contexts may be further refined by defining sub-sub-contexts etc in terms of sub-functors.  In these terms, the hierarchy of the enterprise can be expressed in terms of the ‘is-part-of’ relations between the enterprise context and these subordinate functors representing subordinate enterprise contexts.

Let us now say that a customer situation (the experiencing of a need) is also defined as a natural transformation between the functors representing its sub-situations. These sub-situations may be further refined by defining sub-sub-situations etc in terms of sub-functors. In these terms, an effects ladder for the customer situation will be expressed in terms of the relations between the customer situation and its subordinate functors representing subordinate situations.

For example, a hospital is an enterprise, with one of its sub-contexts providing a hip-replacement service.  A patient’s condition would then be a customer situation, the need for a hip replacement being one of this condition’s sub-situations.

Now consider that the patient’s condition demands a number of different treatments provided by different specialist organizations – physiotherapy, home nursing, orthoses, home help. This would be a demand higher up the patient’s effects ladder, addressing more of the need arising from their condition (and thereby reducing the patient’s value deficit).   Let us say that a geometry-of-use is a functor composing some number of sub-functors within the hierarchies of some number of different enterprises.   A stratification can be expressed in terms of  the ‘is-used-by’ relations between the geometry-of-use and these sub-functors, representing how these sub-functors are composed.

Which brings us to demand asymmetry.  A demand arising from a customer situation is asymmetric for an enterprise if the functor of the geometry-of-use can not be made to commute at all levels with the functors of the enterprise i.e. there is no natural transformation between the functor for the customer situation and that of the enterprise as a whole. It is this demand asymmetry that forces us onto the ground of collaborative systems of systems and beyond.

Edge and edginess

by Philip Boxer

Collaboration involves working with experiences in groups.  As such, consideration can be given to basic assumption activity affecting the work of the group – the way our personal unconscious valencies affect the ways in which we work together.  In this context, we can think of edginess as being on a personal edge…  the angst associated with being beyond our own comfort zone.  On edge, perhaps!  But how does this relate to the “edge” in edge-driven collaboration?

The following triangle separates these two concepts: edginess can be experienced as much within the boundary/perimeter of the organization as at its edges.

The challenge in collaborative learning, however, is to be able to use the experience of edginess to tell us something about what is going on at the edge.

Edge-driven collaboration: co-creation

by Philip Boxer

Everyone is collaborating these days.  Collaboration has come to mean any working together by some team of specialists around a common goal.  But is there something different about a collaboration that is edge-driven?  When a number of individuals come together from different organizations in order to manage the care a person receives over time, is it different from specialists collaborating within a single organization?

The answer put forward here is “yes”, because of differences in both the required approach to governance and in the nature of the object around which the collaboration takes place – edge-driven collaboration is essentially a learning process in which there is co-creation, something more than the sum of the parts emerges. For example, collaboration under terms dictated by a Health Care Trust is of a different nature to collaboration between independent care specialists coming together around the treatment of  the complex long term condition of a particular patient.

Why this answer? A two-by-two helps to explain:

  • An organization that operates with a particular business model defines its boundary in terms of the capabilities it uses over which it has direct control, and in terms of its perimeter if it includes the capabilities over which it has contractual control. For example, the perimeter of a primary care practice will include the physiotherapists and psychologists on contract to support its patients, while its boundary will only include those directly employed by the practice.
  • An organization that defines its relationship to demand in terms the variety of products and services that its business model is designed to supply takes up a symmetric relation to demand, which it will define in terms of the markets it has chosen to serve.  A ‘market’ is thus some aggregation of individual demands for its products or services, for example the market for hip replacements, defining a symmetric relation to demand.
  • If then we consider any individual patient presenting such a symmetric demand, and consider what is not satisfied for that patient by the product or service (in this example providing a hip replacement), then it defines a value deficit – something still left to be desired by the patient. For example, not included might be the way the patient subsequently uses their hip replacement as a result of the way they walk. If the supplying business was to include this value deficit as part of what it was trying to satisfy, it would make the demand asymmetric to their business model. Such an asymmetric relation to demand defines an edge.

The following puts these concepts together, with movement towards the bottom-left corner involving increased North-South dominance; and movement towards the top-right corner involving increased East-West dominance:

Within this space, a business model that ignores asymmetries of demand and brings capabilities in-house or under contractual control (the two green arrows) is able to keep control of the way it defines collaborations of value to the business.  For example, the practice might decide that it would be more efficient to treat diabetics as a separate market, setting up treatment protocols to define the collaborations managing their care pathways.

The difficulty arises because of accelerating innovation in products and services and because of patients’ conditions becoming increasingly complex, making demands increasingly singular and heterogeneous (the two red arrows). The effect is to increase the size of the top-right quadrant and make the scope of the bottom-left approach increasingly limited.

Which brings us to what is different about edge-driven collaboration.  Its governance is different because the collaboration constitutes  the business itself, ‘outside’ its supplying businesses.  And its object is different because it is defined by the (demand-side) value deficit experienced by the particular patient.

Who pays for edge-driven collaboration?  The starting position here is that the patient pays, potentially with the quality of their life when dealing with health care. Its costs are the costs of aligning all the individual suppliers’ products and services to the particular patient’s demand.  Value for the supplier can be generated by reducing these costs of alignment.

Studies have so far shown that these costs of alignment can be 30% to 50% higher than they need to be if suppliers focus on the business of edge-driven collaboration in its own right. But this means focusing on the performance of the business ecosystem rather than on the individual business.  Not easy.