Surrendering sovereignty through business platforms and K-type propositions

by Philip Boxer BSc MBA PhD

What happens when an enterprise must respond to its client-customers one-by-one? The enterprise will face demand asymmetry and therefore will need to be able to make under-determined choices at its edges over the extent of any value deficit it seeks to address in creating shared value.  The multi-sided nature of the demand will require that the enterprise must support multi-sided relations between multiple product/services and therefore a business platform that is itself multi-sided, these business platforms then requiring network-based architectures. This all means that we are dealing with supporting novel emergence of a third kind.[1]  What does all this mean for how we define the enterprise?

K-type propositions dynamically align orchestrations of product/services to customer situations
The minimal macrostates of this third kind of novel emergence, defined by matrices 5 and 5b, are based on the maximal microstates of the r-type and c-type propositions generated by novel emergences of the 1st and 2nd kinds:
pan7
Note the ‘big data’ matrix here, representing all possible traces of behavior, whether generated directly or indirectly, which support the K-type dynamic alignment processes, along with the platform (matrix 4-platform), through which multiple product/services are dynamically aligned to the customer situations in matrices 6 and 7.[2]  Whereas the effects ladders (matrix 6) define how effects are generated on the overall demand situations of client-customers (matrix 7B), Matrices 5 & 5B define the K-type propositions through which ‘big data’, the platform and the product/services are orchestrated and aligned to the customer situations.

If we think of a patient’s condition as a demand situation, then a hospital is not only the source of treatments (the columns in Matrix 4).  It is also a platform that supports the orchestration and synchronisation of many treatments around the condition of the patient. Another example related to dogs would be the following from Garmin:

Delta Smart is the on-collar training device and activity tracker that works in tandem with the Garmin Canine app on your compatible smartphone. Your pup is more than just a pet, so get the tools you need for effective training and a more comprehensive look at your furry friend’s activity, even when you’ve been away. Our system lets you monitor and train with bark detection/limiting, behavior corrections, activity monitoring and more.

In this case, Garmin is supplying a platform that is a combination of smartphone app and an on-collar training and tracking device. It is also providing the ‘big data’ traces of the dog’s behavior. The point here, however, is that the orchestration and synchronisation of these capabilities within the dog-owner’s context-of-use are left to the dog-owner.  In other words, unlike with the hospital that is itself providing K-type propositions, in this case the platform is aimed at enabling the dog-owner to develop their own K-type propositions.

Novel emergence of the third kind
‘Big data’ and the platform together with matrices 4-5-5B generate economies of alignment: the ability to create additional ways of organising the business relationship with a customer over time, not only reducing the average cost of alignment of business operations to the dynamics of each customer relationship, but also reducing the costs to the client-customer of the value created. Creating economies of alignment are critical to competing within ecosystems by creating indirect value.  In the context of healthcare, there are not just the economies of alignment arising from shortening the length of the patient’s journey through the hospital’s care pathways.  There are also economies of alignment arising for the patient such as reduced recovery times and less travel to-and-fro for appointments.

The tension between supply-side sovereignty and being edge-driven
There is an essential difference between a sovereign supply-side approach to markets, and an edge-driven demand-side approach to the client-customer’s demand situation:

  • the sovereign supply-side (positional) approach does as much as possible for its management without jeopardising its market relationships, while
  • the edge-driven demand-side (relational) approach does as much as possible for its client-customers without jeopardising the sustainability of the enterprise.

In the context of a hospital, the positional approach will be concerned with such things as operating-theater utilization, bed occupancies and costs-of-treatment.  In contrast, the relational approach will be concerned with such things as the patient’s length-of-stay, recovery times and re-admission rates. This tension between the positional and the relational is apparent when all the matrices are put together:
pan6
Whether the supply-side or the demand-side are dominant depends, of course, on the competitive dynamics of the ecosystem within which this tension is experienced.  In the case of the hospital, are the costs evaluated at the level of the hospital itself, or at the level of the through-the-life-costs of the patient’s condition.  What makes it difficult to move towards being edge-driven is not just the surrender of sovereignty necessary to becoming edge-driven. It is also difficult because establishing demand-side accountability is inherently more complex.  Nevertheless, all enterprises have to go through a P-K-c-r cycle, as described in value propositions at the edge. The issue facing an enterprise, therefore, is the tempo at which this cycle repeats itself, and how much time has to be spent in each part of the cycle.[3]

Notes
[1] Novel emergences and their relation to the four asymmetries, the first three of which we have met before (see the three asymmetries):

[2] Of course not all behaviors leave a trace, not all traces are captured for later recall, and of all the traces that could be captured, not all actually are. Even if traces are captured, there is no reason to assume that they are used in any way for the purposes of managing. For example, looking at commissioning of health care, much data is collected about patients, but the ways of examining that data are not organised in such a way to make the patient’s experience over time accessible for the purposes of managing outcomes.
[3] See also managing over the whole governance cycle – ‘destination’ involves P-type and K-type propositions, ‘comparison’ and ‘custom’ are different kinds of c-type proposition, and ‘cost’ is r-type.

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