The Art of Ecosystem Boundary Management

Welcome to the latest edition of my newsletter series in which I discuss the key elements of our capability framework for business ecosystem leadership. This time I’d like to reflect on one of most favorite subjects: the conundrum of dealing with boundaries. It’s a challenge that lies at the heart of every relationship but becomes especially prominent in the context of ecosystems.

Why are boundaries such an important topic?

When companies engage in ecosystems, they become part of a new collaborative architecture that reaches across previously protected domains, connecting a variety of different organizations in a novel value creating network. The partners inevitably embark on a process of (inter)organizational configuration that challenges the traditional setup of their internal and external boundaries - a process that shakes up not only operational routines and traditional mindsets, but the very identity of the firms.

Managed well, the reconfiguration of boundaries becomes a competitive advantage and turbo-charges the performance of the ecosystem. Managed poorly, it creates negative friction, destroying value and producing toxic dynamics.

I first explore a bit the nature of boundaries and their inherent challenges, and then suggest?seven principles that will help companies develop a stronger boundary management capability.

The Janus-faced Nature of Boundaries

Leveraging boundaries means embarking on a joint organizational learning journey with the other members of an ecosystem

When working with and at boundaries, it is important to understand their very nature as indispensable building blocks and enablers of any social system.

At a fundamental level, boundaries play a critical role as providers of security, comfort, and orientation. They provide identity, a “home”.?At the same time, they are barriers that constrain us, as they inhibit collaboration and contribute to silo culture and an inward orientation of organizations. This Janus-faced nature makes boundaries a frequent issue of contention, on a geopolitical (walls against migration), organizational (functional/divisional silos), microsocial (tensions between neighbors), even personal level (dynamics in intimate relationships).

A main reason for this contention is that boundaries constitute difference, which threatens identity. Opening your boundaries challenges your normative system, the way you think and interpret the world. Giving them up entirely ends your existence as a different entity. At the same time, this difference (of culture, of language, of norms, of assumptions, etc.) is the primary space where learning and innovation happens - on an individual, organizational, and strategic level. Only if we play at the edge, reach across the aisle, and expose ourselves to the alien and unknown, we can transcend existing paradigms, mindsets, and behavioral patterns. Otherwise, we remain in a tribal bubble.

Transcending this bubble is a delicate task. It requires courage and the willingness to question dear habits to acquire a new mindset and new capabilities. It means embarking on a joint organizational learning journey with the other members of an ecosystem.?To make this journey successful, it is important to identify and embrace the productive elements of friction that unavoidably happens at boundaries, and to recognize and fight unproductive friction by unmasking its often-irrational and/or political foundation.

?How Open Should You Be?

The optimal degree of fluidity is different for each stakeholder

We know that sharing lies at the heart of the logic of ecosystems – they won’t work without it. Yet - assessing the degree of openness that is appropriate in the various relationship contexts is one of the most daunting challenges ecosystem participants face. How open should you be when it comes to give access to customer data, financial information, IP, talent, or other assets??What must you share to make the system work? What can you share to make it more effective and efficient? What can you keep to yourself without doing too much damage, what must you protect by all means?

These are important strategic questions as they relate to key elements of your competitive advantage as well as the performance of the ecosystem. It’s a delicate balance to strike. Too much openness threatens the identity, security, and/or profitability of the individual players, too little openness inhibits the realization of synergies and the harvesting of the ecosystem's potential. To make things even more complex, the optimal degree of fluidity is different for each stakeholder.?In the end, it is the business model of the ecosystem and its related operational requirements that determine what to share and what to keep under wraps.

?Horizontal Connectivity is not Enough

Designing connectivity across horizontal boundaries won’t be effective if it is not accompanied by new mechanisms of vertical alignment

When we talk about managing boundaries across traditionally separated units, we tend to think primarily about creating horizontal collaboration architectures such as digital platforms, shared spaces for strategic dialogue, dedicated units that serve as brokers between stakeholders, and other interventions that assure connectivity.

As important these elements are, it is equally important to rethink the design of vertical processes that connect the top with the bottom (or, perhaps more fitting, the center with the periphery) of the organization. Top-down (or inside-out) processes are instrumental for creating the overall strategic and organizational framework that enables effective ways to co-shape the business ecosystem.?And bottom-up (or outside-in) processes are indispensable for understanding and leveraging insights from dealing with the outside world.?Designing connectivity across horizontal boundaries won’t be effective if it is not accompanied by new mechanisms of vertical alignment that institutionalizes a two-way dialogue across hierarchical boundaries.

Unfortunately, most organizations lack dedicated roles that are tasked with establishing, maintaining, and leveraging an architecture that assures a smart management of horizontal and vertical boundaries. It is a “white space” in need of institutionalization.

Seven Principles That Help You Build a Stronger Boundary-Management Capability

Cherish the fact that others are not like you

There is no silver bullet that solves boundary conflicts – they belong to the very nature of differentiation. Don’t try to avoid them but develop capabilities that leverage their potential. As boundaries are by definition shared, they create shared issues that must be addressed and negotiated jointly. Ecosystem leaders recognize this and champion efforts along these lines, triggering a process of co-development.

Here are seven principles that will help you master the boundary management challenge:??

1. Create a shared understanding of the ecosystem’s business model and its related operational requirements (see the Dual Strategic Acumen element of our framework). It provides the basis for identifying mission critical boundaries that require sharing and/or are likely to cause contention. It also serves as a rationale for designing the degree of permeability each boundary needs.
2. Put boundary management on the agenda of your strategic dialogue. The implementation of ecosystem strategies depends on smart boundary management. Institutionalize an ongoing dialogue both within your organization and among the key players of the ecosystem to continually discuss the optimal fluidity of strategically important boundaries. Make sure that this dialogue is both strategic and operational and make it a key element of the ecosystem’s governance structure.
3. Design learning architectures across boundaries. Initiating and facilitating a dedicated learning architecture that reaches across the boundaries of the involved stakeholders is an excellent way to exert ecosystem leadership. Such an architecture lubricates collaboration by enabling partners to work on potential issues within a space that is designed for open-mindedness, creating trust and improved connectivity in the process.
4. Think multilateral, not bilateral. Your relationship management with one member impacts the dynamics of the entire ecosystem. Be considerate of the impact of individual arrangements on other players
5. Be Curios. Treat encounters with stakeholders of the ecosystem with an attitude of an explorer, an anthropologist. View the other perspectives as inspiration and an opportunity to widen your horizon, not as threat that must be aligned with your view of the world. Share what you learn.
6. Develop (organizational) empathy. The best way to find out about the mindset, the values, the modus operandi, etc. of your ecosystem partners is by literally putting yourself into their shoes. Have influential members of your organization spend time in other parts of the ecosystem and invite others to spend time in yours. You will be surprised what you learn, and it will ease boundary negotiations.
7. Embrace difference and diversity. Cherish the fact that others are not like you. An effective ecosystem has non-redundant collaborators who contribute their specific value to the game. This specificity comes with differences in culture, operating system, mindset, deal type, and so on (see the Polydexterity Management element of our framework). It’s the difference and diversity that materializes at the boundaries between partners which creates the value.

I’d be curious about how you deal with boundaries in your organization. Are you able to leverage their learning potential? What barriers do you encounter? Do you have additional suggestions how to best address the challenges? As always, I'd be delighted to hear your input, your comments, your perspective.

If you like the subjects I am writing about, please subscribe to this newsletter and follow me and the Center for the Future of Organization (CFFO).

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This is the seventh installment of a multi-part series on a?capability framework for business ecosystem leadership. It is?based on our work at the?Center for the Future of Organization?at the Drucker School of Management at Claremont Graduate University (CFFO). If you would like to get immediate access to the entire framework, you can get it as a physical booklet or Kindle version here.

To further deepen our understanding of the subject, we plan to launch a global dialogue and action platform on Future of Organization, with special emphasis on Business Ecosystem Leadership and the related transformational challenges. If you are interested to receive an invitation to this platform, drop me a note in the comments or send me a DM.