VISUALIZE
Create Your New Network Business Model
We view ourselves both as an automotive company, and as a mobility company.
—Mark Fields, CEO, Ford Motor Company
VISUALIZING YOUR ORGANIZATION AS A DIGITAL NETWORK, even in a small portion of the business, is a similar leap to the one made fifteen or more years ago by every great leader telling her teams and boards, “We need to get our organization online.” Most people did not know what that meant, but the best made the leap.
To be sure, every industry is undergoing a change, including those grounded in physical assets—transportation and lodging. You’ve heard of Uber, and probably Lyft, and maybe even their car-sharing grandparent Zipcar—not to mention Getaround, RelayRides, Greenwheels, GoCar, and many more. Car sharing and driving-as-a-service are available in more than a thousand cities around the world. The accessibility and convenience of these options are a threat to the car industry as well as the taxi and limousine industries, as millennials seem happy to get around without either a driver’s license or car ownership.
Travelers now have options that extend far beyond standard hotel rooms. You’ve likely heard of Airbnb, Homeaway, and VRBO (vacation rental by owner). These are similar network-based businesses, but for homes and bedrooms instead of cars. Through these network-based listing services, you can now rent a home, a bedroom, or even space for a tent in someone’s yard. Although hoteliers like to say that these services address a different market than standard hotel customers, there is no denying that the lodging revolution has hit hotels’ bottom lines.
One of the major advantages of network lodging options is that they can rapidly scale up and down. Major hotel chains have noticed that their ability to charge very high rates for “tent pole” events, such as a major music festival or a visit from the pope, have declined as enterprising local residents list their guest bedrooms on Airbnb to capitalize on spikes in demand.
What has happened? Technology allows owners to increase the utilization of some of their most expensive assets: their cars and their homes. Around the world, millions of car owners have paid to buy, fuel, insure, and maintain their cars while using them only an hour or so per day. Homeowners frequently have extra space in guest rooms and basements that is rarely utilized. Network innovators have broken down historical barriers, such as the need for licensing and the difficulty of finding customers, to enable a new source of revenue generation.
Technology is now catching up to travelers’ needs and desires and is allowing a broader population a share in the value creation by using cloud platforms and mobile technology.
PIVOT Step 3: Visualize
The goal of the Visualize step, which takes one to two months, is to design an inspiring network-based business that will begin to help your company apply PIVOT to at least a portion of its capital, time, and talent, turning to network orchestration and starting to generate the increased value that this business model offers. Although we recommend starting small, you should aim to find something that could, one day, grow into a significant portion of your business.
In this step, you design a new business initiative using the network orchestration business model. To do so, you will identify one network to activate; determine the value that the network, and your organization, will give and receive; and identify the platform and technology necessary to make it happen.
Beginning to Visualize Your Network
In this step, you will begin to get practical about creating a new future for your firm. You have already identified your firm’s starting point—your business model, along with the many types of assets that you currently have at your disposal. In the Visualize step, you begin to put these components together in a meaningful way, creating a plan for reallocating your capital to scalable and low-cost assets and digital technologies. We will walk you through this step methodically, considering each component necessary for a network orchestration business model, the assets you have to work with, and the tools you will need.
The network orchestrator business model
In short, this step is like visualizing a new investment portfolio.
But first, let’s break down network orchestration so that you can think carefully about each element. The network orchestrator business model diagram notes all the essential elements of a network business. As you can see, in network orchestration there is a value cycle for the company and a value cycle for the network, which intersect on a digital platform. The network, the company, and the platform are the key components you will focus on.
Note: you must also think carefully about managing your network (growing it and ensuring loyalty) and managing the internal side of the business (using the right management practices and iterative approach). We cover these management items, and complete the diagram for your organization, in the next chapter.
Gaining an Overview of the Process
You apply the Visualize step with a small team of leaders, all of whom have bought in to the process and are up-to-date on the previous steps. This is often the same group of leaders who undertook pinpointing your business model. Designing a new business, with a new business model, is a daunting undertaking, so we want to reassure you that you won’t get it right the first time. Don’t put that expectation on yourself or your team. Instead, we recommend you use an iterative process: the team creates a draft, shows it to experts in the organization for feedback, and then revisits and revises the draft.
The idea is to go through the Visualize step quickly and then repeat with more care and more insight. Giving people a week to digest the new ideas between iterations will greatly increase the effectiveness of your next meeting. As the team homes in on the most promising network possibilities, you can add experts to the team to help finalize the structure and create an implementation plan in the next step (Operate).
At the beginning, your team should feel free to try unexpected combinations, push the boundaries, and genuinely experiment. When people step out of comfortable business and mental models, everything may seem outlandish at first. Give your team time to sit with the ideas, iterate on them, and begin to see a new future.
Identifying Potential Networks
You will begin by focusing on the network. Because network trust, intimacy, and reciprocity (co-creation and shared economics) are the hallmarks of network orchestration, it makes sense to begin with a network focus.
To select a network to focus on, you begin by referring to your network inventory from the Inventory step, where you detailed your firm’s many networks and their characteristics. Peruse your list of networks and focus on the key, and currently underserved, desires of each network as it relates to your company, products, or industry. You are looking for occasions when the network members could actually serve their own needs and wants, if properly enabled. As a business model, network orchestration is highly differentiated because it is the only model in which the company enables and allows the network to serve itself (participants serving other participants) instead of the company trying to serve all the network’s needs on its own.
As you consider each network’s needs, keep in mind the four asset classes. Network platforms can help facilitate the creation and exchange of any of the four types:
- Physical capital: access to physical assets that are related to your products, value proposition, or industry. Examples: Airbnb, Uber
- Human capital: expertise related to your products, processes, or industry. Examples: TaskRabbit, Apple Developer Network
- Intellectual capital: feedback on products or services, input on product design, data about themselves, or product usage. Examples: Yelp, TripAdvisor
- Network capital: word-of-mouth advertising, access to friends and family. Examples: Facebook, LinkedIn
The best place to begin is with those networks that already have high affinity for your firm; these members are the most likely to participate in a new network initiative. For each of your three to five top networks, create a list of the members’ unmet needs and ways that the network might be able to serve its own needs.
Don’t feel that you must get this right on the first try. You probably won’t. Iteration is a necessary part of the process.
Analyzing Your Contribution
After selecting your top network opportunities, you consider the complementary piece: the value your firm can return to the network. You probably won’t be able to finalize your thinking on network self-service before you move on. Again, this is an iterative process.
Now that you’ve begun to home in on some key networks and identify what they can provide for themselves, it’s time to start thinking about how your company fits in to the picture. For each of your top networks, answer the following questions with regard to the needs you believe they could self-serve.
WHAT DOES THE NETWORK NEED IN ORDER TO SELF-SERVE? A software platform is usually a part of the equation, but the needs may go further. Members of the network may need a way to prove their credentials and value to each other. Training and certification programs are useful in highly technical areas. A simple ratings system, such as those used by Airbnb, Uber, and Yelp, also can be useful in almost any network setup.
The network members might also benefit from other physical supplies or technical devices, such as the Nest thermostat or the Nike+ running monitor, to help them gather the data they need. Another point: you may want to conduct events and offer incentives to facilitate interaction among network participants.
HOW CAN YOUR COMPANY PARTNER WITH THE NETWORK? Next, identify whether your company has the assets and capabilities to fulfill network members’ needs. If you don’t, are there any potential partners you could reach out to for a solution? For example, Nike and Apple partnered to integrate Nike+ with the iPod.
WHAT WOULD YOU (LIKE TO) GET OUT OF THIS SCENARIO? There are many possibilities here. Remember that because operating a network requires the ability to make real-time changes in response to member demands, you may change your mind about what you now think you want from the network.
Of course, revenue is always an option. You could charge subscription fees for accessing the network, or transaction fees for using it. You could also sell advertising or access to outside parties. But direct revenue is only the beginning. Your organization could also generate a great deal of customer data that could be useful for outreach, product design, and more.
A network can also serve primarily to increase customer affinity—increasing brand awareness, supporting customer success, and creating avenues for customer feedback and co-creation.
Bringing Together the Network and the Organization
Now is the time to reflect and make a decision. You have thought carefully about your networks, the needs of the participants, and the networks’ ability to self-serve. You have also considered the role your firm could play in facilitating this self-service, and the value that doing so could provide. How do you feel about the possibilities you’ve created? Does one network stand out among the rest?
You may need to iterate between the network value cycle and the company value cycle multiple times before you hit on a model that seems like a genuine opportunity.
We suggest that you select the network, and need, that you find most inspiring—whether the inspiration stems from the value to your firm or the value to the network. If none of the possibilities is inspiring, return to the network value cycle and the firm value cycle, and try new networks, new assets, and new ways of generating value. This is a good time to bring in outside thinking. You can use a peer, a reverse mentor, or a total stranger as a collaborator and sounding board.
We know that sounds strange, but think about your own life for a moment. Hasn’t a sentence overheard in a diner, or an advertising slogan, or a random television commercial startled you by leading you to an insight? Remember that you’re putting on network eyes—and very likely, it’s the first time you’ve done so. Inspiration comes from all sorts of places! You know the old saying, we’re sure: minds are like parachutes—they work better when they’re open.
When you’ve selected a network and need that your company could serve, you will be ready to move on to the next choice: the digital platform.
Choosing the Platform
The platform is the place where your network participants come to interact and share value with each other and with your company. Because you want to take advantage of the rapid scaling potential of technology, the platform must be digital. Your platform could take various forms, depending on the type of value that the network members are sharing: if they’re selling goods or services, the platform needs to be a marketplace; if they’re sharing information, it needs to be a good forum for communication; if they’re generating data, you may need to develop a physical device in addition to the software platform.
Detail the specifications for the platform as you would for any software development project. We recommend that you begin small because iteration will be required. There are many off-the-shelf solutions (for example, online forums and e-commerce platforms) that will suffice for the first year or more of a new network initiative. Determine which digital technologies—social, mobile, cloud, big data analytics, and the internet of things—will be important for success.
With your specifications written, think critically about the current talents and capabilities within your organization. Review your physical, human, and intellectual capital inventories. If this network initiative is a departure from your normal state of business, you likely do not have the talent or technological assets you need to develop or manage the platform. In the next step, Operate, you will tackle these missing pieces. For now, focus on the ideal platform, even if you’re certain you don’t have the talent to create it.
Making It Real
You’re picking up steam, but you’ve probably noticed that we haven’t yet covered all the elements in the business model diagram. Although you have planned the foundation—who the key players are, what they will contribute, what they will receive, and how they will interact—there is still the crucial task of implementing your new vision. You will need to build, staff, and manage it. You will tackle these pieces in the next chapter.
The Enterprise Visualize Story
The Enterprise leadership team members were taken aback by how hard it was to complete the inventory process when they realized how little they knew about the resident and partner communities they served. But Terri Ludwig’s vision was clear: the mission was to help people move up and out of poverty. Building housing was only a means to an end, and not an end in itself.
During its Visualize journey, the Enterprise team realized that a network focused on underserved end users—low-income families—was inspiring, but it was far beyond Enterprise’s current competencies. The leaders realized that they would have more success beginning with their business relationships, which were much stronger and better understood. Therefore, they proposed an initial investment in a B2B network connecting their suppliers and partners, eventually transitioning into a B2C network with end users. After the board approved the capital to fund this plan, the leaders were off to the races.
CIO Pradip Sitaram identified the need to build additional apps to serve three audiences: internal Enterprise workers; the partner community; and, in the long run, the resident community. He also needed to understand more about each group’s needs so that he could build the apps on a standard platform in order to follow standard technology best practices: build it once and use it many times.
Enterprise also needed to begin restructuring the organization around its new theory of value—to use digitally enabled network orchestration to support low- and moderate-income families. The executives knew that they could expand the digital platform that Sitaram had already created for Enterprise’s internal team, but it was a big undertaking to turn it outward to serve the B2B community and eventually the residents.
Reshaping the organization was not going to be an easy task, and everyone knew it. But they also knew that accessing and serving the B2B network would create a differentiated level of value and a new organizational design. In addition, the team members knew that low- and moderate-income families still had high levels of access to mobile phones and that the organization’s network offering would allow Enterprise to reach and serve the needs of a broader population. Through the resident- and partner-centered apps, Enterprise would seek to organize and orchestrate relationships with the large health care, transportation, educational, and finance providers their residents and developers needed, as well as help the community members support each other. To do that, Enterprise needed to bring its twenty-five hundred partners into a large-scale digital ecosystem.
The new vision presented by Ludwig and Enterprise president Charlie Werhane was inspiring: to create a ten times or hundred times impact by restructuring the company to create “one Enterprise, one operating system, and one technology”—an arrangement that let the organization go beyond its traditional asset focus to serve end users (residents). Some board members went so far as to say that this approach was “the greatest vision that had been presented since the firm’s inception by Jim Rouse,” the famous developer of Baltimore Harbor, New York’s South Street Seaport, and Boston’s Faneuil Hall.
This network vision was presented to the board and approved in September 2015. The hard work of operationalizing the vision—to transform Enterprise from an asset financier and service provider to a digitally enabled network orchestrator—was still ahead.