The Network Law Review is pleased to present you with a Dynamic Competition Initiative (“DCI”) symposium. Co-sponsored by UC Berkeley, EUI, and Vrije Universiteit Amsterdam’s ALTI, the DCI seeks to develop and advance innovation-based dynamic competition theories, tools, and policy processes adapted to the nature and pace of innovation in the 21st century. The symposium features guest speakers and panelists from DCI’s first annual conference held in April 2023. This contribution is signed by James F. Moore, known for pioneering the business ecosystem approach to studying networks of organizations.
1. Business uncertainty
In my years as a management advisor and consultant, I have been privy to the operations of senior executive teams facing new realities. This experience is invariably marked by persistent strategic uncertainty. Teams that imagined themselves as dominant, often depicted as such by outsiders, were actually profoundly ignorant – a phenomenon often referred to as “breathing your own exhaust.” Their perceived dominance led to fleeting existences and ultimate failure, often without a real understanding of their demise due to a detachment from their actual situation.
In stark contrast, successful executives have a keen sense of the radical uncertainties they face. This recognition of uncertainty is what pushed them to invent self-consciously co-evolving communities of businesses. By creating self-conscious communities, a group of business leaders could make a kind of shared island of strategic cooperation.
Allow me to provide several examples. Andrew Grove, during his tenure as CEO of Intel, exemplified this. He first worked tirelessly to bring together the complementary capabilities required to create semiconductors and establish a shared cadence of upgrades that enabled the creation of a linear innovation. Trajectory reflected in ever smaller, semiconductor features and ever larger numbers of such features on a tiny chip. He later led what he called the layering of the personal computer industry in the complementary color, co-evolving, sub-industries.
Similarly, Warren East of ARM Holdings worked tirelessly within the wireless ecosystem, aiding the growth of the semiconductor and hardware technology that underpins it. Rather than solving various computing problems, he offered an architecture that fostered innovation, inviting various companies and individuals to contribute and create both human and technological value.
Zhang Ruimin, the longstanding leader of Haier Group, is another noteworthy figure. He views himself as an orchestrator of organizations aimed at maximizing human value creation and the personal potential of everyone involved, including customers and all individuals touched by them. His focus on expanding human value has seen the quiet spread of Haier Group’s philosophy among those who acknowledge the profound uncertainty of today’s world. Over several decades, Haier Group and its ecosystem have grown to become a leading manufacturer of essential durable goods and an increasingly important developer of IT-supported cultural platforms that facilitate the self-development of people living in various local contexts.
These three companies and their corresponding business ecosystems represent intriguing models of how the contradiction between being large and operating in a world with vast and unpredictable human value can be reconciled. This is achieved by acknowledging the immense human potential and aiding its development, in the process learning how to be useful in a billion different places and situations.
Businesses that operate in this manner constitute the most advanced business ecosystems, in my opinion. They utilize information technology to merge ideas, leading to greater innovation and helping to disseminate insights. They provide support from shared resources like semiconductor foundries, global telecommunications networks, or educational systems, all aiming to facilitate self-directed individual development and cooperation.
2. Business ecosystems
Aligning a business with individual development and collaboration resonates with the most significant and fastest-growing dynamics in the world today – the immense proliferation of human value created every moment by actual human beings.
It has been three decades since we first introduced the idea of business ecosystems. Communities of related businesses have been around from the beginning of human activity. The difference that what we identified was the emergence of self-consciously established communities. The transition might be characterized as what David Teece has called a transition from related capabilities to one of related dynamic capabilities, where leaders are seeking to develop new capabilities and realize that they can best do this by collaborating with others who complement their own capabilities.
This was not merely an academic concept. Instead, it emerged from years of intense thinking and experimenting on the part of business leaders in the technology sector in the United States. I began to be involved in this activity first as a graduate student and then as a young management consultant in the early 80s. This became a more urgent concern for me starting in 1985 when I was a management consultant helping AT&T navigate the aftermath of its government-mandated breakup. Amid the chaos, we were not only attempting to reconstruct AT&T but also envisage its future in a rapidly changing telecommunications world.
The advent of wireless communication, mobile phones, data networking, and systems integration marked a significant shift in telecommunications. We soon realized that these technologies could be harnessed to create large-scale business systems or platforms connecting millions. AT&T, with its decades-long experience with global scale platforms, was uniquely positioned to pioneer in this new era.
3. Social construction of reality
However, navigating this ever-changing world required more than technology. It required a shared vision, what I would refer to as the social construction of reality – a term borrowed from sociologists Peter Berger and Thomas Luckmann, signifying the formation of institutions. These institutions aren’t merely physical infrastructures but communities bound by shared ideas and ideologies.
Interestingly, even though AT&T successfully built a shared vision, it was not successful in its first form. It first sought to recreate its previous form, the Bell System. It became an integrated firm that owned the key assets in its ecosystem. This form presumed that those who hold assets define the future. In a sense, this was the experience of the old-time monopolies sometimes still envisaged in competition policy. But in the new world, this form proved to be too hierarchical and thus rigid and insensitive to the powerful swirling customer dynamics emerging chaotically around it.
AT&T’s attempt to create a vertically and horizontally-integrated ecosystem turned out to be an internally inconsistent idea because a fundamental advantage of an ecosystem is to create interdependent but independent relationships with its fast-changing customers. AT&T eventually spun off the parts, which in turn enabled them to co-evolve customers, to thrive, and, finally, to successfully contribute to ecosystems.
4. Enabling technologies
We learned that even a company with massive assets is ultimately dependent on its customers. In a world of affluence and connections, customers choose to engage with businesses that help them improve their lives. Moreover, the more successful customers are in their lives, the more varied their dreams and desires.
It is when customers collectively seize upon an idea for a community of innovation that this community takes off. The ultimate irony is that the ecosystem that became the Internet, and that ultimately replaced the AT&T ecosystem was created within loose communities of technologists. And these technologists were assisted in their activity by the ecological design of the UNIX operating system, which consisted of many small parts doing small things well, and combined in a multitude of ways. The overall system was open to new small parts created by innovative people. As the community of such innovative people grew, so did the capabilities that were combined into the technological ecosystem.
What held this community together was not technology but rather a sense of shared creativity. The technology was as minimal as possible and yet enabling combinations and shared achievements. What was maximized was the opportunity for people to create human value in the form of innovative capabilities and then participate in the resulting ecosystem. What was important was the human community and how easily people could join and participate.
5. Individual human creativity
It is an ultimate irony that the UNIX operating system was the invention of a small group of engineers working in computer science research within AT&T’s own Bell Laboratories. The architecture of this system was designed to achieve stability because, again, ironically, it depended upon many small parts doing their jobs well rather than a large design, where the small parts are not done well but, on average, expected to be successful together. Each of the small parts in the UNIX system was created by a human member of the community, paying close and creative attention to the challenges that a small part faced. Together in a largely self-organized community these creative contributions scaled.
Thus the most profound force driving economies today is the creation of human value through individual human creativity. Human value is not like financial value, though they interact. Human value is benefit, defined by each person, and is ultimately undefinable and unpredictable because it is truly creative and innovative. Human societies exhibit chaotic properties like strange attractors and unpredictable dynamics because they are formed by billions of people acting both alone and socially. Ecosystems provide socially-constructed matrices for collaborative creative activities.
Our increasingly connected world, underpinned by advancing education and consumer choice, has enabled an extraordinary proliferation of human value creation. Despite remaining largely unmeasured and undefined, this human value is ceaselessly evolving, generating new constructs, experiences, and ecosystems.
6. Market power
Contrary to what one might expect, large-scale platforms, such as AT&T then, or Facebook today, despite having billions of users and generating immense income, are not as stable as they seem. Their fate is determined by their ability to be platforms for people to create human value, to improve people’s lives better than the alternatives.
Potential alternative platforms and ecosystems continually arise and have the potential to expand rapidly. The old platforms seem stodgy and ineffective. In a paradoxical twist, assets that once provided competitive advantage have become liabilities, traps limiting adaptability to an ever-turbulent reality.
In an environment of rapid and unpredictable breakthroughs, the ability to adapt, to lead the social conversation, to shape and reshape reality becomes critical for survival. Modern-day technologies such as ChatGPT have emerged as powerful tools in this context, enabling instant institutions based on semantic knowledge.
The death of traditional competition and the rise of platforms and ecosystems has led us to the precipice of a new world order, one driven by human value proliferation within an intricate web of interconnected business ecosystems, and human communities, institutions, and cultural values. The onus is now on us to chart the course forward, constantly adapting and innovating to stay relevant in this era of change.
7. The current situation
So, what’s the current situation? We seem to be entering an era where competition centers around creating cooperative, collaborative, highly innovative, and creative communities that could potentially scale to billions. Notable examples can be found in global consumer brands, which often represent sets of human values and foster particular types of innovation and creativity. A classic example is Apple’s “Think Different” campaign, which celebrated innovative individuals who transformed our worldview, such as Albert Einstein and Bob Dylan.
There’s a fascinating, albeit chaotic, competition among brands, which goes beyond the surface to a deeper cultural level. This competition spans nations, regions, brands, and individuals, paradoxically aiming to generate cooperation and collaborative co-creation. This cultural competition, I believe, represents our new reality.
In this context, large language models, like GPT, will significantly accelerate two things. Firstly, they enable the rapid creation of more internally consistent or better-referenced cultural ideas. This empowers individuals and co-creators to develop and explore these ideas quickly and to communicate them thoroughly. As a result, the acceleration of cultural creativity and human value is set to skyrocket. It’s hard to quantify, but we can anticipate a significant increase in the aggregate creativity on the planet.
8. Generative AI
Implicit ideas in culture and literature can now, through large language models, generate consistent explicit artifacts to reflect, communicate, and collaborate with others. It’s as if we’ve transitioned from a personal computer age to a personal culture age. GPT, like a personal culture service, aids in the creation of micro-cultures, which can sometimes scale significantly through collaboration.
Interestingly, the regulation of models like GPT is also viewed as cultural competition. The Chinese government’s recent regulations on generative models and their use reflect this. These regulations, advocating for egalitarianism, social benefits, truthfulness, and inclusivity, represent a set of explicit cultural values and processes, inviting people to participate in culture-making. This is a novel level of analysis, particularly for nations, and extends the ongoing conversations about national and European values.
Nonetheless, there is a multitude of unresolved issues regarding the relationship between regulation, state governments, and these new technologies. They echo the age-old tension between top-down power and bottom-up culture creation, now more relevant than ever as we navigate the forefront of everything humans are trying to accomplish in our uncertain world.
James F. Moore
|Citation: James F. Moore, “Navigating the Death of Competition: The Emergence of Business Ecosystems and Beyond”, Network Law Review, Summer 2023.|