Analytics Strategist

September 14, 2007

business ecology

Filed under: business strategy, Random Thoughts — Tags: — Huayin Wang @ 3:40 pm

On Aug 16 2007, Q Interactive reinvested in Didit for SEM. Both are excellent companies.

In thinking about business ecology, there are many dimensions, layers, and spaces to consider: companies in markets (both horizontal and vertical) are competing and cooperating, selling and buying, and otherwise connected in numerous ways, forming a complex and dynamic picture.

Within this metaphor, there is an “ecological divide”, a separation that often escapes our attention: good companies compete, cooperate, transact, and connect with good companies while the hopeless ones live amongst themselves.

Why is this?

In truth, it is not all that puzzling. Business are social animals just like human beings are social animals. They survive better and are happier when they are connected. The desire to connect, relate, share and transact with each other is there by nature. The order of separation comes not from lack of intention, but from the barriers that prevent the actuation of it. In this case, there is the technological barrier, the capability barrier, the communication barrier, even barrier in business cultures! All of these together contribute to a much higher transaction cost for the relationship.

It makes sense.

What about the vendor-client relationships?  Why would a vendor care if the client is competent or not in their relative marketplace? There seems to be no problem for sup-bar vendors to take on sub-par clients, rights?

My experience tells me that it is in fact very expensive to serve sub-par clients; some costs are explicit, while others are hidden/latent/opportunity costs. It would certainly take another post to full elaborate this point.  Suffice it to say that I am now very sensitive to how my clients stand in their respective markets during project/relationship evaluation.

What’s been your experience?

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2 Comments »

  1. This is thought provoking, although a bit dense and abstract. Could you give an example?

    joe

    Comment by joe — September 20, 2007 @ 2:46 pm

  2. joe,

    here’s a made-up example 🙂

    Vender A was an excellent company, providing great technical services, to a company B which was in trouble.

    Company B had a whole-sale change of management, headed by someone who specialized in “change strategy” but not necessarily the business B is in.

    The new head revamped the whole processes/strategy and challenged everything that were done before. The new head does not really know the business, so he can’t understand that Vender A’s strategy was in fact way better than what the new “head” had in the head.

    The new head complained loudly of vendor A’s key talents, and also praised loudly of vendor A’s less-knowledgeable talents who happen to have similar level of understanding. The complaints caused a series of changes on vendor A’s side:
    1) the inferior technology was chosen for the serivce, and the sub-optimal strategies become best practice, and
    2) the people who are good in producing the sub-optimal strategies were advancing, the key talents became alienated.

    Eventually,

    vendor A got more projects from company B
    vendor A’s key talents left the company
    company B’s new head got promoted
    the newer head was a no-BS person, get annoyed by vendor A’s lossy technology service and sub-par talents,
    vendor A loss company B’s business
    company B’s newer head was fired

    Comment by huayin — September 20, 2007 @ 10:22 pm


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