Platt Perspective on Business and Technology

Follow the money: nonprofits, not for profits, growth companies and short term profit investments – 2

Posted in macroeconomics, nonprofits, strategy and planning by Timothy Platt on September 21, 2011

Approximately a week ago I posted a short note in this blog about business models and revenue allocation: Follow the money: nonprofits, not for profits, growth companies and short term profit investments – 1. I ended that posting with the following.

• “One way to look at this is at level of the individual organization, as I have been doing so far. Another is to look at this from the perspective of the marketplace, and at the level of business and organization ecosystems. I am going to turn to consider that approach in my next posting in this short series, and at the macroeconomic implications of the relative balances of businesses and organizations in these larger systems that in fact seek to follow the various individual business approaches I have been discussing here.”

There are in fact several fundamentally distinct ways of looking at marketplaces, and I would pick up on two of them here by way of contrast. Looking at marketplaces as systems of producers, distributors and consumers, you can view these organizing structures:

1. In terms of the products and services they offer in meeting individual and collective needs, or
2. In terms of cash and value flow, as collectively organized systems of businesses create opportunity for each other to produce, distribute, consume and contribute.

Think of this as “what the organizations do” and “how these organizations do what they do” in effectively participating in larger market communities. Perspective 1 looks at the individual participants in a marketplace as black box entities whose inner workings remain hidden. Emphasis there is on the flow of products and services that functionally define the marketplace. Perspective 2 peels back the outer walls that delimit these participants and looks at the same marketplaces in terms of monetary and other value flows, and how this collectively enables all participants. This is where successful business models become successful as ultimately this is the source of the liquidity that they depend on to be and remain viable.

• In either case, I would state as an axiomatic principle that the strength and viability of a marketplace depends upon the effective interconnections that it creates between participants: producers, distributors and consumers, in meeting their individual needs. This holds whether you look at these systems and their participants in terms of product and service flow, or at the level of monetary and other value flow, creating liquidity pools needed for these participants to be able to enter into the marketplace in the first place.
• Gaps and potential gaps in the flow of products and services, or alternatively in the flow of value that maintains this system create market needs and value proposition opportunity.
• Unique value propositions arise as opportunities to expand the marketplace in new directions, and true unique value propositions do so in ways that strengthen the entire marketplace as a whole.
• The diversity and dynamic range of business models and approaches followed by business participants in this, and the diversity and range of consumer decision processes and models they follow serve to make these systems more robust. There, the more distinct models and approaches taken, the less likely that any one external factor or event would adversely affect many or all participants. Diversity of how participants function and decide on how they will participate in the marketplace creates marketplace robustness and resiliency.

Putting that last bullet point somewhat differently, having a diversity of nonprofits, not for profits, and growth and revenue model for profits in play strengthens marketplaces as a whole. This is a curious outcome of the basic line of reasoning I have been touching upon here, and it has some significant implications. I will be coming back to this in future postings.

You can find this and related postings in Business Strategy and Operations and in Macroeconomics and Business.

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