Platt Perspective on Business and Technology

Leveraging social media in gorilla and viral marketing as great business equalizers: a reconsideration of business disintermediation and from multiple perspectives 3

Posted in social networking and business, strategy and planning by Timothy Platt on August 20, 2017

This is my third posting to a series on disintermediation, focusing on how this enables marketing options such as gorilla and viral marketing, but also considering how it shapes and influences businesses as a whole. My focus here may be marketing-oriented, but marketing per se only makes sense when considered in the larger context of the business carrying it out and the marketplace it is directed towards (see Part 1 and Part 2.)

I focused in Part 2 on a complex of issues that enter into making a business a success, or at least for making it more successful, focusing for the most part on two specific types of business scenarios:

• A new, young, small startup that seeks to leverage its liquidity and other assets available as creatively and effectively as possible, and from its day one when it is just starting to develop the basic template that it would scale up from,
• And a larger, established business that has become at least somewhat complacent and somewhat sclerotic in the process, and with holdover systems and organizational process flows that might not reflect current actual needs or opportunities faced.

And I expanded the second of these basic scenarios to consider larger and more established businesses in general too, and certainly as they seek to develop and evolve so as to avoid the challenges specifically noted there.

• In the course of that developing narrative, I at least briefly discussed business acquisitions as a route that larger and established businesses can pursue as they seek to bring new and innovative into their systems in order to avoid the complacency and sclerosis of the second bullet point.
• And I wrote in that context of the need for an acquiring business to integrate its business acquisitions into its strategic and operational systems with care, so as to preserve their strengths and capabilities that made them good acquisition choices in the first place.
• I have seen acquiring businesses in effect strangle and kill off the sources of value that they had just paid for, and dearly for the amounts of liquid capital expended in doing so,
• By forcing their corporate culture and their operational systems on this new part of their overall system.
• Too tight a grip can create both risk and loss. But at the same time, too loose a grip and too little real integration can carry risks too and certainly where a key, essential acquisition that has been brought in, fails to fit for what it does, into an overall overarching strategic vision and plan. The goal in this is to find an effective middle ground that can create and sustain value and both for the acquisitions brought in so they can perform effectively, and for the acquiring business as a now larger whole.

At the end of Part 2 and in anticipation of this next installment to this series, I stated that I would examine some of the business model assumptions that I have been building this line of argument around. And in the course of doing so, I said that I would consider:

• Tightly and loosely organized businesses, and what in their looser forms can become what amounts to in-house value chain-like business assemblages – with a blurring of the lines between large and small businesses per se.

I added in that context that I will consider what might be called clearinghouse corporate models, which I offer as a logical conclusion endpoint for developing loosely organized businesses. And I will tie this line of discussion back to the questions of how a business is structured and how that might or might not be simplified through disintermediation. I will go on from there to consider the issues of marketing and how a business presents itself to the world around it, and how. And in anticipation of that, I note that the issues of tightly organized and loosely organized, add whole new complexities to the concepts of in-house and outside, and of marketing and marketplace per se.

I begin this with tightly organized businesses and loosely organized ones and precisely what those terms mean:

• A tightly organized business model is one that has and assiduously holds to a single strictly enforced strategic and operational system and vision, throughout its entire organization: any business acquisitions included. Such an enterprise generally maintains a single, consistent overall corporate culture as well.
• A loosely organized business model, on the other hand is one that allows for a much larger amount of diversity in its overall systems: structurally allowed for and explicitly planned for diversity. Businesses that follow this approach tend to hold a single overall strategic vision and approach. But they are much more complexly varied in how this is carried out and certainly when working with separately located offices and facilities that might have to function within different legal and cultural frameworks for foreign-based facilities. And they can take a more hands-off approach when dealing with and supporting high value business acquisitions, that have arrived with their own approaches to doing business, and with their own corporate cultures and their own locally best-fit operational systems in place that have helped them become sources of value worth acquiring.

Both approaches can work and very successfully – provided that they are not just blindly applied and without any awareness of their impact in the specific instance. I have written on a number of occasions in this blog about how too strict and unseeing an adherence to a tightly organized approach can strangle the value out of a once-valuable acquisition. An ill-considered loosely organized approach can cause an acquiring business to in effect unravel, and particularly at points where overall consistency would be most needed.

The tightly organized model is well known to essentially anyone who has worked in the standard, basic corporate world. Strategic and operational patterns arise from and are promulgated down from above on the table of organization, and through the flow of management decisions that take place in what can amount to a conveyor belt-like process from the executive suite outward. This can and often does work, and effectively so. Though too strict an adherence to it can create problems too, including the possibilities of the “larger, established business” scenario that I began this posting with, with all of its sclerotically set-in-its-ways local inefficiencies and fragilities. The operational terms there are “overly rigid inflexibility” and the “inability to adaptively adjust and change.”

So I focus here on what might be viewed as a polar opposite to that, and certainly when dealing with serial business acquisitions, and a business model built around assembling overall strength and competitive capability through an ongoing acquisitions process and through assiduous maintenance of overall flexibility there. And I refer to that approach as the clearinghouse business model.

I have at least briefly and selectively written about business acquisitions and mergers in this blog on a number of occasions. And I have noted in this series how larger corporations can develop a practice of serially acquiring successions of smaller specialty businesses that each individually holds essentially unique sources of innovative value that could be added as if puzzle pieces to what the acquiring business already holds. Most of the time, such an acquiring business starts out this process by adding its first such acquisition to a very substantial, competitively strong foundation that it has developed on its own, in-house. And the weight and momentum of the organization begins in and fundamentally remains in that originally in-house developed and maintained core as this business begins filling gaps in what it does and how, from the outside.

The clearinghouse business model, as an at least somewhat theoretical construct, posits a core organizing business that starts out with a goal of building an at least eventually large and comprehensively competitive business, out of outside-sourced smaller business entities, that when centrally organized can collectively create more value than these smaller enterprises could possibly develop on their own. This is a business model based on collective synergy, and with a goal of offering all participants greater strength in collective and coordinated action, then any of them could arrive at on their own, and with the central organizing business serving as a central organizational point for making that happen. For a structurally more simplified biological example of such an organizing principle, consider colonial organisms such as the ant or bee colonies with their diverse specializations within their overall social systems. There, individual participants are in fact born into these larger systems; here they would be brought in from the outside and would be both more complex and more individually unique within the systems that they join.

I offer this perhaps cartoonish business model approach as a tool for thinking through organization structure and its implications and consequences and both as layers and structures are developed and elaborated in it, and as they are reduced and simplified through disintermediation processes. As a matter of principle, I assume here that arriving at the right balance there is essential for a business if it is to optimize for competitive strength and flexibility in its industry and business sector and when seeking to competitively address the needs of its marketplace.

I have written this posting with a goal of developing and offering a conceptual structure that I can use in addressing a set of basic questions and issues that I raise in this series. And I will begin doing so in my next installment to it, where to repeat my to-address next notes from earlier here, I will at least begin to:

• Tie this line of discussion back to the questions of how a business is structured and how that might or might not be simplified through disintermediation.
• I will go on from there to consider the issues of marketing and how a business presents itself to the world around it, and how.
• And in anticipation of that, I note that the issues of tightly organized and loosely organized, add whole new complexities to the concepts of in-house and outside, and of marketing and marketplace per se.

And I will delve more deeply into the clearinghouse business model as a loosely organized business approach, and how it would be set up and run, and with comparisons to tightly organized business models as needed. I will discuss the above bullet-pointed issues in terms of that foundational discussion.

Meanwhile, you can find this and related postings and series at Business Strategy and Operations – 4, and also at Page 1, Page 2 and Page 3 of that directory. You can find this and related postings at Social Networking and Business 2, and also see that directory’s Page 1.

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