I have spent nearly 30 years in and around Silicon Valley. I have worked for small start-ups, medium sized and large established technology and services companies. Looking back over my high-tech career and the careers of my peers, it seems our skills and expertise overall have easily transferred across different companies, roles, industries, technologies and solution categories. For the most part, at least in the high-tech industry, business is business.
At the highest level all businesses have similar processes. They need products and services to sell, customer acquisition processes, customer success processes, front and back-office systems and operations to keep track of everything. All of these processes and systems must have experienced experts supporting them.
Over the course of my career I have spoken with dozens of venture capitalists and angel investors. In no case did these investors express an interest in spending money on the basic business processes listed above. They wanted to invest in unique and clever products and services that are in demand and generate profits. All the rest of the business is simply noise to many of them.
For several decades the trend has been to out-source an increasing amount of non-essential services to third party organizations that specialize. The goal was to reduce costs and free up more internal resources to focus on the core, essential parts of the business. This has for the most part succeeded. I am wondering now in this time of COVID-19 pandemic if there aren’t additional reasons to look deeper. Is there more that can be done to achieve even higher degrees of resilience, agility and adaptability?
The headlines today are calling for more resilience, adaptability, agility and redundancy to be built into our supply chains so when black swan, disruptive events like COVID-19 emerge, the negative impact on businesses can be more effectively mitigated. We can no longer argue that these coronavirus events are unexpected. The SARS epidemic emerged in 2002. The MERS epidemic emerged in 2012. The COVID-19 pandemic emerged in 2019. All of these are in the coronavirus family. In fact, there have been over seventy epidemics around the world since the 1950s. Pathogen-based black swan events that disrupt normal business environments, plans and strategies seem to be here permanently. As a result, business leaders are now focused more than ever before on making their companies more hardened, resilient and adaptable.
The COVID-19 pandemic might just be the tipping point that motivates businesses to ask, “What parts of our business can be more resilient and adaptable if we were using our ecosystem partners, rather than supporting all the cost burdens, infrastructures and solutions all on our own?”
Today no business is an island. Both individual entrepreneurs and businesses are increasingly plugging into and operating within ever expanding ecosystems. One of the core values of an ecosystem is that costs for important business processes and functions can be shared across the participating members. Think about all the companies that utilize Amazon’s ecosystem to market, sell, warehouse and deliver their products without having to invest in all the processes, systems and assets themselves.
Before a business begins moving significant parts of their operations to ecosystem partners, they need to identify what parts of their business are truly strategic and unique. Is it their business plan and growth strategy, brand(s), company purpose, products, services, intellectual property, research and development efforts or a special approach to customer experience? What are the secret sauces in their company’s recipe for success? Once they have those answers the next exercise is to identify what parts of their business are left, that could be more resilient, provided at a lower cost, and would make the company more agile and adaptable if they were provided by the ecosystem rather than in-house.