Was meeting with a fascinating entrepreneur today, the details of which I cannot share because it’s too soon and too cool! But one of the defining aspects of his enterprise architecture is the strong offering network. Rather than maximizing the business returns, he’s focused on maximizing the network’s financial returns, so that everyone that participates wins. He’s leveraging a notion I’ve been advocating for a while, strengthening market positions by building loyal and strong offering networks. These strong offering networks, in which each node provides solutions to the needs of other nodes within the network while it’s own needs are met by solutions offering by other network members, are more robust in competitive markets. One example of this today is how Apple handles the revenue sharing with the App Store for the iPod Touch and the iPhone. By giving most of the application sales revenue back to the developers, Apple has attracted a sizable population of developers churning out a cornucopia of experiences that serve both to extend the hold Apple has on it’s users and attracting more developer talent to create for this market. Apple strategy is in direct conflict with classic retail channel management where the retailer’s margin demands most of the time leave little of the consumer sales revenue in the hands of the original developer of the consumer experience.
Why don’t more companies, big and small, embrace the creation of strong offering networks? It’s a difficult play to execute. Many times you sacrifce short term financial gains for longer term market position and competitive advantage, two business attributes that are difficult to model with current accounting practices with any certainty. Crafting strong offering networks also requires the other nodes in your network to want to play by the same long term rules focused on mutual benefit. The advantages of such an approach are significant, especially if you are the first to set up such a structure in your market. Once your success is know, your competitors will be rushing and struggling the learn the rules of the new game in town. Think about anyone else that sets up an App Store for their device or network. They have to, at a minimum, meet the same juicy terms for developers or exceed the experience offered by Apple, a difficult task indeed.
So it’s up to you, the leader, to decide if you want to continue the classic Divide and Conquer approaches to market dynamics or embrace the potential of Share and Conquer!