Leverage: Minimize Investment Required About Scaling Edges: Key design principles

Once an edge has been identified and initial resources allocated, the inevitable question arises: “now what?” When looking to kick off and grow, edges will run against resource constraints; the team may lack necessary skills in certain areas or lack the assets necessary to achieve scale on their own. The traditional mentality to “put more in in order to get more out,” may tempt the edge to look towards the core for support (after all, what is the benefit of being attached to a large firm if not to receive funding and resources?) This, however, can jeopardize the autonomy of an edge and again, raise institutional antibodies.

An edge should constantly be seeking opportunities to leverage already established external resources and infrastructures to grow. Relentlessly pursuing leveraged growth models by tapping into resources and skills outside of the core, minimizes investment from the core (and, hence, institutional antibodies). This strategy can also help a team focus their time and resources on the most important areas.

Q: How do you start?
A: Look externally, not internally

It is often inefficient for edges to leverage the shared services of the core. In most firms, the incentives for shared services are structured such that core projects with large and predictable returns receive priority. Further, edges usually incur a portion of the cost of shared services, which may be disproportionately high to the support actually received.

Instead of looking to the core, it's usually more effective for an edge to leverage external resources and ecosystem for support. This form of external leverage can be more economical and help the edge avoid the political pressures imposed by using core resources. Thanks to disruptive technologies, leveraging external support is an even more viable solution. Cloud-based platforms, in particular, are useful to coordinate large ecosystems and facilitate communication between participants.

Q: How do you mobilize the right resources and participants?
A: Starve the edge

To “starve the edge” is to provide the edge with less while simultaneously asking more from it. While this may seem counterintuitive, it forces the edge to become self-sufficient and adopt the scrappy, resourceful mindset so crucial to success in an unknown marketplace. This model is similar to how venture capital firms fund start-ups, as investors make small, targeted investments while maintaining high expectations for performance. There are two key principles for successfully starving an edge:

• Limit financial resources

Limiting financial resources forces the edge to leverage the least expensive resources it can (be it internal or external). Second, being deprived of funding will help focus efforts on those items which provide the greatest “bang for the buck”. Finally, this action sets a precedent that the edge must prove itself with results before returning for additional funding.

• Set interim milestones

Having limited resources makes interim goals all the more important. Edges must have frequent checkpoints and adopt a more agile methodology, changing course quickly rather than sinking more money into a problem. These interim milestones create further incentive for the edge team to succeed while minimizing their expenditures.

Q: How do you use disruptive technologies to grow?
A: Mobilize the passionate outside the firm

There are many benefits to connecting with passionate individuals outside of the firm. As we discussed previously, passionate individuals are excited by challenge and more likely to draw upon relevant experience to derive an innovative solution. Connecting with passionate people, however, can be challenging when they are outside of the organization. Today’s technologies remove much of the friction that made it difficult to search for and collaborate with these passionate outsiders.

Social software is a powerful tool for quickly canvassing a diverse group and connecting with other passionate people to participate in the ecosystem. Similarly, technologies such as cloud computing allow for a much broader scope of participation and the sharing of much more complex problems.

Q: How do you measure success to drive improvement?
A: Measure progress of the ecosystem

Ecosystems of engaged participants are ultimately more successful than those with disconnected or passive members. Therefore, it is important to measure not only the output of an ecosystem, but also track the internal activity and extent to which technologies are being leveraged to encourage collaboration and minimize costs. These indicators will likely be key to predicating the long-term potential of an ecosystem. Below are two important metrics to track ecosystem performance:

• Network Involvement

Having highly engaged participants is crucial to the success of an ecosystem. To measure this, it is important to track the growth rate of a network, and more importantly, the growth rate of knowledge flows exchanged throughout the ecosystem. Over time, these interactions should evolve from one-off, transactional exchanges to repeated, trust-based relationships.

• Technology usage

Disruptive technologies can be used to lower the cost of maintaining an ecosystem and facilitate greater, richer interactions between members. When assessing the performance of an ecosystem, it is important to track how technologies are being employed and whether there are opportunities to leverage these tools more extensively.