Ideas@scale

James F. Moore in conversation

James moore is one of the true pioneers in the field of business ecosystems. His 1993 Harvard Business Review article, ‘predators and prey: a New Ecology of Competition’, and his best-selling book, The Death of Competition: Leadership and Strategy in the Age of Business Ecosystems, created a new agenda for business and beyond. he has continued to be a pioneer, forging a unique and compelling path through conventional wisdom.

Business Ecosystem alliance director Stuart Crainer talked with James moore from his home during the pandemic in Costa Rica.

Stuart Crainer: Welcome Jim. You must be beginning to feel that the movement you ignited around business ecosystems is finding more momentum by the day.

James Moore: Thank you very much, Stuart. I’ve dreamed of this moment for many years, as I’ve watched the community of ecosystem researchers expand around the world. Though I’ve been both, today I tend to be more of a researcher than a consultant. Every day, I see new articles published in peer- reviewed journals which are sent to me and it’s fantastic — particularly the global breadth.

Stuart: Can you explain the growing interest? Why now?

James: I think part of what has happened, and I didn’t really anticipate this 30 years ago, is that the ecosystem concept is actually a very open concept, and a bit crude. It’s rather simple. People have dreams and purposes, and then they gather together to make these futures happen. The radical thing from a business strategy standpoint was that it wasn’t a thing focused typically on firms, it was focused on people and their dreams coming together, and firms played a role. There are leading firms, of course. But, ultimately it’s about people thinking about doing something together and then doing it.

So, over the years we’ve gone from business ecosystems, which was simply a way to say it wasn’t a biological ecosystem, to start-up ecosystems and innovation ecosystems, and now workforce ecosystems and regional ecosystems, and advanced manufacturing, and so forth and so on. It has become a very general concept, and that’s just wonderful. It’s also a concept that focuses on time, evolution and development, which makes it happily helpful if you are trying to make something happen. It’s a theory really not just of something being there and having a certain static presence, but actually being a dynamic that you can enter into and relate to and move, and it leads then to a lot of practical ideas.

Stuart: You have made intriguing comparisons with Kurt Lewin’s work in the 1950s. Can you explain this?

James: I’ve come to see ecosystems as action research at scale. Kurt Lewin was one of the early founders of organizational theory and system theory in organizations, and his major observation about action research was that when we’re dealing with complex systems, the only real way to do research is to try to do something purposive with that system. Try to interrupt it, extend it or shape it. That is how you enter into a relationship with the system and it is from that relationship you begin to understand how it pushes back, how it moves forward, how it changes. And through the expected and unexpected outcomes of action research is how you learn.

The action research perspective has also led us to a deeper and deeper understanding of systems theory and systems dynamics. One of the fascinating things I have noticed working with the Chinese company Haier and its CEO Zhang Ruimin is they have a very deep understanding of systems theory and systems analysis, right at the frontier. And they actually use that daily to make moves in an action research sense to further creative human development in their ecosystem.

Stuart: Is it right to say that your perspective now is much more willing to embrace the human side of systems?

James: A life coach told me a few years ago to ask, ‘What is invisible to you now that if it became visible would change everything?’ It’s one of those things you’re intended to puzzle over. Eventually what I realized was that the ongoing sense of being and relationships in my world were largely not things I was directly experiencing. It became staggeringly obvious to me that there are much deeper levels of interaction among people. It was very helpful to me to be more and more aware of that.

So that’s my personal story, and then this year during the pandemic, I’ve had a similar kind of a shift, and the shift has been from seeing ecosystems principally as complex production systems to now seeing them as very complex human systems.

Stuart: This is certainly a shift from your initial work in the 1990s. Can we go back to that to get a sense of the evolution of your ideas?

James: In the 1990s I became very involved with AT&T, Intel and Hewlett-Packard. I was particularly enamored by how Intel was creating its business ecosystem, or an ecosystem it was creating and managing with Microsoft. What I found fascinating was how it had taken a layered and very blown apart personal computer industry, that IBM had pulled together into a dominant design, and Intel was able to simultaneously encourage other companies to take parts of that IBM dominant design, and make those the focus of their specialized work, while at the same time Intel increasingly took command of the architecture. And it was not simply the chip architecture for Intel, but it was the Intel architecture writ large, which included the contributions of everybody else. This allowed a number of companies to enter into these specialties and advance much more quickly than they could as part of one hierarchical IBM organization.

At the same time, it allowed people to substitute for each other, to make new combinations, to come up with lots of creative action, and yet all be structured by Intel. And as Intel pursued the trajectory of Moore’s Law, making faster and faster chips, it developed a thing called the Intel treadmill, and people were either on or off the Intel treadmill, and it meant they were co-evolving with Intel. This was a kind of co-evolving forced march rather than something which could be understood via biology.

Intel was very successful as a business and I was enamored with it. I did feel the problems with it on the human side. Being inside Intel was actually pretty tough. It was an emotionally difficult place. The people focused heavily on what they called ‘actions required’, ARs, often to the exclusion of personal feelings, and things like that.

So, it was a tough place, and I also found that other companies involved with Intel felt that the ecosystem was a tough place, and trust was actually very low. Even so, it was very interesting to me, and other people adopted that way of looking at things, and it all seemed reasonable. But what had really happened is that Intel had created a kind of a hierarchy across a broader set of specialties.

Around 2011 I was approached by ARM Holdings. For those of you who don’t know the computer and communications industry, ARM is kind of the modern Intel. It is the architecture that is under essentially all smartphones. It’s the basis of the new Apple M1 chip. It’s really become the dominant architecture in the world for microprocessors, other than in the server world, where Intel is still the king. ARM asked if I would be interested in studying their ecosystem. They introduced me not just to their own people but across the various companies that were involved. And in many regards, it was parallel to Intel. It had a technical architecture, and people were coordinated by that technical architecture in their specialist activities.

But I was struck by something immediately: it just felt different. If you went to ARM’s offices in Silicon Valley they had a sense of calm. There were no obvious guards at the front door. There was a person who greeted you when you went in and handed you a bottle of water. It was just a serene place. By contrast, just down the road in Santa Clara, Intel headquarters was heavily guarded like a bank. It had an entirely different feeling.

ARM felt open and different. They had created an ecosystem that was very open, starting with the system on a chip. The Intel chip was a monolithic one, and when people would innovate in new ways like in graphics or in communication, Intel would, to the extent possible, integrate it into their chip. In contrast, ARM built a system on a chip that allowed other people to put their content on the chip. They had this adage, ‘You always want to leave space on the chip for everybody else,’ and in their ecosystem they left room for people. They invited people in. Their licensing requirements were very easy. Essentially very little cash up front and then you paid a percentage, often several years down the line, when you finally made a product and sold it. So, they were taking much of the risk of setting you up in using their chip and then they received between three and six percent of revenues, eventually.

For many years, this business model didn’t work very well, except that the ecosystem kept scaling and scaling, diversifying and diversifying, and eventually multiple billions of chips were sitting out there and going into devices that were collecting revenues and ARM became, with a few people, a very powerful and profitable company.

Now, back to me. I wrote about it as a human ecosystem, and I called my book Shared Purpose, but I was still mainly interested in what I just described, the technical architecture, the production architecture. I did recognize the cooperative mentality, and I recognized that, for example, they had blended into their ecosystem the open-source software movement. What was fascinating about that was that, at the time, the open-source software movement was actually highly anti- property rights and anti-commercial use of open-source code. It was thought that if you took open- source code and made money off of it, you were a free rider on the voluntary contributions of the members of the community. ARM had somehow struck a balance. They could talk about business opportunities along with open-source sharing. They created an ecosystem where people did a tremendous amount of sharing, and also did a tremendous amount of business, and they shared business ideas with each other.

One of the keys was that in general, people, as they came in, when they competed with each other or when they were in the same specialty, to the extent they could, they would find other niches to go into. So, people were intentionally avoiding head-to-head competition. They were positioning themselves in relation to different problem sets in the world, different solutions and different customers, such that they were learning a lot from each other. And that turned out to be enormously valuable for everyone in the ecosystem, in terms of being able to reinvest, in terms of having a stable business, and so forth. The purpose of the ecosystem was to grow more and more of those stable businesses.

Stuart: Was it at this point you met Wally Rhines?

James: Yes, Wally is a Silicon Valley legend -- one of the early people at Texas Instruments, a founder of Mentor Graphics (one of the three leading chip CAD companies), and now he’s leading a start-up with a new form of chip. Wally told me how in the early 1990s, Texas Instruments felt it had been locked out of the chip business by Intel. The Texas Instruments people sat down and tried to figure out what they could do. They looked at the PC ecosystem and concluded that the most important thing there was the community. ‘The community of people, its informal connections and in some sense its collective cognition and mind and feelings, was actually driving the ecosystem,’ said Wally. ‘The community members were paying for things, but they also were the ones who did or didn’t buy into these visions of where that industry should go.’

In my previous work I emphasized the impact of Andy Grove selling visions to the Intel ecosystem members that would be compute-intensive so that the ecosystem could continue to grow in a more compute-intensive way. But Wally’s point was that Andy couldn’t sell that vision unless this vast community was looking for that in some sense and drew it out of Intel. So, I was really struck by the idea that the community holds great power in ecosystems, and by the design of the ARM ecosystem, the desire to form a community.

Even so, I remained enamored by the production rather than the human function. I still hadn’t grasped this notion that it could be the human function that drove society and drove progress. It has to be, I now believe, the human function that drives progress.

Stuart: And this realization has been encouraged by the work you have been doing with Haier?

James: I was contacted by Haier during the pandemic. They had read my work and, of course, I knew of them. I’ve partnered with a wonderful friend of mine, Professor Rong Ke, at Tsinghua in China, and his wonderful students, to learn more about what is happening in terms of ecosystems at Haier. My conclusion is that, essentially, they’re doing action research on human potential.

I have had conversations with Haier CEO Zhang Ruimin. I have kept knocking my head up against the radicalness of Mr. Zhang and his view of the primacy of human potential, and we’ve talked a lot about RDHY – the Haier philosophy which loosely translates to maker and user co-value creation. Talking to Mr. Zhang he makes it clear that entrepreneurship is too controlling a concept to describe what they are doing. He describes it instead as creating an atmosphere to support human creativity. It is the human creativity that drives Haier, and everything else is built around that.

Haier, as I think many people know, has been split into many micro enterprises, and some of them are tiny, some of them are a little bigger., Talking to the executives at Haier-owned GE Appliances in Kentucky, they say they argue constantly about whether they have 14 or 17 micro-enterprises, but it’s somewhere around that. I find it strikingly similar to how Amazon Web Services has grown to be the biggest cloud service in the world by breaking everything up into what Jeff Bezos calls two-pizza teams with each team having open interfaces and APIs to the work of other teams. This gives them an enormously flexible co-evolving kind of system.

Haier is doing that same thing in manufacturing appliances, but what’s striking is that I cannot find any of the residual examples that I look for in terms of forcing a hierarchy, a model or a vision on people. Instead, they have these leading goals which are kinds of visions and dreams of where we might go, and then this very deep philosophy. So, what I finally concluded is that Mr. Zhang and his team are in constant dialogue with thinkers, a constant conversation, trying to deepen their understanding of the human being. And then they’re doing scaled action research, trying to figure out what kind of system you need to create to manifest human potential and human creativity. Its biggest product is the expansion of human potential.

Stuart: So, your eyes have been opened to the human side of ecosystems.

James: I have made the shift. We’ve understudied the human side of business ecosystems and rather than look at it as a deficiency I see it as an opportunity. There are powerful dynamics at play. To understand them we will need to expand our lenses and invite in new fellow researchers. For example, there’s interesting research on communities of shared minds. There’s an influential group in the UK that looks at what they call big minds, and they’ve been very much a part of the British government’s programs for developing various kinds of industries and other national capabilities. The OECD has adopted a new ecological and complex systems approach to national economies, showing that to do economic development, you must center on human development.

We have the fantastic work of Elizabeth Altman and her colleagues at the University of Massachusetts Lowell, MIT Sloan Management Review and Deloitte on what they call workforce ecosystems. They’re looking at how companies are hiring so many people from beyond their own boundaries that now companies have an incentive to invest in the general human development around them, and then in turn be able to feed off of that. She also has an amazing case with the United Nations Development Program. It has 60 different innovation centers around the world where people are building ecosystems.

I’m also seeing really interesting academic work from the communications field. There’s a field of organization communications and they talk about how organizations are constituted from communication. There are very interesting papers about the connection between what people do, and how people look at the world, and how they create value.

So, in a sense I’ve embarked on a new research career trying to understand the human ecosystem.

Stuart: What intrigues me, Jim, in the 1980s and 1990s, when you were going into organizations and talking about ecosystems, what kind of reaction were you getting? I can see that somebody like Andy Grove, who was a really bright guy, might get it, but a lot of other people must have shrugged their shoulders and shown you the door, surely?

James: In the early ‘80s, there were a lot of interesting things going on that were broadly in this paradigm, like the quality movement and all that. So, as long as I talked about things as, say, quality process improvement, or concurrent engineering, or things like that, that was fine. Also, ironically, most of our work back then was actually about people and organizations, and human resource strategies—the human side of ecosystems.

A friend of mine gave a copy of my Harvard Business Review article to Bob Allen, who was the CEO at AT&T. Bob liked it and gave it to the board, but he put a note on the thing before he gave to the board -- he called me Jimmy because I was still pretty young: ‘You know, I think Jimmy’s paper is really pretty good, but I want to say, I just don’t really buy this ecosystem thing.’ And that was kind of it, it wasn’t macho enough. I liked that it wasn’t macho enough, although I was a very competitive guy, but it looked silly to a lot of people.

Stuart: It strikes me that ecosystems are universal and timeless. It’s just the question of how far we understand them, and how far we utilize them.

James: Yeah. Ken Wilber, who’s a sort of mystic intellectual, was asked whether the Buddhist enlightenment would be better now than it was back in the day. He answered, ‘Of course it would be better, because we know so much more, and so he’d be enlightened on top of everything else.’

So, I think it is fascinating is that there’s all this going on in complexity theory and in mathematics that bears on these subjects, and then also, we’re in an explosive time in human potential.

Stuart: So, who gets ecosystems, when you talk to people in different organizations, industries and cultures?

James: So, this may be my biased observation, and people just saying nice things to me, but I think it’s become ubiquitous now. There’s a way in which the concept is so broad that it’s really kind of just a point of view. And I’m not saying that people haven’t, including me, tried to systematize it and learn more, but at root, the basic insight is, I’m not alone, and my success doesn’t depend on just the things I control, or just the things that a traditional firm was really built to control, and if I want to make change, it depends on other people. And then the next loop is if I want to make change, it would be helpful to go get to know the people who are making that change and see if we can come up with something together. So, at some level, it’s not a very tough concept.

Stuart: Yet, I have visited Haier in China on a number of occasions, and I’m always struck by the sheer complexity and level of vagueness and ambiguity. I accept that something might be lost in translation, but I think they’re comfortable with it, and they use it as a kind of dynamic force. But 20th century corporations in the West were built around simplicity and clarity.

James: Well, I agree with you. Haier is embracing complexity Actually, as you say that, I think, ‘Yeah, maybe people haven’t gotten it at all. They talk about it a lot, but there’s an awful lot of control going on,’ and there’s an awful lot of still seeing the firm’s function as control, whether it’s agency theory or whether it’s the bundle of contracts idea. The ecosystem concept encompasses many different ecosystem philosophies and cultures, including pretty tough controlling approaches.

Maybe we need an even deeper term for what Haier is doing and for this kind of human potential revolution.

Stuart: An interesting angle on this is intellectual property protection. How does a company committed to ecosystems remain open while still protecting its IP?

James: I don’t think there’s a simple answer, but clearly intellectual property is important and people will not invest in and generate intellectual property if they can’t get a return on it. But there’s a big difference between, say, “I generate intellectual property, I charge you to license it, but in general I freely license it to you,” versus “I develop the intellectual property and I either license it at very punitive levels so it’s unaffordable to most people, or I keep it exclusively to myself and bundle it with a production system, and command very high prices.” This is the Intel approach, and it gets them much higher margins for their chips. That’s not necessarily a bad thing, but it gives you so much power that you can squeeze your ecosystem too far.

In the ARM ecosystem they do a lot of collective patent sharing, So, they will build organizations, one of them is called Linaro, where companies come together and they build open-source software and agree to cross-license it to others in the ecosystem. So, that’s another way to do it. It gives IP owners less bargaining power, but it may make for a more vibrant ecosystem. I think it’s a big issue.

Stuart: What does all this mean for the job of the CEO? You talked about an orchestrator, but CEOs get promoted on their ability to communicate certainty and simplicity, to some extent. Ecosystems are a bit beyond their traditional remit, so where does it leave CEOs?

James: Well, first of all, the role of the CEO is really difficult in today’s world. There’s so little they can control, they’re under such a spotlight. I think it’s a very, very difficult role, and CEOs like Andy Grove and Mr. Zhang have a big advantage because they have been in a company a long time and their position is not at risk. I don’t know how you can do the deep ecosystem experimentation and development on a shorter term, or with the risk of being thrown out.

In the case of Mr. Zhang and Andy Grove, and Bill Gates when he was at Microsoft, and a lot of others that aren’t as famous, they have the time to be more of a philosopher and an action researcher. They have the time to experiment, and they have the connection to the organization and people will trust them and put their hearts into a change. So, CEOs like that are such treasures in their ecosystems, because they can do experiments that other people have real trouble doing.

Stuart: You referred to the Intel treadmill, and you would say the same about Haier, for all the talk about ecosystems and the ambiguity there is still the intense pressure to perform. It’s an interesting combination of the big picture and the nitty-gritty of actually performing.

James: For me the difference is whether people are performing under fear or like Olympic athletes or something similar. I think places like Haier and Intel are places for people to be high performers, so they are really like Olympic training programs. Those firms are going to inevitably have a lot of pressure and a lot of action. I think the difference is, do people feel trapped there or do they feel like they can compete at the highest level? I think they’re not, in a sense, humanistic organizations in the traditional way we sometimes think about them. They’re not soft.

Stuart: Another thing you alluded to was about the optimal size of organizations. If you go to Dunbar’s number of about 150 being the optimum amount in any group, we’re still battling between the big- is-good philosophy of the past and venerating small entrepreneurial start-ups. But they tend to be subsumed into corporations when they’re actually bought. There’s still that battle, isn’t there?

James: The nature of the production function, to go back to that side, has changed, and we’re now in a very modular world. And even start-ups focused on their minimum viable product are building a module that they hope people will grab hold of and stick into a lot of other things. Modularity and combinatorial innovation is the world we’re in, and small teams can be perfect for making those little modules and advancing them.

I have had this question for Haier, about, how do they do the big Elon Musk-like programs that Musk appears to accomplish with aggressive top-down leadership? Mr. Zhang and I had a conversation about it the other day. He said, ‘I appreciate what Elon Musk does a great deal, but that’s not what I’m interested in.’ Mr. Zhang is interested in creating ecosystems that help small and medium-sized business to thrive which, by the way, is a much bigger total opportunity than Elon Musk’s. But I do think that it’s important to study what Elon Musk does, how for example he stakes out going to Mars, he identifies big system areas that are essential, like how do I reuse the rocket, and if I have to reuse the rocket, then how do I land it safely when it comes back down, and how do I make software to control the landing? So, he’s coming at things from a big chunks view which I really admire, but that’s in tension with, it seems, this notion of small teams and how they agglomerate and build up.

Stuart: Do you think we’re heading in the right direction in the way we understand and create organizations?

James: There is an awful lot that’s happening in our world that’s heading in a good direction. I’m fundamentally optimistic. That said, I’m also scared. I was talking to a friend of mine in Israel the other day and he said, ‘I feel like the world is balanced on a precipice, and there’s all this amazing good stuff happening, but there’s also amazing bad stuff happening. I feel I could wake up 20 years from now and we’d have blown it all up or it’ll be just a wonderful place.’ I do feel some of that.