Market as organisation, market as enterprise

Is a market an organisation, or an enterprise? Seems to me the only valid short-answer is ‘Yes’…

Can we design a market? We’d probably say ‘Yes’ there too, though perhaps with a fair few  ‘It depends…‘ riders attached to that answer.

And when seeking to understand what a market is and how it works, should we look ‘outside-in’, or ‘inside-out’? Seems like that’s also another ‘Yes’…

Something useful to consider, yes?

The starting-point for this one was a back-and-forth Twitterstream on market, organisation and enterprise, between enterprise-architects Nigel Green (@taotwit), Chris Potts (@chrisdpotts) and Chris Bird (@seabird20), of which I managed to catch only the following:

• chrisdpotts: NB: With IT now consumerized, to design your enterprise #IT #outsidein you must design your enterprise itself outside-in #entarch #CIO
• chrisdpotts: NB(2): If you design your enterprise #outsidein you’ll automatically design your enterprise#IT outside-in. Sorted. #entarch #cio #strategy
• chrisdpotts: @seabird20 A bit similar. But in #outsidein #entarch the system is the market, and it’s an ecosystem. No organization can design it.
• taotwit: RT @lefep From Inside-out to Outside-In… http://bit.ly/VP5kT3 > externalization by another name
• taotwit: @chrisdpotts @seabird20 #outsidein #entarch it seems to me Conway’s Law still plays – reflects the organization of the market!
• chrisdpotts: @taotwit @seabird20 Hmm. A market as an organization? I need to explore that one! Starting here: http://bit.ly/71G6kV
• chrisdpotts: @taotwit @seabird20 Who designs a market? #entarch
• taotwit: @chrisdpotts @seabird20 #entarch frustrating thread! We probably agree!
• chrisdpotts: I thought so | RT @taotwit: @chrisdpotts @seabird20 #entarch frustrating thread! We probably agree!
• taotwit: @chrisdpotts @seabird20 does it help if I say self-organizing nature of Markets?
• chrisdpotts: @taotwit @seabird20 Yes. I think we were drifting into confusion re. organization (action) vs. organization (entity). Happy to leave it.
• taotwit: @chrisdpotts @seabird20 – suggest subtly was in the Conway tweet! Point missed earlier.
• chrisdpotts: @seabird20 Saw your Tweet after mine. Relevant wisdom of Conway’s law: don’t let an organization design an ecosystem. #entarch #outsidein
• chrisdpotts: @taotwit @seabird Conway’s law also explains why organizations can struggle with market inflections like #CoIT, #cloud. #entarch #outsidein

There are some great points here, yet to me much of it seems best typified by Nigel’s agonised wail of “frustrating thread! we probably agree!”. Again to me, a key source of this is a real tangle over terminology, perhaps illustrated best by Chris Potts’ “you must design your enterprise” followed by “the system … no organization can design it”. What is a system, a market, an organisation, an enterprise, and what aspects of it can we and can’t we design?

For me, the best way out of this one is to inject some clarity into the terms ‘organisation’ and ‘enterprise’, and show where that takes us in relation to ‘the market’.

These are the definitions I use in my own work on enterprise-architectures:

• an organisation is a legal structure, primarily conceptual/physical in nature, defined by rules, roles and responsibilities
  (the organisation does – it provides action, the ‘how‘ and ‘with-what‘ for the context)
• an enterprise is a social structure or story, primarily emotive/aspirational in nature, defined by vision, values and mutual commitments
  (the enterprise is – it provides motivation, the ‘why‘ for the context)

In this sense, ‘an organisation’ and ‘an enterprise’ are not really entities in their own right, but bounded-sets or bounded-views into or of a space or context. We can’t really say that anything ‘is’ or ‘is not’ either an organisation or an enterprise, because in essence the two terms describe different aspects of a context.

We can easily describe a context in which the boundaries of ‘the organisation’ and ‘the enterprise’ coincide with each other, but in practice it’s not very useful to do so. To see why, take a look at the market-cycle:

In effect, what drives the market-cycle is the tension between the different boundaries of the desire and intent implied in the shared-enterprise (“shared-purpose defines the market”) and what the organisation can actually deliver (“transaction/exchange”). In effect, that’s what we mean by ‘outside-in’ versus ‘inside-out’: the organisation looking outward to the enterprise, and the enterprise looking inward to the organisation. If we describe a business as both ‘the organisation’ and, with same boundaries, ‘the enterprise’, there’s then no tension between ‘inside’ and ‘outside’ – no ‘outside-in’ or ‘inside-out’. Hence no reason for anyone else to have any conversation with the business; hence no driver for transaction or exchange; hence, in turn, no business. Oops… not a good idea.

So although the two sets can coincide, in practice, for business-architecture and enterprise-architecture, we need to understand the tension that drives those business-relationships, and hence we do need to describe distinctly separate boundaries between organisation and enterprise. A useful guideline that I use in my own work is to say that the enterprise in scope should be some three steps larger than the organisation in scope:

For example, if we describe a for-profit business as ‘the organisation’, then:

• step 0: the business is ‘the enterprise’ (self-centric/narcissistic-view)
• step 1: the direct value-web of suppliers, customers and prospects is ‘the enterprise’ (transaction-view)
• step 2: the market-context is ‘the enterprise’ (regulation/competition-view)
• step 3: the shared-story is ‘the enterprise’ (stakeholder-view)

Given all of this, can we design an organisation? Yes, we can: we do so by defining and adjusting its rules, roles and responsibilities. And we could answer Nigel’s question about ‘self-organization’ in much the same way: in many contexts, those rules, roles and responsibilities will kind of arise by themselves from the context itself (which is not always a good thing, as POSIWID would warn us…).

And can we design an enterprise? In effect, yes, though only ‘sort-of’: we can choose how we relate to and interact with the vision, values and shared-commitments of the enterprise-story, but we can rarely define them as such (especially if we try to do so solely for our own benefit…).

If, as above, we choose to view our own business as ‘the organisation’, can we also ask is the market an organisation? Yes, it is: it has its own distinct rules, roles and responsibilities, that define it as a market. One of the key points here is that those rules, roles and responsibilities are at least in part beyond our boundary-of-control – which is what makes it a shared market, and also a distinct organisation in its own right.

In which case, is a market an enterprise? Yes, it is: it describes a ‘story’, intent, commitments, belonging – and aligning our business with a market will not only place us within that market’s boundary-of-identity, but the market itself also becomes part of our business-identity too.

(Note, though, that although we can say that a market ‘is’ an organisation or an enterprise, in itself it is neither of those things: ‘organisation’ and ‘enterprise’ are views into the context of ‘the market’, not the market itself. Yet another of those subtle distinctions that can be horribly important in practice…)

From the perspective of our own business, the market – just like the broader shared-enterprise – is ‘outside’ of us: our view of both is ‘inside-out’. Likewise, from the perspective of the indirect (non-transacting) stakeholders in the broader-enterprise, both the market and our business are ‘inside’ the context of their own interests and needs: their view of both is ‘outside-in’. Yet from the perspective of the market, our business is ‘inside’ of itself, yet the broader shared-enterprise is ‘outside’: hence it has views that are both ‘outside-in’ (to us and other businesses in its scope) and inside-out’ (to the broader shared-enterprise). All of these views are valid in their own right: it’s all a matter of which way we choose to look…

All of this applies at every level: we can move up and down the layers of views and boundaries according to how we need to view the context. For example, the old TOGAF layering of ‘Business Architecture’, ‘Information-Systems Architecture’ and ‘IT-Infrastructure Architecture’ does make perfect sense if the ‘organisation-in-scope’ is IT-infrastructure: if that’s the case, then the information-systems are its ‘market’, and the broader business-context is the ‘enterprise-in-scope’. (However, that layering doesn’t make sense if we try to start from ‘Business Architecture’, because there’s almost nothing in the TOGAF spec that describes anything beyond the business itself: at that level, TOGAF’s constraints restrict us to an almost-worse-than-useless view where ‘the organisation’ and ‘the enterprise’ are deemed to be the same.)

So if we apply the same recursion to the market in which our business operates, then we have:

• the market is an organisation, bounded by rules, roles and responsibilities – its regulators, its reporting-mechanism, its constraints and sanctions and suchlike
• the market operates within a market of markets, where each individual market is an organisation with its own customers, suppliers, competitors, and subject to the rules of that broader market-of-markets
• the market-of-markets operates within a broader shared-enterprise, such as – in a current commercial context – the enterprise and economics of possession and exchange

And yes, we can recurse ‘upward’ again and again, eventually up to a full global scope. (Or ‘downward’, right down to the smallest minutiae of the business and its operational-detail.)

To take a real-world example of a market-of-markets, if I’m a cattle-farmer in Wales, I might go to sell my beasts at Sennybridge or Llandovery or Welshpool – and if I did so, I’d be subject to the rules, roles and responsibilities of the respective (live)stock-market. Or I might move them over the English border, to Melton Mowbray or Oswestry or right down to Smithfield in London, where the different English rules and regulations would apply. I could ship them out to a European market, where yet other rules would apply, and where the prices would be in in a different currency, too. I might even ship them right out of Europe, to another continent – where again different rules and contracts and currencies would apply, and would be different for the same beasts dependent on whether they’re livestock or deadstock. As a farmer, I’m always in the market for the right market, the right market-as-organisation that best meets my business-needs – yet I’m also always in the same ‘market’, in terms of the overall market-as-enterprise of farming and farm-goods worldwide.

Much the same applies for the finance-folks: all those different stock-exchanges and finance-exchanges represent a market-of-markets – one that’s also often referred to as ‘the market’.

So is a market an organisation? Yes.

Is an organisation a market? Yes – sometimes. Sort-of.

And is a market an enterprise? Yes.

Is an enterprise a market? Yes – sometimes. Sort-of.

Should we look at the market ‘inside-out’? Yes.

Or should we look at it ‘outside-in’? Yes.

Can an organisation design a market? Yes – sometimes. Sort-of.

And can an enterprise design a market? Yes – sometimes. Sort-of.

It depends…

It’s always ‘it depends’ – as in all enterprise-architectures. But I hope this description above will help clarify a bit better what it is that this ‘it depends’ depends upon? 🙂