A Study of the Ecology of Business Design for Sustainability within the SME Sector

A Study of the Ecology of Business Design for Sustainability within the SME

Introduction: It is a common perception that business design is applicable only to large corporations and conglomerates. However, they are equally applicable to small and medium-size enterprises (SMEs). At present, there is little information or data on the use or impact of business design within SMEs.

The purpose of this research project is to conduct a study on how SMEs engage in the identification and application of the component parts of business design for sustainability.
The aim is to analyse the ecology platforms of SMEs that are best suited for sustainability
within this sector.

The objectives are:
• to research how design thinking, and business design will support the future of SMEs
• to identify the key characteristics required for SME development in the future
• to study how small businesses need to engage and develop socially, both internally
and externally

Origins and history:

In 1934 Schumpeter claimed: industrial growth and development is a direct product of what people from within the firm do in an efficient manner. He posits that individuals bring new
ideas and practices from outside the industry, across industries and applied them in the workplace. The concept of business design has its roots within management theory and
practice over many decades. However, the scope, theory and understanding of what exactly a business design has yet to be defined (Chesbrough 2007).

A number of global businesses for
example: Dell and Wal-Mart demonstrate to us the ability to commence the process of evolution and growth from an SME to a global presence in the space of a number of decades
(Wal-Mart history 2008). These examples demonstrate what can be done when there is an open flexible approach and a level of sensitivity to market needs. The capacity to adapt and change and even be the creator of change comes with experimentation, insightfulness and courage to extend the boundaries of existing structures and thinking.

The evolution of management theory model (figure 1), gives a snapshot of the historical discourse within the context of business management. This is also insightful in how business
design evolved over time.

Fig.1 Evolution of Management Theory Models
1. Living with change
2. Thinking Creatively
3. Managing Change
1. Building and maintaining power base
2. Negotiating agreement and commitment Open system model Create Rational Goal Model Compete Internal process model Control Human Relations Model Collaborate In the early to mid 90s we were introduced to a concept and the beginning of a new phase in the evolution of business and social interaction, the World Wide Web. With its introduction, came rapid growth, and global change, the effects of which are argued to be greater than those experienced within the Industrial Revolution. In the developed world, the manner in
which we generate exchange and create relationships both socially and from a business perspective changed forever. The pace of change accelerated from this point forward in the late 1990s and early 2000 we had the.com boom.

Within this boom/bust period the concept of 'business model' and business design was used in a loose and extravagant manner (Hite, J.M and W.S Hesterly, 2001). Over the past few years, the term 'business design' has received greater attention. It has become the subject matter of a growing number of literary papers and reviews in the context of large organisations. Education has begun to recognise the need for fusion of what were historically two distinct subject areas; the art/design world and the science of business. However, there is a paucity of literature on this topic within the domain of SME's. Questions arise as to the value that business design brings to business.

Further questions arise as to what the constituent fundamental elements are, and their relevance within the SME sector. Hamel (2000) 'leading the revolution' suggests that the number of mediocre companies is growing and the number of high performing companies is diminishing. He suggests that those strategies which focus on cost reduction, downsizing, restructuring and outsourcing have become indistinguishable from those used by their competitors, therefore eliminating initial advantages. He goes on to say "the end of an era of continuous progress has given way to an era of imagination and revolution. Radical innovation requires a complete and coherent business design to be constructed". Prahalad and Oosterveld (1999) used the term "competitive discontinuity" and define this as abrupt change. Abrupt change is mainly driven by the introduction of advanced technology, knowledge networking and globalisation. This is challenging for all types of organisations and in particular SME's.

Added to this factor is the shift from manufacturing to service industry, particularly in the developed countries of Western Europe and USA. The service industry accounts for 86% of business carried out in these geographical areas. The current drivers of change: From the viewpoint of the International growth of SMEs the three main drivers of change are:
I. the transition to a service-based economy
II. the change in the role of location
III. their development and convergence of technology
These three themes are partly interrelated and overlapping. The importance of the "non-manufacturing sector" has been growing steadily, and it can be argued that at the moment we are experiencing a service driven business revolution (Moller etal. 2008). Also in international business that transports the increasing importance of services has been noticeable, as, for example the composition of foreign direct investment has been shifting towards services worldwide (World Investment Report 2004). This development is in line with the current service dominant logic in businesses: i.e., customers play a crucial role in creating end value together with a service provider (cf.Vargo and Lusch 2004) and in order to be able to do that service providers need to be close to the customer.

However, it needs to be highlighted that this emerging trend is not restricted to the service sector. On the contrary, the service logic can be transferred to goods, because in manufacturing customer value is often now created in interaction with the customer (Gronroos 2006). Additionally, the
boundary between a physical product and services is nowadays blurred, as most tradable products also include a service or a knowledge related element.

Second, the concept of location has always been central in international business research, not least because of eclectic paradigms applied in research on foreign direct investment and multinational enterprises (cf., e.g., Dunning 2000). However, recently the importance of location has been challenged, particularly due to the "global shift" (Dicken 1998) in the economy. SMEs with a global mindset are moving their mobile assets (including technology, skills, brands and production) around the globe in order to create a perfect fit with their
immobile assets, which are situated in different locations (UNCTAD 2003), and as a result the value chain of the company (cf. Porter 1985) or value network is disintegrated and scattered worldwide. The outcome is a "global factory", a structure that reflects the combination of innovation, distribution and production of both goods and services (Buckley 2009, Buckley and Ghauri 2004).

It can be argued that the traditional regional clusters may be de-clustered to other nations (Gupta and Subramanian 2008) but this also raises the
question of balance between local and global operations (Buckley and Ghauri 2004) as both of them are required for a value creation. There are many arguments for the "death by distance" and the "end of geography" in internationalisation of business, location still
matters but the question of what way remained unanswered.

Third, one key argument behind the claims for "death by distance" and the decreasing role of location is the development of technology. In addition to the service driven revolution it can be argued that a parallel technological revolution has been in progress for some time, due to the advances in information and communications technology (UNCTAD 2003). It is a
commonly shared opinion that the development of technology would profoundly we constitute the nature of international business, resulting in changes in all elements of a
company's value chain. This is evidenced in the shortening of product life cycle, the drive for innovation, the need for technology transfer, the rapid development of information
technology and global telecommunications are all factors that have particularly encouraged knowledge-intensive firms to enter international markets more rapidly than they previously
had done (Madsen and Servais 1997).

Empirical studies also verify that companies do benefit from technological advances in the form of opportunity identification, the execution of
strategy, and as knowledge and resource-building tools (Loane 2005, Aspelund and Moen 2004). On the other hand, the same technology also creates additional challenges in the form of an excess of information and markets. When combined with limited resources and an overload of information the result is that strategic decision-making becomes more complex and crucial to a company's success (Jones 1999). Consequently, advances in technology have opened new avenues for International growth but also introduced novel challenges, both for which are factors that do not match well with our historical discourse and understanding of business within the SME sector.

Where will the future lead Us?
There are several potential future avenues for research on the ecology of businesses design and growth of SMEs. However, it is fairly clear that the landscape in business is about to
change as the focus is shifting again from the West and Northern Hemisphere to the East and South. New global players are entering the international business arena, which impact on
both regional and international focused SMEs. With the developed markets becoming more saturated and European growth projections lower than any other region in the world, the
challenge facing SME's is immense.

It will definitely be of importance to study how even new, small ventures leverage their value chains in terms of the resources and the market opportunities that global markets offer. With the emergence of the various "hybrid organisational forms" we should attempt to discover what the future architecture of globally operating smaller business will be (Griffith et al.
2008). We should come up with new ways of measuring the globalisation of company value chains and dig deeper into what the future level of efficiency achieved by firms through the
global configuration of value activities will be. It also needs to be ascertained if the worldwide orchestration of value-added activities will lead to better performance in growth
seeking SMEs, and if it does then we need to find out how that better performance has been achieved. To this end, this study can be seen as a call for new business design models,
paradigms and strategies that advance the collective understanding of the ecology of business design and sustainability of SMEs.

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