Welcome! This is our second Folklore community contribution, written by Rafa. Funds from the NFT will be split between Rafa and the Folklore treasury.
Ecosystems, as part of organizations
Our digital ecosystem no longer lingers in the background; instead, it has forced its way to the forefront. It is a moving entity requiring new paths for organizational development. As a result we can ask: what new patterns of organizational design are becoming visible?
Historically, organizational designers like Galbraith and Chandler have proposed a series of different models of how organizations deliver Products. Chandler’s seminal work in 1962 outlined how “structure follows strategy”(1). Then, Galbraith built on this thesis by defining the four modern components of organizations: capabilities, service types, geographies, and customer segments(2). Each component, concatenating on the previous, expanded the variety of organizations possible in an increasingly globalized world.
“International expansion leads to organizations of three dimensions: functions, business units, and countries. Customer-focused strategies lead to four-dimensional organizations currently found in global firms such as IBM, Nike, and Procter & Gamble.”
Now we’re seeing hints at the next evolution; organizations are experiencing another step-change in complexity; new companies, especially in the technology sector, are integrating components of the blockchain stack and extending their functions into a thriving and volatile digital Ecosystem where their organization lives.
This digital ecosystem has two primary components that an organization can integrate into their strategy. First, as many have discussed over recent years, is the Protocol(3). This serves as an extension of the logic system on which an organization is built. Protocols, like L1 blockchains, introduce legitimacy through public, verifiable and codified rulesets.
Second, there is a component that’s been relegated to a product feature and overlooked as a design focus: Community. This is the interdependent human relationships of the organization.
The trifecta of Product, Protocol, and Community forms the cornerstone of every organizational map today, as it navigates survival and growth. A complete strategy needs to address all three. Viewed together, the components address internal priorities and a participatory approach to the organization’s ecosystem. However, tradeoffs exist. Each founder must choose a Sequence of development which will influence their valuation, fundraising and growth strategy.
A (not-so-secret) third thing: Community
“If you stand together and profess a thing before your community, it holds you accountable”
Robin Wall Kimmerer, Braiding Sweetgrass
As blockchain technology continues to evolve, organizations are becoming increasingly aware of the differences between product offerings and protocols. Recent writing, such as Jesse Walden's "Product vs. Protocol," have explored the various implications of the blockchain stack, including the value accrual patterns that come with it (e.g. “Fat Protocols”); now organizations are developing competitive strategies accordingly.
As Jesse mentions, a clear example is Uniswap, who made the software application open and free to use, “commoditizing the complement” to their advantage.
However, while recent work has focused on the differences and opportunities of protocols and products, organizational strategy has either neglected, or been unable to integrate a key component of our open-source trade network: Community.
Similar to a product or a protocol, a community can become the primary anchor of an organization. Yet a community is not “The Customer” or “The Market”. Both these terms are product centered vernacular, where the participants are defined in the context of a product opportunity.
A market is where goods are sold
A customer is who goods are sold to
A community is who participates in the organization’s survival and success
We can find many ‘DAOs’ at the forefront of community-centered organizational development. Friends with Benefits (a.k.a. FWB) is an ideal example here, where the products they are developing are FOR the community’s development, while most software organizations “build a community” to increase their product growth.
It is important to note that the layer of "Community" goes beyond potential sources of revenue; it includes the matrix of friends, advocates, fans, their support network, creator partnerships, and other operational support. Community is not simply a list of ideal users, the supply chain, or the industry; community is the network of agents(4) within which a particular organization operates.
In other words, Community is the relationships between those who are touched by the product and protocol.
When we invest in Community, we are trading relationship optionality for depth. The benefits may not be trivial. While depth unlocks access, trust, and long-term mutual support, it also increases the cost of pivoting networks. This cost can be detrimental to new product organizations without product-market fit. On the other hand, those who ignore Community beware; we are soulbound to the platforms which we use for distribution.
Choosing an anchor
“The idea of interdependence is that we can meet each other’s needs in a variety of ways, that we can truly lean on others and they can lean on us. It means we have to decentralize the idea of where solutions and decisions happen, where ideas come from”
Adrienne Maree Brown, Emergent Strategy
Organizational leaders must develop a comprehensive strategy that considers all three elements: the product itself, its underlying protocol, and the community it serves. The way these pieces are sequenced, developed, and integrated with each other will lead to different opportunities and risks.
At the inception of any venture, and then again at each growth milestone, the leadership team should ask:
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Where is the highest need for the ecosystem? (Why?)
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What is our anchor? Where do we center our decision making?
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Do we build internally? Or do we borrow?
Following this choice, investors need to create specific, and likely novel, valuation models based on the organization's sequence of development. An organization that emphasizes community will have a different growth model than one that prioritizes a specific protocol. For instance, the former may launch multiple solutions to boost the GDP of its community, while the latter may focus on serving as many communities as possible, driven by volume.
Emerging sequences
Digital-first organizations are already experimenting with various ‘Sequences’ of development.
The three most common include:
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Tooling: These, like most SaaS organizations, are founded on a product roadmap. Once product-market-fit is established, organizations then may deploy a set of protocol contracts, extending the functionality of the ecosystem.
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Protocols: Like many DeFi innovations, these begin by building an open protocol. Afterwards, they invest in nurturing third-party applications that leverage the protocol.
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DAOs: These are started by jump-starting a community. They gathered a mass of advocates through crowdfund and then decided what application to build.
Where next?
In the future, it would not be surprising if organizations design their functions around the communities they are a part of, or the foundational protocols they participate in. After all, geographic boundaries are evolving from physical borders to network edges and protocol compatibility.
Only time will tell if these new approaches which diverge from the established "product-first" SaaS model will succeed. Their viability, long-term prospects, and ability to generate substantial returns for those who provide starting capital is still uncertain. That being said, there is no doubt that the emergence of blockchain technology and its intersection with vibrant online communities has opened up new possibilities, inviting us to reimagine the very process of organizational genesis and growth.
Thank you to Steph, Gilbert, Jad, David, Spencer, Bethany, Jon Hillis, the Folklore Makers, Mirror, and so many others that have helped me clarify my thinking. This framework was first shared in Berlin (2022).
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“Chandler defined strategy as ‘the determination of the long-term goals and objectives of an enterprise and the adoption of courses of action and the allocation of resources necessary for carrying out those goals’” Read more here
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See The Unreasonable Sufficiency of Protocols for more details: “A protocol is a stratum of codified behavior that allows for the construction or emergence of complex coordinated behaviors at adjacent loci.”
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Agents include all forms of human-ish coordination nodes in the network. For example: people, businesses, other entities, and human-managed autonomous bots as well.
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Richard Barlett has an excellent framework for community-building called Microsolidarity. You can read more about it here: https://www.microsolidarity.cc/
Questions or comments? Reach out on twitter @rafathebuilder