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DOCUMENT DE TRAVAIL 2007-030

TETRAHEDRON FRAMEWORK: THE CASE OF QUEBEC’S LUMBER INDUSTRY

Sébastien CAISSE François GIGUÈRE Benoit MONTREUIL

Version originale : Original manuscript: Version original:

ISBN – 978-2-89524-310-6

Série électronique mise à jour : On-line publication updated : Seria electrónica, puesta al dia

11-2007

TETRAHEDRON FRAMEWORK: THE CASE OF QUEBEC’S LUMBER INDUSTRY

Sébastien Caisse

Sebastien.Caisse@cirrelt.ulaval.ca Ph.D. Researcher

CIRRELT Interuniversity Research Center on Enteprise Networks, Logistic and Transportation Faculty of Administration Sciences

Université Laval

François Giguère, ing.f. Francois.Giguere.1@ulaval.ca

M.Sc. Management Researcher - FOR@C Faculty of Administration Sciences

Université Laval

Benoit Montreuil Benoit.Montreuil@cirrelt.ulaval.ca

NSERC/Bell/Cisco Research Chair in Business Design Canada Research Chair in Enterprise Engineering

CIRRELT Interuniversity Research Center on Enteprise Networks, Logistic and Transportation Faculty of Administration Sciences

Université Laval

Résumé

This paper presents the design of Quebec's lumber industry, as expressed through five different sawmill business models. This is essentially a knowledge representation endeavor, anchored to a holistic peer-reviewed conceptual design framework: the Tetrahedron, a highly scalable framework which relies on four key ideas (poles) to conceptualize design: Character, Stakeholders, Creation, and Offers – who is that industry, collectively; who is that industry made up of; what do these people do, and; why do they do what they do? The Tetrahedron is presented first, followed by an analysis of the industry's four poles in the Quebec province. Five sawmills business models are presented: the Traditional, the Perseverant, the Generic, the innovator and the Strategist. The paper concludes with a discussion on design opportunities and challenges as seen through the Tetrahedron's 12 flows (one pole's relation to another pole), 6 dyads (interrelations binding two poles) and 4 faces (interrelations binding three poles).

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Introduction This paper presents the design of Quebec’s lumber industry and its five sawmill business models. Quebec is a province of Canada, where the provincial government owns most of the boreal forest, a vast expense as big as Sweden and Norway combined. The lumber industry has been vital to Quebec’s economic vitality for centuries, and its recent troubles have made for frequent headlines in most provincial newspapers: increased competition from abroad; unfavourable exchange rates; massive layoffs for sawmill workers; and whole regional economies threatened by these changes, where lumber is a key economic resource. This research is limited to an industry design encompassing lumber and its use as dimension or engineered wood, as distinct from ligneous fibre used for pulp and paper and lumber by-products like chips used for agglomerates, combustible, and etc. This industry case limits itself to the province of Quebec, which features some unique design characteristics, the main one being public ownership of the forest. The vast majority of Quebec’s productive forests are publicly owned, most of which are coniferous and transformed through TSFMAs (an acronym for “Timber Supply and Forest Management Agreement”, or CAAFs, a French acronym for “Contrats d’Approvisionnement et d’Aménagement Forestiers”). TSFMAs secure sawmill lumber supplies in exchange of economic rents and sustainable development obligations. Private forests and deciduous forests are mostly found along the St-Lawrence River and the Outaouais River, as well as the Saguenay and Chicoutimi regions. Quebec sawmills get their wood from both private and public forests. Section 1 presents business design, its key intellectual contributions, as well as the framework chosen to conceptualize the sawmill industry: the Tetrahedral Business Design Framework (or “Tetrahedron”). Section 2 presents the analysis of the industry’s four poles, which sets the stage for business model identification and description. Section 3 presents the industry’s five salient business models, anchored to the description of the four poles found in Section 2. Section 4 presents a deeper analysis of the interrelations between the industry’s four poles, and what these mean for the five business models in terms of strengths, weaknesses, opportunities, trade-offs and challenges.

1. Tetrahedron Business Design Framework Design refers to purposeful complexity, either through what is intended to emerge or in what is planned to occur. Business design is rooted in strategic management, but far exceeds it scope. The term was coined in the late 1990’s by Slywotsky and Morisson, who sought to represent to whole of business through three broad types of conceptual dimensions: strategic, operational and organizational. Their work was complemented by authors who strived to represent such key components in semantic networks of various form, gaining the benefits of better knowledge representation for systems thinking (Senge, 1990). These semantic networks, or business design frameworks, are used to anchor vast amounts of knowledge, insights and wisdom in orderly, meaningful and tractable fashion. In other words,

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understanding and representing the design of Quebec’s lumber industry is an exercise aimed at making sense of the holistic result of multiple intended as well as emergent business phenomena, namely five sawmill business models which currently coexist. Not all business design frameworks are created equal; frameworks vary in granularity, scope, intent, and so forth. A thorough comparative analysis of business design literature’s various frameworks is provided by Caisse and Montreuil (2006). Noteworthy frameworks include Slywotsky and Morisson’s Three Dimensions Framework, Rayport and Jaworsky’s e-Commerce Framework, Hamel’s Business Model Framework, and Caisse and Montreuil’s Tetrahedral Business Design Framework (Slywotsky & Morrison, 1998; Hamel, 2000; Caisse & Montreuil, 2003; Rayport & Jaworski, 2003).

◄ BundlingFeedback ►

◄ Contribution

Gain ►

◄ Network

Role ►

◄LearningThrea

t ► ◄Defe

nse

Orchestration ►

Engagement ►◄

Alignm

ent

Stakeholder

Character

Offer Creation

6 Dyads

Exchange

Value

Web

CooperationCompetition

Trust

Craft

Prosperity

Community Team

4 Faces

◄ BundlingFeedback ►

◄ Contribution

Gain ►

◄ Network

Role ►

◄LearningThrea

t ► ◄Defe

nse

Orchestration ►

Engagement ►◄

Alignm

ent

Stakeholder

Character

Offer Creation◄ BundlingFeedback ►

◄ Contribution

Gain ►

◄ Network

Role ►

◄LearningThrea

t ► ◄Defe

nse

Orchestration ►

Engagement ►◄

Alignm

ent

Stakeholder

Character

Offer Creation

6 Dyads

Exchange

Value

Web

CooperationCompetition

Trust

Craft

Prosperity

Community Team

4 Faces

Figure 1. Tetrahedron Business Design Framework This paper examines Quebec’s lumber industry though Caisse & Montreuil’s Tetrahedron, a highly scalable framework which relies on four key ideas to conceptualize design: Character, Stakeholders, Creation, and Offers – who is that industry, collectively; who is that industry made up of; what do these people do, and; why do they do what they do? These answers are then put in relation to one another, revealing critical design points such as strengths, weaknesses, opportunities and trade-offs on varied key topics. These are represented as flows (one pole’s relation to another pole), dyads (interrelations binding two poles) and faces (interrelations binding three poles), summed up in the Tetrahedron.

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2. Design Poles: Character, Stakeholders, Offers and Creation As shown in Figure 2, the industry started as a means to covert forests into money. It did so not only for sawmills, but for stakeholders as a whole: government collected economic rents from sawmills, cities were built around shipyards and pulp and paper factories, farmers became lumberjacks for the winter, etc. With a seemingly infinite resource, processes were decidedly oriented downstream and production capacity went up with no ceiling in sight – more capacity equalled more lumber equalled more revenue. As tools and processes evolved, it became clear that the resource was finite and that making money from the forests would take more than steady growth in transformation capacity. Competition from other provinces and countries pushed lumber into commoditization, with more value-added activities flowing downstream. Other uses for the forests came to vie for economic attention as well. In addition, non-economic uses became new priorities for a number of stakeholders, dislodging economic rents in favour of ecologic rents for some. This research is limited to an industry design encompassing lumber and its use as dimension or engineered wood, as distinct from ligneous fibre used for pulp and paper and lumber by-products like chips used for agglomerates, combustible, and etc. The industry can currently be characterized as a mostly U.S.-oriented commodity supplier with sawmills sourced through government TSFMAs, but its position as the preferred means of converting forests into money is strongly questioned. Sawmills want to keep making money from the forest, but they are trying to shift from push to pull, improving their tools and processes while starting to compete for downstream added-value activities carried out by their own clients. In addition to vertical integration and downstream migration, horizontal consolidation through mergers, acquisitions and partnerships are deemed inevitable by most.

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Strategic Conceptualisation

Tactical Conceptualisation

Inherited Past:-Vast boreal forests;

-Public ownership of forests as wide as Sweden and Norway combined

-Sawmills as engines of regional growth and development

-Large public and corporate stakeholders

-Lumber activities conducted ever farther north

-Limits to forest regeneration capabilities

CHARACTER FuturePreserve

Change

Generate profits from the transformation of trees into lumber (complementary market: pulp & paper)

Push oriented value chains serving sawmill and government needs through Timber Supply and Forest Management Agreements

Commodity supplier (lumber)

for global value creation networks

(focused on the U.S. market),

such as construction &

housing

Improve lumber production processes and integrate 2nd and 3rd transformation

processes (ex.: floor systems)

Pull enabled value networks based on information

technologies, globalization and knowledge about end-user needs

•Less attractive commodity (lumber) market (increased competition, multi-resource

eco-systemic public forest management, unattractive exchange rate)

•New growth niches (essences, green certifications, 2nd & 3rd transformations)

•Downstream (rather than upstream) control over creation networks

•Stakeholder activism (hunters, local communities, etc.)

Integrated global value network orchestrator, from forest to end-users

Figure 2. Character of Quebec’s lumber industry Looking forward, public forests become the focus of multi-purpose, ecosystemic management practices, where transforming trees into lumber is just one of many ways of making money from the forests, and where making money is just one of many objectives in forest management. Economic endeavours surrounding minerals deposits, hydrologic basins, trees, recreational activities, and etcetera, as well as ecological endeavours in ecosystem preservation, fire control, epidemic containment, and etcetera should be balanced and designed together with synergies in mind. It is within this context that sawmills hope to integrate and lead their value networks worldwide, from forest to end-users. This can only be achieved through new technology-enabled pull-oriented processes, a global mindset, and a thorough understanding of end-user needs. This future is by no means a given; competitors outside Quebec may be trying to achieve the same thing; 2nd and 3rd transformation companies may be trying to become leaders of their value-adding networks; and some companies have already transformed themselves and are pushing their industry forward even today. Figure 3 presents the individual actors who make up this industry in three broad groups1: lumber manufacturers (“lumberers”), business facilitators (“enablers”) and lumber consumers (“clients”). Note that an individual actor may belong to more than one group depending on the offer or creation process considered. Such stakeholders increasingly use Internet to present

1 All size groupings from Figure 2 are taken from Ressources et industries forestières: Portrait statistique Mars 2006, Ministère des Ressources naturelles et de la Faune, Direction du développement de l’industrie des produits forestiers.

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themselves, and the growing use of information technologies to research, analyse and match end-user demand to sawmill capacity is represented as a “@” pulley system in Figure 2.

Retail distributors Agents/Brokers(structural wood; firewood)

Large builders & Small builders (housing, contractors, engineering firms)2nd & 3rd transformation manufacturers

-Sawmill owners, managers and employees -Sawmills (grouped by m³ of authorized log consumption):•Small sawmills(less than 10,001 m³/ year)•Medium sawmills(between 10,001 and 100,000 m³/ year)•Large sawmills(over 100,000 m³/ year)-Remanufacturers

-Productive forest owners•Quebec Government

•Small Private Wood Lot Owners(owning no more than 800 ha)

•Large Private Wood Lot Owners (owning over 800 ha)

•Canadian Government-Forest agencies

(groups of small private owners)-Logging enterprises, Collective Management

Groups & Quebec Forest Cooperatives (forestry service providers to owners)

-Local populations & Native communities (Regional County Municipalities,

Regional Conference of Elected Representatives)-Lobbies, Unions & NGOs

-Knowledge & expertise networks -Business service providers

-3rd party logistics-Accreditors

-Investors

STAKEHOLDERS

@Achieving pull requires new competencies… …

many of w

hich can be provided by new

types of enablersClients

Information technologies can act as an enabling pulley system to gather

client expectations and demand

End users ( individuals, groups or organisations who currently cannot deal directly with lumberers)

Figure 3. Stakeholders of Quebec’s lumber industry Lumber manufacturers include business owners, managers and employees, large, medium and small sawmills, and remanufacturers. Sawmills can carry out various tasks such as collecting, sawing, classifying, drying and finishing lumber in accordance to various environmental forest management standards. Remanufacturers buy lumber from sawmills and add value through new cuts, grades, packaging, and so forth. Enablers include forest owners, groups of owners, forestry service providers, local and native populations, lobbies, unions and non governmental organizations, knowledge and expertise networks, business service providers, 3rd party logistics, accreditors, and investors. The Quebec government is the largest forest owner of productive lands and provides leadership for most other enablers, initiating, funding and coordinating multiple initiatives, such as open industry tools and software, specific training programs, and various efforts aimed at resources valorization, Agencies and cooperatives offer various forestry services to government and private owners. Local populations are represented by regional county municipalities and regional conferences of elected representatives. Lobbies, unions and NGOs abound, notably where the environment is concerned. Knowledge and expertise networks include academia and non-academia experts from various fields. Business service providers include eBusiness solutions suppliers, legal counsel, accounting services and so forth. Third party logistics include overland and overseas transport, as well as complementary services such as just-in-time inventory management. Accreditors are organizations which certify lumber or sawmills

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for various purposes. Investors include entrepreneurs, bankers, investment funds and various other organizations ready to loan or invest in the industry. Lumber clients include brokers, retail distributors, builders, 2nd and 3rd transformation manufacturers and end users. Agents and brokers aggregate sawmill offer and lumber client demand, thus acting as information intermediaries in the absence of a commodity exchange to support the lumber trade within Quebec. Some remanufacture lumber which they acquire and stock for later trade. Some online business directories offer information about industry stakeholders, while others act as agents for sawmill networks, locating clients, organizing transport and preparing market studies. Retail distributors usually have warehouses located near urban areas and ports, with retail outlets located closer to consumers. Retail distributors are not the only outlet for sawmills; some may sell directly to builders, given orders ranging in thousands of cubic meters. Builders use lumber and prefabricated systems such as roof trusses, floor systems and wall panels for construction work. Builders are increasingly interested in prefabricated systems mainly because they require less costly specialized labour in the face of growing expertise scarcity (Schuler & Adair, 2003). In addition, large American builders tend to seek as few suppliers as possible to minimize transaction costs and complexity; such suppliers may supply lumber and prefabricated systems as well as other complementary offers such as windows, doors, plumbing and so forth, making it more attractive to think of distribution channels in terms of intricate webs rather than simple chains. Second and third transformation includes roof trusses, wall panels, flooring systems, doors, windows, patios, fences, pallets, furniture and so forth, many of which are complementary to the housing market. Figure 4 groups the industry’s key offers along stakeholder lines drawn in Figure 2: what the industry offers to lumberers, what it offers to enablers, and what it offers to clients. These broad offer types are subdivided in five strata. At the core are undifferentiated offers – the basics of the trade (commodity lumber, wages to workers, moneys owed to suppliers). Each layer adds a new type of value, which is intended to generate an added gain premium, either in economic or non-economic terms. One of the key design aspects of Quebec’s lumber industry is what it offers to business facilitators in general and the provincial government in particular. At its most basic level, the industry generates economic activity like any other. Unlike other industries, it generates a direct economic rent for the government through TSFMAs: the more wood is cut, the more moneys are collected. As a renewable resource, its preservation represents an investment for future revenues. Balancing this long-term gain against short term revenues has been the object of much debate (for a recent example, see Coulombe, 2004). Beyond these opportunities for gathering economic rents lies a more potent form of gain for the government: economic development. Forestry creates jobs on scales large enough to warrant the development of remote regions. These political, social and economic gains can be counterbalanced by unsustainable harvesting practices; closing down sawmills and villages where short term gain has overshadowed long term benefits is not good news for the government. The highest form

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of gain is true transformation for a given region: from basic economic activity to continued prosperity reaped from a renewable resource and its various derivatives.

…to

Lu

mbe

rers

…to Clients

…to

Enablers

OFFERS

Commodities

Goods

Services

Experiences

Transformations

Lumber and its by-products

Certified or Specialty Lumber / Products Portfolio

Shipping / Inventory Management / integrated 2nd & 3rd transformation

Order follow-up and personalised co-development/ online design / outstanding customer experience

Client acquisition and development of a wood culture through workshops, seminars and peers (growth of vibrant

communities of interest)

Prosperity (ex.: bounty reaped from

durable ecosystemic

forest managem

ent)

Development

(ex.: job creation in remote areas)

Investment

(ex.: stock value)

Revenues

(ex.: Forest rent)

Accounts

(ex.: equipment

payments)

Wag

es (e

x.: S

ower

,

lum

ber i

nven

tory

work

ers)

Jobs

(ex.

: saw

mill

wor

ker,

soci

al

and

Firs

t Nat

ion

actio

n)

Care

ers

oppo

rtuni

ties

(ex.

: whi

te c

olla

r at

com

pany

hea

dqua

rters

)

Peer

reco

gniti

on

(ex.

: wor

k in

a re

spon

sibl

e in

dust

ry)

Self-

real

isat

ion

(ex.

: ent

repr

eneu

rial a

chie

vem

ent

and

proj

ect r

ealis

atio

n)

Personalisation Differentiation

Established Industry Offers

Emerging Industry Offers

…to

Lu

mbe

rers

…to Clients

…to

Enablers

OFFERS

Commodities

Goods

Services

Experiences

Transformations

Lumber and its by-products

Certified or Specialty Lumber / Products Portfolio

Shipping / Inventory Management / integrated 2nd & 3rd transformation

Order follow-up and personalised co-development/ online design / outstanding customer experience

Client acquisition and development of a wood culture through workshops, seminars and peers (growth of vibrant

communities of interest)

Prosperity (ex.: bounty reaped from

durable ecosystemic

forest managem

ent)

Development

(ex.: job creation in remote areas)

Investment

(ex.: stock value)

Revenues

(ex.: Forest rent)

Accounts

(ex.: equipment

payments)

Wag

es (e

x.: S

ower

,

lum

ber i

nven

tory

work

ers)

Jobs

(ex.

: saw

mill

wor

ker,

soci

al

and

Firs

t Nat

ion

actio

n)

Care

ers

oppo

rtuni

ties

(ex.

: whi

te c

olla

r at

com

pany

hea

dqua

rters

)

Peer

reco

gniti

on

(ex.

: wor

k in

a re

spon

sibl

e in

dust

ry)

Self-

real

isat

ion

(ex.

: ent

repr

eneu

rial a

chie

vem

ent

and

proj

ect r

ealis

atio

n)

Personalisation Differentiation

Established Industry Offers

Emerging Industry Offers

Figure 4. Offers from Quebec’s lumber industry The industry’s past design allowed for the development of remote regions, but fell short of sustaining their prosperity. The fact that the industry’s current design cannot reach this level of transformative offers – from momentary wealth to sustained prosperity – is a crucial point. In a nutshell, rising supply costs in getting lumber from ever farther regions in compliance to ecosystemic imperatives which imply the creation and maintenance of road infrastructures is pushing commodity prices up. In addition, rising exchange rates with the USA, the main market on which the commodity focus was enacted, is also pushing commodity prices up. As the commodity offer no longer generates the profits it once did, sawmills start to close down. This, in itself, is not a problem if an industry has alternative jobs to offer in order to sustain the prosperity of a region. Unfortunately, this is not the case of the sawmill industry. As a result, the government, a key stakeholder in the design under review, may turn to other industries which can offer sustained prosperity. This means legislative and executive attention turning away from lumber for forest valorization. In this sense, what the industry offers to end clients is the foundation upon which broader transformative offers can be built.

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Another crucial design aspect is what the industry offers to lumberers after so much time and energy spent focusing on the US lumber commodity market. The current design provides salaries, jobs and careers characterized by the mastery of rules, guidelines and practices aimed at the delivery of a standard commodity (note that investors are considered to be facilitators rather than transformers). It offers little in terms of peer recognition, and that will likely remain so as long as public perception of the industry remains negative. The number of forestry graduates has been declining for some time and there is no indication that the trend is buckling as of this writing (Coulombe, 2004). Offers of self-realization are even more remote, although some may exist for entrepreneurs. From the clients’ point of view, the industry traditionally offered what it was best at pushing through its value chain: undifferentiated lumber. This commodity offer has been enhanced by modest levels of differentiation, such as certified product or logistic services. The service level is the one receiving the most attention nowadays, as industry majors strive to move from push to pull by using new technologies. On one hand, the Web has so far proven to be a poor platform for the sale of traditional lumber commodities, with most transactions still conducted through phone and fax. B2C and B2B web sales which include e-payment options and shipment details for clients are limited to 2nd and 3rd transformation products like wooden toys and furniture. On the other hand, the Web has proven to be a better interface to prepare a transaction, most notably in monitoring lumber stock and availability, as well as providing a virtual workspace where businesses can potentially co-develop an offer with its clients (ex.: the online design of a pre-fabricated house, followed by a phone order). Experiential offers which, for example, could enable a family to witness the creation of its chosen prefabricated house, or transformational offers which, for example, could turn end users into advocates of the environmental benefits of lumber usage in housing construction, are still in their infancy. Figure 5 presents the industry in its wider creation context: the forest considered as a source of ligneous fibre, in abstraction of other uses such as hunting and tourism, is subject to multiple uses such as pulp, chips, panels, lumber and treated logs production. Sawmills transform logs into lumber, which may be further transformed, or used in construction by framers, builders or consumers. This value chain can operate as a push mechanism, or as a feedback pulling interface. Push is increasingly giving way to pull, as companies seek to improve production and sales through intranets and pool their tools such as resource planning and sorting machines in an attempt to plan demand and react more quickly to changes.

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Pull example: Inventory sorting machines for wood selection based on log dimensions and projected or real-time end-user demand

CREATION

Push

Push: Sales & business

development; focused on the

United States housing market

Value Chain for Traditional, Perseverant & Generic Models : “Cut first, sell later”

PullVirtual Value Network for Innovator & Strategist Models : “Sell first, cut later”

Pull: Web co-design & client centric

personalisation; network

weaving for multi-industry

synergies

Overland & overseas shipping

Forest(certifications)

Logs Sawmill Lumber

Chips

Panels

Paper

2nd & 3rd

transformations

Framers Builders

End users

Agent or Broker

Remanufacturer

Distributor or wholesaler (pro dealers) or retailer (homecenters)

Treated logs

Pull example: Inventory sorting machines for wood selection based on log dimensions and projected or real-time end-user demand

CREATION

Push

Push: Sales & business

development; focused on the

United States housing market

Value Chain for Traditional, Perseverant & Generic Models : “Cut first, sell later”

PullVirtual Value Network for Innovator & Strategist Models : “Sell first, cut later”

Pull: Web co-design & client centric

personalisation; network

weaving for multi-industry

synergies

Overland & overseas shipping

Forest(certifications)

Logs Sawmill Lumber

Chips

Panels

Paper

2nd & 3rd

transformations

Framers Builders

End users

Agent or Broker

Remanufacturer

Distributor or wholesaler (pro dealers) or retailer (homecenters)

Treated logs

Figure 5. Creation in Quebec’s lumber industry Most sawmills are certified to insure that the wood they transform conforms to environmental standards. Certifications found in Quebec include ISO 14001, FSC, and CSA, which include rules for native population participation in strategic forest management, pristine forest conservation, etc. Sawmills are also certified to insure that the lumber they produce conforms to various qualitative and quantitative measures. The development of a feedback pulling interface is an essential trait of the industry’s envisioned design. For example, builders face increasing worker unavailability, translated into higher wages and longer delays. Prefabricated housing or prefabricated frame components constitute an increasingly attractive proposition, creating new types of demand for lumber: common dimension wood is thus transformed into ready-to-assemble jointed frames, roof trusses, wall panels, etc. These value-added products must then be moved by trucks or ships to their destination – either retail distributors or builders. Most of these value-adding transformations are currently carried out by framers who specialize in pre-fabricated house sub-components such as roof trusses and flooring systems. The current design allows many intermediaries to add value and coexist. Large sawmill groups create lumber and can sell to intermediaries or builders directly. Large sawmills also create specialized lumber, sometimes in direct response to online demands. Wholesalers match sawmill inventory and capacity with downstream demand (some using past data and information systems to anticipate offer and demand), usually by phone or internet. Information intermediaries and brokers communicate lumber and sawmill availability through the Web, potentially at the expense of wholesalers and retailers, though most retailers rely on

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geographical proximity to reach their clients. Consolidation of capacity for sawmills, as well as consolidation of offer and demand aggregation for wholesalers, brokers and information intermediaries seems likely.

3. FIVE SAWMILL BUSINESS MODELS This section presents five generic business models existing within the design of Quebec’s industry. These could be seen as five different ways of surviving and thriving in the ecosystem as currently designed. Business models are short narratives and representations which provide the gist of the system put into place to realize a business endeavour (Magretta, 2002). In other words, most lumber manufacturers have their own unique design which can be summed up in one of these five business model. The five business models presented in this section have some points in common, and some major differences. The traditional model relies on a single modest sawmill. The perseverant model relies on a single medium or large size sawmill. The generic model relies on a network of sawmills, or sawmills within a wider business network. The innovator model boasts forward integration into distribution; and the strategist model boasts end-to-end value chain integration. The main differentiation points for character are business scope and demand pull, where globalization issues often clash with a past local market focus. For stakeholders, variation occurs mainly in distribution channel configuration, with the Internet potentially removing or displacing certain intermediaries while creating new ones online. All must contend with Quebec’s government. For offers, differentiation is client-centric, with the Internet potentially opening up new ways to co-design offers as well as to improve transaction follow-up. For creation, the key is operational scale and responsiveness, with client inventory management and just-in-time practices not yet the norm. Each model proposes its own configuration of the industry’s design poles as follows. Note that many Quebec industry stakeholders are large corporations which operate sawmills amongst other activities, such as pulp and paper. Such corporation may have designs more reminiscent of other cross-industry giants than designs typical of the sawmill industry. It is not the objective of this paper to describe such corporations. The five models presented here are intended to describe sawmills only, either as whole businesses or as specialized divisions within larger organizations. In other words, a company could very well be conceptualized through one model for its sawmill division, yet be conceptualized through other models for other divisions or at other scopes of analysis. For example, a company division could be conceptualized as a Generic commodity lumber sawmill designed to supply a parent company which happens to be a world leader Strategist in pulp and paper, all of this without any contradiction for the purpose of this paper. In addition, this paper makes no claim to the relevancy of these five models in industries other than sawmills.

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3.1 The Traditional The Traditional represents various local sawmills which respond to the modest needs of private forest producers. While a healthy business can be built on this premise, the scale and scope of the Traditional’s activities is essentially that of a micro or a small enterprise. CHARACTER: The Traditional business model reflects how things used to be before digitization spawned the global village and the New Economy, and still makes sense for small sawmills filling the needs of local villages and businesses. Such sawmills produce small volumes of lumber, volumes which are likely to stay in demand in rural areas for the foreseeable future. The model relies on dedicated craftsmen and entrepreneurs, acquiring skills and expertise through experience, sometimes bestowing a unique character to the lumber they produce. STAKEHOLDERS: These sawmills usually go through wholesalers for distribution, except for direct sales to local consumers. Most contacts are made directly by phone, which enriches the link between seller and buyer and constitutes one of this model’s strengths. Direct sales to retail banners and their smaller local competitors are the exception. Small and mobile sawmills are currently the only lumber manufacturers who sell directly to individuals and small lumber consumers. OFFER: The Traditional mostly focuses on the first one or two levels of industry offers presented in Figure 4. Its specialty offer is packaged with great care for shipping, which is mostly local and thus cheap enough to compete with larger sawmill offerings. The scale trade-off is felt on the global lumber market, where the Traditional is less competitive for lack of volume or international logistics expertise. For example, networks of small and medium sized sawmills active in the same local market can accommodate local demand surges, something a lone traditional sawmill may prove unable to do. Local demand surges are increasingly common, as demand is itself rooted in ever larger builders, as well as 2nd and 3rd transformation client networks active in ever larger and global-spanning projects. Another scale trade-off is the cost of environmental certification relative to sawmill output, a barrier to certification which the FSC is currently trying to address by developing cheaper and better suited norms for small sawmills. However, as long as small sawmills source themselves in small privately-held forests rather than through TSFMAs, it remains to be seen if any certification relating to forest management can actually benefit Traditionals unless such certification is embraced by private forest owners. CREATION: The Traditional leverages his experience to focus on personalisation and flexibility, relying on a hybrid specialist / client solution profit model (Slywotzky & Morrison, 1997). He creates lumber according to customer demand and what is available in small privately-held forests, limited by his own infrastructure: limited transformation, drying and stockpiling capacity. The Traditional creates unique value in his ability to custom-cut

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wood that is otherwise too rare or too big in most ecosystems to be mass transformed by larger sawmills.

3.2 The Perseverant Perseverants represent successful Traditionals who have grown into medium or large enterprises, enhancing their scale of operation and scope of offer, yet surviving the constant competitive pressure of joining a sawmill network. CHARACTER: Perseverants have distinctive transformation know-how, can mass-produce lumber, can ship directly to their clients, and are experts at marketing their products at competitive prices in local and adjacent markets. However, these markets are open to more competition than ever, forcing Perseverants to respond to precise end-user needs, including environmental certifications of performance and responsibility. Perseverants concentrate on their key competency: achieve the industry’s best resource transformation ratio. Even if nothing prevents a Perseverant from entering the added-value arena of 2nd and 3rd transformation (ex.: tie itself to a construction component manufacturer in a joint-venture or similar partnership), or build a presence on the web, the Perseverant remains first and foremost a sawmill pursuing operational excellence. STAKEHOLDERS: Medium or large Perseverant sawmills have sales representative dedicated to answering buyer information requests regarding costs, availability, quantities, shipping, delays, services, etc. These clients can be local or regional retail distributors. Consumers are mostly local and regional builders and renovators (roof trusses, fences, houses, small buildings, etc.) OFFER: The Perseverant mostly focuses on the first two or three levels of industry offers presented in Figure 4. Its portfolio of mass-produced, essence-specific dimension or structural lumber of various grades is often offered on the Web, allowing clients to compare prices and quality. Web sites may also present production activities and mission statements for new client introduction. Another key offer of the Perseverant is rural economic development through more or less specialized jobs, which can be an important driver of client faithfulness in rural areas. Still lacking from most Perseverant offers are environmental certifications, probably due to the same scale issue mentioned in the Traditional model, a problem which the FSC is currently trying to address by developing cheaper and better suited norms for small sawmills. Unlike the Traditional model, Perseverants source themselves through TSFMAs, and thus have more control on whether they want to invest in certification or remain uncertified. CREATION: The Perseverant creates a price competitive portfolio of products based on what enters its mill. Volume is important, yielding economies of scale which allow it to compete on price. It provides output capacity as well as inventory, shielding its distributors and consumers from supply shortages. It makes sure that each product conforms to industry norms, and that each is swiftly delivered at the right place and at the right time according to contract specifications, even in remote areas. It can also provide client inventory management. The

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Perseverant profit model is based on the experience curve: nurturing a faithful client base which appreciates its skills and experience in lumber production as well as its contribution to the local economy. While sustainable in its local market, this profit model yields diminishing margins in the face of sawmill network competition.

3.3 The Generic Generics take their name from using the business model most common to medium and large Quebec sawmills: networked enterprises with over 25 to 50 years of experience in the industry, sometimes achieving some level of control over the evolution of market prices. Such networks are mostly the result of sawmill sales, acquisitions and reengineering, enabling economies of scale and the renewal of processes for better performance. CHARACTER: In addition to national distribution networks, Generics rely on access to global, multinational networks and can manage inventory through the headquarters of each affiliate. Generics are image conscious, investing in social causes, educational forestry programs, and environmental certification. However, Generics fall short of taking the initiative on environmental issues or 2nd and 3rd wood transformation endeavours. STAKEHOLDERS: Distributors play a key role in positioning Generics in their markets, often developing long term win-win relationships thick with daily information exchanges. Their websites link to sawmill networks to let clients know who they are, and know the availability of their lumber in terms of grade, size, essence and quantity. Some distributors are experimenting with Web interfaces to take and manage orders (ordering, tracking, etc.), though much more work needs to be done before it becomes the favoured retailer practice. OFFER: The Generic mostly focuses on the first three levels of industry offers presented in Figure 4. Generics offer vast arrays of products with varying degrees of quality, dimensions and essences at sustained volumes throughout their network of affiliates. Such diversity and availability is a competitive advantage that Generic networked sawmills have over lone Perseverant sawmills. This is reinforced by the fact that distributors can be integrated in the Generic’s value chain and can propose complementary 2nd and 3rd transformation wood products to consumers. Generics increasingly boast environmental certification and have begun offering environmental and urbanism seminars to end-users and individuals. CREATION: Generics rely on three success factors: speed of production and delivery; economies of scale through local, national and global sourcing networks; and constant product portfolio availability through distributor inventory management. Many Generics have their own overland transportation fleet as well as subsidiaries in other countries. Distributor and retailer inventory management is now common practice. In essence, Generics try to establish a de facto standard in the industry and maintain control over their relative market share. This makes sense as long as the construction market remains strong for wood housing; should the number of projects go down for any reason, be it economic, political, environmental or ecological (ex.: sourcing problems due to fires or disease), market share could prove relative indeed.

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3.4 The Innovator The Innovator distinguishes itself from other models by taking the lead on numerous fronts: certifications, information technology solutions, downstream integration, and so forth. Intent, determination and execution are what set it apart. Its brands are generally familiar to consumers, with activities in wood, pulp, paper, and various complementary value-added services and products, such as wood frames, online building design interfaces and overseas logistics. CHARACTER: ISO 14001, FSC and/or CSA certified and active in various social causes, the Innovator is close to being the world leaders’ business model. Its presence is felt on a daily basis by clients who wish it; his Web site links to online product design interfaces, customized quote requests and order tracking reports, private extranets, and other contact points such as email and instant messaging. By granting full access to his product portfolio and opening online venues of product customization to fit client needs, the Innovator is one step ahead of the Generic. Innovators also leverage their networks in ways that go well beyond output reallocation, seeking cooperation synergies with competitors. The difference between lone Perseverant and lone Innovator is this: a lone Perseverant pursues excellence in sawmill operations and products, while the lone Innovator is striving to build a sustainable and profitable integrated bridge between forest and clients. STAKEHOLDERS: Distributors have an important role to play in this model, but not as crucial as for the Generic. The Innovator’s integrative online presence allows much closer collaboration between affiliates, retailers, consumers and end-users. OFFER: The Innovator mostly focuses on the first four levels of industry offers presented in Figure 4, emphasizing its capacity to offer an experiential solution rather than a mere product or service. (Cohen, 2006), For example, online product design interfaces may allow clients to choose from various options or to directly contact someone to co-design the needed product. In essence, Innovators leverage lumber to offer systems or interactions in which lumber is a key component. CREATION: The Innovator’s integrative online presence allows a profound shift to take place in value creation procedures: the Innovator doesn’t seek to push a static mass-manufacturing capacity output down his distribution channels. Instead, the intent is to collect precise market demands and produce accordingly through flexible manufacturing capabilities. Orders can be taken in real-time and processed swiftly. Extranet interfaces allow clients to visualize order status and gather project information from start to finish. With activities both online and offline, in lumber as well as transformed wood products, Innovators combine two profit models: specialist and multi-component profit (Slywotzky & Morrison, 1998). The specialist model is most notably found in research and development sawmills dedicated to provide the network with unique structural wood products for online sales. This is done in synergy with offline or online generic lumber sales in which economies of scale can be achieved. Such value web transparency also allows Innovators to contemplate new venues of cooperation with other stakeholders, including shared fleet logistic solutions and combined global business development efforts.

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3.5 The Strategist The Strategist is the business model currently used by global industry leaders. It represents an integrated bridge between forest and end user. No Strategist is native to Quebec, and no foreign Strategist is currently active within Quebec as a fully integrated bridge between forest and end user. The Strategist is thus presented not because of its current instantiations (their presence is barely felt in Quebec) but rather because there is no compelling reason to believe that Strategist cannot take root and grow within Quebec. CHARACTER: The Strategist is characterized by its multifunctional approach, integrating distribution and retail sales with inventory management, shipping, 2nd and 3rd wood transformation, and lumber manufacturing. Like the Innovator, its presence is felt on a daily basis for clients who wish it. In addition to being an excellent lumber manufacturer, the Strategist is also an efficient multinational distributor. STAKEHOLDERS: The Strategist retains partners such as infomediaries and distributors when needed. It also seeks out stakeholders from other industries with synergistic potential, such as real estate (ex.: housing projects) and finance (ex.: investment). In fact, much of the Strategist’s model revolves around connecting with other industries, finding good partners to outsource to, and nurture its own mission-critical core competencies while it expands its activities. OFFER: The Strategist achieves all levels of industry offers presented in Figure 4. Like Innovators, Strategist clients can navigate the Web to explore value-added products and services as well as sawmill affiliates. Unlike Innovators, Strategist clients and end-users are invited to place orders at one of the network’s sawmills, which they can visit without construction boots thanks to clean wooden floors. In other words, the mill is both the locus of production and of client experience. This stands in stark contrast with any other competitor offer, and this experiential offer has yet to be offered in Quebec. The Strategist also offers transformative potential to the industry, leading the paradigmatic shift in how its host society perceives the use of lumber in construction: collected through multi-resource and sustainable ecosystemic practices, lumber production is no longer an assault on the environment, but rather a mean to improve it. CREATION: This model creates value by reaching end-users without losing information to any intermediary. It integrates the entire value chain spanning from forest to end-user, from production, transformation and shipping to distribution and retail, and manages to outdo its competitors at every stage. The Strategist invests time and money to understand and respond to customer needs throughout its value chain, since information management is the key to its responsiveness, its agility and its profitability. It offers online housing design services as well as all products relevant to wood structure construction. In doing so, it combines three profit models: the profit pyramid, the entrepreneurial network and the client solution (Slywotzky & Morrison, 1997).

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4. Dyads, flows and faces: design opportunities and challenges This section looks at the interrelations between the four poles in terms of their impact on sawmill business models and the industry’s holistic design. The Tetrahedron’s six dyads and their constituent flows are presented first, followed by the four faces. A synthesis of key dyad and face strengths, weaknesses, opportunities and trade-offs for each business model concludes this section.

4.1 Character-Creation dyad: Cooperation and its Orchestration and Learning flows The five models present a gradation in levels of cooperation: Traditionals and Perseverants go it alone, Generics and Innovators integrate into horizontal networks of multiple sawmills, and Strategists push this further by integrating upstream and downstream. Upstream and/or downstream integration without horizontal network building is also possible. For example, Perseverants can cooperate with downstream manufacturers through joint-ventures, which can be thought of as learning experiments that lower the potential costs of failure through joint orchestration. If the experiment works and develops into further cooperation endeavours downstream, a Traditional could potentially grow into a small, fully integrated Strategist. The trick is who controls orchestration in a series of interlocked joint-ventures.

4.2 Character-Offer dyad: Competition and its Defence and Threat flows One of the industry’s most glaring design weaknesses is the absence of any Quebec player operating under the Strategist model, though this may be changing as of this writing. The absence of a Strategist poses a major threat to the industry. While the province is rich with natural resources, most are transformed elsewhere. Others have found a better way to integrate these into value-added end-user offers, directly tying forests to clients. Put another way, Quebec’s industry competes mostly at the commodity or goods level, with few stakeholders at the services or experiential levels. As long as it does so, Quebec’s industry is prone to competition from developing countries where labour is cheap and resources plentiful, such as Argentina and Brazil. It is also prone to commercial disputes about commodity prices and subsidies such as the U.S.-Canada lumber trade row. One possible defence is to go from offering commodities, goods and services, to offering client experiences and transformations. This defence strategy can be instantiated in multiple ways, most of the following being already under development: new types of certifications which promote the use of lumber as green resources; tools which facilitate the use of lumber in project management, costing and CAD; specialist training offered in major university programs. The question is how quickly this can be achieved efficiently. The race is on against foreign Strategists and against commoditization of what is currently perceived as a value-added goods or products.

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4.3 Character-Stakeholder dyad: Trust and its Alignment and Engagement flows Most of Quebec’s forests are owned by the provincial government on behalf of its population. TSFMAs allow sawmills to collect wood, but they also give sawmills many obligations regarding forest management. Unfortunately, mistakes were made. In 1998, Quebec artist Richard Desjardins produced a movie criticizing the industry and calling into question the sustainability of its forestry practices. Public outcry was strong and vocal, and the population’s trust in the industry as the preferred way to generate sustainable wealth from the forest was diminished as a result. This has had various consequences on many levels, leaving no business model untainted. Not many students want to pursue a career in unsustainable harvesting practices and public wealth ransacking, if this is the public’s perception of their activities. Industries making use of the same resources benefit from increased media coverage and public attention, making their time easier when lobbying government for favourable policies. For the lumber industry, the challenge is to show genuine alignment with the public when it comes to multi-resource eco-systemic forest management, and to engage that public in other ways than the economic. In this sense, public relations and communications remain a major design challenge for this industry.

4.4 Offer-Creation dyad: Value and its Bundling and Feedback flows Quebec’s lumber industry is experiencing a wave of horizontal integration. Put another way, the Generics are getting bigger, based on the assumption that their commodity offer will benefit from the bundling of more production capacity and ensuing economies of scale. Scale provides more leverage in financing certification programs, which allows lumber offers to move one step up in Figure 4, from commodities to goods. It also provides similar leverage in acquiring, outsourcing or developing the necessary means of bundling services with goods and products, such as financing a fleet of trucks for shipping or installing a RFID system for client inventory management. More importantly, horizontal integration doesn’t guarantee any innovation in the way a business operates. A network of sawmills may grow in numbers and still reap the same qualitative feedback it did before, the main change being quantitative. Without such qualitative change, the Conventional isn’t tracking the evolving nature of value for its clients. The understanding of what constitutes an exceptional experience or what can actually transform a client is the prerogative of Innovators and Strategists, because businesses enacting these two models seek to change their offers, not only in terms of scale, but also in terms of what they are. Horizontal integration may benefit sawmill networks who seek to become bigger and better Generics, but has no bearing on whether a business will become an Innovator or a Strategist. In sum, horizontal integration can enrich existing offers, but does little to help the business create new offers, unless the economies of scales it reaps are used as levers to finance a transition from Conventional to Innovator, or from Innovator to Strategist.

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4.5 Stakeholder-Offer dyad: Exchange and its Contribution and Gain flows The offer’s promise of gain in return of a stakeholder contribution involves an exchange mechanism, both in material and symbolic terms. Lumber shipped outside the country must go through customs. Foreign currencies must be converted into Canadian dollars. These mechanisms are anything but simple. For example, Quebec’s lumber industry is part of the large Canadian industry, which has been stunted for many years over the U.S.-Canada trade row. The industry could have designed itself to source other countries or to offer value-added lumber not subject to U.S. anti-dumping fees, which are features found in the Innovators and Strategists models. Instead, the industry designed a lobbying instrument which pressured the Canadian government into fighting the U.S. rules in court battles. The trade row ended in a political settlement in spring 2006. The point is not that the industry was right or wrong in doing what it did, but that it had design alternatives in how to use its time and money. By definition, commodities differentiate on price. If the industry is designed around a single major foreign market, it cannot offset upward tendencies in one market with downward pressures in another. Since Quebec’s industry is strongly dependant on the U.S. market, U.S.-Canadian dollars fluctuations become even more important. Currency fluctuations will be a major concern as long as the industry’s design remains U.S. centric, or commodity-oriented, as is the case with most Traditionals, Perseverants and Generics. Note that unlike other commodity markets, there is no lumber commodity exchange in Canada. A commodity exchange would require established norms of quantity and quality for undifferentiated lumber, with preset buyer and seller obligations to simplify and speed up exchanges. Buyers and sellers would transact through the Web, with a central compensation chamber compiling and processing exchange information before sending it back.

4.6 Stakeholder-Creation dyad: Web and its Role and Network flows eCommerce has been one of the recurring topics of this paper. It has two strong design implications: how it reveals existing flows of information, and how it can propel a local business in the global arena. First, the industry as a whole constantly creates information. The trick is to gather it and transform it into knowledge and intelligence. The Web and various other information and communication networks are tools to do just that. Sawmills and networks of sawmills which seek to design their businesses around more advanced business models will inevitably find themselves faced with Internet integration issues, which implies that industry stakeholders need to be trained to use and master this enabling technology. Unfortunately, the industry has been somewhat slow to recognize its role towards information, as demonstrated by the limited number of businesses enacting Innovator and Strategist models. Quebec sawmills are currently making little use of the Web beyond the eBrochure, which advertises sawmill offers but fails to provide any exchange mechanism. The transition of pushing sawmill output downstream to pulling client information upstream is a long one.

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Second, networking on a global scale has also been slow, perhaps due to the lure of the neighbouring U.S. market. Still, Quebec’s lumber industry has strong built-in design advantages: many stakeholders speak French and English and are Web savvy, and the horizontal integration currently underway may yield better tools for the conquest of global markets. It remains to be seen if such networking will be made in regard to a commodity lumber offer, or for value-added offers.

4.7 Craft: The Stakeholder-Creation-Offer face Emerging trends in construction and architecture have an impact on the way lumber industry stakeholders create offers. The public’s growing ecological awareness makes environmentally friendly solutions increasingly attractive. Green housing is a growing market which could benefit all business models and alter the way the industry approaches its craft. An early indicator of this trend in the industry is lumber certification regarding sustainable forestry practices. Through lobbying efforts, houses made entirely of wood could benefit from annual tax deductions. Promoters of this policy could thus create a new environmentally friendly niche for their products, and do a great deal of good for their public image. To boost wooden house adoption, sawmill owners and employees could become early adopters, perhaps through company reward programs. Whichever solution is favoured, the opportunity is in redesigning the craft from beginning to end to match the public’s dream of a green lumber industry. This might be the single most important challenge to tackle if the industry wants to move up its offer to the workforce and attract new talent, as shown in Figure 4. Pushed further, this logic transforms Quebec’s cultural outlook on its lumber industry: can it go from environmental compliance to environmental improvements? Can the craft benefit the forest and the environment to an extent which makes alternatives such as concrete and steel less appealing construction alternatives from a sustainable ecosystemic point of view?

4.8 Team: The Character-Creation-Stakeholder face Certain stakeholders have more influence than others when it comes to the ongoing creation of the industry’s character. This core team has profound explicit and implicit clout, and their view of the industry slows and hastens certain changes, sometimes dependent on what other stakeholders believe this group favours (Kleiner, 2003). Who is part of this core team, and how deeply they affect it is in constant flux. The lumber industry’s current head representative was once the minister in charge of Quebec’s forests for the provincial government. This means that both the largest forest owner in Quebec as well as Quebec’s sawmills are represented by people who are or were high ranking public officials. The result is an elite team level of veterans and trendsetters which tends to look to government for solutions, at least as portrayed in mass media, from the settlement of the U.S.-Canada lumber dispute to the subsidizing of its costly horizontal integration.

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The design opportunity is to better balance this team of deciders, or to better explicit their intent, and to integrate tomorrow’s key stakeholders now. As long as its homogenous team of tenors is portrayed as focusing on lobbying government for financial and legal solutions aimed at the industry’s largest corporate interests, the industry defers to the government’s influence. The result is a dialectic engaged mainly between government and large corporations. Yet the industry could take the lead when it comes to web technologies, to globalization, or to genuine multi-resource eco-systemic forestry. The government could decentralize its decision making processes to get regional interests involved, and industry lobbies could favour diversity in opportunity valorization by letting new players enter the elite of decision makers. In fact, both these changes were suggested by the Coulombe Report.

4.9 Community: The Character-Offer-Stakeholder face One of the lumber industry’s unique character traits is the geographic scope of its activities. Populations occupying the forest inevitably become stakeholders, with powerful offers like sustainable economic development and healthy environments hanging in the balance. Quebec’s First Nations are communities with direct interest in the industry’s design, and this is made all the clearer by signed agreements which include forest management obligations between Quebec and aboriginal representatives. Other parties involved in the larger community include environmentalists, young foresters, non-governmental organizations and private citizens like poet Richard Desjardins. A design opportunity lies in leveraging the industry to better integrate First Nations. If the industry finds a way to do this, its integrative character could represent an offer of great value to Quebec’s population, setting an example of wealth generated to the benefit of both populations. Certifications which integrate First Nations in forest management as well as specific government contracts granting rights untied to sawmills are a step in this direction. Recent legal battles over Levasseur Island are not. As of this writing, it remains unclear if First Nation integration is part of the industry’s evolving design.

4.10 Prosperity: The Character-Creation-Offer face There seems little doubt that the industry’s sustained and profitable creation of offers stems from innovation throught harnessing the potential of globalization and digitization. The first extends the market not only for lumber commodities, but for a wide variety of value-added offers, from goods to client transformations. The later allows businesses to gather information from anywhere around the globe and to react with speed and precision, whether for basic eCommerce transaction like quotes and sales or for more elaborate processes like collaborative product design and solutions development. Prosperity can be found in all five business models if they are implemented and executed wisely, whether alone or in combination. However, capturing profit from the whole value chain remains elusive for Quebec firms, with none yet qualifying as Strategist.

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4.11 Dyad and face strengths, weaknesses, opportunities and trade-offs in the five business models The Tetrahedron’s flows, dyads and faces have brought a number of industry-wide issues to the forefront. For all five business models, more client-centric and pull-enabled approaches seem to be sounder means of achieving survival and growth. Another key point is to unlock creativity by relaxing hierarchical controls and opening up to new stakeholders, a mindset more conducive to the rise of Web-enabled networked organizations. But the Tetrahedron’s flows, dyads and faces have also presented a number of issues which are more specific to one or a few models. Tables 1 through 5 synthesise the dyad and face strengths, weaknesses, opportunities and trade-offs of each of the five generic business models shown in section 3. Flows are treated within the dyads for simplicity’s sake. The TRADITIONALIST Strengths & Weaknesses Opportunities & Threats Trade-offs

Cooperation dyad (Ch-Cr)

+ Physical co-location - Go-it-alone approach

+ Network with experts on a global community of practice basis - Expertise appropriated by larger networked enterprises

More humane scale of work, but more limited in what can be undertaken

Competition dyad (Ch-Of)

+ Local presence - Local, regional and global competition from all other models

+ Move into global arena in a virtual niche market (type, size, treatment, quality, transformation of lumber) - Resource limitations due to scale

Good local presence; no influence over the industry’s global evolution

Exchange dyad (Of-St)

+ On-site, face-to-face transactions - Lack of enablers to execute more difficult exchanges

+ Carry out complex exchanges with help of specialists - Other models offer complex exchange mechanisms

Simplicity comes at the expense of learning how to conduct more complex exchanges necessary to grow global, virtual niche markets

Trust dyad (Ch-St)

+ Local accountability - Unknown brand outside local area

+ Transform model to insure long term viability - Model increasingly threatened; clients fear the business may not be there tomorrow

Risk associated with inertia vs. risk associated with movement

Value dyad (Cr-Of)

+ Can deliver a small scope of offers very well - Weak offers portfolio

+ Extend reach of value; create offers that travel farther - Cost and risk of new value creation

Fortunes linked to a limited portfolio / niche

Web dyad (St-Cr)

+ Tightly knit core group - Extremely limited scope of networks (talent, clients, enablers)

+ Connect with select specialists who can extend the reach of the model - Limited scope of skills available

Low cost of network maintenance

Community face (St-Of-Ch)

+ Embedded in local community - Constraining scale of community

+ Focus on community of practice unbound from geographic trappings (niche markets) - Return on investment timescale

Local comfort zone vs. risks associated with the unknown

Craft face (St-Cr-Of)

+ Face-to-face personalization - Limited scope of work

+ Specialization for niche markets - New talent scarcity

Scale; hands on control vs. large scale specialized management

Prosperity face (Ch-Cr-Of)

+ Low barrier to entry makes this model attractive - Tied to local demand

+ Grow healthy global niche market - Constant menace of being eaten by larger sawmill networks

Small business endeavour by design

Team face (St-Cr-Ch)

+ Common collective endeavour - Limited versatility

+ Grow enablers support team - One man show ends when entrepreneur retires; renewal?

Ease of management vs. limited skills

Abbreviations: Character Pole (Ch); Creation Pole (Cr); Offer Pole (Of); Stakeholder Pole (St) Table 1. The Traditionalist

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The PERSEVERANT Strengths & Weaknesses Opportunities & Threats Trade-offs

Cooperation dyad (Ch-Cr)

+ Co-located, industrial scale work force achieving strong resource transformation ratio - Important fixed costs necessary to sustain collective work; unused output capacity

+ Cooperate with other firms to better utilize capacity (consensual consolidation) - Lower fixed cost in other countries

Skills and tools focus at the expense of versatility

Competition dyad (Ch-Of)

+ Economies of scale to deliver low priced commodity; embedded in local and regional market - Strengths can be beaten by Generic model’s networks

+ Use low cost commodity as input for wholly or partially owned transformation business (construction, treated wood, furniture, and so forth) - Limited time and resources to transform and validate new model

Specialization in one commodity ties model to market’s good or ill fortunes

Exchange dyad (Of-St)

+ Can conduct large scale transactions - Must compete against other large scale transaction experts

+ Grow service portfolio to enhance the exchange experience (ex.: inventory management) - Weak network support

Commodity acts as basis for exchange, but profit lies in add-on offers portfolio

Trust dyad (Ch-St)

+ Size and brand exposure, local and regional clout - Model increasingly threatened; may not be there tomorrow

+ Transform model to insure long term viability - Low attractiveness for creditors

Risk associated with inertia vs. risk associated with movement

Value dyad (Cr-Of)

+ Operational excellence - Commodity offer

+ Higher value offers as add-ons to commodity lumber (ex.: environmental certifications, special treatments, shorter delays, and so forth) - Cost and risks of reinventing operational excellence for new value creation

Market simplicity: commodities face-off against commodities; however, this model may be more efficiently enacted in other countries

Web dyad (St-Cr)

+ Tightly knit factory with standardized processes - Limited scope of networks (talent, clients, enablers)

+ Connect with specialists who can add-on to commodity offer - Scarcity of specialists outside larger sawmill networks

Replicable model; allows sawmills to network

Community face (St-Of-Ch)

+ Embedded in local and regional community prosperity - Constraining scale of community; TSFMAs often in remote areas

+ Mobilize community to achieve model transformation - TSFMAs may change according to government imperatives

Availability of social and political commitment vs. availability of entrepreneurial skills

Craft face (St-Cr-Of)

+ Operational excellence - Commodity skill focus

+ Use commodity skills and experience to seek out domains of synergy in add-on services or further transformations, such as treated lumber - Lacks complementary craftsmanship available through networks

Committed, dedicated workforce which lacks versatility

Prosperity face (Ch-Cr-Of)

+ Model may provide financing scale and clout to conduct meaningful transformation - Tied to commodity market

+ Take control of vertically integrated value network, from commodity to client transformation - Prime target for consensual or forced industry consolidation

Model is weak on its own, but provides leverage to spin-off potentially profitable complementary businesses

Team face (St-Cr-Ch)

+ Core entrepreneurial team possesses business management skills - Limited experience outside commodity business

+ Grow enablers support team - Low appeal for young new talent

Inertia deters enrolment of needed talent but preserves current power structure

Abbreviations: Character Pole (Ch); Creation Pole (Cr); Offer Pole (Of); Stakeholder Pole (St) Table 2. The Perseverant

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The GENERIC Strengths & Weaknesses Opportunities & Threats Trade-offs

Cooperation dyad (Ch-Cr)

+ Industry practices designed around this model - Cooperation is mainly horizontal (between sawmills) rather than vertical (from forest to end user)

+ Orchestration of the vertical value network in which the business is currently a player -Orchestration of the vertical value network by other stakeholders

Focus of the industry’s policies, good or bad

Competition dyad (Ch-Of)

+ Scope, scale and availability of lumber portfolio - Must compete with global businesses which can provide more integrated portfolios

+ Move from business vs. business to network vs. network, while making certain that the business takes control of the network - Other stakeholders already battling for network control, such as metallic joints manufacturers

Experiments and takes risks with products, services and experiences structured around legacy commodity offer which it knows well

Exchange dyad (Of-St)

+ Mastery of global transactions and logistics - Vertical integration logistics and information flows are still inadequate

+ Rigorously experiment with vertical network integration - Unfavourable exchange rates

Horizontal integration is not over and plays to current model strengths, but this may not be enough

Trust dyad (Ch-St)

+ Brand recognition, fits industry expectations, environmental awareness - Model under siege from better designed global players

+ Enough clout to tackle environmental issues and regain public sympathy, which fosters talent and end-user renewal - Public opinion sceptical of Generic’s competency to turn the industry around

Meets public expectations, but does not surpass them

Value dyad (Cr-Of)

+ Can insure the availability of a broad lumber portfolio, and provide add-on services - Lumber focus is a legacy of commodity operational excellence

+ Rigorously research and master core competencies to orchestrate or move up or down the value network - Other stakeholders are reconfiguring their value networks

Current lumber focus is important to engage in further consolidation

Web dyad (St-Cr)

+ Networking skills developed and mastered - Model does not yield value network control

+ Rigorously research and master core competencies to design and operate within networks of global scale - Sawmills run the risk of being vertically integrated by other stakeholders

Current horizontal efforts grow a web of operational excellence, but fail to do so vertically

Community face (St-Of-Ch)

+ Prime beneficiary of public policy and support - Focus of public criticism

+ Demonstrate how the model can benefit the community through business design innovation - Model obsolescence

Last ditch short term gain vs. long term prosperity and investment

Craft face (St-Cr-Of)

+ Workforce fits current horizontal, push oriented model - Investment of time and resources required to develop new vertical, pull oriented skills

+ Long term commitment to transform the craft for multi-resource usage and network accordingly - Lower fixed costs in emerging economies and aging workforce

The current craft is well understood, which favours consolidation

Prosperity face (Ch-Cr-Of)

+ Model provides resource leverage to conduct meaningful transformation - Business design innovation required yesterday

+ Consensual consolidation combined with rigorous design experimentation - Goods are being commoditized; time is running out

Generics may prosper as lumber specialists, but will not control their vertical value network

Team face (St-Cr-Ch)

+ Highly skilled core group of stakeholders with consolidation experience - Limited vertical, pull oriented integration experience; limited team attractiveness for new talent

+ Conduct learning experiments; acquire relevant skills from other industries; insure core stakeholders renewal - Innovators and Strategists attract brightest talent

Experienced managerial team vs. entrepreneurial team

Abbreviations: Character Pole (Ch); Creation Pole (Cr); Offer Pole (Of); Stakeholder Pole (St) Table 3. The Generic

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The INNOVATOR Strengths & Weaknesses Opportunities & Threats Trade-offs

Cooperation dyad (Ch-Cr)

+ Virtual workspace, always accessible, pull oriented - High cost, high risk experimentation phase

+ Orchestrate a fully integrated value web, bridging forest and client; become de facto standard - A faulty partner can wreck havoc in the network

Learning opportunities and inaction both come at a high cost in a volatile environment

Competition dyad (Ch-Of)

+ Ahead of most competitors; attracts best stakeholders - High pressure associated with world-class competition; not for everyone

+ Master the model to become a Strategist - Tempting to slow down and become future Generic

No high rewards without high risk

Exchange dyad (Of-St)

+ Virtual exchange, transparent performance, end user dictated - High cost (time, resources, competency) of meaningful implementation

+ Establish new exchange experiences and interfaces to gain de facto standard in pull integration - Poor exchange conditions, such as unfavourable exchange rates, poor network infrastructure, and so forth

Pull implementation in its infancy, lots of room to experiment and beat the competition, but at costs associated with volatile environments

Trust dyad (Ch-St)

+ Identity recognition (deeper than branding) and relationship continuity from forest to client - Requires demanding and rigorous commitment

+ Leverage trust to become Strategist - Failure in new business endeavours and offers can reflect poorly on overall value web

Long term investment in stakeholders for long term prosperity

Value dyad (Cr-Of)

+ Availability, scope and scale of offer portfolio - Value web accountability and fragility should a key stakeholder default

+ Explore complementarities and synergies with other industries (ex.: other materials, real estate, and so forth) - Sawmill’s value appropriated by other stakeholders from complementary industries, yielding a compelling offer portfolio alternative

Every stakeholder can benefit from or be hurt by the value web

Web dyad (St-Cr)

+ End users as empowered value web stakeholders - Network complexity

+ Extend global reach (ex.: overcome cultural and language barriers) - Web vs. web competition on a global scale exposes the business to new competitor

Web of networks difficult to create, difficult to replicate

Community face (St-Of-Ch)

+ Local and regional community leadership - Regional leadership limited to area of significant economic activity, even if active on a global scale

+ Mobilize community to achieve model transformation - Difficulty of communicating visionary designs

Reputation and high expectations attract the best talents

Craft face (St-Cr-Of)

+ Outstanding network of expertise - Growing skills which are complementary to mass personalization and virtual, project-based organization is difficult

+ Experiment and discover new ways of approaching the craft (new roles, new tasks or new ways of dividing work) - High cost of mastering new core crafts; deciphering what is core and what can be handled by third parties

The craft is constantly changing and this is likely to continue as long as tools evolve

Prosperity face (Ch-Cr-Of)

+ Multiple sources of survival and growth throughout the value web - Complexity inherent to Innovator model makes cost, revenue and profit centers harder to locate

+ Embed the value web in public prosperity to gain clout in the industry’s overall design and future - This is where competition is most intense, at the meeting of multiple industries vying for value web dominance

Eggs in multiple baskets; less prone to industry cycles, good or bad

Team face (St-Cr-Ch)

+ Core stakeholders expert in virtual networked organizations; attractive to best talent - Rare skill requirements (language, culture, competency, experience, and so forth), need for constant learning (limited time and resources)

+ Use polyvalent team to generate new business endeavours within or outside the current value web - Head hunting for key talent in a knowledge-intensive context

Preserving the core team’s excellence means experimenting and learning from successes as well as mistakes

Abbreviations: Character Pole (Ch); Creation Pole (Cr); Offer Pole (Of); Stakeholder Pole (St) Table 4. The Innovator

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The STRATEGIST Strengths & Weaknesses Opportunities & Threats Trade-offs

Cooperation dyad (Ch-Cr)

+ Pull oriented experiences delivered through any channel for all stakeholders - Extremely difficult to implement and maintain

+ Steadily extend design to profitable ancillary markets by leveraging halo of success around offers portfolio - Face top competitors with every new market and industry

Learning opportunities and inaction both come at a high cost in a volatile environment

Competition dyad (Ch-Of)

+ Industry’s best; impeccable reputation; attracts and retains best stakeholders - Strongly contested territory from Innovators worldwide

+ Reshape the industry for enhanced sustainable profitability; create and grow new markets - Strategists from complementary industries will have their own agenda

No high rewards without high risk

Exchange dyad (Of-St)

+ Project-based, pull enabled exchanges - High cost (time, resources, competency) of implementation

+ Simplify the exchange process for all stakeholders, thereby lowering costs - Competitor de facto standards

Experience needs time to blossom into wisdom

Trust dyad (Ch-St)

+ Stakeholders identify with the business and seek continuous, sustainable prosperity - Demanding and rigorous commitment

+ Leverage trust to obtain greater insight into stakeholder expectations - Sustaining meaningful stakeholder relationships over time is difficult

Long term investment in stakeholders for long term prosperity

Value dyad (Cr-Of)

+ Offers provide value which transforms the stakeholder for enhanced, sustainable prosperity - While unable to match key experiential or transformative offers, some competitors may match or surpass commodity, goods and service offers in the Strategist portfolio

+ Leverage value to transform stakeholders in ways which strengthen the value web as a whole - Provide a portfolio of good offers at the expense of a few great offers, when the market can provide a portfolio of great offers from various competitors

Value locked in commodities, goods and services is the most easiest to replicate and poses little threat to Strategists unless competitors learn to provide experiences and transformations

Web dyad (St-Cr)

+ Networking excellence - Global network complexity

+ Leverage global network diversity to locate and nurture best stakeholders (unlocking resources and competencies) - Web vs. web competition at the highest level

Web of networks difficult to create, difficult to replicate

Community face (St-Of-Ch)

+ Industry leadership - Regional leadership limited to area of significant economic activity, even if active on a global scale

+ Mobilize community around sustainable industry prosperity; make the value web’s fortunes crucial to the industry’s fate - Mismatch between Strategist’s cutting edge design and the industry’s overall design, making it difficult to embrace

Reputation and high expectations attract the best talents worldwide

Craft face (St-Cr-Of)

+ Best network of expertise - To nurture, communicate, share and grow excellence across the value web is extremely difficult

+ Experiment and discover new ways of approaching the craft (new roles, new tasks or new ways of dividing work) - Lose sight of the importance of core sawmill competencies

The craft is constantly changing and this is likely to continue as long as tools evolve, which implies new costs and new savings

Prosperity face (Ch-Cr-Of)

+ Multiple sources of survival and growth throughout the value web - Revenue and profit models interlock in ways that may make cost, revenue and profit centers harder to locate

+ Uncover new revenue and profit models which require value web mastery - To stay on top requires relentless effort; many are called but few succeed

Eggs in multiple baskets; less prone to industry cycles, good or bad

Team face (St-Cr-Ch)

+ Core stakeholders expert in global virtual networked organizations; attractive to top talent worldwide - Rare skill requirements (language, culture, competency, experience, and so forth), need for constant learning (limited time and resources)

+ Use polyvalent teams to generate new business endeavours within or outside the current value web - Head hunting for key talent in a knowledge-intensive context

Preserving the core team’s excellence means experimenting and learning from successes as well as mistakes

Abbreviations: Character Pole (Ch); Creation Pole (Cr); Offer Pole (Of); Stakeholder Pole (St) Table 5. The Strategist

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4.12 The Tetrahedron To sum up, the Tetrahedron characterizes the Quebec lumber industry as one entrusted with a key collective resource capable of bringing wealth to all of its stakeholders. It must find a way to satisfy a significant stakeholder under the guise of the provincial government if it is to preserve most of the key points of its design. Its creation endeavours are shifting from push to pull dynamics; devising better production and inventory management and achieving shorter delays, using the Web to exchange more meaningful information faster, and connecting key stakeholders in new ways. And its offers are gaining in refinement as it moves from commodities to higher levels of differentiation and personalisation. Nevertheless, few Quebec-based businesses are active in the more complex and value-adding business models presented above, such as Innovators and Strategists. On the average, Quebec sawmills remain a conservative lot. This is not to say that no prosperity can come outside of the Innovator and Strategist models. Traditionals, Perseverants and Generics can thrive, but they have much less control and impact on the industry’s future design. That is because seeing businesses as industry stakeholders is only one side of the coin. If businesses have expectations about the industry, the reverse is also true. The industry can be conceptualized as a stakeholder of each of its constituent businesses, because it shares alignment in the survival and prosperity of each of them. It has its own expectations for each, in terms of character, creation, offers and stakeholders. Which one leads the pack? Which one sets the benchmark for creation? Which one can offer industry transformation and renewal? In what has been discussed above, the likeliest candidate is to be found enacting an Innovator or Strategist model by the very defining attributes which have been ascribed to them. This is not to say that the industry needs a Strategist saviour, but rather that a healthy number of Traditionals, Perseverants and Generics need to experiment with design transformations leading them to Innovator and Strategist models in order for the industry’s holistic design to hold its own in the New Economy. Such experiments can benefit from business design through the Tetrahedron, and could also benefit from further design conceptualization at enterprise and business-unit levels.

Acknowledgments The authors wish to thank Sophie D’Amours (FOR@C Director of Research and Administration), Luc Bouthillier (Titular Profesor – Environment and Poicy – Department of Wood and Forest Sciences –Laval University), Oskar Selmeryd (Forest Engineer in Sweden), Diane Poulin (Professor, Department of Management, Laval University and François Rouleau (Director of the Development of Forest products industry – Minister of Natural Resources and Fauna) for their precious comments.

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Rayport, J, & Sviokla, J., 1995, Exploiting the Virtual Value Chain, Harvard Business Review, November-December, 75-85 Ressources et industries forestières: Portrait statistique Mars 2006. 2006. Ministère des Ressources naturelles et de la Faune, Direction du développement de l’industrie des produits forestiers, <http://www.mrnfp.gouv.qc.ca/forets/connaissances/connaissances-statistiques.jsp> Schuler, A., & Adair, C. 2003. Demographics, the housing market, and demand for building materials. Forest Products Journal, 53 (5): 8-17. Senge, P., 1990, The Fifth Discipline, New York: Currency Doubleday Shapiro, C. & Varian, H. 1999. Information Rules. Boston: Harvard Business School Slywotzky, A.J. & Morrison, D.J. 1998. The Profit Zone. New York: Times Business Tapscott, D., Ticoll, D. & Lowy, A., 2000, Digital Capital, Boston: Harvard Business School

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Appendix 1. The Tetrahedron takes root in four basic ideas, portrayed as poles: Character, Creation, Offer and Stakeholder. Since each pole relates to the other three in a precise way, the poles are bridged by links portrayed as pairs of unidirectional flows: Gain, Contribution, Role, Network, Bundling, Feedback, Threat, Defense, Orchestration, Learning, Alignment, and Engagement. The framework is thus composed of four poles linked by twelve flows, geometrically forming a tetrahedron. Character is the collective actor and its praxis. Creation is the process through which past, present and future contributions are transformed into new stakeholder value potential. Offers are what attract individual actors into the business, like products, shares or careers. Stakeholders are the business’ individual actors, like clients, employees, investors, suppliers, and etcetera. The overarching concept binding a pair of poles is called a dyad, and that which sums up the relationships between three poles is called a face.

The Tetrahedron: Four Poles

1. Character refers to the business frame of collective action, both in terms of past, present and future and in terms of level of analysis, from strategic to tactical (Normann, 2001). It is the seat of elusive notions like culture, will, personality, identity, and soul (Collins & Porras 1994; Collins 2001). This mental image of an industry is different for every stakeholder, but some common traits are likely to be shared. Stakeholders can also actively mould and transform character.

2. Creation is the process through which past, present and future contributions are

transformed into new stakeholder value potential. The use of “potential” as a qualifier is meant as a caveat about value – a notion which can mean many things to many people, depending on one’s circumstances and perceptions (value is treated bellow as a framework dyad between the creation and offer poles to further expand on this relativism). The temporal emphasis on transformed contributions helps to understand their interplay in the creation process; contributions can be used and transformed for multiple purposes simultaneously, depending on the temporal horizon one is looking at, and this has strong design implications.

3. Offers are the polished, coherent result of creation, and serve as the basis upon which

third parties choose to become stakeholders. Offers are not the sum of industry creation, but rather a distillate of it. Businesses only bundle part of the potential value they create in certain forms called offers (Shapiro & Varian, 1999). For every stakeholder, there exists an offer that links him or it to the industry. Products, services, jobs, stocks, and the context in which they are offered are all examples of this.

4. Stakeholders are individuals, groups or organizations who participate in the industry to

achieve their goals and on whom the industry is depending for its existence (Näsi &

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Näsi, 2002). Note that a single stakeholder may assume multiple roles in the industry’s design.

The Tetrahedron: Twelve Flows 1. Alignment, flowing from the Stakeholder pole to the Character pole, is how individual

stakeholder gain enhances collective stakeholder gain. For example, continued and enhanced gain are sought by most stakeholders, which is why survival and prosperity are often described as the only real goals indigenous to organizations; they are goals on which most, if not all, stakeholders share alignment.

2. Bundling, flowing from the Creation pole to the Offer pole, is the aggregation of value

potential in coherent forms called offers. As such, the objective of an offer is to make one a stakeholder, and different bundles are made to appeal to different stakeholders. For example, a job offer may bundle salary, challenges, career outlook, etcetera, as well as emergent qualities like proximity to relatives.

3. Contributions, flowing from the Stakeholder pole to the Offer pole, are past, present

and future stakeholder inputs in the business, like money, time, talent, skills, and etcetera. This flow explains why the business seeks stakeholders – it depends on stakeholder contributions for its existence.

4. Defenses, flowing from the Character pole to the Offer pole, are counter measures

erected to protect past, current and future offers. Examples are lobbies and differentiation – the creation of a unique market position involving a differentiated set of activities (Porter 1996).

5. Engagement, flowing from the Character pole to the Stakeholder pole, is how the

collective actor binds stakeholders to itself, from informal trust to formal contracts. For example, the promotion of stakeholder identification with the industry – attributes perceived as shared by both the individual and the collective actor – is a form of engagement.

6. Feedback, flowing from the Offer pole to the Creation pole, is channeled stakeholder

response as filtered through offers, validating or invalidating creation activities. Offers act as a filter because they set the context for stakeholder response. Feedback is how businesses can get to know more about what stakeholders perceive as value and consequently adjust their creation process. In addition to obvious information flows, profit is itself a form of feedback, validating or invalidating creation activities (Drucker 2001).

7. Gain is enabling or relieving stakeholder value creation (Normann 2001). When

creation fails to turn into gain, the stakeholder has no incentive to pursue the business

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relationship. This explains the motivation behind stakeholder participation in the business. Learning, flowing from the Creation pole to the Character pole, is creating better ways to create. Put another way, learning improves the collective actor’s praxis.

8. Learning prevents stagnation and provides flexibility (Mintzberg, Ahlstrand & Lampel

1998). Over time, it transforms how stakeholders collectively conduct business and thus shapes character.

9. Networks, flowing from the Creation pole to the Stakeholder pole, describe how

stakeholders are related in their various roles, specifying the responsibilities of each stakeholder in relation to creation processes (Poulin, Montreuil & Gauvin 1994; Martel & Oral 1995). Networks can take many metaphorical forms, including value chains (Porter 1985, Porter 2001), virtual value chains (Rayport & Sviokla 1995), value webs (Tapscott, Ticoll & Lowy 2000), and be the subject of countless categorizations, such as formal vs. informal, internal vs. external, and etcetera.

10. Orchestration, flowing from the Character pole to the Creation pole, is the context set

out for creation. Orienting a business toward a vision, stating a mission, or setting goals are all examples of orchestration. Orchestration prevents chaos and provides order (Mintzberg, Ahlstrand & Lampel 1998).

11. Roles, flowing from the Stakeholder pole to the Creation pole, are the masks worn by

stakeholders in relation to creation networks. Such taxonomy brings clarity and insight as to what contributions are expected of each stakeholder.

12. Threat, flowing from the Offer pole to the Character pole, is the potential for

interrupted survival or prosperity. Since offers are the interface between businesses and stakeholders, they are the instrument through which competition is felt. In other words, a business competes where it has offers. The term threat rather than competition is used because offers also expose businesses to other constraints and dangers, such as lawsuits and trade disputes.

The Tetrahedron: Six Dyads 1. Trust is a covenant of mutual gain between stakeholders, the essence of what

transforms individual actors into a collective actor. For example, do citizens trust businesses to collect lumber in a sustainable way?

2. Value is an offspring of assumptions and perceptions; it is what a set of stakeholders

assumes to be valuable to another set of stakeholders, and what that set of stakeholders actually perceives to be valuable. For example, non-customers can make educated guesses about what customers find valuable, but they can never really know for certain – value lies in the eye of the beholder (Holt 1997). Offers bundle a lot of educated

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guesswork and assumptions about customer perceived value (Firat & Venkatesh 1995).

3. Web is a network of networks which evolves through time, as networks dissolve and

mesh with each other and stakeholder roles are accordingly redefined and transformed. Markets and industries can be represented as portions of this web, and the “environment” as a gestalt reticular representation, encompassing all stakeholders, past, present and future. Scoping inward or outward allows for new configurations to be gleaned.

4. Exchange is the arrangement of the many flows of contribution and gain which

permeate the business. Temporal concerns are very salient, with cash flows, delivery times and warranties as obvious examples. Time permeates this dyad because it is a universal and ubiquitous form of contribution and gain.

5. Cooperation is intentional collective creation, both in terms of work orchestration and

in terms of self-enactment and learning. Cooperation is intentional because it combines both aspects: it is not merely doing stuff together, nor learning for its own sake; it is creating together with the intent of learning, or learning from creation with the intent of improved orchestration. Put another way, cooperation is about honing collective skills for an improved praxis.

6. Competition is the array of offers out there which may tempt stakeholders away from

the industry’s own offers, thus threatening character with erosion and calling for proper defenses such as differentiation or name recognition. Competition can greatly vary in intensity since some defenses are provided or outlawed by various nations. Since businesses compete through their offers, this dyad is closely tied to an industry’s view of its environment and its various competitive markets, such as products and services, human resources and capital.

The Tetrahedron: Four Faces 1. Craft is the essence of the Stakeholder, Creation and Offer poles – how stakeholders

create offers. A less intuitive way to put it is how offers create stakeholders (how offers dictate roles and what is expected of people), or how value is exchanged in the business web (the three dyads as a face).

2. Team is the essence of the Stakeholder, Creation and Character poles, focusing on

human interactions aptly named teamwork. Teams are common business artefacts, conceptually anchored to this face’s three dyads in that they navigate a web of trust and cooperation (or lack thereof). Teams are about fit, belonging and making the whole stronger than its parts, things which look easy on paper but which are actually true challenges in today’s global and virtual economy.

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3. Community is the essence of the Stakeholder, Offer and Character pole. Community is

anchored in three dyads: exchange, trust and competition. An example is the community of practice (CoP), where potential competitors exchange insights and gradually build trust in each other’s expertise and behaviour. Alumni, lobbies and professional associations are other examples of key community players in an industry’s design.

4. Prosperity is the essence of the Character, Creation and Offer poles, and deals with

how the collective actor creates offers in a sustainable way. It involves three dyads: the mastery of cooperation and competition in order to provide value. This is where one finds profit models and business models as narratives for survival and prosperity.