Draft:Arena model

The Arena model is a graphical depiction of a firm’s business environment. A comprehensive arena would show a company’s value chains within the company’s business cluster, as well as external forces that might impact relevant companies in the arena. The concept of Arena mapping was developed by Dr. Alex Coman, who has worked, taught, consulted, and served on the board of companies including IBM Research, Microsoft, AT&T, Intel, eBay, Samsung, Stratasys, Marvel, Syngenta, Novo Nordisk, Intel, and more.

Senior executives and consultants challenged with visually mapping their business ecosystem have had to modify Porter’s five forces model and value system to express their strategic and tactical concepts. Thus a “tower of Babel” was created rather than a universal paradigm. The Arena formalism aims at establishing a canonical paradigm for structured visual mapping of an ecosystem.

Background: Motivation for the Arena Model

The development of the Arena Model by Dr. Alex Coman was motivated by a study analyzing 579 executive presentations to analysts, where executives from a range of global industries (including energy, hi-tech, sports, travel, and dental) depicted their business ecosystems. This approach highlighted the necessity for a formal tool to map complex business landscapes effectively.

Notably, significant entrepreneurs like Walt Disney utilized similar visual conceptual models. Similarly, Jack Ma included a visual map of his business vision in Alibaba Group's IPO prospectus in 2014. Satoshi Nakamoto's document exposing Bitcoin's foundational blockchain technology visually mapped its major use-cases. These are examples of the need for a visual structured formalism depicting visionary business ideas that Arena seeks to encapsulate.

Ilya Sutskever and OpenAI's team’s launch of ChatGPT, provides yet another example where visual mapping is used to communicate ChatGPT’s architecture in evolving business environments. These instances underscore the Arena Model's relevance in capturing the essence of business strategy and vision across diverse industries.

Previous Research and Existing Frameworks

This section examines the prior research and frameworks that inspired the Arena Model’s mapping of business ecosystems. Joseph Lampel's and Henry Mintzberg's work on "Customizing Customization" proposes a vertical value stream for strategy planning as well as a breadth of strategic patterns. Economics Nobel prize laureate Jean Tirole's ”Market failures and public policy” provides a visual mapping that captures the full breadth of the business ecosystem. Porter's Five Forces, Value System, and Business Clusters are groundbreaking models. None of these models reference academic research foundations nor do they conduct any research of their own to support their theoretical constructs.

Academic Foundations of the Arena Model

The Arena Model was developed by Dr. Alex Coman, who for the past 20 years studied 579 global executives across different industries that have visually mapped their arenas within presentations to financial analysts. These executives illustrated initiatives such as: vertical integration, horizontal integration, diversification, pivoting, recycling, geographical differences, company allies, and merger rationale.

The development of the Arena Model is rooted in academic principles from several disciplines. Euler's graph theory provides the mathematical underpinning for representing relationships and interactions within complex systems. The use of Venn diagrams in the model draws from set theory and logic, offering a way to visualize intersecting sets and shared characteristics in a business context. Furthermore, David Harel's synthesis known as the "Statechart" has influenced the model's ability to represent dynamic processes. These foundational elements are synthesized in the Arena Model to facilitate the mapping and analysis of intricate business ecosystems.

Components of the Arena Model

The Arena Model allows for visually mapping entities and relationships so that the viewer can easily understand the environment.

Entities

• Firms: Companies are noted by solid rectangles in the arena.
• Markets: Markets are noted by dotted rectangles that surround firms. Markets can include competitors, substitutes, market segments, geographical regions, or any other strategic sector.
• Monopolies and regulatory agencies: Thick solid rectangles note major players that are monopolies or regulatory agencies and standards institutions.

Types of Entities in the Arena

Relationships

• Business relations: Solid arrows point in the direction of product or service flow from the supplier to the customer. A product or service name is indicated on or near the arrow. Each individual product or service receives its own arrow.
• Information flow: Dotted arrows point in the direction of information flow from source to destination. The medium for transmitting data is noted by the arrow.
• Control: A thick arrow points from the controller to the controlled entity. Control generally comes from regulatory agencies or experts making industry decisions.
• Integration: Arrowless lines can show vertical and horizontal integration. Vertical lines show vertical integration while horizontal show diversification.
• Hierarchy: Venn diagrammatic syntax is used to show hierarchical relationships.

For the purpose of concise mapping, strategists link entities abstractly. For example, there is no need to designate every supplier of a specific product and every retailer. Users can write down the relevant firms for their purpose.

Significance

The Arena Model creates a multidisciplinary platform for discussion and analysis. With suppliers on the top, manufacturers below, followed by distributors, retailers, and then customers, maps show where value is created, added, and transformed. This can help management make strategic decisions.

Management in different departments can look at the arena and focus on their area of expertise. Yet, because the arena includes all value chain levels, different departments possess a deeper understanding of their roles and positions.

The Arena Model thus combines academic models with empirical study of how executives visually express their business visions.

Here are three examples of applications of the Arena model:

An Example of the Apparel Arena

An Example of the Mobile Phone Arena

An Example of the Healthcare Arena