CHAPTER 3 Building Networked Businesses Building Networked Businesses

“CHAPTER 3: Building Networked Businesses”

Building Networked Businesses o “Our dream and our plan well over a decade ago was simple. We set out to shape a global enterprise that preserve the classic big company advantages while eliminating the big company drawbacks. What we wanted to build was a hybrid enterprise with the … body of a big company and … the soul of a small company” § § Jack Welch Former GE CEO Quote on page 227 of Applegate.

Building Networked Businesses o “ABB is an organization with three internal contradictions. We want to be global and local, big and small, radically decentralized with centralized reporting and control. If we resolve those contradictions, we create real competitive advantage” § Percy Barnevik, CEO Asea Brown Boveri (ABB)

1. The Need for New Capabilities o “We saw two challenges ahead of us, one external and one internal… Externally, we faced a world economy that would be characterized by slower growth, with stronger global competitors going after a small piece of the pie. Internally, our challenge was even bigger. We had to find a way to combine the power, resources, and reach of a large company with the hunger, agility, spirit, and fire of a small one. ” § § Jack Welch Former CEO of GE. Quote from page 228 of Applegate.

Building the Networked Business

2. Is History Repeating Itself? (p. 229 -231) o Hybrid Organization design n To improve control and efficiency while simultaneously enabling flexibility and speed of response n But, hybrid designs bred conflict, confusion, information overload, and costly duplication of resources

Flattening the Organizational Structure

Matrix Organizational Structure n. But, hybrid designs bred conflict, confusion, information overload, and costly duplication of resources

Virtual Organizational Structure

2. Is History Repeating Itself? (p. 231) o Notes on page 231: n Although the networked IT infrastructure can provide important tools, it cannot define the information that needs to be in the system. n In addition, while the networked infrastructure can enable new organization structures and systems, it cannot motivate people to use the information to make decisions and take actions on behalf of the organization. n New organization capabilities are required to execute the sophisticated network strategies and business models

3. Blueprint for a Networked Organization (p. 231 -245) o Challenge n Designing, implementing, and constantly evolving the structure and systems that enable an organization to executes its strategies and accomplish its goals is one of the most formidable tasks facing 21 st century executives n Continuous change is one of the most challenging issues facing the 21 st century executives o Operating and Innovating o Managing and Learning o Leading and Engaging

3. Blueprint for a Networked Organization o 1. Operating and Innovating (p. 232 -236) n The operating processes of a firm include all the activities a firm and its suppliers and partners undertake to design, build, market, sell, and deliver products and services for customers, suppliers, and business partners. n Ability to flexibly adapt to constantly changing business environment is the key to success.

3. Blueprint for a Networked Organization o 1. Operating and Innovating n Hierarchical Operations o Define rigid procedures, top down n Entrepreneurial Operation o Company do not depend on well-defined polices and procedures or structured jobs. n Networked Operations o Big-small companies, o Precision execution and fast-cycled innovation o Operation is designed to fully exploit the power of both people and technology whether this assets are in your firm or in someone else’s. o Technology can ensure precision and people can use the information in real-time to deal with unforeseen problems

3. Blueprint for a Networked Organization

3. Blueprint for a Networked Organization o 2. Managing and Learning (p. 236 -240) n The management processes and structures of a firm include all the activities that a firm and its business community undertake to: o Plan strategy and how it will be executed o Allocate resources o Organize people into groups and coordinate work o Monitor and measure performance o Adjust strategies, plans, budgets, and organizations based on learning

3. Blueprint for a Networked Organization o Traditional Management Process n Driven from top down, incremental goals and allocation of resources to carry them out. o Entrepreneurial Management Process n Planning, decision making, action, and performance management are informal and ad hoc. n Ability to respond quickly on the basis of what is being learned are fundamental to effective entrepreneurial management

3. Blueprint for a Networked Organization o Network Management Process n Big-Small most provide assess to a shared source of real-time information on market dynamics, operations, and performance that enables real-time planning and performance monitoring. o Networked management Process n Improved access to information enables employees, customers, and partners to invent new ways of working and to respond quickly.

3. Blueprint for a Networked Organization o 3. Leading and Engaging n While management is all about coping with complexity, leadership is all about attracting and mobilizing the resources for change o Leadership involves defining a clear, compelling vision and ensuring that is translated into a set of actionable strategies and initiatives. o Attracting, motivating, energizing, and retaining top talent inside an organization and within partner, supplier, and customer networks o Creates a culture and ensures that values, beliefs and behaviors are deeply ingrained and reflected in the decisions made and actions taken

3. Blueprint for a Networked Organization o Hierarchal Leadership n Emphasis managing complexity and minimizing it. n Management process overshadowed leadership n Risk were minimized by centralizing decision making, segregating activities and structuring work rigidly. o Entrepreneurial Leadership n “Create or seize an opportunity and pursue it regardless of the resources currently controlled” n Attract, motivate and engage people, partners and investors in the task of working together to create a clear and compelling vision that excites and deeply engaged all involved.

3. Blueprint for a Networked Organization o Networked Leadership n In the Networked Economy, the free flow of information throughout the company enhances the ability of employees, customers, partners, and executives to share in defining both a clear and compelling vision for change and the necessary tactical initiatives required to achieve business goals n When aligned with incentives and motivations that foster commitment rather than simply compliance. n In complex global organizations senior executives cannot oversee every decision or action taken by empowered teams. So, it more important for them to identify key strategic risks – critical success factors – and ensure that they have effective control systems in place.

Networked Organizations (cont. )

4. Building Value Networks (p. 245 -257) o Building the value chain network n Where Should Activities Be Performed? (p. 245246) n How Should We Relate to Market Participants? (p. 247 -248)

4. Building Value Networks o Building the value chain network n Where Should Activities Be Performed

4. Building Value Networks o Building the value chain network n How Should We Relate to Market Participants?

Evolving Market Structures & Relationships (p. 248 -257) Proprietary Capabilities and Infrastructure Create Walls Inside an Organization and Among Members of a Value Chain Network

Questions that can help executives to evaluate organization capabilities (p. 256 -257) o What are your organization’s core capabilities, strengths and weaknesses o What operating processes, policies, structures, and systems must be changed to enable you to operate efficiently o What management system must be changed to enable you to ensure that the company is in control yet is able to “learn by doing” o Is leadership stressed throughout the company. What organizational structures, incentives. And cultural changes need to be made to enable the company to act both big and small simultaneously. o Within which market do you currently participate? How do the market participants relate. o Given your current and future strategy, what is the stream that must be accomplished to develop products and services that create value for all stakeholders