Building the Networked Business

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Building the Networked Business

• 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

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Building the Networked Business

• 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)

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Building the Networked Business

• 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.

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Information, Organizations, Processes and Control

• Hierarchical organizations of past years
• Today
• Process-oriented, Learning, Team-based, and
  Fast-cycle organizational models
• Flat, flexible, focused on core competence
• Inside, empowered, interfunctional teams of
  knowledge workers are reengineering and
  continually improving core business processes.
• Think globally and act locally

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Information, Organizations, Processes and Control

• Strategic alliance and partnership that will
  enable them to focus on core competence while
  expanding capabilities, scale and scope.
• Creation of virtual organizations
• Challenge
• How do we meet these challenges?
• How can organization be both global and local,
  big and small, and radically decentralized with
  centralized reporting and control?

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Flattening the Organizational Structure
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Matrix Organizational Structure

• But, hybrid designs bred conflict, confusion,
  information overload, and costly duplication of
  resources

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Virtual Organizational Structure
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Information, Organizations, Processes and Control

• Question Can firms take the advantage of the
  information management communication tools this
  revolution provides to create an information age
  organization that simultaneously manages speed
  and complexity?

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Information, Organizations, Processes and Control

• Notes
• Although the networked IT infrastructure can
  provide important tools, it can not define
  neither the information that needs to be in the
  systems nor the meaning of the information and
  how to use it to coordinate and manage the
  business.
• Nor can the networked IT infrastructure define
  the organizational structures, processes, and
  culture required to enable people to use the
  information to make decisions and take actions.
• These tools cannot provide incentives that would
  motivate people to use the information to meet
  both organizational and personal objectives.
• What should firms do?

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Information, Organizations, Processes and Control

• To accomplish the organizations of the year 2000
  and beyond firms must change the way they are
  organized, and employees at all levels must
  become information literate - not just computer
  literate.

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Information, Organizations, Processes and Control

• Notes
• Implementing networked information and
  communication system in a traditional,
  hierarchically structured organization will not
  work.
• A much more comprehensive approach to
  organizational change is required.
• In general implementing the technology is the
  least complicated part redesigning the
  organization and defining the information to
  manage it constitute major constraints on
  organizations attempts to meet the challenges of
  the the year 2000s

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Creating the Information Age Organization

• Speed Counts, but not at the Expense of Control
• New products must be introduced quicker, order
  processing cycle must be cut dramatically, etc.
• The faster the pace, the greater the need to
  monitor business operations and clearly define
  and enforce rules.
• Empowerment is not Anarchy
• In an empowered organization, senior managers are
  more involved, not less and organizational
  boundaries and value systems must be more clearly
  communicated, closely monitored, and more
  consistently enforced.

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Creating the Information Age Organization

• Transforming an Organization Requires more than
  just Changing the Structure.
• True change occurs deep within the organization
  as individuals and work teams redefine the way
  they work and the values that guide decision
  making and action.
• Managers need to rethink the nature of control
  and authority
• Smashing together the features of the hierarchy
  with features of an entrepreneurial firm will not
  work.
• Work must change and people must change
• New knowledge and skills are needed

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Creating the Information Age Organization

• Transforming an Organization Requires more than
  just Changing the Structure.
• The personal values and frameworks that people
  people use to make decisions and take actions
  must be realigned with new organizational
  priorities and goals.
• The ability to transform the firms information
  infrastructure is a critical component that both
  supports and enables the organizational
  transformation
• Change must not stop at the doors of the
  corporate headquarters but must be infused
  throughout every part of the organization
• Laying collaborative structures (e.g. team-based
  units and incentives) over a traditionally
  structured organization will not work neither.

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Streamlining the Business Cycle

• Operating Cycle
• The activities through which an organization
  designs, produces, markets, delivers, and
  supports its product and services
• Management Cycle
• The activities through which an organization
  manages the design, produces, markets, delivers,
  and supports its product and services

Operational Process
Management Process
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Strategic Alignment

• Basic questions confronting managers
• What are the implication of IT in my business
  operations? Today and in the future?
• What are the alternative perspectives for
  leveraging IT capabilities for business
  operations?
• Is the locus of IT component inside or
  outside the operation?
• What is the executive role of senior management
  for leveraging IT capabilities?
• How should the IT function be organized, and what
  is the role of IT outsourcing
• What are the appropriate criteria for assessing
  IT based benefits

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Building the Networked Business
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Building the Networked Business

• Note
• Although the networked IT infrastructure can
  provide important tools, it cannot define the
  information that needs to be in the system.
• 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.
• New organization capabilities are required to
  execute the sophisticated network strategies and
  business models

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Blueprint for the Networked Organization

• Challenge
• 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 21st century executives
• Continuous change is one of the most challenging
  issues facing the 21st century executives
• Operating and Innovating
• Managing and Learning
• Leading and Engaging

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Blueprint for a Networked Organization

• Operating and Innovating
• 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.
• Ability to flexibly adapt to constantly changing
  business environment is the key to success.

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Blueprint for a Networked Organization

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

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Blueprint for a Networked Organization
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Blueprint for a Networked Organization

• Managing and Learning
• The management processes and structures of a firm
  include all the activities that a firm and its
  business community undertake to
• Plan strategy and how it will be executed
• Allocate resources
• Organize people into groups and coordinate work
• Monitor and measure performance
• Adjust strategies, plans, budgets, and
  organizations based on learning

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Blueprint for a Networked Organization

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

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Blueprint for a Networked Organization

• Network Management Process
• 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.
• Networked management Process
• Improved access to information enables employees,
  customers, and partners to invent new ways of
  working and to respond quickly.

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Blueprint for a Networked Organization

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

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Blueprint for a Networked Organization

• Hierarchal Leadership
• Emphasis managing complexity and minimizing it.
• Management process overshadowed leadership
• Risk were minimized by centralizing decision
  making, segregating activities and structuring
  work rigidly.
• Entrepreneurial Leadership
• Create or seize an opportunity and pursue it
  regardless of the resources currently controlled
• 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.

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Blueprint for a Networked Organization

• Networked Leadership
• 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
• When aligned with incentives and motivations that
  foster commitment rather than simply compliance.
• 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.

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Networked Organizations (cont.)
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Building Value Networks

• Building the value chain network
• Where Should Activities Be Performed?
• How Should We Relate to Market Participants?

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Building Value Networks

• Building the value chain network
• Where Should Activities Be Performed

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Building Value Networks

• Building the value chain network
• How Should We Relate to Market Participants?

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Evolving Market Structures
Proprietary Capabilities and Infrastructure
Create Walls Inside an Organization and Among
Members of a Value Chain Network
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Questions that can help executives to evaluate
organization capabilities

• What are your organizations core capabilities,
  strengths and weaknesses
• What operating processes, policies, structures,
  and systems must be changed to enable you to
  operate efficiently
• What management system must be changed to enable
  you to ensure that the company is in control yet
  is able to learn by doing
• 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.
• Within which market do you currently participate?
  How do the market participants relate.
• 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