Smart business networks: How the network wins (Van Heck & Vervest, 2007)
Many platforms have signals of network effects: The more users, the more useful the network
becomes, the more difficult it becomes to switch and the less likely the user will move to another
network. Business can become more valuable in their business network by capturing a valuable
position and leveraging that position across as many links as they could.
Organizations are moving from relatively stable and slow-moving business networks to an open
digital platform where business is conducted across a rapidly formed network with anyone,
anywhere, anytime despite different business processes and computer systems. The potential of
these new business networks is to create these types of products and services with the help of
combining business network insights with telecommunication capabilities.
The business is no longer seen as a self-contained organization working together with partners. It is
seen as a participant in a number of networks. The network includes additional layers of meaning –
from the ICT infrastructures to the interactions between businesses and individuals. Actors in a smart
business network seek linkages that are novel and different to create better results. Smartness
means the network of cooperating business can create better results than others. Another way the
new business network distinguishes itself is the way the network is leaded (leading towards business
advantages)
The Networked Business Operating System (BOS) is similar to that of the computer’s operating
system. It follows the newest information and communication technologies. Implementation of a
BOS enables the portability of business processes and facilitates the end-to-end management of
processes running across many different organizations in many different forms. It coordinates the
processes among the networked business and its logic is embedded in the systems used by these
businesses.
Understanding the network
In common networks each participant does not see the behavior of the network but responds to the
local situations with their own logic. There is no centralized control. The study of networked behavior
reveals the attributes and characteristics that can be applied to the design of smart business
networks. They find that such networks have properties like those of other biological, social and
technological networks:
- They demonstrate that the distribution of incoming communication links always has a cut-off
(numbers are restricted), while the distribution of outgoing communication links is
considered scale-free, meaning some nodes act as highly connected hubs.
- It seems easier to transmit information than to process information.
- Smartness could be related to the capability to organize the information flows within the
business network as well as to the topological structure of the network.
- Certain positions in a network are highly important, some nodes are dominant and others
take subservient roles.
- With a larger network horizon a company can take a more advantageous network position
depending on the distribution of the network horizons across all actors and up to a certain
saturation point. Expansion of network horizon will soon be a critical success factor for
companies.
,What makes a smart business network?
Includes firms in a business network, using ICT to outperform other firms and networks.
The key characteristics of a smart business network are that is has the ability to rapidly ‘pick, plug
and play’ business processes to configure rapidly to meet a specific objective. It need to organizing
capabilities to: be able to quickly connect and disconnect with an actor, the selection and execution
of business processes across the network, establishing the decision rules and the embedded logic
within the business network.
- Quick connect and disconnect: Quick connect requires that, as a result of an event the smart
business network must seek and select those members who, together, can fulfill the required
goal. The capability of quickly connected plug-compatibility enables a superior response
speed and greater component variety particularly for dealing with new requirements.
Besides the attention towards quickly connecting, quickly disconnecting requires more. Rules
should be agreed upon for when the actors are disconnected. Decision rules and logic with
regard to connection and disconnection will be a crucial component for the success of the
business network.
When you are connected, you can quickly plug and play.
- Plug and play: The network participants must be plugged together to enable the required
network outcome. This means they must act with modularity (decomposition of a system by
grouping elements into a smaller number of subsystems with rules governing the
architecture for mixing and matching these components). Modularity brings benefits of
versatility and agility. A crucial decision is the degree of modularity or granularity in a system.
- Embedded business logic: Each business network participant has specific capabilities
captured in its business processes that it executes according to this logic. When such
participants combine they create interfaces between capabilities: translating from one
business logic to another and executing accordingly.
Traditional business network approach New business network approach
The central idea of the new business network approach is that linking partners is on the basis of
linking processes but allowing individual execution according to those processes: they act individually
according to the joint rules of the network. The network separates process from execution. It shares
the processes required to achieve its goals (shared business logic) allowing each participant to
execute in its own way according to this logic.
The business operating layer couples the underlying systems, so it resolves the problem of
information silo’s. This layer also allows process execution and management ‘from a distance’ from
the underlying application systems. This layer can become complex due to the facts that it is related
to issues as: membership selection, linking, goal setting, risk and reward management, continuous
improvement, fault tolerance.
, Chances and challenges in business networking (Oesterle 1, 2001)
Business networking is defined as the management of IT-enabled relationships between internal and
external business partners. The importance of business networking grew with the integrated support
of business processes. As technology developed, the integration area grew. Five phases can be
distinguished in the development of business networking:
- Phase 1 (1970s): The aim of computerizing single island’ function was to automate individual
business functions.
- Phase 2 (1980s): The computerization of functional areas. Integration within the most
important business function areas.
- Phase 3 (1990s): The development of ERP.
- Phase 4 (1990s): Link-ups with customers or suppliers.
- Phase 5 (1990-2005): Customer orientation. Companies adapt and built to suit customer
needs and processes.
A lot of theories are published about business networking strategies. Still a lot of companies face
trouble with implementing these theories. It is proposed to close the gap by using a business process
view on Business networking. The main goal is to achieve networkability: The ability to cooperate
internally as well as externally (efficient business relationships). Networkability refers to resources,
business processes and business units.
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