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Smart business networks 2020- Complete summary - Book, papers and lecture notes
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Week 1 Osterle Ch1 & Ch2 (2001), Smits (2002), Heck & Vervest (2007), Slides ......................................... 3 Osterle Ch1 (2001) - Networked Enterprise: The vision ........................................................................... 3 Osterle Ch2 (2002) – Challenge of the Info...

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COURSE SCHEDULE AND COURSE OBJECTIVES 2020

COURSE SCHEDULE




COURSE OBJECTIVES
1. Be able to determine performance indicators at the firm level, network level, and team level.
2. Be able to analyze the structure, process, and performance of business networks by using
– Smart Business Networking theory (Van Heck et al; Smits et al)
– Networkability theory (Osterle, Alt et al)
– Strategic Alignment theory (extended for business networks) (Henderson & Venkatraman; Smits et al)
– Coordination Theory, Transaction Cost Theory, Resource Dependency theory
3. Be able to explain and predict the impact of IT (services, applications, and infrastructure) on a business model
innovation, by assessing the impact of ICT on:
– the business strategies of firms in a network
– the organizational structure of a business network
– intra- and inter-organizational business processes and operations in the network
– the performance of a business network
4. Have knowledge of factors that influence organizational structure, business processes, coordination, and
performance of business networks over time

• Knowledge objectives:
– Recent developments in e-business networking theory and practice
– Effects of IT infrastructure and IT applications on (smart) business networks
– Distinguish between the networked enterprise (firm) and a business network
– Distinguish between smart business networking and networkability
• Skills objectives
– Analyze extended strategic alignment
– Analyze performance of business networks
– Analyze the structure, processes, and strategy of a business network
– Analyze networkability of an organization and a business network
– Design (conceptually) a smart business network and advice on networkability


1

,CONTENTS
Course schedule and Course objectives 2020 .............................................................................................. 1
Week 1 Osterle Ch1 & Ch2 (2001), Smits (2002), Heck & Vervest (2007), Slides ......................................... 3
Osterle Ch1 (2001) - Networked Enterprise: The vision ........................................................................... 3
Osterle Ch2 (2002) – Challenge of the Information Age........................................................................... 3
Smits (2002) – Performance and development of electronic business networks .................................... 5
Van Heck & Vervest (2007) – Smart business Networks: How the network wins .................................... 8
Sheets – 1 Introduction & 1a SBN and case multiassistencia– Extra info............................................... 13
Week 2 – Smits & Janssen (2008), Smits et al (2018), Smits & Hulstijn (2020) .......................................... 13
Smits & Janssen (2008) – Impact of electronic markets on health care markets ................................... 13
Sheets – 2 SBN and the CareAuction Intermediary– Extra info .............................................................. 17
Smits et al (2018) – Blockchain technology in SBN: the impact of IT on networking… .......................... 19
Smits & Hulstijn (2020) – Blockchain applications and institutional trust .............................................. 24
Week 3 – Alt & Zimmerman (2014), BCG (2009) ........................................................................................ 31
Alt & Zimmerman (2014) – Editorial 24/4: Electronic markets on business models .............................. 31
Boston Consulting Group (2009) Business Model Innovation ................................................................ 33
Sheets – 3a Business model innovation and network analysis – Extra info ........................................... 35
Week 4 – Provan et al (2007), Osterle Ch3, Smits et al (2009) ................................................................... 36
Provan et al (2007) – Interorganizational networks at the network level: a review… ........................... 36
Sheets – 4 SBN and the Network analysis – Extra info ........................................................................... 40
Osterle Ch3 – The networked enterprise + Appendix (2001) ................................................................. 42
Smits et al (2009) – Assessing strategic alignment to improve it effectiveness ..................................... 51
Week 5 - Straub et al (2004) & Torabkani, Smits (2007) ............................................................................ 56
Straub et al (2004) – Measuring firm performance at the network level: A nomology ......................... 56
Torabkani (2007) – Improving the performance of business networks in E-government...................... 62
Sheets – Lecture 5 SBN extended strategic alignment - extra info .................................................... 68
Sheets – 5 SBN extended strategic alignment – The unitech case ..................................................... 69
Networkability assessment ......................................................................................................................... 71




2

,WEEK 1 OSTERLE CH1 & CH2 (2001), SMITS (2002), HECK & VERVEST (2007), SLIDES

OSTERLE CH1 (2001) - NETWORKED ENTERPRISE: T HE VISION

Business Networking = The management of IT-enabled relationships between internal and external business
partners. So far, there has been no clear vision of the business units and processes nor of the coordination
mechanisms that Business Networking has in store for the economy. Disintegration, specialization, reintegration,
centralization etc. are certainly among the current trends that present a growing challenge for business
management and science.

[Sheets] Business network = A business network is a set of more than two firms that provides services to
customers and uses services from suppliers to operate as ‘one firm’ that is owned by different owners and
controlled by different ‘operators’/management teams.


FIVES PHASES TOWARDS BUSINESS NETWORKI NG
The development of business networking grew with the integrated support of business processes.
Phase 1 (1970): The aim of computerizing a single island function such as invoicing;
Phase 2 (1980): The computerization of functional area’s such as production, financial accounting;
Phase 3 (1990): The development of systems for ERP enabled companies to implement integrated processes
internally from customer to customer, such as e.g. order processing.
Phase 4 (1990): Concurrently with the implementation of ERP systems, some enterprises went for link-ups with
their customers or suppliers. Individual 1:1 integration of cross-enterprise processes
Phase 5 (1990-2005): Here we see a new stage in customer orientation. Following Reverse Engineering ideas,
companies will adapt and be built to suit customer needs and processes. The Internet plays a key role in improving
these n:m networking capabilities, since it provides a standardized technological infrastructure.

Business bus = The standardized networking infrastructure. It forms the core of the business collaboration
infrastructure which eventually will evolve from marketplaces. It is the term used to describe the totality of
technical, applications and business standard on which software solutions, electronic services etc. are based.


ACHIEVING NETWORKABILITY
Networkability = The ability to cooperate internally as well as externally. Networkability refers to (a) resources,
such as employees, managers and information systems, (b) business processes, e.g. the sales process, and (c)
business units, e.g. an enterprise in a supply chain. Networkability describes the ability to rapidly establish an
efficient business relationship.

OSTERLE CH2 (2002) – CHALLENGE OF THE INFORMATION AGE

Information technology (IT) opens up possibilities for new business solutions; it offers exceptional opportunities
for fast innovators and harbors fundamental risk for laggards. The ability to identify chances at an early stage and
see them through implementation is opening up a world of possibilities. The Institute of Information Management
at the University of St Gallen is working on a business model within the framework of a research model with the
objective of (l) Identifying new IT based business solutions at an early stage, (ll) Understanding the rules of
business in the information age, (lll) formulating procedures to ensure a successful transformation.




3

,MOST IMPORTANT RULES WITHIN THE FRA MEWORK OF THE BUSINESS MODEL
Coverage: Networking makes it possible to offer all products and services for a customer process on a coordinated
basis and from a single source.

Partnering: Cooperation is not limited to a shopping relationship but becomes true collaboration, i.e. the
processes work together. The supplier develops detailed customer profiles from the gathered data from different
processes. Partnering allows to partner the data and can lead to customer lock-in and thus create a high entry
barrier for competitors.

Critical mass of customers and suppliers: Organizations will try to gain a maximum market share. Customers
prefer organizations who can offer the most comprehensive range of products and services, and on the other, the
biggest selection of suppliers for each category of product and service. Suppliers will concentrate on organizations
who can provide them access to the largest number of customers.

Position in the business network: Organizations must find their position in the business network and apply the
rules indicated above to their customers, products, services and skills. Each company must analyze the possible
business networks and try to establish a position of maximum influence in the networks offering the greatest
potential. Early entrance in a business network improves the chances of assuming a dominant role.

Focusing: Networking promotes specialization. A process of disassembly and reassembly is initiated in which
companies consider each of their processes and decide whether it is better to operate them themselves or to buy
them in.

Process efficiency: If no monopoly situations arise which cut out the market, the Internet will always promote the
selection and combination of the most efficient processes.

Networkability: Business relationships on the internet are almost exclusively 1:n relations. A supplier has a
relationship with several customers or a customer communicates with several suppliers. One company sets the
rules and formats, the customer or suppliers have to accept or leave it. Best case scenario in b2b is a m:n
relationship when multiple organizations can communicate with the same standards.

Change management: Business must sharpen their skill in recognizing developments and above all-in mastering
change. Installing change management helps in the systematic analysis of factors determining the success of
change – with the aid of value drivers – and in controlling them by means of KPI's.


SEVEN TRENDS – SEVEN FUNDAMENTAL TRENDS IN BUSINESS TRANSFORMATION
(Book goes in-depth on every trend, but I assume this won’t be critical for the exam)
Enterprise resource planning: the operational execution of business, runs almost imperceptibly in t
he background. Integrated applications for administration as well as for product development and technology
make it possible to concentrate on business rather than on administration.

Knowledge management: supplies each task within a process with the necessary knowledge about customers,
competitors, products, etc. and above all about the process itself.

Smart appliances: take information processing to the point of action. Traffic information is supplied via the
satellite navigation system (GPS) to the motorist, point of sale information from the cash register to the product
manufacturer and machine faults via sensors to the service engineer.


4

,Business Networking: makes collaboration between two companies so simple that they appear to be one
enterprise. Information on sales of the end product is immediately available to all the companies in the supply
chain.

Many subprocesses which companies still operate individually at the moment will be available from the Net as
electronic services. One example could be customer profiling. In addition to the supplier, a third party online-
database provider and the customer him or herself can take over the responsibility of his or her profile and offer it
via an electronic service.

Companies will not simply be selling products or services but will be supporting entire customer processes.
Transport businesses will take on the logistics process, doctors will support the whole therapy process and
insurance companies will handle the claim processing instead of the customer.

Corporate management will no longer merely focus on financial results but also on factors contributing to these
results. Financial management will become value management which keeps an eye on key performance indicators
for the success of the business.

SMITS (2002) – PERFORMANCE AND DEVELOPMENT OF ELECTRONIC BUSINESS NETWORKS

This paper is based on findings of the NEFETI research program (Network Enterprises of the Future Enabled by
Telematics Infrastructure) running from 1999-2001. The aim of this research is to determine key factors that
influence the performance of IT-enabled business networks. Factors like ‘inter-organisational systems’, ‘business
process redesign’, ‘infrastructure’, ‘electronic markets’, ‘trust’, and ‘power relations between stakeholders’ have
been mentioned in literature and practice as being of crucial importance for business networking success. Not all
factors are equally important in every business network. In this paper, we give an overview of the cases studied in
NEFETI, and focus on how network performance is perceived in several stages of business network development.

Electronic business networks are a particular form of business networks and three types can be distinguished:

➢ Stable network: a long-term stable relationship between suppliers, producers, and distributors. It is
designed to serve a mostly predictable market by linking together independently owned specialised assets
along with a given product or service value chain.
➢ Internal network: To create a market inside a company. Organizational units buy and sell goods and
services among themselves at prices established in the open market.
➢ Dynamic network: Components along the value chain are coupled contractually for perhaps a single
project or product and then decoupled to be part of a new value chain for the next business venture.

Virtual organizations: Networked organisations can be addressed as ‘virtual organizations’ if the network (partly)
consists of virtually organised processes or parts. Virtual means in this context that (groups of) people from
different organisational units cooperate from different geographical locations in ‘virtually organized tasks’. Today,
global competition, changing markets, and new technologies are opening up qualitatively new ways of creating
value. Value can still be created by individual organisations, but also opportunities occur for value-added
partnerships.




5

,Value-added partnerships: Is a set of independent companies (or business units
in one organisation) that work closely together to manage the flow of goods
and services along the entire value-added chain.

Usually, the partnerships first develop between organizations that perform
adjacent steps in the chain. Figure 1 shows four examples of business networks,
varying from a supplier network (1), an (integrated) supply chain network (2), a
horizontal network (3), and a service providing network (4)


NEFETI RESEARCH MODEL
NEFETI aims to identify the future forms, their economic structures and impacts, and the critical success factors, of
networked ‘virtual’ organizations. It investigates how IT design strategies, architectures and services in adjustment
with organisational arrangements enable (or hinder) complex forms of cross-enterprise collaboration and
partnerships. The research is based on the analysis of various cases resulting in (i) insights in the changes to be
expected in lines of industry, (ii) guidelines for the design of business networks, (iii) benchmarking and best
practices of business networking, (iv) business models and ICT strategies for networked organisations. Case study
research is based on a conceptual model consisting of six inter-related issues (fig. 2):

(1) The strategic drivers and incentives for networking: This denotes the motives and objectives of the
stakeholders and organisations involved in the network (drivers can be regarded as value propositions by:
commercial goals, improving internal quality, efficiency etc.);
(2) Enabling conditions for networking: The conditions that stimulated or enabled the emergence and growth of
the network (for instance the presence of a champion, previous experience with relevant technologies, the
absence or presence of network standards, or a specific mix of these conditions);
(3) Design of the network organisation: e.g., the participants in the network, their business relationships, the
structure of the network, i.e. a chain, a star, a dyad;
(4) Functioning of the network organisation: The way
the network organisation functions, how the nodes in
the network cooperate in inter- and intra-organisational
processes, how transactions are processed through the
network;
(5) ICT infrastructure of the network organisation;
(6) Performance of the network organisation.




The six issues are regarded as generic for all lines of industry. The six issues are extended with 30 questions to
support interviews with stakeholders in real cases, and to enable case analysis. In summary, NEFETI research is
based on the analysis of various cases, resulting in insights in changes in the performance and development of
network organisations. NEFETI also results in benchmarks and best practices, and a selection of relevant business
models and business and ICT strategies for network organisations. Case studies were done in the sectors finance,
health care, tourism, agro-industry, manufacturing, and transport and traffic.




6

,DISCUSSION AND CONCLUSION
Stages in network formation
Stages in network formation and growth can be distinguished, depending on the level of business change. A well-
known framework for analysis of the impact of IT on organizations is the model by Venkatraman, adapted by
Toppen et al. In this model six levels of IT-induced business transformation are distinguished. The first two levels
are regarded as evolutionary and the other four levels as
revolutionary changes. The evolutionary levels take the
existing situation as a point of reference and the
revolutionary levels take the desired situation in a market
network as a point of reference.

The business network integration stage can be seen as a
necessary step to accomplish business network redesign.
Three remarks can be made:

➢ Going through the stages. Organizations that have completed the business process redesign stage do not
necessarily have to pursue towards business network redesign. It might very well be that the business
process redesign has trigged new ideas causing another cycle of internal integration or business process
redesign.
➢ The starting point of the framework. Some organizations decide to immediately focus on the business
network redesign stage and then focus on embedding the proposed design in the industry sector.
➢ Different stakeholders involved in the network can show different stages of development, different levels
of ICT use, and different objectives or value propositions for networking.

Network relationships
Organizations are involved in one or more business networks. Each organization manages a set of relationships of
varying intensity, specificity, and ICT use with a set of partners. Managing this set of relationships is crucial since
the performance of the relationships depends on the flexibility and scalability of relations. Organizations like ASML
and Cisco manage their networks by distinguishing between ‘low, ‘mid’, and ‘high level’ strategic partners to
design and develop intense and high tech relationships with a few high-level partners. Over time partners move up
and down the scale, depending on business objectives and the competition for partnerships in the network.

The emergence of standards
Standards for communication exist in every network and vary per industry, regional, and local level. All network
organisations are based on some kind of industry-standard, combined with more regional, local or proprietary
standards. We distinguish the following network designs for the emergence of standards:

➢ One strong supervisor in the network that can determine communication standards and systems.
➢ A strong actor -not having a supervisor role- in the network determines several standards for
communication and systems.
➢ A group of actors in the network jointly develops standards for processing and communication in the
network.

The structure, functioning, and performance of the network depend on relative power positions and relations
between stakeholders in the network. This can result in networks of various sizes, based on electronic hierarchies,
electronic markets, and intermediaries with roles of matchmakers, market maker.



7

, An import issue for network standards is the reach (how many clients and partners can be reached by the network)
and the range of the network (how many different products, services can be communicated through the network.

Performance of networks
In business networks, benchmarking refers to the process of assessing and comparing the performance of network
designs (structure and process) and network outcomes (for business and IT performance). Business performance
can be measured, for instance, as quality of care, cost of care, or in generic performance metrics for finance,
internal and external processes, customers, markets, innovation, growth and satisfaction. Different metrics and
values apply for different actors in the network and vary per level. Technical performance is also determined per
stakeholder in the network, using metrics like contribution to the business, business orientation of the
technologies, operational excellence, innovation/ development, organisation and satisfaction.

Conclusion
We observe that improving the IT-architecture in a network organisation does not automatically lead to improved
business performance, nor does it necessarily lead to growth of the business network. The impact of changing the
IT-architecture on business (network) performance depends on the business network design and process design in
the network, its firms and its business units. Only if power is concentrated in one stakeholder (in the network), it
can be sufficient to decide on network design and IT-architecture from the perspective of this one organisation
(node) in the network. However, most cases show that multiple stakeholders play a role in the network decision
making (network governance) and, ultimately, to enhance business network performance

VAN HECK & VERVEST (2007) – SMART BUSINESS NETWORKS: HOW THE NETWORK WINS


BEING SMART IN THE BU SINESS NETWORK
Companies like Amazon, Ebay and Skype attracted hundreds of millions of users in the past. These platforms show
a strong network effect: 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. The Net is not democratic, and the number of
links per node follows a so-called power-law distribution. A few nodes have many links while many more other
nodes have very few links. The node with many links attracts nodes with fewer links faster than the lesser-
connected nodes.


A NEW BUSINESS NETWORK APPROACH
Organizations must move from today’s 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 table shows that the disadvantages and associated costs of the
more traditional approaches are caused by the inability to provide
relatively complex, bundled, and quickly delivered products and
services. The potential of the new business network approach is to
create these types of products and services with the help of
combining business network insights with telecommunication
capabilities. The business is a participant in a number of networks
where it may lead or act together with others.


8

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