value of smart business networks

The Value of Smart Business Networks:

Experiments and Experiences

Eric van HeckRotterdam School of ManagementErasmus University Email: evanheck@rsm.nlwww.rsm.nl/evanheckRSM Alumni Event – February 12, 2009© Eric van Heck, 2009.

Smart Business Networksin the Cloud

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• Motivation and Introduction

• Business Case: – Thebigword – Translation Services

• What Smart Business Networks Should Be Able to Do?

• Some Critical Components:– Network Horizon – example Delta Lloyd– Network Structure – example PD Tasks Networks– Business Operating System – example Cordys – Advocate Agents – example Trading Agent Competition

• Conclusions

Menu

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www.sbniweb.org5

Smart Business Network Participants

Tsinghua UniversityAlibabaBritish telecomCordysElsevierIBMTsinghua

Science Park

SBNi

2008: Beijing, China

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SBNi 2004, 2006, and 2008and Special Issues in JIT (2005) and DSS (2009)

• Smart Business Networks as New Competitive Business Model

• Smart Business Networks will cooperate and compete to fulfil customer needs

• What is different?

– Competitive advantage created by the network not the individual organization

– Acceleration of network’s ability to combine and act– Intelligence embedded in the smart business network captured

in the business operating system– Real business opportunity with a thorough understanding of the

science

Introduction

• TheBigWord: Translations at fast speed

One example:

Thebigword: Translation Services in the UK(Chris Holland et al, 2005)

• Global Scale to international customers

• In wide variety of industries including financial services, technology, manufacturing, travel, and retailing

• Adaptation to local markets (customers’ preferred language)

• Employs approx. 4,500 “mother tongue” linguists

• Innovative use of IT to support every aspect of its operations

Thebigword: Translation Services in the UK(Holland et al, 2005)

Web Services in the Translation Market:Translations available within 48 minutes(Holland et al, 2005)

Content

Content

Dealing articlesauthored at06:30

Language versions available at07:30

• Network

– TheBigWord links 4,500 “mother tongue” linguists to clients worldwide

• Acceleration

– Fast translation process – from hours to minutes

• Intelligence embedded

– Standardized linkages and processes

• Business – Science

– Business architecture and web services

What is different?

...An IT-enabled platform for dynamically linking different businesses having different ‘capabilities’ to build a ‘networked business enterprise’ with innovative business strategies for competing in the changing markets and environmental conditions.....

Bhusnan Saxena, MDI Gurgaon, India, 2008

Definition of a Smart Business Network

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What are characteristics of the new business network approach? (Van Heck & Vervest, 2007)

1. Customer Interaction

2. Modularity : Product / Process / Network

3. Information sharing / Network Horizon

4. Network Structure

5. Network Orchestration

6. Infrastructure: Business Operating System

What Are Critical Components?

• Customers are searching online

• Customers are buying offline/online

• Customers are designing products/services

• Customers are forming networks to discuss products and services

1. Customer Interaction

• Combine modular products (Customer Interaction) with a modular organisation (Asset Configuration)...

• ... resulting in the end customer designing not only the product but the whole (virtual) value chain

2. Modularisation

Customer demands

CoreFirm

Product modules

A1

Organisationmodules

B1 B2

C1 C2

D1

E2

A2

D2

E1

A2

D2

E1

The end customer designs the (virtual) organisation and value chain

• Research focuses on:– Bridging Positions in Business Networks

• Why does a bridging position of the focal firm strengthen?

– Network Horizon• What is the impact of network horizon?

– Weakening of positions• How sustainable are bridging positions?

• PhD Research Project Diederik van Liere supported by Delta Lloyd

3. Information Sharing / Network Horizon

The bridging position

• Bridging position in a network connects actors who are not directly connected to each other

• Firms in bridging positions are more likely to:– Access diverse information

and opportunities– Broker the flow of

information and resources among firms

– Control projects that bring network participants together

Bridging position

Why does a bridging position strengthen? • A firm must have information

about the business network to strengthen its a bridging position

• Network horizon: the completeness of information a firm has about the business network

• Network horizon of these companies determines the intensity of competition for bridging positions

• Differences in network horizons between companies we refer to as network horizon heterogeneity

Bridging position

• Network positions change:– Network horizon– Network horizon heterogeneity

• Differences between firms in terms of their network horizon determine the intensity of competition for bridging positions

– Resource similarity between partner firms• Firms with similar resources are more likely to shift

their network position because they are taken advantage

• Overall conclusion:The most valuable network position is the least

sustainable

Results (Van Liere, 2007)

You can download the PhD dissertation at:https://ep.eur.nl/handle/1765/1

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Network of information flows between tasks of an operating system development process. This PD task network consists of 1245 directed information flows between 466 development tasks. Each task is assigned to one or more actors (“design teams” or “engineers”) who are responsible for it. Nodes with the same degree are colored the same.

4. Network Structure:Product Development Task Networks(Dan Braha & Bar-Yam, 2005)

• Tasks executed by actors (design teams or engineers)• Information flows

• Design iterations delay the time required for product development

• Complex networks are scale-free networks e.g. robust to random failures of nodes, but vulnerable to failure of highly connected nodes

• Complex networks are dominated by a few highly central tasks

Such PD Task Networks consist of:(Braha & Bar-Yam, 2005)

Structural propertiesPath

lengthClustering

coefficientDegree

distributionIn-

(out-) degree

Networks are everywhere

• The one that is interacting with the customer

• The one that is combining the modules

• The one that is designing the products

• The one that is organizing the financial flows

• The one that is organizing the logistical flows

5. Network Orchestration

• Quick Connect, and Disconnect• Embedded Business Logic• Goal Directed Service Composition• Use of Advocate Agents• Business Network Visualization and

Dashboards

6. Business Operating System

customerdashboard

performancedashboards

business network actors

ERP CRM HR Proc ESM

business operating system

SAP

Siebel

PeopleSoft

Ariba

Tivoli

process intelligence

man

agem

ent

partners

workflow

functions - applications

invokethe

transaction

monitorand

report

The Network Business Operating System Contains the Overall Business Logic

Example : Cordys Platform

Research by John Collins, Wolf Ketter, and Maria Gini –Winners of the SBNi award 2008.

• Smart business networks will emerge in high speed markets

• Critical components:

Customer InteractionModularity : Product / Process / NetworkInformation sharing / Network HorizonNetwork StructureNetwork OrchestrationInfrastructure: Business Operating System

• Working together in a smart way by using product and process modules, fast connect and disconnect capabilities, advocate agents, network visualization and dashboards.

Conclusions

In: Communications of the ACM, Vol. 50, Nr. 6, p. 29-37, June 2007