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  • CHAPTER 3: Building Networked Businesses

  • Building Networked BusinessesOur 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 companyJack Welch Former GE CEOQuote on page 227 of Applegate.

  • Building Networked BusinessesABB 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 advantagePercy Barnevik, CEO Asea Brown Boveri (ABB)

  • 1. The Need for New CapabilitiesWe 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

    Source: Applegate, Lynda M., Robert D. Austin, and F. Warren McFarlan, Corporate Information Strategy and Management. Burr Ridge, IL: McGraw-Hill/Irwin, 2002.

    Chapter 3 Figure 3-1

    The Organization Design Challenge

  • 2. Is History Repeating Itself? (p. 229-231)Hybrid Organization designTo improve control and efficiency while simultaneously enabling flexibility and speed of response

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

  • Flattening the Organizational Structure

  • Matrix Organizational StructureBut, hybrid designs bred conflict, confusion, information overload, and costly duplication of resources

  • Virtual Organizational Structure

  • Source: Applegate, Lynda M., Robert D. Austin, and F. Warren McFarlan, Corporate Information Strategy and Management. Burr Ridge, IL: McGraw-Hill/Irwin, 2002.

    Networked Organizational Models are Enabled by Networked Technologies

    Chapter 3 Figure 3-2

  • 2. Is History Repeating Itself? (p.231)Notes on page 231: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

  • 3. Blueprint for a Networked Organization (p.231-245)ChallengeDesigning, 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 InnovatingManaging and LearningLeading and Engaging

  • Source: Applegate, Lynda M., Robert D. Austin, and F. Warren McFarlan, Corporate Information Strategy and Management. Burr Ridge, IL: McGraw-Hill/Irwin, 2002.

    Chapter 3 Figure 3-3

    Blueprint for a Big-Small Business

  • 3. Blueprint for a Networked Organization1. Operating and Innovating (p.232-236)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.

  • 3. Blueprint for a Networked Organization1. Operating and InnovatingHierarchical OperationsDefine rigid procedures, top down

    Entrepreneurial OperationCompany do not depend on well-defined polices and procedures or structured jobs.

    Networked OperationsBig-small companies, Precision execution and fast-cycled innovationOperation 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

  • 3. Blueprint for a Networked Organization

  • 3. Blueprint for a Networked Organization2. Managing and Learning (p.236-240)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 executedAllocate resourcesOrganize people into groups and coordinate workMonitor and measure performanceAdjust strategies, plans, budgets, and organizations based on learning

  • 3. Blueprint for a Networked OrganizationTraditional Management ProcessDriven from top down, incremental goals and allocation of resources to carry them out.

    Entrepreneurial Management ProcessPlanning, 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

  • 3. Blueprint for a Networked OrganizationNetwork Management ProcessBig-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 ProcessImproved access to information enables employees, customers, and partners to invent new ways of working and to respond quickly.

  • 3. Blueprint for a Networked Organization3. Leading and EngagingWhile 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

  • 3. Blueprint for a Networked OrganizationHierarchal LeadershipEmphasis managing complexity and minimizing it.Management process overshadowed leadershipRisk were minimized by centralizing decision making, segregating activities and structuring work rigidly.

    Entrepreneurial LeadershipCreate or seize an opportunity and pursue it regardless of the resources currently controlledAttract, 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 OrganizationNetworked LeadershipIn 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.

  • Networked Organizations (cont.)

  • 4. Building Value Networks (p.245-257)Building the value chain networkWhere Should Activities Be Performed? (p.245-246)

    How Should We Relate to Market Participants? (p.247-248)

  • 4. Building Value NetworksBuilding the value chain networkWhere Should Activities Be Performed

  • 4. Building Value NetworksBuilding the value chain networkHow Should We Relate to Market Participants?

  • Source: Applegate, Lynda M., Robert D. Austin, and F. Warren McFarlan, Corporate Information Strategy and Management. Burr Ridge, IL: McGraw-Hill/Irwin, 2002.

    Impact of Information Technology on Market Evolution

    Chapter 3 Figure 3-7

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

  • Source: Applegate, Lynda M., Robert D. Austin, and F. Warren McFarlan, Corporate Information Strategy and Management. Burr Ridge, IL: McGraw-Hill/Irwin, 2002.

    Chapter 3 Figure 3-9

    Covisints Role in the Virtually-Integrated Global Automobile Market

  • Source: Applegate, Lynda M., Robert D. Austin, and F. Warren McFarlan, Corporate Information Strategy and Management. Burr Ridge, IL: McGraw-Hill/Irwin, 2002.

    Chapter 3 Figure 3-10

    AOL Time Warners Virtually-Integrated Organization within a Vertically-Integrated Market

  • Source: Applegate, Lynda M., Robert D. Austin, and F. Warren McFarlan, Corporate Information Strategy and Management. Burr Ridge, IL: McGraw-Hill/Irwin, 2002.

    Chapter 3 Figure 3-11

    Four Networked Market Models

  • Questions that can help executives to evaluate organization capabilities (p.256-257)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

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