STRATEGIC GLOBAL MANAGEMENT

In the first of two articles, Louise Ross explains the development of an open, collaborative and effective new organisational form: Business 2.0.
Developments in IT have brought about a new mechanism for doing business e-commerce - but they've had even more significant consequences than the introduction of new processes and channels. They have also affected organisational design and the way that enterprises view their customers and competitive landscapes.
The old business model of hierarchies, spans of control and intellectual capital protection is being replaced by a new model of chains, spans of communication and knowledge-sharing. Some organisations are mutating into new forms, often characterised by their lack of boundaries. In the same spirit as we talk about Web 2.0 - the "new" way of using the internet - we might refer to these emerging forms as Business 2.0. CIMA's Innovation and Development team is made up of staff, academics and CIMA members who meet both face to face and virtually to access knowledge from outside the organisation's boundaries practising a number of the approaches that I'm going to describe. The team is interested in how IT developments such as free internet telephony and open-source software are changing organisational practices and structures so as to promote the sharing of information and the formation of relationships with sometimes unexpected parties.
The team has identified three innovative new organisational behaviours, which can be grouped under the following headings: * "Boundaryless" behaviour, which is the focus of this first article.
* New competitive paradigms.
* Acting globally.
Everyone agrees that the business world is becoming Increasingly complicated. In the ubiquity stakes, the "change is the only constant" cliché ranks right up there with "people are our most important asset". There is a school of thought which advocates that companies shouldn't try to predict change; they should simply be as flexible as possible and adapt to whatever comes. In their article "Where value lives in a networked world" (Harvard Business Review on Advances in Strategy, Harvard Business School Press, 2002), Mohanbir Sawney and Deval Parikh write that many of the upheavals taking place seem to have a common cause: the changing nature of intelligence in networks. They argue that, although this sounds abstract, it has immediate effects on how companies organise their workforces, market their products and manage their relationships. Companies that are aware of these influences will be able to exploit change instead of merely reacting to it.
Sawney and Parikh identify two ways in which new trends in network intelligence are reshaping organisations and industries. First, they say that intelligence is "decoupling" - ie, being pushed to either end of a network. second, they argue that it is becoming more fluid and modular. Front-end IT (laptop PCs) has to compromise on processing power and data storage, but when it is networked it can access powerful back-end IT (the servers that store and process huge amounts of data). The front-end IT can thereby be liberated to focus on specialised functions that have been customised to suit particular customer-facing tasks. In this way, back-end intelligence is consolidated into a shared infrastructure at the centre, while front-end intelligence becomes far more variable, taking many forms according to the needs of the field operations. Sawney and Parikh believe that most economic value will be created at the ends of networks.
As this divergence occurs, organisations recognise that it creates separate businesses of infrastructure and customer relationship management, which require different strategies and capabilities. At the back end, for example, economies of scale and the benefits of interconnections will tend to consolidate generic processing and storage functions. At the front end, the company can create highly customised connections to customers. This polarisation of IT is another example of the shift away from the middle, which is also seen in the "delayering" of middle management in many organisations.
The trend for information to become increasingly modular and fluid allows firms to pool their resources in temporary or permanent alliances - Sawney and Parikh call them "plug-and-play enterprises" - in order to exploit specific market opportunities. Owning the intelligence takes a back seat to orchestrating it. Just as the conductor of an orchestra receives most of the plaudits, more money is made by those who co-ordinate the interactions of a network of partners.
Sawney and Parikh propose four strategies to allow companies to benefit from the trends they have observed:
* Arbitrage: moving intelligence to areas where the cost of maintaining it is lower.
* Aggregation: combining formerly isolated intelligence into a shared pool that networked front-end users can access.
* Rewiring: creating a common information "backbone" to connect intelligence. * Reassembly: reorganising intelligence into customised packages for customers.
They write: "Put simply, the digitisation of information, combined with advances in computing and communications, has fundamentally changed how all networks operate, human as well as technological. That change is having profound consequences for the way work is done and value is created throughout the economy."
The CIMA Innovation and Development team first considered practices in the "boundaryless behaviour" category - where organisations had recognised the need to become more flexible to meet customer needs and had engaged In offshoring, outsourcing, joint ventures, supplier partnerships or other collaborative relationships. They viewed themselves differently from traditional organisations, which define themselves with reference to hierarchies - eg, a group and its subsidiaries - or to legal and employment relationships. They considered themselves part of a network, working (often in an interdependent manner) towards the common goal of satisfying their shared customer.
This is an emerging field that has been largely unresearched so far. Commentators have used a variety of terms to describe such networks. These include virtual teams, strategic sourcing, outsourcing, offshoring, emergent organisations, inter-organisational networks, "co-opetition", knowledge exchanges, business ecosystems, electronic markets and organisations without boundaries. A conventional organisation interacts with parties including its employees (inside the organisation), customers (outside), suppliers (outside) and competitors (definitely outside). These relationships, which obviously influence the organisation, are often illustrated by the value chain model (see Study notes, page 48). Within this analogy, concepts are fairly robust - eg, the status of being either part or not part of the chain, or the idea that a limited number of participants are playing predictable roles as specific links. For the boundaryless organisation, I prefer the image of a cloud or galaxy. This represents a more amorphous population of independent partners whose boundaries are flexible and permeable - if you can spot them at all.
The table on the opposite page is a useful model for describing the range of different strategic alliances, as proposed by leading strategy writers Gerry Johnson and Kevan Scholes (adapted from a 1991 diagram by Anil Gupta and Harbir Singh). CIMA considers issues concerning the management, ownership and protection of assets to be relatively important, which is why it mentions them in its call for research on the subject (see "Further information", page 40).
Much has already been written about supply chains and outsourcing, so arguably the most interesting arrangements among those listed in the table are networks and opportunistic alliances. The organisations that have made the daunting decision to share hitherto protected knowledge assets have learned from the open-source model of Linux and the internet itself. Both of these applications could have earned their creators a fortune, but they were shared in the public interest instead. It was a company from a very traditional industry, mining, that made one of the first brave and successful leaps. (taken from : findarticles.com)