Business Network Transformation
Encyclopedia
A Business network transformation (BNT) is a market phenomenon where companies go beyond their traditional business boundaries to drive profitable growth
. As the global economy
becomes increasingly inter-dependent, the businesses need to foster their business relationships as their competitive advantage. By transforming their business network, companies can drive top line growth through superior customer value and faster product innovation
while providing bottom line savings through operational excellence
and responsive supply chains.
in the past decade and rapid commoditization are pressuring companies to rethink their traditional value chain
. Connectivity of people, processes and information beyond corporate and country boundaries has further helped the ease of formation and management of business networks.
Leading companies are transforming their rigid value chain into a dynamic business network of customers, partners, and suppliers to stay ahead. In a business network companies collaborate closely to gain deeper insights on the end customers and respond quickly to changing customer needs. Companies that harness the power of the business network will develop innovations faster, build a responsive and efficient supply chain, and deliver superior value to the end customer. Through business network transformation, companies can achieve profitable growth and a new source of competitive advantage on the global stage.
BNT enables competitive differentiation through innovation across the business network. Traditionally, innovation has occurred within an organization, where ideas and resources are tightly controlled. Today’s world in contrast has businesses taking advantage of the global economy, low-cost information, and mature technology
to collaborate with their business partners to improve processes and offer enhanced solutions.
and Philip Lay shows the emergence of two types of business networks at different stages of evolution of a market or a product.
development initiative, chip design efforts that go into a new game machine or developer ecosystem supporting a software platform.
performance execution, making visibility, decision making, and collaboration
possible across the business network.
Profitable growth
- Definition : :Profitable Growth, a term most often used by CEOs when describing their firm's strategic objective. Profitable growth is the combination of profitability and growth, more precisely the combination of Economic Profitability and Growth of Free cash flows.Profitable growth is aimed at...
. As the global economy
World economy
The world economy, or global economy, generally refers to the economy, which is based on economies of all of the world's countries, national economies. Also global economy can be seen as the economy of global society and national economies – as economies of local societies, making the global one....
becomes increasingly inter-dependent, the businesses need to foster their business relationships as their competitive advantage. By transforming their business network, companies can drive top line growth through superior customer value and faster product innovation
Product innovation
Product innovation is the creation and subsequent introduction of a good or service that is either new, or improved on previous goods or services of its kind...
while providing bottom line savings through operational excellence
Operational excellence
Operational Excellence is a philosophy of leadership, teamwork and problem solving resulting in continuous improvement throughout the organization by focusing on the needs of the customer, empowering employees, and optimizing existing activities in the process....
and responsive supply chains.
Factors driving business network transformation
The rising power of consumers as evidenced by the rise of social networks, access to new markets via rapid globalizationGlobalization
Globalization refers to the increasingly global relationships of culture, people and economic activity. Most often, it refers to economics: the global distribution of the production of goods and services, through reduction of barriers to international trade such as tariffs, export fees, and import...
in the past decade and rapid commoditization are pressuring companies to rethink their traditional value chain
Value chain
The value chain, is a concept from business management that was first described and popularized by Michael Porter in his 1985 best-seller, Competitive Advantage: Creating and Sustaining Superior Performance.-Firm Level:...
. Connectivity of people, processes and information beyond corporate and country boundaries has further helped the ease of formation and management of business networks.
Leading companies are transforming their rigid value chain into a dynamic business network of customers, partners, and suppliers to stay ahead. In a business network companies collaborate closely to gain deeper insights on the end customers and respond quickly to changing customer needs. Companies that harness the power of the business network will develop innovations faster, build a responsive and efficient supply chain, and deliver superior value to the end customer. Through business network transformation, companies can achieve profitable growth and a new source of competitive advantage on the global stage.
BNT enables competitive differentiation through innovation across the business network. Traditionally, innovation has occurred within an organization, where ideas and resources are tightly controlled. Today’s world in contrast has businesses taking advantage of the global economy, low-cost information, and mature technology
Mature technology
A mature technology is a technology that has been in use for long enough that most of its initial faults and inherent problems have been removed or reduced by further development...
to collaborate with their business partners to improve processes and offer enhanced solutions.
Type of business networks
Research from Geoffrey MooreGeoffrey Moore
Geoffrey Moore is a Silicon Valley based high technology consultant, venture partner at Mohr Davidow Ventures and author.His books are derived from his Silicon Valley consulting work at The McKenna Group and The Chasm Group , and earlier work by Everett Rogers on adopter categories and diffusion...
and Philip Lay shows the emergence of two types of business networks at different stages of evolution of a market or a product.
Collaborative business networks
In the emergent stage, collaborative business networks enable companies to explore and develop an emerging opportunity. Such a challenge is highly complex and largely undefined, so the emphasis is on communication, interaction, iteration, fast failure, and faster recovery, all trending toward delivering a complete solution to an end customer. In these networks there is typically a ringleader (called an Orchestrator) who has a vision for what is possible and rallies the other parties to pursue it. The other members of the network are included not only for their specialized expertise but also for their ability to team well with others in relationships that are not explicitly defined. This in turn implies relationships of trust built on a spirit of joint venturing to create new products and markets, the unifying principle being that the new market will reward all in reasonable terms. Examples include linuxLinux
Linux is a Unix-like computer operating system assembled under the model of free and open source software development and distribution. The defining component of any Linux system is the Linux kernel, an operating system kernel first released October 5, 1991 by Linus Torvalds...
development initiative, chip design efforts that go into a new game machine or developer ecosystem supporting a software platform.
Coordinated business networks
As a process or product produced by a business network matures, it must now provide scale through coordination and standardization. Now the network must operate under a new social contract, one which puts a high value on efficiency. This type of network is usually dominated by a single organization which acts as a “concentrator’. As such networks ramp to maturity, their operations become increasingly driven by a concentrator, a member of the network who has gained greater bargaining power than the others and who drives the performance of the whole to its own greater benefit. In a sector that is supply-constrained, this will be the resource owner or the manufacturer. In a sector that is demand-constrained, it will be the end customers or consumers, or the sales channel that controls access to them. In either case, the network as a whole has become highly transactional in its relationships and becomes increasingly dependent on IT to manage and monitor its end-to-end operations.How to do business network transformation
C.K. Prahalad and M.S. Krishnan in their new book, The New Age of Innovation: Driving Co-Created Value Global Networks argue that firms need a new operating model for global networked economy. This Business Week article http://www.businessweek.com/innovate/content/may2008/id20080519_851847 captures their insights very well. This book revolves around two ideas – N=1 and R=G. N=1 states that companies can create value through unique and personalized consumer experience. While, R=G, argues that since no company has resources to satisfy demanding and varied expectations of so many consumers, it must orchestrate resources from its business network partners. Instead of owning assets, companies can seek relationships that provides these assets.Strategic role of IT
Business network transformation requires change that runs through a company, its partner companies, and the underlying IT landscape that connects the two. Not surprisingly, businesses are turning to IT to address this phenomenon. Orchestrating these business networks requires a new IT architecture and strategy. It begins by establishing an open, service-enabled business process platform. This allows companies to reuse capabilities and rapidly compose new processes to integrate with partners and drive cross-enterprise business performance. Analytical apabilities then provide closed-loopControl theory
Control theory is an interdisciplinary branch of engineering and mathematics that deals with the behavior of dynamical systems. The desired output of a system is called the reference...
performance execution, making visibility, decision making, and collaboration
Collaboration
Collaboration is working together to achieve a goal. It is a recursive process where two or more people or organizations work together to realize shared goals, — for example, an intriguing endeavor that is creative in nature—by sharing...
possible across the business network.