Published on March 8, 2014
AIM TO ACQUAINT THE BUSINESS STUDENTS ABOUT BUILDING NETWORKED BUSINESSES
GROUP MEMBERS MAJ TAVEER AHMED MBA-5TH MAJ FAWAD HUSSAIN MBA-5TH CAPT AZEEM HAFEEZ MBA-5TH M.QAISER MBA-5TH Ms AMMARAH ISHAQUE MBA-5TH MS RABIA KHAN MSBA 1ST MS SEHRISH ZAMAN MSBA 1ST MS GULNAZ AFZAL MSBA 1ST
SEQUENCE INTRODUCTION / NEED FOR NEW CAPABILITIES / HISTORY REPEATING ITSELF • (MAJ TAVEER ) BLUE PRINT FOR A NETWORKED ORGANIZATION • (RABIA KHAN ) MANAGING AND LEARNING • (GULLNAZ AFZAL) LEADING AND ENGAGING • (AMARAH ISHAQUE) BUILING VALUE NETWORKS • (M.QAISER) HOW SHOULD WE RELATE TO MARKET PERTICIPANTS • (SHERISH ZAMAN) EVOLVING MARKET STRUCTURE AND RELATIONSHIPS • (MAJ FAWAD HUSSAIN) MODELS / EXAMPLES / CONCLUSION • (CAPT AZEEM HAFEEZ) QUESTION / ANSWER SESSION • (ALL)
• “Our 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 company” » Jack Welch Former GE CEO
INTRODUCTION • • • • • Dilemma of todays executives. Being big act small. Concept of hybrid business organization. Emergence of entrepreneur and executives. Role of entrepreneur, executives and networked organization, its capabilities and requirement.
DIAGRAMATIC LAYOUT Need for new cap Is history repeating itself Introduction TANVEER Blue print for networked organization Building value Networked Operating Mng and learning Leading and and innovation GULNAZ Engaging RABIA AMMARA Where should activities performed QAISAR How we relate these activities SEHRISH /FAWAD Evolving mkt structure AZEEM
1. The Need for New Capabilities • • • • 20th century industrial economy designs. Industrial economy era. (1980 to 1990). Networked economy era. 1990+ Challenges faced by executives in industrial era:
THE NEED FOR NEW CAPABILITIES • “We 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.
NEED FOR NEW CAPABILITIES BUILDING NETWORKED BUSINESSES • “ABB 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 advantage” » Percy Barnevik, CEO Asea Brown Boveri (ABB) • • • • Sweden / Switzerland based power company. Assets over $50 bns. 850 subsidiary company. 140 countries over 1,80k employees.
The Building Orga niza tion Design Ch allenge the Networked Business Organization Complex & Global ? Hierarchy Simple & Local Entrepreneurial Organization Stable & Certain Environment Dynamic & Uncertain Source: Applegate, Lynd a M., Rober t D. Austi n, and F. War r en McF arla n, Corporate I nfor mation Strategy and M anagement . Bur r Ridge, IL: McGr aw-Hill/Irwin, 2002. Chapter 3 Figur e 3-1
Is History Repeating Itself? • Hybrid Organization design – To 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 Structure But, hybrid designs bred conflict, confusion, information overload, and costly duplication of resources
Is History Repeating Itself? – 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
BLUEPRINT FOR A NETWORKED ORGANIZATION • Challenges – Designing, 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 Innovating • Managing and Learning • Leading and Engaging
Blueprin t for a “Big-Small” Business Sample Organizational Components Sample Technology Components Leading & Engaging • • • • • Human Resources Management Strategic Alliances Customer Loyalty Supplier Loyalty Partnerships • • • • • HR Systems Customer Relationship Management (CRM) Personalization Communication Infrastructure User Access Devices Managing & Learning • • • • Planning and Budgeting Performance Monitoring Organization Structure and Reporting Organization Decision Making and Learning • • • • Management Reporting Decision Support Systems and Tools Business Intelligence Systems Data and Knowledge Management • • • • • Enterprise Resource Planning (ERP) Supply Chain Management Order Fulfillment New Product Development Distributed Information Processing Infrastructure Operating & Innovating • Operating Process • New Product Development • Business Venturing Source: Applegate, Lynd a M., Rober t D. Austi n, and F. War r en McF arla n, Corporate I nfor mation Strategy and M anagement . Bur r Ridge, IL: McGr aw-Hill/Irwin, 2002. Chapter 3 Figur e 3-3
BLUEPRINT FOR A NETWORKED ORGANIZATION • 1. Operating and Innovating – 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.
BLUEPRINT FOR A NETWORKED ORGANIZATION • 1. Operating and Innovating – Hierarchical Operations • Define rigid procedures, top down – Entrepreneurial Operation • Company do not depend on well-defined polices and procedures or structured jobs. – Networked Operations • Big-small companies, • Precision execution and fast-cycled innovation • Operation is designed to fully exploit the power of both people and technology whether this assets are in your firm or in someone else’s. • Technology can ensure precision and people can use the information in real-time to deal with unforeseen problems
OPERATING AND INNOVATING CAPABILITIES Precision Execution Hierarchy Fast - Cycled Innovation Entrepreneurial Networked
BUSINESS DESIGN REQUIREMENTS Capabilities Business Design Requirements Cost, cycle time and quality levels are benchmarks within the industry and exceed customer/stakeholder requirements. Flexible, modular designs enable customization, personalization, and continuous improvement. - Change processes are embedded within the company’s day-to-day operations Employees are rewarded for devising new, innovative ways to serve customers Customer and community connected Streamlined, integrated, and efficient operations seamlessly link activities performed inside the firm with those performed by customers, partners, and suppliers Fast-cycled innovation Precision execution Resources for change are available. There is a standardized and widely accepted process used to develop and present the “business case” and implementation plan for a potential idea. Executives and employees in all parts of the organization have the information required to understand th e lifetime value of customers, suppliers and partners and have the ability and authority to make decisions and take actions to improve satisfaction and loyalty. Incentive systems reward success in attracting and retaining profitable customers, suppliers, a nd partners and in increasing the frequency and level of engagement. (Note: All key stakeholders, including suppliers and partners are considered “customers” of an e-business.) -
MANAGING AND LEARNING 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 executed Allocate resources Organize people into groups and coordinate work Monitor and measure performance Adjust strategies, plans, budgets, and organizations based on learning
TRADITIONAL MANAGEMENT PROCESS Driven from top down, incremental goals and allocation of resources to carry them out.
ENTREPRENEURIAL MANAGEMENT PROCESS • Planning, 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
NETWORKED MANAGEMENT PROCESS Improved access to information enables employees, customers, and partners to invent new ways of working and to respond quickly.
MANAGING AND LEARNING CAPABILITIES
MANAGING AND LEARNING CAPABILITIES Capabilities Control and Integration Learning by Doing Flexible and well-managed boundaries Business design requirements • Coordination and control of routine operations is embedded within the digital operating infrastructure. • Early warning systems enable close monitoring and immediate response to threats and opportunities • Critical failure factors” have been identified and “disaster recovery” procedures are in place. • Real-time information and interactive management systems – a mix of face-to-face decision making supplemented by high bandwidth communication systems – enable large dispersed teams of people to make informed decisions, take actions, and receive immediate feedback • Key operating metrics are directly linked to financial and market results to provide real time feedback. • Shared, actionable goals provide direction and the framework within which decisions can be made and evaluated. • Employees and partners have a clear understanding of the role they play and how to work with others to get things done. But, these clearly defined roles must not limit people’s ability to work across boundaries - inside the firm and with suppliers, partners and customers. • In a networked organization, companies are highly skilled at forming and successfully managing strategic alliances and partnerships. • If a company is growing by acquisition, companies must be highly skilled at identifying and effectively integrating people, processes, and systems that unite acquired companies.
MANAGING AND LEARNING CAPABILITIES (CONT.) Capabilities Business design requirements Flexible and wellmanaged boundaries • Formal and informal communication systems support frequent two way interactions inside and outside the firm. • Coordinating mechanism (for example, advisory councils, governing boards, liaison roles, and information systems) enable effective coordination and control of activities that cross internal and external boundaries. Accessible knowledge assets • The information needed to make decisions and take actions is relevant, timely, and readily available to those who need it. It is presented in a form that is immediately actionable. • People are information literate and have the skills and incentives needed to turn information into action that is consistent with the best interests of the organization and its stakeholders. • Information and best practices are openly shared. • Politics, bureaucracy, and poorly aligned incentives do not get in the way of sharing and learning from information. • Processes are in place to ensure that information is accurate and reliable, and that employees, partners, customers, and suppliers trust the information they receive. • Privacy and confidentiality are safeguarded and security procedures are strictly enforced.
LEADING AND ENGAGING While management is all about coping with complexity,leadership is all about attracting and mobilizing the resources for change 1: Leadership involves defining a clear, compelling vision and ensuring that is translated into a set of actionable strategies and initiatives. 2: Attracting, motivating, energizing, and retaining top talent inside an organization and within partner, supplier, and customer networks 3: Creates a culture and ensures that values, beliefs and behaviors are deeply ingrained and reflected in the decisions made and actions taken
HIERARCHAL LEADERSHIP Emphasis managing complexity and minimizing it. Management process overshadowed leadership Risk were minimized by centralizing decision making, segregating activities and structuring work rigidly.
ENTREPRENEURIAL LEADERSHIP “Create or seize an opportunity and pursue it regardless of the resources currently controlled” Attract, 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.
NETWORKED LEADERSHIP 1 :In 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 2: When aligned with incentives and motivations that foster commitment rather than simply compliance. 3: 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.
LEADING AND ENGAGING
LEADING AND ENGAGING CAPABILITIES Capabilities Business Design Requirements Visionary yet pragmatic Leadership • Credible leaders at all levels of the organization are able to articulate clear direction. • Leadership is trusted and well respected and, as a result, is able to attract and retain high quality partners and talented employees. • “Visions” are translated into actionable strategies that can be executed and deliver results while the window of opportunity is still open. • Leaders are able set tangible goals and make focused decisions. • Executives are directly involved in the business; they ensure that barriers are removed, resources are available, and employees have the skills and motivation to accomplish growth. Energized participation Skilled in conflict resolution, negotiation and consensus • Culture and incentives foster innovation while also ensuring a strong commitment to delivering results. This requires that large projects be broken into smaller, more focused deliverables, and that senior management break down barriers and realign goals. • Employees, customers, suppliers, and partners believe that managers and other leaders possess the knowledge, skills, and experience needed to run the business. • “Stretch targets” energize action and motivate everyone to work at peak performance. • Leaders display a strong commitment to career development and learning for all. • Processes are in place to ensure that conflicting opinions are openly discussed without becoming destructive. • Employees and partners are skilled at negotiating “win-win” agreements • Despite conflicting opinions, consensus decisions can be quickly reached and implemented.
BUILDING VALUE NETWORKS • Building the value chain network – Where Should Activities Be Performed? – How Should We Relate to Market Participants?
BUILDING VALUE NETWORKS Options Vertical Integration Selective Sourcing Virtual Integration Description Locate all but the most routine, transaction-oriented activities inside the firm. Source selected activities from the outside. Traditionally, sourced activities were controlled through short-term contracts. Become part of a network of highly specialized, independent parties that work together to perform, coordinate, and control value chain activities.
BUILDING VALUE NETWORKS • Building the value chain network – How Should We Relate to Market Participants? Basis of Interaction Duration of Interaction Level of Business Integration Coordination and Control Information Flow Transaction Discrete exchange of goods, services, and payments (simple buyer/seller exchange) Immediate Low Supply and demand (market) Primarily one way; Limited in scope and amount; Low level of customization Contract Prior agreement governs exchange (e.g., service contract, lease, purchase agreement) Usually short-term and defined by the contract Low to Moderate Terms of contract define procedures, monitoring, and reporting One or two way; Scope & amount are usually defined in the contract Partnership Shared goals and processes for achieving them (e.g., collaborative product development) Usually long term and defined by the relationship High Interorganizational structures, processes, and systems; Mutual adjustment Two-way (interactive); Extensive exchange of rich, detailed information; Dynamically changing; Customizable
HOW SHOULD WE RELATE TO MARKET PARTICIPANTS • All firms make choices about the nature of the relationships that they develop with customers, suppliers, and other external industry participants. • .
HOW SHOULD WE RELATE TO MARKET PARTICIPANTS • Transactions involve the simple exchange of goods, services, and payments, usually during a specific time period and with limited interaction or information sharing between the parties involved.
HOW SHOULD WE RELATE TO MARKET PARTICIPANTS • In the contractual relationships, the products or services to be provided by each party and the length of the relationship are well defined
Impact of Information Technology on Market Evolution 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 3-7
EVOLVING MARKET STRUCTURE & RELATIONSHIP In industrial economy organizations were built on proprietary capabilities & infrastructure Difficult to integrate operations, share information, coordinate and control activities Creation of walls that isolated groups within organizations and market participants Firms grew complex, harder to coordinate and control
EVOLVING MARKET STRUCTURES & RELATIONSHIPS Proprietary Capabilities and Infrastructure Create Walls Inside an Organization and Among Members of a Value Chain Network
EVOLVING MARKET STRUCTURE & RELATIONSHIP Large firms vertically integrated Specialized infrastructures & capabilities further isolated functional units In mid 1900s more staff Hierarchical reporting structures also expanded In late 70s industrial economy became multinational and turned sluggish
Evolving Market STRUCTURE & EVOLVING MARKET Structure & RELATIONSHIP Relationship • 80s saw leveraged buyouts ,increased productivity and improved competencies and selective sourcing • ERP (enterprise resource planning) systems and enterprise integration software packages for control, opening of windows within walls • Impact of IT in 80s and 90s was limited and applied only to most critical processes and strategic relationships. • IT systems were costly ,difficult to operate, maintain and change and reuse
EVOLVING MARKET Structure Evolving Market STRUCTURE & RELATIONSHIP Relationship • In 21st century networked technologies provide densely connected, flexible and robust • Storing and sharing voice, video and data and shift to mobile technology • This has reduced cost and time ,increasing range of business activities and transactions with ease
Evolving Market STRUCTURE & EVOLVING MARKET Structure & RELATIONSHIP Relationship • Use of advanced IT helped in establishing virtually integrated market connecting sellers and buyers in virtually integrated C2C internet markets. • After dot-com demise Business-to-business activities. • With increased use of IT new business ways have been evolved
AOL -TIME WARNER’S VIRTUAL INTEGRATION IN VERTICALLY INTEGRATED INDUSTRY In 2000, AOL purchased Time Warner for US$164 billion Merger in January 2001 to become vertically integrated mega corporation Owned content, packaging, distribution, publishing , films , sports , music, cable , internet and TV Each AOL – Time Warner business was able to focus resources and energy towards building best in class products and services
AOL -TIME WARNER’S VIRTUAL INTEGRATION IN VERTICALLY INTEGRATED INDUSTRY • Each unit continued to distribute via traditional channels and gained synergies from them • Company developed new unit AOL – Time Warner Interactive for integrating content and media channel • Independent channel facilitators role by providing services in Vertically integrated market
AOL Time War ner’s Virtu ally-Integra t ed Organization within a Vertically-Integra ted Mar ket Source: Applegate, Lynd a M., Rober t D. Austi n, and F. War r en McF arla n, Corporate I nfor mation Strategy and M anagement . Bur r Ridge, IL: McGr aw-Hill/Irwin, 2002. Chapter 3 Figur e 3-10
CAPT AZEEM HAFEEZ
Fou r Networked Ma r ket Models Source: Applegate, Lynd a M., Rober t D. Austi n, and F. War r en McF arla n, Corporate I nfor mation Strategy and M anagement . Bur r Ridge, IL: McGr aw-Hill/Irwin, 2002. Chapter 3 Figur e 3-11
Impact of Information Technology on Market Evolution 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 3-7
FOUR NETWORKED MARKET MODELS Evolution of four networked market models took place in 2002 Virtual peer-to-peer networks Composed of individual teams & small businesses related through market driven transactions on publicly owned networks operated by neutral third party channels (eg : e-Bay and Yahoo) Virtual Coalition networks Composed of businesses of varying size related through combination of market driven transactions, contracts & partnerships on public and privately owned networks operated by joint equity coalitions (eg : GHX)
FOUR NETWORKED MARKET MODELS Virtually integrated organizations within vertically integrated markets Composed of independent , focused businesses and units within an organization related through combination of internal market driven transactions, contracts and partnerships across privately owned networks operated by corporate headquarters or one of its unit (eg ; AOL) Selective Sourcing Networks Composed of company’s key suppliers, customers or partners related through combination of internal and external market driven transactions, contracts and partnerships across privately owned networks often maintained by one of the parties (eg : Wal Mart)
FOUR NETWORKED MARKET MODELS All four network models develop shared infrastructures and capabilities These network models unite the three levels of a business blueprint Operating and innovating Managing and learning Leading and engaging Done across a network of entrepreneurial units inside and outside a firm
A STEP BY STEP APPROACH TO ANALYZING MARKETS & CAPABILITIES Define the stream of value creating activities required to execute strategy. Determine which activities will be performed inside organization and which can be performed outside Determine the nature of relationship with customers, suppliers, partners and others Define network market model most appropriate for the business and industry Conduct a high level audit of the capabilities required at the three levels of business: Asses ability to operate with precision while innovating and personalizing to ensure best experience for customers, suppliers and partners Asses ability to manage routine operations with control and efficiency Asses ability to develop visionary yet pragmatic leaders
A Step by Step Approach to Analyzing Markets & Capabilities Review findings and identify strength and weaknesses, findings should be discussed with employees, customers , suppliers and partners Develop a set of initiatives and prioritize, define an agenda for change
CONCLUSION NEED FOR NEW CAP INTRODUCTION BUILDING VALUE NETWORKED BLUE PRINT FOR NETWORKED ORGANIZATION MNG AND LEARNING OPERATING AND INNOVATION IS HISTORY REPEATING ITSELF EVOLVING MKT STRUCTURE HOW WE RELATE THESE ACTIVITIES WHERE SHOULD ACTIVITIES BE LEADING PERFORMED AND ENGAGING MARKET MODELS
QUESTIONS IF ANY
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