Building Networked Businesses Chapter 3

Operating and Innovating Hierarchical Operations Entrepreneurial Operations Networked Operations

Operating and Innovating Capabilities

Managing and Learning Capabilities

Leading and Engaging Capabilities

Options for Structuring Market Activities OptionsDescription Vertical integrationLocate all but the most routine, transaction-oriented activities inside the firm. Selective sourcingSource selected activities from the outside. Traditionally, sourced activities were controlled through short-term contracts. Virtual integrationBecome part of a network of highly specialized, independent parties that work together to perform, coordinate, and control value chain activities.

Relationships Options Transaction Contract Partnership Basis of Interaction Discrete exchange of goods, services, and payments (simple buyer/seller exchange) Prior agreement governs exchange (e.g., service contract, lease, purchase agreement) Shared goals and processes for achieving them (e.g., collaborative product development) Duration of Interaction Immediate Usually short-term and defined by the contract Usually long term and defined by the relationship Level of Business Integration Low Low to Moderate High Coordination and Control Supply and demand (market) Terms of contract define procedures, monitoring, and reporting Interorganizational structures, processes, and systems; Mutual adjustment Information Flow Primarily one way; Limited in scope and amount; Low level of customization One or two way; Scope & amount are usually defined in the contract Two-way (interactive); Extensive exchange of rich, detailed information; Dynamically changing; Customizable