Recently, Jeffrey Word, the Director of the Center for Business Network Transformation and Vice President of Product Strategy at SAP, edited and published Business Network Transformation: Strategies to Reconfigure Your Business Relationship for Competitive Advantaged through Jossey Bass, with all royalties from the book being donated to the World Food Program.
The book, which is about the evolving nature of global business and the ways that a company’s network of relationships (with suppliers, customers, and other partners) is being reconfigured to derive competitive advantage and increased profitability, includes contributions from Geoffrey Moore (TCG Advisors), David Kletter (Booz Allen Hamilton), Randall Russell (Palladium Group), Andrew McAfee (Harvard Business School), Mohanbir Sawhney (Kellogg School of Management), and Jeffrey Dyer (Brigham Young Unversity), among others, and does a great job of not only defining business network transformation (BNT), but also in providing practical advice on how to achieve it and case studies that illustrate the ideas.
It starts off with a great introductory chapter by Geoffrey Moore and Philip Lay which explains how most networks these days are either collaborative (like the ones used by Cisco, Boeing, and Goldman Sachs) or coordinated (like Nokia, Nike, or Charles Schwab) and that while each of these network types have their advantages (expertise, innovation, and market development in the case of collaborative networks and efficiency, speed, and adaptability in the case of coordinate networks), each of these network types also have their disadvantages (as collaborative networks struggle with commoditization and entrusting partners with non-core mission critical processes while coordinated networks struggle to enter new markets and achieve downstream visibility). As a result, most networks need to transform to compete in today’s economy. This is especially true if your competitors are transforming their networks and their strategies to capitalize on new opportunities. The chapter concludes with a list of seven early warning signs that indicate you will need to transform your network or risk being left behind.
The next chapter, by Marco Iansiti (of Harvard Business School) and Ross Sullivan (of Keystone Strategy) tackles business network transformation in action by diving into the five guiding principles (design for adaptability, plan for scalability, encourage participation, develop a governance framework, and create superior customer value), providing a four-phase implementation framework for you to follow, and presenting case studies on Novartis (which is using BNT to reduce new drug development cycles and cost), Hugo Boss (which is using BNT to manage multiple brand identities through smaller, nimbler sub-organizations), and NVidia (to create and capture niches in the semiconductor industry).
Chapter three, by Mohanbir Sawhney (Kellogg School of Management) and Ranjay Gulati (of Harvard Business School) tackles the all important goal of creating superior customer value in a connected world and addresses digital networks and customer collaboration. In doing so, it discusses collaborative value exchange in depth and provides a guide on how to use today’s networks and network technologies to create more value regardless of what industry you happen to be in.
The next two chapters, by Ranjay Gulati and David Kletter (Booz Allen Hamilton) and N. Venkatraman of (Boston University), respectively, tackle relational capital and product leadership, which are critical to value creation in today’s modern business networks. An organization with a well designed and well managed network has a lot of relationship capital that it can capitalize on between its suppliers, customers, and alliances; relationship capital that can mean the difference between success and failure in today’s economy. Chapter four discusses the dimension of relationship capital and how to move from transactional relationships to ownership relations which take advantage of strategic partnerships to create value that would not otherwise exist. Product leadership is becoming harder and harder, especially when today’s business landscape is shaped by the intersection of Moore’s law (the number of transistors that can be placed inexpensively on an integrated circuit doubles approximately every two years), Metcalfe’s law (the value of a network grows as the square of the number of users), and the Edholm’s law (bandwidth rises three times faster than computer power, implying that the speed of communication doubles every six months). Chapter five provides case studies from GM (Onstar), Apple (the iPod), and Microsoft (HealthVault) that demonstrate how companies that can create, and take advantage of, opportunities created by the intersection of these laws can change, and dominate, markets.
Then we encounter the chapter on driving collaborative success in global partnership networks by John Hagel III, John Seely Brown, and Gautam Kasthurirangan (of the Deloitte Center for Edge Innovation) which is one of the crown jewels of the book. Truly successful business networks are business process networks (BPNs) which orchestrate many best-of-breed suppliers and partners together in a distributed, collaborative approach that uses the respective strengths of each partner to create new, valuable, products and offerings that no individual organization can create on its own. An organization that moves from a physical network approach to a process network approach can grow from a niche provider to a global multi-billion dollar enterprise, like the Li & Fung group which went from a small exporter of traditional Chinese items made from porcelain and bamboo, clothes, and toys in the 1970’s to a multi-national group of companies with offices in 40 countries and $14 Billion US in annual revenues. Besides presenting a number of impressive case studies, this chapter also discusses the key elements of global process networks (which include product and process modularity, loosely coupled processes, trust in collaboration, and productive friction), common misconceptions (and how to combat them), and a pragmatic path to orchestrating a BPN. This chapter alone is worth the price of the book, but if you stopped reading here, you’d miss the insight on managing innovation by Henry Chesbrough (of the University of California at Berkeley), the discussion on the role of IT in business network transformation by Andrew McAfee (of Harvard Business School), and the full road map to business network transformation presented by
Geoffrey Moore and Philip Lay (of TCG Advisors), which I’m not going to cover because I have to leave you with some surprises so you’ll buy the book and support the World Food Program. It does a very nice job of building on the innovative concepts I’ve been covering since I started this blog (including my posts on the innovation revolution on e-Sourcing Forum) and presenting them all in one nice, neat package. It’s worth your time.