Virtual Enterprises
Ted Goranson

Barriers to Advanced Virtual Enterprises

Just a few, core elements would need to be added to existing infrastructure in order to make advanced virtual enterprises flourish. The new ingredients would balance technical and non-technical issues, and some of the more challenging non-technical elements can be mitigated by more powerful technology. One way that technology can help is during the “discovery” phase; simple virtual enterprises tend to be physically close because that makes it easier to know what everyone else is doing. Specially networked systems can eliminate this barrier, so the same degree of exposure, contact and query is possible across companies worldwide. Effort is expended in the maintenance of such a system to be sure, but the physically based monitoring method is costly as well.

Five such new capabilities would need to be added to systems in order to support the next generation of business enterprise. No one case would require all five, nor an extreme advance in any one. But these five surround all the possible versions. In each case, the technology works with market forces and is geared towards value creation.

These are listed from most easy to most difficult. Sirius-Beta and the sponsored research it led has focused on the more challenging of these.

— Discovery and Advertising, Internal and External.

Potential members need a way to advertise themselves and their capabilities. Similarly, partners need to be able to “see into” the market in order to match cooperative capabilities to market opportunities. The advanced enterprise makes this more challenging because in addition to what a partner does, there is a range of new skills he can learn. There is the even more advanced potential that, in addition to what markets want now, there are products that users will love, but won’t be able to imagine until they have been invented.

— Trust and Liability Management.

In the standard business model, the prime contractor plays the role of judge over a supply chain. Participants may not like the decisions handed down, but at least there’s a simple way of handling problems. Each participant has a relationship with just one other entity, hovering above. No partner has to negotiate trust, or worry about liabilities with anyone but that parent. In an advanced virtual enterprise, a problem between any two partners can destabilize the system. Depending on how distributed the enterprise, the need to manage trust and deal with problems grows.

— Communicating Different Worldviews.

In a conventional enterprise, the prime company sets a culture and an analytical approach, and everyone else is “integrated” into it. The same is true of computerized tools. A well studied example occurs in the aerospace industry, where many engineering disciplines work on the same component – for instance, thermal engineers and structural engineers collaborate to make an efficient car engine. These experts are currently forced to use blunter tools and abstractions than necessary because technologies simplify their common computerized model. One competitive advantage of an advanced virtual enterprise is the ability to cooperate with a partner that has a radically unique approach to their product domain. This is easy until other parties in the enterprise want to understand what is going on in some depth. New technologies would enable ways of communicating diverse views across varied contexts.

— Financial Value Tracking.

Accounting systems are set up for monolithic organizations. In theory, this is because the cost of every aspect of the work is measured against how much value it adds. In a monolithic organization, the rewards for that value do not follow the same accounting, only the investment decisions do. The reason is simple: it is the organization as a whole that makes the profit. In an advanced virtual enterprise, however, there are many players, each of whom want to make a profit. Specialized technology would include a two-way accounting system. The first would measure the contribution of a partner to the organization. This would be a combination of the value added to the product (or service). The second would be a way to reward the value added through the building and maintaining of the enterprise. Such a measuring system will use “value features” that are richer than numbers. Only later, after the pool of income is to be divided, would the accounting be reduced to numbers (as dollars).

— Self-organizing Process Coordination.

In a traditional enterprise, there is a boss who connects up all the processes among partners. We know this is never done as well as it could be, but the methods for doing so are well established. In the extreme virtual enterprise, each process “negotiates with” others and collectively figures out roles and sequences to best deliver the value. Clearly, there is a spectrum between the “one boss” and the “self-organizing beehive” models. Even the smallest degree of self-organization could have tremendous competitive impact.

These five challenges already have hundreds of millions of dollars of investment in understanding the technical issues.

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