Virtual Enterprise Networks allow business scale through virtual collaboration
Small businesses from many different industries, both traditional and hi-tech, have discovered a new way for them to succeed in the "global economy". It involves collaboration on large proposals, R&D and fulfilment of orders assisted by relatively low cost, virtual collaboration technology.
Virtual Enterprise Networks (aka VENs) give small businesses scale
Traditionally many small businesses join supply chains centred on larger companies.
Unfortunately the companies at the bottom of such supply chains are often treated as commodity players and replaced with cheaper alternatives when the opportunity arises.
Some brave small businesses have attempted to "go it alone" by creating sophisticated internet e-business architectures which directly link them to their major customers and partners.
However the expense, risk and sheer management effort involved in this approach puts it beyond the reach of most.
Virtual Enterprise Networks (aka VENs) give small businesses scale
The "third way" which companies are discovering is to join "Virtual Enterprise Networks" or VENs with other like-minded but complimentary businesses to market, sell and deliver collective offers to the market beyond what the individual companies could offer by themselves.
In addition these VENs are also undertaking significant collaborative product development work, often in partnership with applied research institutes and universities, which would be beyond the reach of the member companies individually.
For example, a group of UK Engineering companies are using the VEN approach to collectively bid for many-million pounds of work per annum from a large European Customer. Like many corporates this customer has a supply chain rationalisation (aka small supplier reduction) programme which would stop them dealing with any of the companies individually.
Another example is a group of Swiss component manufacturers who used VENs to move up the value chain away from contract-specific components to branded product solutions in the face of stern cost-based competition from Czechoslovakian companies exporting into their home market.
A third example is a group of Mexican manufacturers who used a VEN to support their entry into a new, more sophisticated market (the US).
So what exactly is the "Value Proposition" for a VEN?
A VEN connects businesses into peer networks that are supported by appropriate technology to give them the capabilities and competitive advantages of global enterprises particularly:
- MARKETING REACH
- PRODUCT DEVELOPMENT
- HUMAN, CAPITAL & IT RESOURCES
Whilst exploiting their inherent competitive advantages in being able to be more agile in areas such as:
- SPEED & RESPONSIVENESS
- ENTREPRENEURSHIP & INNOVATION
- LOW OVERHEADS
So what are the critical factors for making a VEN a success?
All the experience points to four main ones:
CSF1. Not over-complicating the technology support!
The surprising thing about virtual enterprise networks is that the technology support companies need to get started and win collective new business is neither complex nor costly.
When companies are starting to collaborate all they really need is a simple web-based collaboration platform which they can access from their companies (whilst travelling) which allows them to securely communicate, schedule, discuss and work on shared documents.
Typically numerous suppliers offer such software as a hosted, pay-per-use service, which requires no software, installed at any of the client PCs.
Companies operating in a network also need access to good shared business applications such as campaign management/CRM - these applications must be web-based as networks of small companies do not have shared IT infrastructures.
CSF2. Taking "Network Governance" Seriously
The biggest concern a customer will have in dealing with a network is who is accountable when things go wrong (and can I sue them if it has to come to that!).
Also customers want to treat the network like a single entity not like a collection of different companies. Thus they need to see single point of contact, seamless business processes and common values from a network.
This can all be grouped together under the term "Network Governance".
Networks, which do not invest in building this typically unravel in their first sales pitch to any large customer once the customers procurement department starts asking probing questions.
"Marriage of Convenience networks" rarely win collective contract work from major organisations.
CSF3. Development of Common Collaborative Working Practices
A virtual enterprise network is a virtual team. However it is made up of individuals from many different organisations with different ambitions, IT awareness, business cultures many of whom do not know each other well.
It is therefore a classic Virtually Networked Team and as such needs to agree the way these people will work together, make decisions, handle conflicts, share information and use the virtual collaboration technology.
An aspect of VENs which seem to differentiate them from other forms of networking is the willingness of the members to invest in the development of these shared working practices.
Without such practices it is unlikely that trust will grow in the network to the extent necessary to achieve anything significant.
The first conflict that happens will probably destroy the network.
Strange as it may seem it is sometimes the appearance of the first good business opportunity that destroys a network as members revert to non-collaborative styles with the smell of the money!
CSF4. "ABC" Roles
The most successful virtual enterprise networks are based around 3 key roles, which can be remembered using "ABC".
"A" is for the Architect who knows what the network of companies can (and cannot) deliver. The Architect is also responsible for finding companies to fill gaps in the virtual supply networks needed to deliver specific customer opportunities.
"B" is for the Broker who sources potential customer opportunities for the network and then works closely with the Architect to qualify them and configure the right virtual teams to bid.
"C" is for the Coach who works with the individuals in the different companies to build trust, design accountability structures, resolve issues, address conflicts of interest and build them into effective cross-company teams.
Ability to collaborate will be the defining skill for successful businesses in the future
It used to be said that the ability to learn quicker than your competitor was the only skill that would guarantee your survival (Arie De Geus).
The small-medium businesses, who are operating virtual enterprise networks (aka VENs), are demonstrating that real competitive advantage lies in learning to collaborate better.
For more on how to get started with VENs see A kick-start plan for setting up a Virtual Enterprise Network in 6 weeks
An earlier version of this article was originally published by Ken Thompson in Enterprise Ireland eBusiness Live, December 2003
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