Our Digital Planet: The Democracy of Collaborative Networks

Companies must engage with broad networks and rethink their supply chains in order to remain relevant in today’s business landscape.

On November 10 2015, the 20th birthday of UK airline easyJet, the company dispatched an email to the millions of passengers who had flown with it during that time. Not so remarkable, you might think. What company wouldn’t trumpet 20 years of profitable existence?

But this was no chest-thumping message. Instead of highlighting the fact that the low-cost airline had survived and prospered during two decades of turbulence in aviation, the airline chose to celebrate its passengers instead. “Hi Margaret”, it said to one customer. “Remember your first ever trip? It was September 26 2007 when you left Glasgow behind and stepped off the plane in Berlin. And you’ve come so far – 26,251km to be precise. That’s more than halfway around the world! All in all you’ve been on 12 adventures with us, spanning four different countries.”

digital_planet_01_image2As an example of the effective application of consumer-facing, digital-based networking, easyJet’s communication could hardly be bettered. The airline had capitalised on its birthday to mine mountains of accumulated data to launch a dialogue with its passengers that will surely, in the long run, serve to engage the latter more deeply with the group. For good measure easyJet dangled a carrot: “you’ve been to London with us, why not try Milan?”

As enterprise software giant SAP pointed out in D!gitalist Magazine, a native-digital magazine designed for the mobile experience, it’s this kind of initiative that captures the opportunities provided by today’s communications revolution to help grow business. “With advances in networking, cloud computing, social media and mobile technologies, more companies have the opportunity to connect, communicate, and collaborate with important external elements of their value chains,” the company explained. “Building on the early days of electronic trading networks, richer collaboration networks will enable companies to engage more deeply with customers, suppliers, banks, and other trading partners.” There’s no more important element in the value chain than the customer, as easyJet clearly recognised.

Engagement gains

The gains from such engagement are profound. “Those that partner effectively and securely can bring innovative products to market more quickly, boost efficiency, improve visibility, increase agility, and reduce risk,” SAP noted.

In one sense, sending a message to a client, supplier or trading partner is essentially a form of networking, like attending a cocktail party or a conference. But the intelligent employment – and deployment – of the full range of communicative possibilities known as collaborative technology can turbo boost a business’s networking capabilities in quantitative and qualitative ways that were unimaginable even a few short years ago.

In principle, collaborative technology as applied to commerce does imitate the interactions of social media, except it’s much more complicated. As Quentin Fisher, Associate Vice President for Global Analytics at UK-based consultancy HCL Axon, said, just as individuals have moved past one-to-one emails to social networks to stay connected and informed, linear supply chains are transforming into collaborative supply networks, enabling companies to work better together. The tools for these enhanced networks include cloud computing, social media, analytics and mobile systems.

By tapping the potential of these tools, businesses have unlimited – or certainly indefinable – opportunities to create networks that enable higher levels of engagement, transparency, collaboration and trust in the business world. And, as a bonus, these next-level networks usher in a period of commercial democracy. “People can be connected at a much lower level in organisations,” said Fisher. “Companies can be much more agile and adaptive. They can make faster and better decisions.”

As a recent large-scale study by consultants McKinsey & Company of more than 3,000 company executives found, networked enterprises – that is, companies that use collaborative technology to connect internal processes to customers, suppliers, and partners – outpace their peers in nearly every category of business performance, from market leadership to increased sales and profitability.

So it seems companies cannot afford not to explore the full potential of collaborative technology. As Rita Gunther McGrath, an Associate Professor of Management at the Columbia Business School and author of The End of Competitive Advantage argued, the price of ignoring what collaborative technology can do is far too high, especially because of the rapidly shortening time-life of products. Competitive advantage is evermore fleeting, she said. Customers are fickle, product lifecycles are shrinking, and companies won’t keep up if they try and go it alone. Richer business networks will be the platform on which successful companies innovate, collaborate, grow, and continually evolve – in terms of both speed and scale.

Cloud computing, social media and mobile technologies give companies the opportunity to communicate and collaborate

This has been coming for a while. In his 2005 book The World is Flat – A Brief History of the 21st Century, New York Times columnist Thomas Friedman alluded to events such as the attack on the World Trade Center in 2001 as just one of the precursors for where the globe’s increasingly open architecture, in communications, as well as in other areas, was taking us. He explained how the flattening of the world happened at the dawn of the 21st century, with enormous implications for countries, companies and individuals. Friedman highlighted, for example, how the convergence of technology and events allowed India, China and many others to become part of the global supply chain for services and manufacturing.

And that in turn has created an explosion of wealth in regions such as Asia, itself a phenomenon of the flatter world, that has given people a huge new stake in the success of globalisation. Thus, in a virtuous circle, businesses outside those regions have previously unimaginable opportunities that can only be accessed through collaborative technology.

As the 2015 analysis of Asian wealth by bank Julius Baer predicted, the pool of investable assets held by high-networth individuals in Asia could reach $14.5trn by 2020 – that’s an increase of 160 percent in the current decade. And this wealth will emerge in countries that were once economically depressed. Although the story of growing wealth in China is well known, several other nations, such as the Philippines, India, Taiwan, and Malaysia are witnessing spectacular increases in buying power. As Boris Collardi, Julius Baer’s CEO, pointed out: “While we have tempered our optimism as to the rate of growth, there is still much reason to look to Asia as the greatest garden to grow millionaires.”

Redefining the supply chain

The secret of reaching these consumers is the flat organisation, as Fisher, who has deep experience in consumer goods, explained. Collaborative business networks can flatten the organisation, he said, and put small to midsize enterprises on the same footing as much larger companies. That’s why open innovation – an important new buzz phrase – is being employed by companies of all sizes to tap the knowledge of individuals outside their organisations to solve business problems or come up with product innovations. As Professor McGrath said, firms have to move faster.

The need for speed is forcing a rethink of supply chains. As Lamar Chesney, and former supply chain and finance executive told D!gitalist, companies are beginning to define the supply chain as a much broader business network, starting with their supplier’s supplier and ending with their customer’s customers. Business networks must allow companies to transact quickly, collaborate in real time, and access information from their network of partners when and where they need it, he added.

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Does this mean that the vertically integrated company – the one that makes everything under one roof – is dead and buried? Many think so. British Nobel prize-winning economist Ronald Coase is probably most closely associated with the concept of vertical integration. The far-sighted Professor Coase studied transaction costs – those incurred from buying or selling things – and showed that companies could reduce those costs by performing functions in-house rather than dealing in the marketplace. In short, he believed companies should control the value chain.

But that was then. Coase was born in 1910 when roads were still mostly dirt and, as D!gitalist put it, “robots were things you read about in pulp fiction.” By the time the great economist died in 2013 at the age of 102, the world had changed. Transaction costs had dropped steadily, thanks mostly to better transportation networks and greatly increased automation; and then they plummeted further with the introduction of PCs and distributed networking.

The world had changed. And yet many companies still remain wary of doing business outside their four walls.

 

Part of the series: Our Digital Planet: Data-Driven Business Frameworks Are the Future. In a Hyperconnected World, the Collaborator Is King

Read other articles in this series:

The Rise of the Digital Worker

A Digital First World

Collaborating for Success

See it, Click it, Buy it

A More Intelligent Workplace

 

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Tags:

Digital Economy, Supply Chain, Engagement