Tuesday, June 24, 2008

Smart Business Networks

Recent research in network science triggered by the boom in social networks on the internet, has made a significant contribution to a more profound understanding of networked behaviour in business ecosystems.

Networked ‘swarm’ behaviour for example can demonstrate an increase in collective intelligence. Such collective behaviour in complex self-organising systems exhibits impressive ‘smarter’ problem solving capability as well as greater agility.

By linking together in strategic and operational networks, enterprises are therefore able to gain synergy and achieve superior operational performance than was previously achievable using more rigid organisational models. By combining skills and resources as part of a larger networked entity, they have the potential to become much more agile and flexible, reacting to and taking advantage of emerging opportunities.

For example, In less than 10 years Amazon has moved from book retailing to become the world’s leading e-tailer, offering a complete business platform to support a networked model for traditional retailers including- facilitating searching by buyers and sellers, helping set pricing, managing logistical processes, settling payments, arranging fund transfers and authenticating the quality of goods and the credibility of buyers and sellers.

Thousands of retailers join the Amazon network every month to benefit from Amazon's accumulated experience and information relating to retail goods, buyers and sellers. Such new platforms demonstrate strong network characteristics- for example, the more users in the network, the more useful it becomes for all players and the more difficult it becomes for members to switch to another network.

Organisations are increasingly moving from today’s relatively slow and hierarchical model of a self-contained business based on a small number of closely coupled partners, to an open digital platform where business is conducted across rapidly created networks. This open model allows opportunistic linking to a wider range of global partners, connecting to different processes and information systems. The disadvantage of not moving to such loosely-coupled networks includes the inability to provide support for more complex, bundled and rapidly delivered products and services in a fast changing and demanding business environment

Future Trends

The key characteristics of the smart business network of the future will be its ability to rapidly react by picking, plugging and playing business processes and partners, reconfiguring rapidly to meet specific objectives.

In addition such networks will need to quickly and opportunistically connect and disconnect relationships, at the same time establishing business rules and operational logic for participating members on the basis of risk and reward. This ‘on the fly’ capacity to reconfigure new decision rules governing decision and operational processes, will be a crucial dynamic governing the success of tomorrow’s future enterprise.

Future enterprise IT managers must also learn to span the architectural boundaries between their own networked organisation and the increasingly complex social, financial and economic networked environments in which their organisations are embedded and must operate.

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