In the wake of the Internet, traditional constraints of time, distance, and location are being dismantled. And in the world of consumers' market, the prevailing metaphor of business as shipping (be it physical goods or marketing messages) is losing its viability. Increasingly global, fast-paced and networked business renders existing structures unable to capture new opportunities or respond to new challenges. Linear, one-dimensional value chains with distribution channels and intermediaries shield companies from their end consumers, while bringing about costs and inefficiencies.
To meet the dramatically shortened business cycles, companies must reach out to each other and form networked ecosystems that pull together capabilities in a nonlinear fashion, eliminating time, distance and location. A virtually integrated business focuses on its core competencies and the key processes at which it excels, while partnering closely with other organizations that also focus on what they do best. In an extended enterprise, multiple companies work together to create customer value. This vision calls for radical rethinking of a company's identity and strategy.
The emergence of extended enterprise surpasses a mere horizontal trend and denotes a major transition to the next order of complexity: from the relatively stable, closed and controllable system of a self-sufficient enterprise to the relatively fluid, open and transformational system of networked, coadaptive entities.
The upcoming decade will see this paradigm shift gain strength and shake many conventional structures. The increasingly interlinked and coevolutionary nature of extended enterprise entails a number of challenges. In the next few blog posts, I will address some of these challenges in terms of strategy, governance, leadership and enterprise architecture, and outline rules for the whole new ball game that ensues.
Strategy
Traditional strategic planning that focuses on defensible strategic positions is inadequate in today's high-velocity markets, in which the strategic position can quickly be eroded. Also, traditional strategic thinking that emphasizes competitive forces often results in imitative and reactive, rather than innovative and proactive behavior.
As the perspective shifts from value chain to value network, the nature of strategy changes from defensive to proactive. In the extended enterprise and knowledge economy, the focus of strategy is on value innovation. Rather than outperforming the competition, value innovation aims at making competition irrelevant by offering fundamentally new value and by creating new markets. In coevolutionary collaboration, agility, synergy and ecosystem dynamics are emphasized over efficiency and economies of scale.
Sustainable strategic management calls for continual alignment of the organization with its value proposition. As the only constant is constant change, the competitive advantages of organizations are in continuous flux. To be able to create this series of shifting advantages requires effective distributed decision-making at all levels of the organization. How this could be achieved will be discussed next time in Part 2: Governance.
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