Transcript Chapter 23 The New Network Firm: a Spherical Structure

Chapter 23
The New Network Firm: a
Spherical Structure Built on a
Human Investment Philosophy
Raymond E. Miles
and
Charles C. Snow
Introduction
• “Network organization” Delayered, highly
flexible and controlled by market
mechanisms rather than administrative
procedures, obtain complementary
resources through strategic alliances and
outsourcing
Network form of organization
• Combine the resources of two or more firms with
complementary competencies
• Can simultaneously collaborate and compete
• Can be no more flexible and effective externally
than they are internally--their ability to arrange
and manage their internal resources determines the
quality of their external relationships and service
• Replace the traditional metaphor of the
organization pyramid with that of the rotatable
(See exhibit 32.1 p. 449)
Network form of organization
• Flexible, rapid response--the ability to arrange and
rearrange resources to meet the changing, unique needs of
upstream and downstream partners and those of customers
• When a request confronts the organization, the sphere
rotates, quickly providing the initiator with a means of
accessing the company’s entire array of resources
• This member sees the request through to completion
• Resources are at work on existing projects “inside” and on
the sphere’s “surface”
• As soon as the organization confronts its next problem or
opportunity, the sphere will rotate once again, bringing the
appropriate new set of resources to the surface
TCG: A Multifirm Spherical Network
• New product development is called “triangulation” it
involves a three-cornered partnership among a TCG
firm, a similar technology-based firm outside TCG
and a major customer
• Triangulation involves five key steps
–
–
–
–
–
Identify the market niche
Find a development partner
Locate a major customer
Involve other TCG firms
Extend the triangle in new directions
• For a list of the governance mechanisms used by
TCG, see exhibit 23.2 p. 452
The Human Investment Philosophy
• Form autonomous operating units and selfmanaging teams; eliminate unneeded
administrative mechanisms; empower everyone to
act as an entrepreneur and leader; be adept at
relationship management and willing to make both
hard and soft investments in their partners; a
human resource management philosophy in which
employees act as partners in their own
development; facilitate employee development;
locate opportunities for employees to apply their
continuously expanding knowledge and ability
The Human Investment Philosophy
• Assumptions
– Most people want to contribute to the
organization and will act as partners in their
own development
– Most people, both inside the network firm and
across current and future partner firms, are
trustworthy. They can and will develop
effective “relationship management” skills
The Human Investment Philosophy
• Policies
– Managers must view human capabilities from the
perspective of an internal venture capitalist, building
organization members’ operational and entrepreneurial
strengths by investing in their long-term education and
competence
– Managers must locate opportunities for employees and
teams to practice new skills and exercise new
knowledge
– Managers must be prepared to make investments in
technical and governance skills within other networkmember firms
The Human Investment Philosophy
• Expectations
– Continuing, heavy investment in human
capabilities builds adaptive capacity widespread
skill and knowledge reserves--a learning
organization
– The more competent the manager’s own
organization, the more facile and effective are
the network linkages it can make
Implications for management
policies and practices
• Create learning-oriented partnerships within the
firm and among network members.
• Create empowered jobs
• In the firm of the future, the concept of a “job” will
disappear as employees learn to think of themselves
as responsible for satisfying “customers,” whether
internal or external to the firm
• Routes planning and control information directly to
those who need it
Implications for management
policies and practices
• Development investments need not be justified
• Future skills and knowledge requirements can
seldom be fully predictable
• Does not advocate a particular type of reward
system. Instead, it anticipates that all
organization members will have knowledge and
responsibilities with bottom-line implications
Expectations
• Organization members have the potential to
be full partners in the enterprise, not only
helping to meet company objectives but
also being actively involved in generating
new business
The Human Investment Model in Action
• Emphasizes investment as the key
determinant of company success: firm’s
human assets and its ability to use them
effectively; organization members will
flourish only in an atmosphere of mutual
trust and respect; competencies and trust
must be built
The Human Investment Model in Action
• Investing in capabilities
– At the individual level
• Cover a variety of educational opportunities to develop intellectual
muscle and the ability to learn continuously;
• Training focuses on specific skills and know-how; and
• Apprenticeship relationships provide role models; judgment and
insight, and an appreciation for the values and expectations embedded
in the occupation
– At the team level
• Cross-training to develop team flexibility knowledge required to
understand and total production and business processes
• Employees who understand the business increase their ability to
exercise responsible self-management, and work teams that can
calculate profits from their activities improve their self-goverance
The Human Investment Model in Action
• At the firm level
– Return on its educational investment in strategic
thinking, empowerment and partnering
– Proactive and extensive knowledge development--key
competitive weapon in the future
– Culture managers and employees can help the
corporation by helping themselves
– High level of average compensation rewards must
accurately reflect the actual performance of managers
The Human Investment Model in Action
• At the network level
– Assist suppliers in need of financial help by buying
their inventory in advance and settling accounts when
deliveries are made
– Extend purchase orders for future output
– Send its own technicians to work in manufacturing
plants to bring them up to performance standards
Conclusion
• Managers must overcome two major barriers
– an intellectual one: the broader concept of a single
organization with multifirm properties may be difficult for
some managers to grasp
– Attitudinal managers they may resist building the network
organization because doing so conflicts with their beliefs
about people and how they should be managed
• Where strategies and structures are implemented
without supporting human resource management
philosophies, failures usually occur
• Successful redesign will occur only as strategies,
structures, processes and philosophies are brought into
tight fit