Do Business Well

An increasingly common type of structure is the ‘networked’ organization. It may in fact be a ‘hybrid’ of several firms working together for mutual benefit. The rationale for network formation is that synergies can be created by collaboration that would not be available to any one partner firm acting alone. Networked structures permit organizational flexibility in the face of rapidly changing environmental conditions, and therefore represent a more viable response to the current business operating conditions than the ‘organic’ structures described earlier. In its simplest form, one party to a collaborative network may obtain access to particular skills that it does not maintain in-house, while the other party is able to ‘piggyback’ access to new markets that it would otherwise have found difficult to penetrate. In more complex cases, it may be difficult to ascertain the position of organizational boundaries, particularly if an organization is involved in a number of different networks that change composition and evolve over time. In some industries, customers may be attracted to the network on the basis of the quality of the partner organizations involved (note, for example, the often proudly displayed logo `IBM Business Partner’). Such desirability can lead to the somewhat bizarre situation of firms ‘competing to collaborate’.

There are a number of challenges:

Networked organizations do not just ‘happen’ by themselves. Even if a `win—win’ situation such as the one described above is evident, the relationship between the partners still has to be developed, nurtured and managed over time if the firms are to work together effectively. Formal legal agreements are often deemed necessary to set out the respective obligations of the partners, especially in the early stages of a relationship. Over time, formal arrangements may be relaxed as trust becomes established. On the other hand, the costs associated with managing the network may counteract the benefits of participation.

In some cases, an independent ‘network broker’ may play a critical role in finding suitable partners, reconciling vested interests within the network and negotiating how network benefits are to be shared between the participants. While IBM now talks of the need for ‘triple hybrid’ managers to manage collaborative relationships effectively, the skills of the network broker can extend even further to encompass those of an entrepreneur, technician, sociologist, businessperson and politician!

Another challenge concerns how best to deal with collaborators that may also be competitors in other contexts. Although collaborating with competitors does not come naturally for UK firms, research has shown that companies involved in successful inter-organizational networking may become ’strategic collaborators’ by internalizing these networking skills and applying them in entirely new contexts in the future. Seth and Sisodia (1999) use the term ‘co-opetition’ to describe such arrangements. Traditional marketing relationships focus upon five key groups, namely shareholders, employees, customers, suppliers and the community at large (see, for example, McIntosh et al. 1998) Competitors are usually conspicuous by their absence from such lists of potential stakeholders. A wider definition of stakeholders would include ‘any group or individual who can affect or is affected by the corporation’ (Freeman 1997: 24). According to this definition, a competitor would clearly be a stakeholder of the firm, but the assumption of a competitive rather than collaborative environment remains the norm. In an influential early article, Hamel et al (1989) advocated strategic alliances and networking between firms with their proposal that collaboration rather than competition was a winning strategy. They concluded that firms benefiting from competitive collaboration see it as competition in a different form, regarding harmony as the most important measure of success, co-operation as limited and learning from partners as paramount. Key challenges for marketers here include the ability to define the boundary between competition and collaboration, in other words being able to ascertain where the ‘internal environment’ becomes the ‘external environment’.

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