Thinking about Open Network Business Models: Your Insights Invited

Victoria Axelrod (my 21stCenturyOrganization blogging colleague) and I are on deadline for Effective Executive, an India based business magazine published by ICFAI University Press. Working title of our piece is:

Open Net-Working Organizations - Co-generating Knowledge and Innovation

Our article explores themes we've blogged about here over the past 2 years, research for two recent Inside Knowledge Magazine articles ("Broadcasting Innovation: Organising to Connect Intelligence" and "Prediction Markets: Co-creating the Organisation", my Enterprise 2.0 Summit Hanover presentation, and our forthcoming Social Capital: Glue for Sustainability Workshop, May 5 in Las Vegas, following the Community 2.0 Conference. (As Victoria previously wrote please use code SPKRM2005 for a friends 20% discount if you can join us.)

We like to practice what we advocate so as our article is about open, networked, working we're sharing our article outline here and inviting fresh perspectives and contributions of interesting sources.  Our article focus reflects we are contributing to a special Effecutive Executive Knowledge Management edition.

Overview

"In a March 2007 "Long Live KM" online discussion through the AOK Group, Robert Buckman (described by Infoworld as "KM's father figure") wrote:

"Jerry, thank you for the kind words, but I never did try and manage knowledge. What I really tried to manage and nurture was a culture that would encourage and expand the flow of knowledge. It was because economic value could only be obtained in our environment when knowledge moved across the organization in response to a need."
~ Bob Buckman, March 6, 2007 AOK Yahoo Group Post

Two decades since Buckman's pioneering work to encourage and expand knowledge flow and innovation, taking a network view of organizations and using the tools of Organizational Network Analysis (ONA) facilitates creating open, collaborative organizational cultures. More importantly, an intentional open net-working approach aids understanding how "social capital value" is created in organizations through dynamic interactions and relationships between all of an organization's participants and stakeholders. Examples from our research and experience of organizations using new open network models to promote knowledge sharing, innovation and value creation are included.

While we will revisit open working models investigated in our Inside Knowledge articles:

• Qualcomm's Venture Fest using prediction markets
• The Bordeaux Energy Colloquium, a Think Tank Network,
• Executive to Executive Marketing Networks as implemented at Avaya
• Procter and Gamble's "Connect and Develop" and innovation marketplaces like Innocentive

we're also exploring approaches including:

• Boston Consulting Group's use of mapping tools to understand networks around patents and identify high potential talent. (Did they really just use Touchgraph as Manuel Lima suggests commenting on the Business Week article?)
• IBM's use of open network initiatives including sharing research with partners and clients. (Thanks to John Maloney for this paper find.)
• The innnovative and business critical collaborative knowledge sharing initiatives presented at the Enterprise 2.0 Summit, Hanover.

In writing about open network approaches we're alert to investigating when such models appear not to work effectively. Hence we're striving to understand what caused Boeing's decentralized 787 supply chain to become a critical factor in the company's high profile and costly aircraft delivery delays.

Yesterday discovering Robin Teigland's presentation on Slideshare, (displayed as a "Related Slideshow" to my Hanover presentation), I was reminded of the potential value that can be created through openness in knowledge sharing. This is especially so when you intentionally start by "looking around" as John Seely Brown and Paul Duguid encouraged in "The Social Life of Information", 2000.

Hence this blog post sharing our article themes and ideas. Any and all reactions to our focus and examples, insights into Boeing's supply chain issues, and or fresh insights and interesting open net-working business models are welcomed and appreciated.

~ Jenny Ambrozek

Comments

[Laurence Lock Lee]

I think that the diagnosis of Boeing's supply chain ills being attributed to innovating in one area too many is a little too convenient. If that were the case then one could argue that a viable outcome could have been a failure in the new lightweight materials being employed, but a highly successful supply chain result.

I offer an alternate view: Perhaps Boeing's management of an increasingly complex network of suppliers was deficient in some way. I suspect that Boeing would have had a well oiled supplier contracting process in place that they would have simply extended to a larger number of suppliers. With a smaller number of suppliers, Boeing may have been able to manage each supplier on a one on one basis, as well as the interdependencies between the suppliers (the network effect). Once we ramp up the networking effect by adding many more suppliers, the governance processes that may have worked with a fewer number of independent suppliers, becomes woefully inadequate for a larger number of interdependent suppliers.

So what could they have done? Firstly they would have to appreciate that governance processes designed for traditional supply "chain" situations do not scale well to complex supply "network" situations. In these situations the intangible relationship aspects between network actors are as critical as contractual compliance. Being able to monitor the intangible value flows becomes critical as issues here provide the early warning systems for potential partnership breakdowns. If one needs to wait until a contractual condition has been broken to gain attention, then it is all too late, and the network effect will amplify the damage. Secondly they would have to incorporate some new supplier governance mechanisms that are more suited to "networks", as opposed to "chains", where supplier intedependence becomes a bigger issue and visibility of suppliers more difficult.

Our Partnership Scorecard http://www.optimice.com.au/psc_frames.html has been developed to address the issue of monitoring intangible value flows so that in complex networks one does not need to wait for contractual non-compliance events to trigger a corrective action.The scorecard is an output from a "value network analysis" http://www.value-networks.com/ exercise which is used to articulate both the tangible and intangible flows between the critical partnership roles, in Boeing's case the large network of suppliers and its own procurement roles.

There is also an issue here with the cost of supplier governance to Boeing. If Boeing are to maintain a desired cost base, yet take on more suppliers, they will have to rely on the supplier network being self governing to some extent. Again this reinforces the need for monitoring intangibles as the complexity required to craft contractual instruments and enforce them across the network would be cost prohibitive.

[Connie French]

Dear Jenny –

Thank you for mentioning InnoCentive in your recent post about Open Network Models and for mentioning us in your recent article on Open Innovation in Inside Knowledge. I look forward to reading your upcoming article as well.

If you ever need further information on InnoCentive, I would be happy to speak with you.

Regards,
Connie French
InnoCentive

[Jenny Ambrozek]

Connie, thanks for your interest. Writing about InnoCentive is easy to do when it is such a pioneering and innovative network model. Your comment reminds me to dig further into how InnoCentive started. This morning Victoria and I were discussing the conditions necessary for an individual to carry an innovative idea forward in an organization. I believe that is how InnoCentive started within Eli Lilly, correct? No shortage of questions to explore.

Meantime so you are aware our original interest in InnoCentive arose while researching cases for a chapter on "Transorganizational Collaboration and Networks" for the "Sustainable Enterprise Fieldbook". The publisher Greenleaf has announced the book.
http://www.greenleaf-publishing.com/productdetail.kmod?productid=2689

We'll let you know when it is out. Your commenting here appreciated. ~ Jenny

[Victoria G. Axelrod]

Laurence,
Thanks for your thoughtful reply. Although I see your point for the vna approach for looking at the intangibles in supplier relationships it appears Boeing has a perfect storm of several organizational issues blocking their progress. Delays still plague Boeing - http://tinyurl.com/5wcqkh

The sheer volume of suppliers bidding in their electronic network, ability to meet specs, and assembly co-ordination, all very tangible, seem to be superceding the intangible.

Multiple innovations, especially on a high visibility commitment may have been too much to absorb in a culture not known for rapid adaptation. At the very least one would hope they did some simulation modeling to test the new supplier network approach before launch.

Ever major firm has developed core expertise or competence over time. Boeing's may not be in supplier network management. Might they have looked to the lead companies for lesson learned?

I also wonder how or if the supplier network was involved in the design of the supply chain process. Rather than a post mortem, inviting stakeholders into the process upfront to co-create a network is what we have found to be the most successful. There is still an opportunity for Boeing to re-design the supplier network using such a collaborative approach.

Regards,

Victoria

[Laurence Lock Lee]

No doubt Boeing will learn from its experiences and will undoubtedly do things differently next time. The point I would like to pick up on is what is "very tangible". If indeed Boeing's on-line bidding system provided specifications that were beyond any degree of misinterpetation then I would suspect that the "re-work" talked about in the article would not have been necessary. Were the suppliers whose deliverables had to be re-worked actually not meeting their contract...or perhaps Boeing accepted that their specifications weren't bullet proof? Unfortunately, complicated planes are not lego sets and therefore I would argue that there are many "intangible" expectations unwritten in the specifications. Such "unwrittens" can be learnt between partners with a long history, but this is not the case when the suppliers have won an on-line bidding competition. So the challenge is tracking potential mis-matches in expectations before the main damage is done?

[Kristoffer Hartwig]

Jenny,

Sounds very interesting indeed. Have you thought about making use of Systems Theory? I've found that it provides a great framework for analysing complex and dynamic situations such as Boeing's Open Innovation effort.

First of all, you can regard the notion of open innovation as a mechanism for reducing complexity and integrating highly specialised knowledge that does not emanate from the company itself.

The problem arises when the complexity reducing mechanism itself creates second order complexity. A challenge would then consist of discovering where, say enterprise 2.0 tools such as prediction markets could be leveraged to absorb the newly created complexity.

In my opinion, Systems Theory is a highly usable framework for these situations, and I'm hoping to include the 787 in my thesis, there must a lot learn from that case!

Let me know if it might useful for you.

regards

/Kristoffer

[Jenny Ambrozek]

Kristoffer, THANK YOU for contributing thoughts here. Based on your post to the Prediction Markets Google Group and your thinking above I expect your thesis will be a must read. I'm with you on Systems Theory. Victoria has seriously studied but I'm a keen student. If Boeing and the 787 is your focus for context you might want to investigate a 2005 book, "Deep Stall" by Philip K. Lawrence & David Thornton (found through a "Financial Times" article this past week.

The authors make the case that:

"Boeing has neglected strategic value in favour of shareholder value, defined in terms of short-term cash benefits."

http://www.theengineer.co.uk/Articles/292132/Deep+stall.htm

~ Jenny