Part IV in a series of blogposts describing the 10 Principles of Open Business
Our third Principle of Open Business is one defining the organisational structure of an Open Business. It is that it should be a Networked Organisation. “The organisation functions as a platform connecting internal networks to external ones for a common Purpose.” (see Principle 1: Purpose).
This speaks to and supports our primary definition of an Open Business: One which uses its resources to bring people together to achieve a shared Purpose – designed from the outset to scale through participation making partners of customers.
Once again, we invite you to score your organisation against this principle and offer a guide at the end of this post.
This approach to the organisation – long advocated and designed for by 90:10 Group and alternatively described (in February 2010) as the ‘platform organisation’ – is now widely accepted and advocated, even by traditional management consultancies:
For example McKinsey defines today’s most successful organisations as ‘the Networked Enterprise’.
McKinsey Quarterly reported ) : “… 27 percent of the companies in our survey reported having both market share gains against their competitors and higher profit margins… with earnings growing faster than the rest. Highly networked enterprises were 50 percent more likely to fall in this high-performance group than other organizations. This finding suggests that the fully networked enterprise could become the benchmark for more vigorous competition in many industries.
“Moreover, the benefits from the use of collaborative technologies at fully networked organizations appear to be multiplicative in nature: these enterprises seem to be “learning organizations” in which lessons from interacting with one set of stakeholders in turn improve the ability to realize value in interactions with others. If this hypothesis is correct, competitive advantage at these companies will accelerate as network effects kick in, network connections become richer, and learning cycles speed up.”
90:10 believes the key business benefits of The Networked Organisation are that it:
- Links people and teams – breaking down conventional boundaries (e.g. departments and geographies)
- Offers pragmatic, rapid and efficient scaling through access to a global workforce of niche skills
- De-risks/removes the threat of over capacity.
- Brings the org closer to both market and customer – since it integrates with both
- Maximises the knowledge potential and flow of an enterprise;
- Offers greater resilience, minimising the threat and impact of disruption
- Enables both responsiveness and adaptability in a way more rigid and silo’d organisational structures can’t match
Two examples of businesses benefiting from applying the Networked Organisation principle are:
BlurGroup.com: a Global Services Exchange which connects a worldwide network of experts to respond to briefs from multinational clients. To July 12, 2012, 908 briefs had been received – the largest worth $5m. (Source BlurGroup.com)
Apple: While there is much that is not externally networked about Apple, its approach to scaling the functional ability of its iPhone and iPad has been exceptionally networked – and exceptionally successful.
Apple resources provided a platform to enable those outside the org (developers, brands, media companies) to create value by building, marketing and selling apps. The app makers get 70% of the sales value on each download made via the app store. The app store’s market cap value (the value this delivered to apple) as of December 2011 was ITRO $7.08bn (Source Apple.com)
Organisations which aren’t preparing to adapt to take advantage of the networked approach may, according to IBM, find themselves in a minority before the end of 2012.
IBM reports that more than half of CEOs (53 percent) are planning to use technology to facilitate greater partnering and collaboration with outside organisations, while 52 percent are shifting their attention to promoting greater internal collaboration. In 2008, slightly more than half of the CEOs interviewed planned to partner extensively. Now, more than two-thirds intend to do so. (Source IBM CEO Survey, May 2012)
Which side of the line is your organisation on. Score yourself below:
Goal state (Scores 5/5): No more than 1 in 10 in your organisation’s ecosystem are employees – the rest partner with you from outside the organisation. Your staff act as an enabling platform for participation from outside the org.
Worst Case (Score 1/5) You employ staff to fulfil every function of the enterprise.