Increasing volatility, uncertainty, complexity and ambiguity (VUCA) can no longer be mastered with the rigid structures of the past. Collaboration takes place across borders, wherever you look. The related structures are constantly changing and subsist on self-organizing actors who build, use and eventually resolve the necessary relationships. The result is a more or less dense network. Aside from today’s needs, where everything is just one click away, there are some arguments in favor of and against the use of networks.
The following ProCons affect not only networks but all types of communities.
The benefits cover more than just the economic interests of the companies.
Competence advantages The network draws its strength from the purposeful connection of resources and capabilities. The participants’ intrinsic motivation provides the network with a long-term advantage ahead of other forms, which on the one hand require a lot of setup time and on the other hand never have comparable access to this amount of competencies.
Information advantages The actors provide a lot of information. This includes experience and knowledge about different markets, customers, products, technologies and, above all, business processes. By sharing this information (push vs. pull), they reach all network participants at a relatively high speed.
The actors already provide a variety of resources – material and immaterial goods and especially people. Contrary to other forms of organization, the network offers an adjustable openness that makes it possible to expand resources faster. Just the use of these resources of the actors provide means that otherwise would have to be procured with much effort. In addition, this tool is usually better suited that is brought by the craftsman.
Social advantages Getting to know like-minded people is a huge advantage for the actors. The sense of community offers an environment in which you can expect more pleasant working conditions and a trustworthy cooperation due to the same interests.
Economic advantages Looking at the entire network, there are many savings for the company. Cost advantages arise when the actors already bring additionally to their commitment many resources that do not need to be purchased. The combined competence accelerates the business and reduces the risks. Practicing self-organization in a network avoids delays caused by a hierarchical structure with its long decision-making and communication paths.
Against networks speak especially apparent extra efforts, unpredictability and the difficult control.
Even with all the advantages, networking requires active involvement of its members. The open procedures and the lack of centralized control require other efforts of the participants, which are perceived at first glance as additional expenses. However, much higher overall savings can be made for the company.
Even with a lot of engagement in disseminating information, there can be more double work in the self-organized network than in a tayloristic organization. The lack of control can lead to a competition for the best idea that would be wasteful.
Increased communication effort The multiplicity of actors increases the coordination effort, which can even not be avoided with agile approaches. New insights and experiences simply have to be shared, absorbed and processed. This effort is the price for a lot of advantages.
Cooperation issues Of course, because of the variety of characters, there will not only be sympathy, but also antipathies that can burden collaboration and trust and eventually lead to an increased need for mediation. This makes team building an important exercise.
Lack of control A strong driver for the formation of a network is the intrinsic appeal for each participant. Leadership could quickly disturb. At the same time, a network also needs a direction. Without centralized control, the network might take longer to reach an agreement.
Information loss The open structure of a network and the frequent participation of individual members in different networks automatically lead to the leakage of information. Lack of secrecy could endanger the network.
Bottom line: Although many aspects speak against creation and participation in a network, you have to face the fact that a VUCA world creates new conditions that function in a way that cannot be covered by traditional approaches. The competence, information, resource social, and economic advantages are arguments for the use of networks. At the same time, appropriate measures have to minimize the risks.
The search for digital transformation affects many areas of the business. In the context of the delivery of goods and services as well as in the generation of revenue and income, traditional notions of the business world dissolve – the size no longer determines the range; Knowledge is not only available to the financially strong ones; Collaboration does not need the common roof of a company. The society and the politics no longer provide the sense of belonging and social security to citizens – opinions are controlled with new resources, the new normal is the loud otherness; ethical principles are reinforced by the own filter bubble. A look at the dimensions of digital transformation shows that we are already in the middle of change.
The following dimensions require rethinking in business as well as in politics – now. Digital transformation will be possible, as soon as obsolete conditions are abandoned – e.g. Preference of long-term frame contracts, high entry barriers for small businesses by purchasing departments, lack of access to financial means and bureaucratic overload through institutional requirements.
Scaling for all The use of economies of scale was previously reserved for large companies. In order to keep the price for the means of production low, large quantities had to be accepted. Digital components cost almost nothing. This will make even small businesses competitive. Now these new entrepreneurs still have to be freed from the bureaucratic burden of the old economy. Purchasing departments and HR departments need new terms and conditions for these micro-business partners.
The services are complex today, since they are composed of many building blocks. The differences in local or national circumstances that have to be taken into account are made possible by modules and interfaces that fit together because they are standardized. The mandatory cooperation and the distribution of income need new business models.
Increasing acceleration The virtual proximity of all those involved, who are only one click away, leads to a staggering speed. Established approaches and formal decision-making can no longer compete. This gives unbureaucratic, agile companies a head start. It can only be achieved, if the legal and internal framework conditions are correspondingly debureaucratized.
“Soft” capital Since physical assets no longer count in digital markets, “soft” capital comes to the fore – data, knowledge, software, relationships. The critical key players are the computers, networks and above all the employees, who can be located anywhere in the world. This requires the replacement of a rigid corporate concept with networks that are able to quickly come together and to dissolve again.
The values of a company are situated in the cyber-wonderland. There are no national boundaries or affiliations. Since national laws and regulations lose their effectiveness, we need in the medium term supranational legislatures and tax authorities to take over these tasks. In the meantime, the values are moving back and forth in the twilight zone. Assets are no longer determined by an objective financial value, but by the ability to create something new.
Network for everyone
The minimal effort that is needed to set up a network enables everyone to open their own bubble of information. Over time, there will be powerful creative clouds due to the participants and their networking. This wisdom of the crowd, which is available for free, means the end of many, expensive research sites.
Multi-sided business models
Due to the diverse market, it is increasingly difficult to find the right partner. For this reason, business models will evolve that specialize in the mediation between producers, their suppliers and customers. Proven, close cooperation’s will dissolve in favor of spontaneous, time-limited projects that are needs-oriented. The mediator role can be exercised by all those, who can bring together the relevant partners and will be able to earn a living from it.
The classic location and headquarters will disappear. The company headquarters will be located where the founder is currently living without being officially registered, because the business takes place in cyberspace (see above). Accordingly, there will no longer be the workforce with their representatives and regulated employment relationships. Legislation, state power and jurisdiction need to be adapted to international challenges in order to prevent location nomads, who are constantly on the run from responsibility and other duties.
The point in time, when the digital transformation is over, depends on how quickly and skillfully large companies can respond to these new developments. At the same time, government agencies are challenged to create the appropriate framework conditions to support these new developments. It is not the question whether, but when the parties act. In the meantime, the pioneers of these developments will find their way in the Internet and implement their business models.
Bottom line: The digital transformation is happening for years. Like the frog in the Boiling Frog Syndrome, the world is heating up due to increasing digitalization and networking. The dimensions are the scaling for all, the limitless collaboration, the increasing acceleration, the “soft” capital, the homeless values, the network for everyone, the multi-sided business models and the loss of the site. For the sectors of the economy and the society this requires an immediate rethinking, in order to get the control over the used free space, so far unregulated by enterprises. This applies to tax havens as well as to the providers of illegal businesses in the Darknet. The dimensions of digital transformation are the basis.