If you take a networked enterprise approach, you are trying to optimize (in this case, maximize) the performance of a single business in a network. The unit of analysis is the single firm.
However, maximizing a single firm' s performance may affect/harm the performance of other firm(s) that are directly or indirectly connected to the firm at hand. Once the performance of the firm at hand is maximized, the performance of another firm gets the attention.
Furthermore, while optimizing this firm, the initial firm may be affected and its performance may be diminished, making the initial effort obsolete. Therefore, the life-cycle of the network is expected to be short, as the firms that once extracted maximum benefit quit the network to find other such networks to extract maximum benefit. This causes a form of a gold rush.
On the other hand, a business network approaches the network as a whole system. Here, the unit of analysis is the whole network, rather than just one participant.
The goal in business network approach is maximizing the performance of the whole system. The whole system generates a strong body against competition. While maximizing the performance of the whole system, some, if not most, of the firms cannot reach their ideal individual maximum performance, initially. However, this system that is build on trust, is expected to have a long-term life-cycle and generate long-term sustainable competitive advantage. Long-term competitive advantage will turn out to be beneficial for each participant of the system by increasing their individual performances even beyond the initial maximum point, since the synergy of the system hurt the competitiveness of outsiders.
A networked enterprise vs a business network.
These two represent different perspectives on the growing phenomena of network orchestration. I will tell you the difference at approaching a network orchestration problem between using a networked enterprise outlook and a business network outlook by making analogies from 3 different fields. These three analogies will reveal the fundamental value of using a business network approach in network orchestration.
1. Networked enterprise is looking for local optimas in mathematics, whereas business network approach is looking for a global optimum.
2. Networked enterprise is the greedy approach to building a system in computer science, whereas business network is the dynamic programming approach.
3. From a business perspective, networked enterprise is the sum, where business network is the whole. And yes, the whole is greater than the sum.
No other time in the history of civilization has humankind been so much connected. Laptops, desktops, mobile phones, embedded systems, social media, googling, twittering, blogging... This is big and is getting bigger! This is fast, and is getting faster!
How? Connectivity is transforming every individual and every organization it touches. Consider how you would run a global business 100 years ago, it would be tough right? But now every business person's dream is going global. And yes, they can go global if they have good enough value propositions, because we are connected!
The distinctive factor is, some individuals, some organizations get more connected. They are the ones that understand the value of connectivity. They are constantly searching for new ways to improve how they live/work/learn/perform/attract.
As an individual, one should keep asking himself, what do I do to learn new stuff, to improve myself, to manage my relationships, to manage my professional life, to contribute to the society? How is it different from what I used to do five years ago? Three years ago? One year ago? Six months ago?
An organizations should keep asking similar questions: What do we do to learn/attract/sell/manage/improve/grow/distribute? How is it different from what we used to do five years ago? Three years ago? One year ago? Six months ago?
Unfortunately, there are many organizations which are failing to exploit the opportunities offered by connectivity and still perform the same activities to promote the same products/services to the same people.
Marketers have a diverse array of methods to identify customer preferences. Here is one for you: A question like "What would you miss the most if we took your mobile phone away?"
We can apply this to all of the tangible and intangible assets that we own/experience/consume, such as connectivity.
One of the most important capability that has empowered people turns out to be connectivity. We are and should be, obsessed with connectivity and that is why communication related products/services happen to be the fastest diffused innovations. Remember Facebook?
There will be many more innovations based on the Internet that will become pandemic and diffused to millions all around the world, thanks to the energetic entrepreneurs, wise businesspeople, and yes, our obsession on connectivity. Internet has empowered us so much through connectivity that most of us cannot even stand the thought of losing access to the Internet.
Let me elaborate more on the core benefits of a good CRM, to see if CRM really matters.
Via utilizing CRM tools, companies seek to learn more about their customers’ needs and behaviors in order to develop stronger relationships with their customers. They can provide services and products that are exactly what customers want, offer better customer service and increase loyalty among customers. A good CRM application helps companies in two ways; first one is related to analyzing patterns, the second one is related to one-to-one relations.
Let us start with the first broad benefit. Pareto’s original 80/20 rule states that 80% of a nation’s wealth is enjoyed by the 20% of the society; where the remaining 20% of the wealth is enjoyed by 80% of the society. Pareto’s 80/20 rule can be applied to businesses, also. Most of the profits of businesses come from a couple of specific customer profiles. In order to align with Drucker’s ‘creating and keeping profitable customers’ idea, companies should seek to understand their customers, their behaviors and analyze patterns to increase the number of profitable customers they have. Good CRM implementations enable companies to do that.
Second broad benefit is dramatic effectiveness in one-to-one relationships with customers. Sales force gets the ability to close deals faster, and the ability to offer the best value proposition to a customer. Customer service increases and the individual customer feels he/she gets the treatment he/she deserves. Increased effectiveness in one-to-one relationships with customers directly raises loyalty, thereby helps companies keep profitable customers, and make each customer more profitable!
Peter Drucker has influenced the way business people perceive what business is and the way they act and operate, by stating that the fundamental aim of a business is to create and keep profitable customers.
His statement has shifted the focus from Fordism to customer-centric approaches.
Today, business schools all around the world are embedding the importance of understanding customer needs, into their curriculums and companies, at least some of them, are trying hard to identify their customers and their needs, and make superior value propositions that the customers cannot refuse.
CRM, which stands for Customer Relationship Management, is an invaluable element of this business endeavor.
We all have an idea about the two important economic revolutions, agricultural revolution and industrial revolution, that have changed the world. We were exposed to these concepts when we were very young. Yet, someone (President of DEC) claimed there were no reason anyone would want to buy a computer in their home, not foreseeing the information revolution.
Although we have read a lot about the impacts of agricultural and industrial revolution, and we have seen the information revolution grow, did we take any lessons?
Three strong words are arising: bits, genes and nano. These three words will shape the way we live, work and learn while disrupting many industries. It all boils down to the simple, yet vital question: Where do you see your company in the next fifty years?
Only through such organizational outlook can businesses find new not only defensible positions, but also offensive positions that will make use of one or more of the trends in the long run.