Business networks require enforced coordination
09 Oct 2008Business networks are made up of organisations that strive to provide complex products and services by coordinating their activities. The level of coordination required is substantial, not only between a company and a few of its immediate suppliers, but also among the suppliers. When we took a closer look at coordination research, we came across recent work in the field of multi-team systems, which, in a sense, is what business networks are.
Successful teams are characterised by increased coordination. Researchers Leslie DeChurch and Michelle Marks recently set up an experiment in close cooperation with the army. The experiment was a simulation of an attack situation. The exercise involved putting together teams of six people, who were then divided into three teams of two. Within each group of three teams there was a flight team, a ground team and a leader team. The leader teams were manipulated, which involved training leaders to engage in activities believed to facilitate teamwork between the teams. DeChurch and Marks concluded that team leaders trained in strategy urge other teams to focus on a better individual strategy. Teams trained in coordination, on the other hand, focused instead on better coordination between the different teams. As the scale of business networks steadily increases, special attention must be devoted to coordination between the different parts of the network.
In business networks, however, it is not always possible to create a central coordination unit. According to Professor Peter Rittgen, who specialises in business processes and information systems, in the absence of a central coordination unit, a contract is typically used as an instrument of coordination. Such a contract describes the workflow of a particular partnership and covers all relevant issues of the partnership. The contract has to specify general terms and conditions that can be seen as parameters controlling the interaction between the different partners. Pricing, terms of delivery and terms of payment are all examples of such parameters. An elaborate contract should be clear. Vague contracts lead to the same kind of problems we find in badly managed teams, particularly virtual teams. Communication disorders are the number 1 problem. In his research on business networks, Peter Rittgen talks about “broken patterns”: each business act should be related to another in a pattern of initiative and response, and the sequence of business acts must be followed so that the pattern is not broken. This goes along with indistinct communication structures: who has to communicate with whom? Next, business rules are needed to regulate the details of interaction and to provide infrastructure support, such as IT systems. Finally, establishing trust is important as lack of trust often leads to unfulfilled expectations.
Peter Rittgen is Professor of Business Process Innovation & Intelligence and a member of the Faculty in Residence for a period of one year. He will work on the development of useful process innovation tools.
Further reading: Rittgen, P. (2008). “A contract-based architecture for business networks”, International Journal of Electronic Commerce 12(4), 137-145.
To news overview