Building your virtual enterprise


To innovate, even established companies need new forms of organisation, such as the virtual enterprise or collaborative network.


It’s 3am and you are fast asleep. Strangely, as a product executive for an edgy pharmaceuticals firm you would often be awake at this time, worrying about whether the company was about to blow a lot of cash on its latest drug therapy. However, in this case you are bearing the full burden by yourself. In Australia, a lab continues to refine formulae that will be part of the new therapy. In Israel, programmers are building the innovative software you will use to run trials in a safer and more transparent manner, and in Paris a new distribution company is working on entirely new ways of getting the product to the patient. All of these organisations are part of the virtual enterprise you have put together in order to share knowledge, reduce risk, and speed up time to market.


The reason you can sleep so well is that you had done your research. You knew that the insights to creating a virtual enterprise could be found in an emerging piece of organisational design research: collaborative theory.

This theory proposes two really important ideas:

  1. In a complex world, real innovation will mean working with enterprises that have different competencies, approaches and underlying knowledge bases.
  2. Building a genuinely collaborative enterprise is actually very difficult: especially for large established organisations.

It is important to understand both the challenges and the opportunities, because large enterprises increasingly use multiple collaborative networks, or virtual enterprises, for different purposes. One product may be largely developed and delivered in-house, while another may be the result of a multi-entity collaboration. Some such collaborations can take many years to reach fruition. For example, in Australia the Botany Bay container terminal is utilising leading-edge robotic technology that is a result of a decade long collaboration with the University of Sydney. Such projects, and the relationships required to sustain them, are the result of multiple generations of management committing to the vision. This is vital but not necessarily common.

Lessons to learn from digital-age success

There have been lessons to learn from digital-age successes. Take the fast-growing e-retailers that outsource product design, manufacturing, distribution and the development of the web-platforms so essential to their business. Yet they have consciously planned to retain and develop two fundamental competencies. Firstly, they retain sophisticated software algorithms that enable them to understand the customers’ preferences and buying behaviours. In this way they spot trends down to an individual level, can secure the right product and offer it to the right customer. Secondly, they have developed and retained an ability to collaborate across entities. Regrettably many leaders do not fully appreciate the importance of the competency set, and the investment required to build it.

In a 2009 article, titled ‘Collaborative Networks are the Organisation’, Shuman and Twombly reviewed a very public example of the potential difficulties in collaborative management: delays in the delivery of the Boeing Dreamliner 787. The aircraft itself is a masterful piece of engineering, however, it is the result of many organisations working together on different components. Shuman and Twombly cogently argued that management may not have fully appreciated the effort required in building and sustaining this network of players. So, when it first came to assembling the parts from multiple suppliers, the assembly plant expected just over 1,000 components, but actually received over 30,000. Having now delivered impressive operational aircraft, Boeing might also have learned a great many lessons on the construction and management of a highly complex collaboration.

So, if you really wish to innovate with others, you may have to deal into collaborative networks. Yet this requires that your enterprise invests in sophisticated cooperation and coordination skills. Such competencies come with a price tag, but it is probably cheaper than the consequences of failure. Most importantly, such investments can help with nights of worry-free sleep.

By Roger Perry – CEO Bevington Group

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