Friday 1 February 2008

Network-Centric Competition in a Flat World - Opportunities for SMEs

The world is flat, this is what peole is talking about nowdays. The term "flat world" perhaps was popularised by Thomas Friedman who describes the levelling of the world through 10 Flatenners including workflow, open sourcing, outsourcing, offshoring and supply channing, driven and enabled by technology and spread of information.
The flatenning of the world requires enterprises to re-look at how they deal with the concept of time, space and knowledge, the deep fundamentals which will continue to change on an ongoing basis. Alvin Toffler in his book the Revolutionary Wealth decribes the phenomena of "de-synchronization" where different groups of people react to change at different speed, creating opportunities and risks for them, depending on which groups they belong to.
Today, most of us has our own "spatial reach" - the places we have been, the origin of good and services we use and consume, the places where our friends come from, the source of news and information we have access to and the source and places of wealth we create - among others. Knowledge, the source of new wealth, keeps on being created, discovered and become oblolate as faster rates. The best part about knowledge is it is non-rival, if I transfer my knowledge to you, we ended up with both with the same knowledge.

Another transformation in the market that is exciting to be observed is the shift from competition based on supply chain to competition based on network of enterprises. Companies such as Li & Fund has managed to demonstrate that new capabilities that would create competitive edge is "network orchestration" where the orchestrator designes the overall supply chain, drawing together multiple suppliers at different locations to deliver the products desired by customers at the quality and prices determined by the customers. Yes, the customer is the central of gravity of the network.
Based on the above observations, the flat world creates opportunities for small and medium enterprises to be significant and meaningful to their customers through a "network-centric" approach where either their become the network orchestrator or they belong to a network of companies producing and delivering goods and services demanded by their customers. The network-centric approach is based on the realisation that vertical integration is no longer possible due to the diverse needs and wants of cutomers as well as the speed goods and services become obsolate. Such approach means the SMEs need not have all the innovation, production and distribution capabilities but work together with like minded enterprises, synchronised by the network orchestrator, in metting the demands in the markets they serve.

How do SMEs be part of this? They have to get rid of two beliefs that most enterprises have:
  • Not Invented Here (NIH) - where people in the organisation only support their own ideas and are not open to knowledge and ideas from outside the organisation

  • We Know Everything (WKE) - where people in the organisation believe that they know all that are required to be competitive in the market
The two main road blocks are mainly in the mindset of people. Therefore, for a network-centric approach to be adopted and successful, the major change that needs to happen is in the hearts and minds of key people in an organisation. This is where leadership would be really critical in transforming an enterprise from taking the world on its own to working together with groups of other enterprises towards fulfilling the demands of common ultimate customers.
A network-centric approach requires new capabilities to be developed within the network itself and within the network members. At the larger network, a leader has to take responsibilities over the success of the network as a whole and need to introduce and enforce clear rules and protocols for network members to observe. At the individual network member level, the ability to connect and perform based on the overall network strategy would be very critical.

In the final analysis, the flat world enable more enterprises to be significant and meaningful to their customers. Technology and information are two major drivers that level the world and having the capability to access and making sense of them would create opportunities for being more competitive. A network-centric approach is where customers is the major focus and the network of enterprises, lead by an orchestrator, align their innovation and supply chain to meet the demands of the customers at the quality and prices which make sense to the customers. A network-centric approach enable enterprises with lesser capacity and capability to offer quality and competitive goods and services based on the overall strength of the network.

Well, what would you do next?

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