Tactics to Make Your Business a Networked Organization, Part 1

This is part 1 of a multipart series on the steps businesses must take to become networked organizations, while also examining how organizational structures and processes can make managing the demand of a product or service a process-based, predictable and repeatable science.

Like many business tools, organizational design has come to the end of its useful life.

Organizational design emphasizes structure. But today’s organizational analysts believe relationships between people inside and outside an enterprise create economic value by sharing knowledge and generating new knowledge. Value networks are a new form of organizational thinking based on human interdependence.

Companies have both external and internal value networks. External networks include customers, intermediaries, stakeholders, open innovation networks and suppliers. Internal value networks focus on key activities, processes and relationships that cut across functional departments, such as order fulfillment, innovation, lead processing or customer support. Value is created through exchanges and the relationships between roles that advance innovation and wealth; they're the source of company growth and success.

Sometimes value networks can be groups of companies working together to produce and transport products to customers — e.g., the partnership between Procter & Gamble and Wal-Mart. Customers also can create value networks, such as mothers who form a community on a baby care product site, like the Huggies Baby Network. Companies can create value through linking their customers by direct methods (phone and web) or indirect methods (combining customers’ resources for production or delivery).

A value network analysis helps communities of practice negotiate for resources and demonstrate their value to different groups within the organization. It's possible to develop scorecards, conduct return on investment and cost/benefit analyses, and drive decision making.

Because the value network approach addresses both financial and nonfinancial assets and exchanges, it expands metrics and indexes beyond the lagging indicators of financial return and operational performance to also include leading indicators for strategic capability and system optimization.