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Slide 1: Thompson The Networked Enterprise CKen
Slide 2: 26 March 2009 | The Old Market| Hove The Networked Enterprise: Competing for the future through Virtual Enterprise Networks Ken Thompson ken.thompson@bioteams.com Copyright Ken Thompson 2009
Slide 3: The evolution of business competition It used to be competition between companies (vertical integration) Then we heard “future competition will not be among individual companies... shareholder value will be determined by competitiveness of supply chains…” Professor Arjan J. van Weele, Eindhoven University Now we hear “…future business competition will not be between companies or even supply chains but between networks” Professor Marco Iansiti, Harvard Business School Copyright Ken Thompson 2009
Slide 4: What is a Virtual Enterprise Network (VEN) • A way for businesses to achieve virtual scale enabling them to operate as if they had more resources and capacity than they actually have • Allowing them to operate with all the resources and reach of a large enterprise but without sacrificing their speed, agility and low overheads • Enabling them to compete for bigger more profitable contacts with higher innovation and design elements with bigger customers who are prepared to have strategic partnerships with their suppliers Copyright Ken Thompson 2009
Slide 5: Virtual Enterprise Network Case Studies VEN International (Yorkshire, ENGLAND) MEXICAN Industry.com AGS Aerospace Group of SWITZERLAND Environmental Technology Cluster, IRELAND Copyright Ken Thompson 2009
Slide 6: 3 VENs interlinked into a super-VEN Based in North West Ireland Facilities Management Environmental Technology Construction Most companies are in 2 VENs Copyright Ken Thompson 2009
Slide 7: Typical 5-Year Benefits Profile of an effective Virtual Enterprise Network VEN Size: VEN Contract Size: Growth Profile: Avg Individual Contract size Small Small Conservative YR1 £20,000 YR2 £20,000 YR3 £20,000 YR4 £20,000 YR5 £20,000 Total Notes Avg Collaborative Contract Size £50,000 £60,000 Contract Win Rate (%) 10% 15% Number of Bids Made 10 20 Contracts Won 1.0 3.0 Annual Contract Revenue Won £50,000 £180,000 Cumulative Revenue Won £50,000 £230,000 Average Number of Virtual Community Members 12 15 % Members Involved in Virtual Projects 30% 40% Number of Virtual Project Members 3.6 6 Annual New Revenue gained per Project Member £13,889 £38,333 Active Member/Bid Ratio 0.4 0.3 5 Year Rev Multiplier on Initial Contract Size Additional Member Resource Requirements 16667 76667 Annual Additional Full Time Equivalent Staff 0.6 2.6 Annual New Collaborative Products/Svcs Developed 0 1 Annual New Bilateral Partnerships/Contracts (SME-SME/Partner) 1 2 NOTE: These numbers are based on experience from other successful VEN Programmes £72,000 £85,000 £100,000 20% 20% 20% 19% 30 40 50 150 6.0 8.0 10.0 28 £432,000 £680,000 £1,000,000 £2,342,000 £662,000 £1,342,000 £2,342,000 18 21 24 50% 60% 70% 9 12.6 16.8 £73,556 £106,508 £139,405 0.3 0.3 0.3 47 220667 447333 780667 7.4 14.9 26.0 26 2 3 3 9 2 2 2 9 The VF Story 1 2 3 4 5 6 7 8 9 These programmes provide the key VEN support roles (Architect, Broker, Coach, Leader and Technology Support) over the full 5 year period (typically fully provided by government sponsor in Years 1-2 and reducing by 50% in Years 3-5 and partly/fully paid for by benefiting members) Metrics and Assumptions underlying the VEN Benefits Model We have classified VENs as either: a. Member Size = SMALL, MEDIUM or LARGE (related to size of companies and number of potential VEN members) b. Contract Size = SMALL, MEDIUM or LARGE (related to potential collaborative contract size) c. VEN Growth Rate = CONSERVATIVE, MEDIUM or AGRESSIVE 1. Depends on the sector - from £50,000 - £500,000 - as develop track record can go for bigger contracts 2. In first year Hit Rate between 1 in 5 and 1 in 10 for major enterprise customers - improves over time up to 1 in 3. This improves significantly if a virtual network can be initiated around a major partner/customer bringing a contract/funding to the table. 3. Depends on Broker, Architect , Coach and a critical mass of active companies. Annual Bidding can grow in proportion to new members and requests from existing customers 4. The Key responsibility for Network Leader is to attract new members. 5. Initially about 1 in 3 members are active in year 1 - increases with success 6. To deliver the new revenue the member companies will need to provide resources - reasonable to assume that one third of the revenue is the resource cost 7. Converting to FTEs using an average salary of £30K - these would be new jobs if the member companies staff are already utilised in other work 8. It is reasonable to assume that one third of the collaborative contracts won will be based on or will produce new collective IPR (either developed new or by combining pre-existing company IPR) 9. We assume that new bilateral relationships are created as a spin-off between community members at a rate of 10% of the community size Size: Contracts: Growth Rate: Based on European experience one small well-run virtual enterprise network in a typical region/sector should deliver in excess of $4M in new revenue and 25+ potential jobs protected over a 5-year period. 50 bids per year Company size 20-150 £3.5M won after last trade show alone Annual Revenues (2003) = £5M £2.5 M in Year 2 of operation Contract size £50K-£500K Summary 5-Year Benefits Profile New Contract Revenue Won Resources Required (FTEs) Collaborative Products Developed Bilateral Relationships Established Small 1 Small 2 Conservative 3 4 5 Total £50,000 1 0 1 £180,000 3 1 2 £432,000 7 2 2 £680,000 £1,000,000 £2,342,000 15 26 26 3 3 9 2 2 9 Copyright Ken Thompson 2009 Copyright Ken Thompson 2007
Slide 8: The 10The 10 Foundations ofa Virtual Enterprise Network Foundations of a Virtual Enterprise Network The Network must have a Critical Mass of suitable member companies with complimentary capabilities who want to work together, will commit senior personnel time and can construct a viable collective supply chain Core Member Companies Copyright Ken Thompson 2009
Slide 9: The “Critical Triangle” in selecting a good Virtual Enterprise Network for Incubation Right Companies  Hungry for business growth Right Industry  Under Threat/Opportunity  Good linkages to major prospects  Potential for credible critical mass  Linkages to Innovation Sources 12 Crucial Factors  Can be linked into an interesting collaborative supply chain  Well regarded in their sector  Able to commit the resources for the duration Right Individuals  Leaders in their companies  Action focused but see the big picture & market oriented  Natural Win-Win Players  Prospects for strong Leader, Broker and Architect Copyright Ken Thompson 2009
Slide 10: The 10The 10 Foundations ofa Virtual Enterprise Network Foundations of a Virtual Enterprise Network The Network must include innovation partners such as universities, r&d labs, corporates and RTD Project Partners Core Member Companies Core Innovation Partners Copyright Ken Thompson 2009
Slide 11: Successful growth companies & networks concurrently manage 3 horizons (Envisioned) Embryonic Emerging Existing The Alchemy of Growth Baghai, Coley & White Copyright Ken Thompson 2009
Slide 12: The Foundations of a Virtual Enterprise Network The 1010 Foundationsof a VirtualEnterprise Network Networks need up to 12 months intensive support from their business support agencies to enable them to win their 1st collaborative contract. Core Member Companies Core Innovation Partners Core Support Partners Copyright Ken Thompson 2009
Slide 13: A Road Map for incubating Virtual Enterprise Networks 18 6 - Sustainability months 5 - Differentiation Creating Self-Sustainable Commercially Viable Future Solidly Differentiated as Innovative in the market 1st business success & delivery underway & successfully selling & delivering more contracts Network establishing its identity and 1st marketfacing collaborative project Enough companies on board & working to a real plan (& 1st member-facing collaborative project) Companies seriously exploring network idea Opportunity Assessed, VEN Viable & Selected Copyright Ken Thompson 2009 12 4 - Viability months months 3 - Market Testing 6 2 - Mobilisation 1 - Incubation 0 0 - Selection
Slide 14: The 10The 10 Foundations ofa Virtual Enterprise Network Foundations of a Virtual Enterprise Network The network is always looking for suitable new members and associates to extend its collective capabilities Core Member Companies Core Innovation Partners Core Support Partners New Members & Associate Companies Copyright Ken Thompson 2009
Slide 15: New Members and Associate Companies There are typically 4 entry requirements for new members: 1. Sign a Non Disclosure Agreement 2. Commit a senior company director to active participation 3. Sign-up to the Network ground rules 4. Be accepted by the other network members. All new members are subject to a probation period. Companies may also join the network as associate members if they do not wish to join (or are ineligible to join) as full members or are fulfilling specific bid/contract roles and/or as a first step to full membership Copyright Ken Thompson 2009
Slide 16: The 10The 10 Foundations ofa Virtual Enterprise Network Foundations of a Virtual Enterprise Network An agreed Set of "Ground Rules" form the basis for all member participation. Company Board and Operational Meetings provide Governance and Oversight. Formal Collaboration Governance Model Core Member Companies Core Innovation Partners New Members & Associate Companies Core Support Partners Copyright Ken Thompson 2009
Slide 17: Network Governance – “Ground Rules” 1. What damages trust? (Yellow Cards) 2. What destroys trust? (Red Cards) 3. Conflicts of Interest – most likely scenarios? 4. How will we share information? 5. How will we resolve issues/conflicts? 6. How will we make decisions? 7. How will we handle new members? 8. What sanctions will we employ and how will we agree? 9. On what basis will we construct bid and project teams? 10. How will we handle lead generation & business development? Copyright Ken Thompson 2009
Slide 18: The 10The 10 Foundations ofa Virtual Enterprise Network Foundations of a Virtual Enterprise Network Each company explicitly states its capabilities which aggregate into the networks collective capabilities Formal Collaboration Governance Model Core Member Companies Collective Capabilities Database New Members & Associate Companies Core Innovation Partners Core Support Partners Copyright Ken Thompson 2009
Slide 19: Example Network Capability “Heatmap” Software Maintenance & Support Hardware Sales & Maintenance 1 1 2 2 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 Sales & Marketing Applications Capability Area -> Internet Services/Applications Enterprise Application Integration Database Systems/Services Decision Support Systems 1 1 1 1 1 1 1 3rd party s/w distribution Software Development business continuity System Integration Hot Zone Focus most initial business devel effort here = best return Warm Zone Develop and extend own capabilities and areas to attack here Cool Zone Only enter through partnerships and new members Capability Type Customised eBusiness Solutions Web Applications/Integration Integrated Business Applications Software Development e-Commerce Content Management Systems EDI ERP Systems Software Product Development Stock Management Solutions. Database Installation email response systems Mail Systems Project Management Accounts/Payroll installation Intranets 2D Graphics 3D Graphics Software Process Capability Maturity Modelling Web Development Business Information Mailing List Databases 5 5 4 4 4 3 3 2 3 3 2 2 2 4 2 2 2 2 3 4 3 5 3 1 2 2 4 3 2 3 3 2 3 4 2 2 2 2 2 2 2 2 2 1 2 1 1 3 4 1 3 2 2 1 1 2 1 1 1 2 5 4 4 3 3 3 3 3 2 2 2 1 1 1 2 1 1 1 4 3 3 3 3 3 3 2 2 2 2 2 2 1 1 1 1 1 4 3 4 3 3 3 3 2 2 2 2 1 2 1 1 1 1 1 4 3 3 2 1 3 3 2 2 2 2 2 1 4 3 3 3 3 2 2 2 2 2 1 1 1 2 1 2 1 1 1 1 1 2 1 1 1 1 1 1 1 2 2 2 2 2 1 2 2 2 2 1 1 1 1 1 1 2 1 1 2 2 2 2 2 2 1 1 1 1 2 2 2 1 3 2 1 1 2 1 2 2 1 1 1 1 2 1 1 1 1 1 2 1 2 2 1 3 3 1 2 2 1 1 2 1 1 1 1 1 1 1 1 1 2 1 1 Managed Services 1 2 1 1 1 1 ERP/Logistics eCommerce Outsourcing consultancy Training Ice Zone Avoid – waste of time! 2 2 1 1 1 1 2 1 1 3 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2 1 1 1 1 Copyright Ken Thompson 2009
Slide 20: The 10The 10 Foundations ofa Virtual Enterprise Network Foundations of a Virtual Enterprise Network The Network is not usually a legal trading entity but needs a single consistent identity to the market Formal Collaboration Governance Model Core Member Companies Collective Capabilities Database Single Market Identity & Purpose New Members & Associate Companies Core Innovation Partners Core Support Partners Copyright Ken Thompson 2009
Slide 21: The 10The 10 Foundations ofa Virtual Enterprise Network Foundations of a Virtual Enterprise Network This includes all forms of virtual meetings, issue resolution, teleconferences, collaborative bid development and all member-member / member-customer interaction processes Common Processes, Practices & Standards Formal Collaboration Governance Model Core Member Companies Collective Capabilities Database Single Market Identity & Purpose New Members & Associate Companies Core Innovation Partners Core Support Partners Copyright Ken Thompson 2009
Slide 22: From “The Networked Enterprise: Competing for the future through Virtual Enterprise Networks”, MKPress 2008 Copyright Ken Thompson 2009
Slide 23: The 10The 10 Foundations ofa Virtual Enterprise Network Foundations of a Virtual Enterprise Network The Critical network roles are Network Leaders, Network Architects, Network Brokers, Network Coaches and Network Technology Support Common Processes, Practices & Standards Formal Collaboration Governance Model Core Member Companies Leadership & Roles Team Collective Capabilities Database Single Market Identity & Purpose New Members & Associate Companies Core Innovation Partners Core Support Partners Copyright Ken Thompson 2009
Slide 24: The Critical Roles in a Virtual Enterprise Network Coach PRIMARY RESPONSIBILITY; Build Network Teams and Work Groups who trust each other, are able to surface issues and resolve conflict and effectively manage their commitments without being constantly chased. Brokers PRIMARY RESPONSIBILITY Use their contacts and personal credibility to bring potential customer opportunities to the network and manage these relationships during the bid process. Architect PRIMARY RESPONSIBILITY; To qualify opportunities brought by the Network Brokers and others and to creatively configure viable network supply chains which can win bids, satisfy the members and successfully deliver the work to accepted quality levels/standards. Executive Leader PRIMARY RESPONSIBILITY; To win the confidence of the other network members that their interests will respected, attract new members, represent the public identity of the network and be the internal customer for all network activity.. Group Leaders PRIMARY RESPONSIBILITY To lead workgroups which address important areas of VEN member interest such as business development, network development and member development. Digital Technology Support PRIMARY RESPONSIBILITY; Train and support the network members in the effective use of virtual collaboration technology and administers the network technically Copyright Ken Thompson 2009
Slide 25: The Foundations of a Virtual Enterprise Network The 1010 Foundationsof a VirtualEnterprise Network It needs its distinctive Network Business Applications such as Integrated IT & Capability Aggregation and Communication Tender Matching to enable Systems it to function effectively as a co-operative in both presales and contract It needs its own Common operations Private Member Processes, It needs to be Leadership & Collaboration System able to exchange Practices & Roles Team to communicate and data with other Standards develop its projects applications (e.g. and bids. tender datafeeds) Formal and link to other Collective Single Market Collaboration leading webCapabilities Identity & based apps (e.g. Governance Database Purpose VoIP) Model The Network needs its Public Web Portal to manage its interactions with potential customers and new members. Core Member Companies Core Innovation Partners Core Support Partners New Members & Associate Companies Copyright Ken Thompson 2009
Slide 26: The 10 Foundations of a Virtual Enterprise Network Integrated IT & Communication Systems Common Processes, Practices & Standards Public Web Portal, Private Collaboration System and Network Business Applications Network leaders, architects, brokers, coaches and technology support are all critical plus clear and appropriate accountabilities for each member Each company explicitly states its capabilities which aggregate into the networks collective capabilities The Network is not usually a legal trading entity but has a single consistent identity to the market This includes all forms of virtual meetings, issue resolution, teleconferences, collaborative bid development and all membermember/member-customer interaction processes Leadership & Roles Team An agreed Set of "Ground Rules" form the basis for all member participation. Company Board and Operational Meetings provide Governance and Oversight. Formal Collaboration Governance Model Collective Capabilities Database Single Market Identity & Purpose Core Member Companies Critical Mass of suitable member companies with complimentary capabilities Core Innovation Partners Core Support Partners New Members & Associate Companies The network is always looking for suitable new members and associates to extend its collective capabilities Networks must include innovation partners such as universities, r&d labs, corporates and RTD Project Partners Networks need up to 12 months intensive support from their business support agencies to enable them to win their 1st collaborative contract. Copyright Ken Thompson 2009
Slide 27: 26 March 2009 | The Old Market| Hove The Networked Enterprise: Techniques for building The Networked Enterprise Ken Thompson ken.thompson@bioteams.com Copyright Ken Thompson 2009