Emerging new order with new rules
Digital transformation is a fundamental architectural leap from current top-down hierarchies to peer-to-peer networks. Successful business, operating and organisational models will be those based on networks, according to management-issues.com.
In the linear hierarchical way of thinking and acting, the key factor was control. Whoever controlled the transactional supply chain achieved market dominance.
Networks operate differently: their most important attribute is connectivity. Connectivity means being connected to many other entities, not controlling them. And because everyone in a network is connected to everyone else, control as the primary source of dominance is not really a factor. Working relationships in networks are about the whole ecosystem, not mere supply chains. The influential players are those who build platforms for others – businesses, suppliers, customers.
What it means for firms
Understanding how to build and lead networks is crucial. In addition to emerging ecosystems, another key dynamic is the fundamental shift from verticals to horizontals. Vertically integrated firms focus on gathering as much as they can under their proprietary control because success stems from having as much as possible under one roof.
Horizontally connected firms care much more about influence than control. They view their ecosystem as an expansive phenomenon which they themselves cannot reasonably dominate. They want to be linked to the ecosystem because that is what helps improve their results.
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