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Extended Enterprise Spanning Company Boundaries |
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By: Vadim Kotelnikov
Founder, Ten3 Business e-Coach – Inspiration and Innovation Unlimited
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"If you think you can go it alone in today's global economy, you are highly mistaken." |
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What Is Extended Enterprise? The term "extended enterprise" represents a new concept that a company is made up not just of its employees, its board members, and executives, but also its business partners, its suppliers, and its customers. The notion of extended enterprise includes many different arrangements such as virtual integration, outsourcing, distribution agreements, collaborative marketing, R&D program partnerships, alliances, joint ventures, preferred suppliers, and customer partnership. Why Extended Enterprise? Previously organizations have been thought of as linear entities, each with a linear value chain that consisted of all the activities required to design, market, sell, produce, deliver and support products and services. Suppliers and customers were thought to be "outside" the organization's domain. And the organization was depicted as a hierarchy of reporting relationships, primarily functionally aligned. Such depiction implied a command and control approach to actions, decision-making and information.1
The new economy, with high-tech companies rapidly evolving and "old economy" enterprises embracing new ideas, brought tangible reality and urgency to new organizational forms. With globalization of markets, productivity pressures, scarce resources, intensifying competition, blurred industry boundaries and rapid technology change, new relationships and structures have emerged in all sectors of the economy. Modern organizations create new ways of delivering value to customers, new approaches to collaborating with suppliers along with critical thinking about organizational structure and purpose. The Role of Information Technology The extended enterprise can only be successful if all of the component groups and individuals have the information they need in order to do business effectively. Extended enterprise applications, or applications that span company boundaries, include a web of relationships between a company and its employees, managers, partners, customers, suppliers, and markets. Technology plays a strategic role in the extended enterprise – in some cases driving the opportunity for change and in others facilitating collaborative relationships and inter-organizational operation. IT enables the openness, immediacy, information sharing, flexibility and adaptability that the extended enterprise demands. Information technology also enables customer responsiveness, speedy decision making, superb inventory control and greater visibility across the extended organization for demand planning. The IT vendor community is ideally positioned to assist with technology strategy and deployment for the extended enterprise.1 The extended enterprise is an intricate, interconnected network of information, and you need true enterprise-strength solutions to tie all these together. Planning for an Extended Enterprise? In a world populated by value creating and value exchanging entities, often the decision will come down to owning one of three fundamental value propositions. You will either be able to own the customer, own the content that the customer seeks to acquire, or own the infrastructure that allows the content to be produced or the value to be exchanged. Each has a different business model. Each exploits a unique core competence. Each employs a different means of generating economic returns. However, in the connected economy, attempting to own all of them simultaneously will increasingly become a game of diminishing returns. When the network allows competitors to fill the gaps in their offerings at no additional cost, owning all of these competencies only increases risk without necessarily increasing returns.2
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