Lecture 20 Virtual Organisations
Forces of Revolution
Virtual Organisation - The corporation of the 21st Century?
Definitions of a Virtual Organisation
A virtual corporation is a temporary network of independent companies - suppliers, customers, even rivals - linked by information technology to share skills, costs and access to one another’s markets. It will have neither a central office nor organisation chart. It will have no hierarchy, no vertical integration. (Byrne,J.A. The Virtual Corporation. Business Week 8 Feb 1993)
Why would an organisation consider going virtual?
Design a virtual organisation: what type of business? How would it be
organised?
Internal Virtualisation and External Virtualisation
An internal virtual organisation uses IT and communication to disconnect itself from space and time.
An external virtual organisation uses IT to connect with other organisational units to create a co-operative organisational network.
Gerling Group: an example of internal virtualisation.
Gerling: Large German insurance group
Insurance - Property, Accident, Marine, Credit, Life, Health
Reinsurance.
Risk analysis and management
Organised into corporate headquarters, regional centres and branches.
Use of voice network which enables use of call centres and removal of geographical restrictions.
Extend to data and video conferencing.
Enables guaranteed quick answers to customer calls, easy access to experts, and the creation of ‘vertical services’ e.g. health insurance which are independent of geographical location.
In what sense is Gerlings ‘virtual’?
Networking and the underlying management organisation creates a logical view of the organisation which is different or overlaid on the physical organisation.
Enables a small local branch to appear bigger than it actually is.
Enables a better distribution of resources - staff, locations etc. - to meet changing needs of customers and deal with peaks and troughs.
Enables flexibility - resources aggregated and disaggregated depending on size of project.
Role of teleworking in internal virtualisation.
The ‘Virtual Employee’.
Virtual Organisations ‘a desirable outcome of BPR..’ Olson
Empowerment or disenfranchising?
Barclays: A virtual bank?
Problems requiring an international solution:
Electronic payments across international boundaries.
Foreign currency dealing.
Barclays developed internal systems to meet these needs but then realised external value of the systems:
Link payments and exchange system to small local banks in foreign countries such that their customers can use International payment and trading systems.
Gives the impression that the small local bank - which retains its identity and independence - is an International bank with significant resources.
Customers do not see that network and systems being used are Barclay systems.
To what extent is this a virtual organisation?
Small local banks - greater resources and an international presence.
Barclays: more business on its network and access to local markets.
Also: Virtual bank reduces number of potential suppliers by incorporating selected partners into an extended virtual supply chain.
Note; importance of trust. Can we guarantee this?
Erosion of distinction between customers and suppliers.
Properties of a Virtual Corporation
Alliances and outsourcing
Agreements for :
access to markets
breaking new product barriers.
Alliances of partners with focused core competencies.
But core competencies may be context-sensitive and not transferable.
How do we transfer tacit skills if there’s no socialisation?
Short-term and temporary.
But how do we establish the same language in this short time?
Is co-operation limited to the exchange of explicit technological artefacts?
Directed at specific goal.
How is this goal negotiated?
Do people need to be in the same place to deliver a service?
Communicate by e-mail and telephone instead of face-to-face.
Trust: fate of company in hands of people who are not members of company.
Co-operating with potential rivals.
Trust in individual workers.
Is this practical?
How do we generate obligations?
Restructuring of allies to create integrated virtual operation.
Establishing a virtual operation.
Virtual teams
Communication is work, not a support function.
What consequences does virtualisation have for IS strategy?
IS Strategy Implications for Virtual Organisations
Conclusions
Concept of Virtual Organisations not well-defined.
New technologies: Web, E-mail, Video-Conferencing may lead a trend towards Virtual Organisations when linked with economic trends e.g. globalisation.
Future Thought
Have VOs had their day? Is virtualisaton simply a standard part of business practice?
Virtual Organisation Web Sites
Journal of
Computer-Mediated Communications: Virtual Organisations
Semi-related News Item: