Business Innovation in Virtual Enterprise Environments

Virtual Enterprises are temporary alliances of business organizations that come together sharing skills, knowledge, information and resources in order to better respond to business opportunities, and whose cooperation is supported by IT platforms. This chapter in an introduction to Business Innovation in Virtual Enterprise Environments.

One of the most interesting aphorism in Innovation literature is, without any doubt, “Change Or Die!”. Few people know that this sentence was actually an advertisement made by Electronic Design and it was conceived in 1970, and only in 2005 it became the title, and the opening concept, of the Alan Deutschman’s article “Change or Die” for the magazine Fast Company. In that article, talking about the contents of the previous IBM’s Global Innovation Outlook conference, Deutschman argued that science has shown that in only one time out of nine, when faced with preventable conditions like heart attacks, there are people able to change the environment conditions and the style of their life.

If we were moving the point of view from people to companies we would realize that the situation is exactly the same: companies, too often, are very slow to react to changes in environmental conditions and, when the environment is related to their own market, the results could be fatal. History is full of situations in which large companies have failed to change, although there were all the signs of a change in their target market, and consequently died.

So, the first thing to do, from a company point of view and when the market is going to change, is the willingness to change. Actually, as you know, the willingness is a very important trait, but of course is not enough. A company needs something else and this element is often what makes the difference between surviving and dying, this element is Innovation.

In literature there are several definitions for the term Innovation, well this is my favorite one: “Innovation is the process of creating values from ideas” (JOE TIDD and JOHN BESSANT, Strategic Innovation Management, Wiley 2014).

The first thing we have to well understand is that Innovation is a process. It is not a spark that enlightens the dark minds of some business managers or engineers when they are closed in their office staring at the white ceiling. It is a process, with a beginning, with phases or waves, with owners, with stakeholders, with positive people and negative ones, with some organizational entities prepared to pay and some other ones prepared to enjoy for the success of a new product, a new service or a new way to do things in a better way. All of these actors working in a sole body: the Organization.

The Innovation goal is not only, as it might seem at a superficial analysis, to earn more money, that is only a side effect and, actually, is related only to products or services innovation from a company point of view. In a more general vision we can have different levels of innovation, from company level to system and social level.

From a company point of view we can have an innovation based on new and advanced materials which can be used to improve the products and services performances. On the other side we can have an innovation based on new kind of products (or new market for existing ones) or the need to update the existing products in order to make them more attractive for the evolving market. In this case, of course, the main innovation goal is related to company money.

From the society point of view, however, we can have a radical innovation based on new general interest findings or inventions, such as: steam power, ICT revolution, bio-technology. On the other side we can find us to use new technologies or products that, regardless of their brand, could change the way we do some daily activities. In example we can listen to music using old vinyl record, so usually only using very big devices, or using new portable devices with tens of hours of music inside and, in the near future, other kinds of portable devices with all the world’s music directly available in streaming. When these types of innovation are more related to improve the quality of life for people, for instance a new green engine, we can say that the social impact of innovation is much more important for the society than it is for the company that puts it on the market.

Innovation is not art, craft or skill, is not empirical practice or engineering activity, is not creativity or vision. Actually is a manifold compound that includes all these ingredients and one more: knowledge. Knowledge is the real key factor that makes the difference between disorganized and theoretical innovation attempts and real business innovation strategies. Knowledge means that people involved in innovation processes well known the company business strategies, the products and services, the involved technologies, the new market opportunities, the other relevant technologies or methodologies recently discovered or just placed on the market.

Unfortunately it is very difficult to have all of this knowledge in one team, even in very large, smart and agile organizations, the covering of every aspect of the innovation process is a mirage, a myth. This is the reason why typical one-band organizations (like companies) need to link themselves in more complex structures, in order to share their knowledge with other partners in a particular context and, on the other side, to access to other partners’ one, building a so called Virtual Enterprise.

A Virtual Enterprise is a temporary alliance of business organizations that come together sharing skills, knowledge, information and resources in order to better respond to business opportunities, and whose cooperation is supported by IT platforms.

In this larger vision, related to Virtual Enterprises, Business Innovation could be described as a designed, managed transformation of some aspects of the involved enterprises aimed at a substantial improvement of the quality of products and services. This results in better production processes, costs reduction (and/or revenues increase), better staff satisfaction and better overall sustainability.

In this extended and more open and fertile environment we will find many opportunities in which we can insert new ideas and insights directly coming from the virtual enterprise knowledge.

First of all we will discover new products or services for our usual market and, similarly, new potential markets for our current products and services catalog. This new range of prospective opportunities could be considered enough to say that the virtual enterprise has great potential, but this is only the beginning.

Sharing knowledge with partners means also the possibility to improve business production, and administrative processes; this is a very important topic because having more efficient processes directly means having less costs and often better quality.

At the same time the company will have access to competencies, capabilities and skills not usually present into the employee headcount, this is a crucial aspect when in a situation a particular, and not easy to find, skill is requested.

Last but not least the company will have access to technology directly offer from technological partners, with the best economic conditions and in a partnership model that, as everybody well know, is much more efficient than the classical customer-supplier relationship.

It is clear that in a so supportive environment there are great advantages not only for standard production projects, but also especially for innovation projects that can have great opportunities precisely because they are born in a knowledge-based environment when every partner has access to information, best practices, tools and platforms that allow the best ideas selection in the described scenario and generate the best conditions for great innovation projects.

(originally published on my Linkedin Pulse Stream)