Network Management

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Generally, network management can be seen as the coordination of activities between companies (Konsynski, 1993). The managerial actions that are necessary from a network perspective are more selective and focused than general management of single firms, because a network usually serves a specific purpose for its member organizations (Castells, 1996; Riggins et al., 1994). Consequently, networks rarely demand the coverage of a whole range of issues that a single firm has to address. Nevertheless, network management is not simpler or easier. It has to deal with the collection, combination, and allocation of labor and tasks, knowledge and resources, as well as benefits and profits among network members.

Network management aims to establish structures and mechanisms that are needed to sustain ongoing coordination efforts among network members (Johnston & Vitale, 1988). Hence, management within a network environment faces a series of complexities: coordinating different actors with different knowledge and backgrounds, creating an environment where collaborative action can evolve and take place, and aligning different strategic, organizational, and technological perspectives and systems.

A Multiperspective Framework for Network Management

Figure 3 depicts an integrative framework for network management covering several managerial issues, dimensions, and structural relationships among various management areas. With ICT, and in particular with the management of IOISs at its core, the framework can be understood as a landscape of typical management areas in an interfirm context. In order to understand the network interplay of players in the adoption process of IOISs and to manage the resulting organizational structure, it is paramount to take into consideration strategic and organizational aspects complementing the technological perspective that is related to IOISs.

Figure 3: The network management framework

The network management framework distinguishes three views: the context, the firm, and the network view. The context view is related to industrial and environmental factors and contingencies that influence the way firms and networks interact with each other.

Firms are the central actors within networks. They establish or participate in networks pursing certain goals and are simultaneously influenced by the participation in networks. Hence, the firm view addresses the perspectives of individual firms and their objectives and strategies as well as their roles within the network, such as network members, network managers, or network initiators. Network achievements have to be internally exploited, and intrafirm structures have to be aligned to external network requirements.

Management at the single-firm level can be divided into the three basic pillars: strategy, organization, and technology:

1. A firm has to position itself strategically in the market in a way that ensures an advantageous competitive position. It must gain access to a superior resource base in order to be able to set up a unique service portfolio (Hagedoorn, 1993; Johnston & Vitale, 1988). The establishment of an IOIS and, hence, the formation of organizational network arrangements might be a suitable approach.

2. The firm has to design appropriate organizational structures that ensure efficiency, flexibility, and sustainability (Zuboff, 1996). IOISs and networks in general often promise efficiency improvements and access to new (external) organizational capabilities (learning, benchmarking).

3. The technology (or information management) perspective highlights the increasing relevance of ICT infrastructures and information systems for conducting business (Ives & Jarvenpaa, 1991; Hanseth, 1998). Consequently, IOIS adoption often means network participation.

The DIMER network, for example, implemented an IOIS in order to improve the coordination of project work, especially in terms of monitoring and reporting practices. From the DIMER perspective, a new technology was used to achieve organizational benefits. Thus, the reasons for establishing the IOIS and changing the network custom of project coordination are of an organizational nature. The effect of adopting the IOIS, however, caused significant problems that affected the strategic level and threatened the stability of the network setup. The IOIS has thus been abandoned.

In the ONIA NET example, we have to distinguish between the ONIA NET and the participant perspective. ONIA NET’s motive for setting up the IOIS and the corresponding network is clearly strategic, because it aims to transform the industry structure and become the major transaction hub between retailers and suppliers in its region. The benefits for participants are organizational, because ONIA NET is offering a new business solution for interfirm process improvements. The adoption of the ONIA NET IOIS provides the business partners with an efficient solution to tackle inefficiencies such as out-of-shelf problems.

Finally TELCO aims to transform its relationships with key customers by providing new collaborative services using a new IOIS. The motive is partly of strategic and partly of organizational significance. By locking in key customers via new specific IOISs, TELCO wants to stabilize its customer base. Additionally, new organizational practices aim to improve key customer processes in terms of service quality and efficiency.

Network View: Building Blocks of Network Management

The network view as the core of the network management framework distinguishes a static and a dynamic life cycle perspective. The static perspective differentiates, corresponding to the firm-level view, between network strategy, network organization, and NIM. The life cycle perspective visualizes the dynamics of network management. Starting with the initiation of a network, it covers the management tasks throughout the lifetime of the network, including configuration, implementation, stabilization, transformation, and finally dissolution. The dynamic perspective emphasizes particular management tasks depending on the maturity and the importance of the network.

Network Strategy

The strategy level comprises network mission, network resources, network market positioning, and the network business model. Particularly because new Internet-based IOISs have dramatically impacted the way firms are able to operate, scholars and practitioners have paid a great deal of attention to the discussion of new business models (e.g., Timmers, 1998; Riemer et al., 2002). The proliferation of networks is supposed to impact entire industries by shifting competition from a firm level to a group or network level (Gomes-Casseres, 1994). In this scenario, entire supply chains or networks of firms compete with each other. ONIA NET, for instance, is aware of these industry changes and takes into account the prospect of becoming the nucleus of one of these networks in the grocery industry.

Network Organization

Following Mitchel’s definition of a social network (Sydow & Windeler, 2000), a network comprises a structural dimension with linkages among actors and a behavioral dimension with interactions that take place between the people within the structure of the network. That implies not only a structural but also a behavioral understanding of a network, defining an interfirm network by the relations between a set of independent organizations (the network structure) and their interactions within that structure (the network behavior). To be more specific, network management is concerned with the following:

• Network structure: In order to design sustainable and viable network structures to enable the intended network operations, network tasks have to be identified and assigned to appropriate roles fulfilled by the participating firms. The linkages (dyads) between the partners have to be designed, and network-wide (interfirm) processes have to be specified and agreed upon. While ONIA NET has successfully established its network structures, TELCO faces the challenge of segmenting its customers in order to identify the key customers and to assign appropriate roles to the potential network participants that are supposed to adopt a future IOIS solution.

• Network behavior: Managing network behavior means taking care of people, team building, and establishing social ties among the people working within the formal relationships between firms. This means coordinating, often informally, interactions that take place within the formal organizational structure of the network. Besides, managers have to deal with the capabilities of the cooperating people. The ONIA NET case showed how important it is to take into account the roles and behaviors of people in IOIS- mediated network arrangements.

• Network governance comprises formal rules and norms as well as informal aspects, such as culture and identity. Network culture and identity sustain the network as a whole (the network will be perceived as an organizational entity by network participants). Appropriate network policies encourage network participants to work together without any reason to distrust each other. In order to enable the coordinating effect of network policies, content and interpretation of rules and values have to be communicated clearly. Network managers have to consider in which way norms, values, etc., can be communicated to all network participants and how to ensure the internalization of these values.

A Life Cycle Perspective of Network Management

As already noted, organizational networks, like single-firm businesses, are dynamic arrangements that are subject to evolutionary changes. Although the network life cycle, as shown in Figure 3, is a conceptual or an idealistic rather than an empirical approach, it has proven useful to structure management thinking. Management challenges vary considerably in the different life cycle phases and depend on the maturity of the network.

The initiation phase is concerned with activities related to the formation of organizational networks in the formation process of IOISs. The goals of the initiation phase are (from an initiator’s perspective) to find the right partners, to determine a basic network structure, and to define a network mission and strategy. “Fit” can be distinguished in different dimensions as being strategic, cultural, or technical. It is closely related to the concept of networkability. In other words, initiators should look for potential partners that fit into the network and show significant networkability in the relevant dimensions. Sometimes it is most important that the “fit” be strongest on the cultural side and at other times on the technical side. From a single-firm perspective, it is important to make sure that the necessary internal support is available. This includes creating a positive vision for middle management and employees working in the network. Finally, it includes everybody being aware of the reasons why the single firms are working in networks.

In our case example, TELCO is aiming to transform the arms-length relationships of key customers into cooperative ones by implementing collaborative IOIS services. Therefore, TELCO specifies a strategic direction for its IOIS and the resulting organizational network, and it segments its customer base in order to identify the key customers that will be addressed. This is part of the strategic network information management (SNIM).

The configuration phase comprises the specification of the IOIS and its services as well as the business model of the network. Starting from strategic decisions, the organizational configuration of the network follows. The latter aspect covers roles and linkages among the participating partner firms, the assignment of roles to the players involved, and the design of contracts. On an IOIS level, the issues of network information resource and systems management (NIRM and NISM) have to be addressed.

During this phase, the members of the network should succeed in designing useful processes and structures. Various sources for conflicts are avoidable in the later stages of the network life cycle, when misunderstandings and conflicting expectations can be eliminated in this early stage. The structures and processes determine the interactions in networks and are affected by the overall atmosphere and quality of the relationship. Atmosphere is a product of organizational behavior and derives from the power and dependence structure between the participating firms, the absence or presence of cooperative behavior, and the mutual expectations of the firms and the individuals. In this phase, the network roles, responsibilities, and positions related to each participant within the single firm are unknown to its partners and need to be specified and communicated. It always takes some time before these traditional group processes are in line. Moreover, the selection of people for working in the network might have a significant influence on the process. The design of the network can incorporate procedures that reward collaborative behavior, and thereby motivate the participants in succeeding with networking. Top management plays a crucial role inasmuch as they can set a good, and visible, example in collaborative behavior.

In the TELCO example, the imminent service specification and design is part of the configuration phase.

The implementation phase is concerned with the realization of the results of the configuration phase. The structures and processes developed have to be put into practice, and IOISs have to be implemented, which often goes along with the challenge to “make things work” as they are intended. The issues emerging in the implementation phase furthermore comprise the implementation of a controlling mechanism and the starting of network operations. The network information infrastructure management (NIIM) has to take care of an effective alignment and integration of network IOISs with the network participants’ infrastructures. The processes and structures are key implementation elements in this phase of the network life cycle. The major challenge is to align the daily business operations with the network strategy. Thus, it is very important to be distinct about the division of tasks and roles, enabling members to have a clear understanding of the governance structure of the network.

However, the implementation of structures and processes does not automatically lead to efficient operations. Consequently, the implementation phase is complemented by a stabilization phase. A functioning collaboration within the network can only be assured by aligning the different interests of the network partners and by facilitating the social integration among the people involved. The emergence of social ties among people ensures a frictionless flow of information, facilitates the emergence of trust, and helps to avoid misunderstandings and conflicts. Thus, besides configuring the organizational structure of the network, the social structure has to be dealt with to foster collaboration among the partners and to ensure smooth network operations. The ONIA NET network (and IOIS) is in its postimplementation stage, where the organizational network is subject to an ongoing stabilization process in which the relevance of trust and the face-to-face nature of the sales business have been successfully identified and addressed. The ONIA NET network initiated the development of a management control system in order to monitor the effectiveness of the operations. The application of the management control system in this specific case, will force the whole arrangement to the next stage of the network life cycle.

However, situations do not remain stable, and thus, network transformation is required in order to adjust a network to changing environments. Network controlling mechanisms help to monitor performances and processes within the network and to discover opportunities and needs for changes and rearrangements. An important issue is the observance of the IOIS adoption processes and the initiation of appropriate support measures. Monitoring and controlling in this sense does not only mean to collect and analyze formal (e.g., financial) data. It is also concerned with observing and assessing interpersonal collaboration, the social performance of teams, as well as the impact of IOISs on work practices. In doing so, potential conflicts and inefficiencies can be discovered, teams can be rebuilt, processes can be adjusted, and IOIS issues can be addressed. Moreover, learning processes can be nurtured. Ideally, the organizational network is able to continuously learn from past experiences and to adapt to changing needs and requirements coming from network partners and the surrounding network environment. The DIMER case is a good example of a network in its transformation stage, where an ongoing observance of work practices leads to the discovery of serious problems in the adoption of the IOIS solution that destabilized the network setup. Due to an immediate need for reaction, the IOIS was abandoned, and the network operations were adjusted. The DIMER network now faces the decision to reenter the network management cycle concerned with the redevelopment of a new IOIS. Figure 4 summarizes the case interpretation using the network management life cycle perspective.

Figure 4: IOIS cases in different life cycle stages

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