Management of Virtual Enterprises: Results from ...

The Proceedings of the 9th International Conference of Concurrent Enterprising, Espoo, Finland, 16-18 June 2003

Management of Virtual Enterprises: Results from Case Studies in Northern Germany Ulrich Hausner1, Kai Teichmann2, Sönke Albers 2, Ingo Hussla1 1

Gesellschaft für Technologieförderung Itzehoe mbH, IZET Innovationszentrum Itzehoe, Fraunhoferstr. 3, 25524 Itzehoe, Germany, [email protected], [email protected] 2 Institut für Betriebswirtschaftslehre, Christian-Albrechts-Universität zu Kiel, Olshausenstraße 40, 24098 Kiel, Germany, [email protected], [email protected] Abstract In this paper we derive a typology of Virtual Enterprises from case studies performed in Northern Germany and investigate their organizational and managerial features. Three types of virtual enterprises can be distinguished according to the direction of collaboration and the homoge neity of the product and services offered by the Virtual Enterprise: (1) the General Virtual Contractor, (2) the Virtual Allocation Network, and (3) the Virtual Support Network. Virtual Enterprises employ organizational and managerial tools for communication, coordination and cooperation. Although all Virtual Enterprises consider the establishment and nurturing of mutual trust as well as regulatory contracts as essential management tools, there does not seem to be a real blue print for management of Virtual Enterprises. We therefore conclude that an internet-based information platform combined with regional support centers will contribute to mitigating the organization and management problems and further the start-up of Virtual Enterprises among SMEs. Keywords Virtual Enterprise, Virtual Organization, Virtual Enterprise Typology, Management of Virtual Enterprises, Virtual Enterprise Support Platform

1 Introduction Virtual Enterprises (VE) or Virtual Organizations (VO) are new organizational business forms that emerge with the application of information and communication infrastructures. They are built on the need to respond to rapidly changing business environments and opportunities. Virtual enterprises are based on stable business networks or “virtual communities” from which project specific, temporary collaborations of real enterprises are formed. On the level of the business networks real enterprises interact in multilateral fashion, identify their core competencies, invest in a common business understanding and presentation towards the outside, define innovative – often decentralized - management and organizational structures, and develop a basis of mutual trust (“corporate culture”). On the project level, Virtual Enterprises make intensive use of information and communication technologies for cooperation, coordination and communication. Here, the core competencies are bundled in order to produce an integrated customer specific product or service. In this paper we derive a typology of Virtual Enterprises from ten original case studies performed in Northern Germany during 2002 and characterize their typical organizational and managerial features.


2 Ten Field Studies in Northern Germany The research presented in this paper is based on ten field studies performed as a series of structured interviews in Northern Germany over the period of January to February 2002. The interviews were carried out by the Institut für Betriebswirtschaftslehre of the University of Kiel, Germany [Albers, Wolf, 2003], [Teichmann, Borchardt, 2003]. Each case study gives a short overview of the history of the Virtual Enterprise, characterizes the bundled core competencies, the organizational and managerial structures and the employed information and communication tools, and describes measures used in establishing and nurturing a cooperative climate and mutual trust. The case studies were embedded in the co-operation project BtoB-Markt Schleswig-Holstein [BtoB-Markt Schleswig-Holstein, 2002], [Hussla, Thiemann, 2001], co-funded by the State of Schleswig-Holstein and Deutsche Telekom AG. The project aimed at the creation of virtual enterprises, implementation and promotion of a virtual market for the trade of industrial goods [Bidbizz, 2002], and the support and guidance of virtual management.

3 A Typology of Virtual Enterprises Most recent contributions to the literature stress the importance to develop common reference models for Virtual Enterprises [Camarinha-Matos, 2002]. Current network typologies distinguish between supply chain networks and peer-to-peer networks [Katzy, Horodyskiy, 2002]. They mainly consider the direction of relationships within virtual organizations. Enterprises in a supply chain network are configured along an industry value chain, with issues of supply chain management and efficient customer response presenting the driving force of the collaboration. Often these networks are managed by a central partner. In peer-topeer network management functions are distributed over the various network partners, who each can launch business activities for the whole network [Katzy, Horodyskiy, 2002]. In this paper we extend the typology by adding another dimension of distinctive patterns derived from observations performed on existing virtual collaborations and investigate the managerial portfolios deployed by the various types of Virtual Enterprises. Virtual Enterprises can be categorized according to two basic distinctive features: the direction of collaboration and the homogeneity of their product and services. Based on the results from the case studies we distinguish three different types of Virtual Enterprises. Type 1 – the “General Virtual Contractor (GVC)”. The direction of collaboration is strictly unilateral, with one leading enterprise or “contractor” receiving goods and services from a pool of networked suppliers. This case is usually characterized as a strictly vertical form of collaboration often found in classical supply chain networks. It is a unilateral collaboration with one enterprise acting as the leading entrepreneur and the others as recurrent, projectspecific suppliers. Examples can typically be found in the construction industry, large equipment manufacturing industry, automotive industry or the telecommunication industry. The two examples found in the case studies both deliver web-based services, that is, on-line publishing in the case of dhs consult and on-line human resource management in the case of TeamDesign. Reciprocal relationships are typical for a horizontal form of collaboration with contributing enterprises operating on the same level of the value chain often competing with each other. They often switch between the role of customer and supplier depending on the specific collaborative project. The case can be further distinguished by the organizational form – i.e. central or decentralized coordination of the collaborating partners - and the homogeneity of the contributed products and services – i.e. homogenous or heterogeneous goods. The latter largely determines if the partners act as competitors and issues of commissioning become


viable to the survival of the virtual enterprise or if partners mainly integrate their complementary contributions within an integrated, complex good or service. From the results of the case studies we conclude that there is close correlation between central coordination and homogenous products and services and between decentralized coordination and heterogeneous products and services. We therefore distinguish two more types of Virtual Enterprises: Type 2 - the “Virtual Allocation Network (VAN)”. The network is characterized by reciprocal forms of collaboration with contributing enterprises supplying a homogenous product or service. The VAN mainly aims at the allocation of free resources between collaborating partners. Cooperating enterprises from the logistics industry (e.g., in the case studies, Comtrans) are likely candidates for this type of collaboration. Type 3 – the “Virtual Support Network (VSN)”. The network is characterized by reciprocal forms of collaboration with complementary products or services. The VSN mainly aims at producing integrated customer-specific solutions. Examples are easily found within the ICT industries (e.g., in the case studies, Lynx and – to a lesser extend – ConVerve), the construction sector (e.g. Spektrum Raum) or the manufacturing industry (e.g. Virtuelle Fabrik). Figure 1 shows ten Virtual Enterprises interviewed in the field studies with respect to the typology introduced above. In our study most of the established collaborations show a high degree of vertical collaboration with changing supplier and customer relationships and heterogeneous contributions of products and services towards an integrated, customer oriented value offering.

Figure 1: Typology of Virtual Enterprises in the Northern German Cases Studies [Albers, Bisping, Teichmann, Wolf, 2003]

4 Management of Virtual Enterprises Table 1 lists a variety of management tools used by the Virtual Enterprises interviewed in the field study. Structural management tools define the coordinating decision units and their respective responsibilities within the Virtual Enterprises. Personal management tools are


geared towards the creation of human relationships and collaborative social environments – “virtual communities”. Abstract management tools create the – mainly classical, economic and market oriented – institutions governing the collaborative process.

Personal Management Tools

Abstract Management Tools

Organizational Management Tools

Type of the Virtual Enterprise Central Enterprise Central Support Unit

1 X

1 X

2 X X

Workgroups

X X

Plans Contracts (Network Level)

X X

X X

X

X

X

X

X

X

X

Rules Fixed Prices

2

3

3 X

3

X

X

X X

X

X

X X

X

X

X

X

X

X

X

X

X

X

X

X

Common ICT

X

Promoters

X

Job Rotation

X

X

X

X

Education and Training

X

X X

X

X

X

X

X

X X

X

X

X

X

X

X X

X

X X X

X X

3

X

X X

Virtuelle Fabrik

Spektrum-Raum

missing.link

Lynx

ConVerve

ECG 3

X

Flexible Prices

Trust

3

X

Central Control Committee

Contracts (Projec t Level)

Gerusia

Comtrans

Virtual Enterprise

TeamDesign

dhs consult

Table 1 shows that Type 1, the General Virtual Contractor (dhs consult and TeamDesign), employ rather few management tools. The collaboration is dominated by the central enterprise (general contractor), which coordinates the collaboration using classical market oriented tools. Type 2, the Virtual Allocation Network (Comtrans and Gerusia), focuses on abstract plans and rules as coordinating tools. Type 3, the Virtual Support Network, exhibits no clear focus on specific management tools. Especially for Type 3 no real blue print for management has been established. Only six out of ten Virtual Enterprises have established a common ICT infrastructure. This might be attributed to a more recent research finding that most advanced infrastructures coming out of leading R&D projects require complex configuration and customization hardly manageable by SMEs [Camarinha-Matos, 2002]. The single most important management tool all Virtual Enterprises agree upon is the establishment and nurturing of mutual trust.

X

X

Table 1: Management Tools in Virtual Enterprises [Albers, Bisping, Teichmann, Wolf, 2003].

5 Summary and Conclusions The research performed on the management of virtual enterprises within the frame of the case studies reveals the prevalence of three types of virtual enterprises: the General Virtual Contractor (Type 1: unilateral collaboration with recurrent suppliers), (2) the Virtual Allocation Network (Type 2: reciprocal collaboration of enterprises with a homogenous product or service), and (3) the Virtual Support Network (Type 3: reciprocal collaboration


with complementary products or services). Virtual Allocation Networks mainly aim at the allocation of free resources within a stable network of collaborating enterprises. Virtual Support Networks focus on producing integrated customer-specific solutions. They constitute the most flexible answer towards rapidly changing business opportunities and employ the largest variety of management tools. The establishment and nurturing of mutual trust as well as regulatory contracts on the project level are considered as essential management tools by all types of Virtual Enterprises. Surprisingly, not all Virtual Enterprises in the study have established a common ICT infrastructure for communication and collaboration. We therefore conclude that a blue print for the management of Virtual Enterprises has not been adopted so far, but organizational and managerial solutions are constructed on a case-to-case basis. An internet-based information and services platform combined with regional support centers will contribute to mitigating the information and communication problems and to establishing an off-line breeding environment necessary for the start-up, implementation and growth of Virtual Enterprises [Hausner, Hussla, Thiemann, 2002]. Information and services geared towards the specific needs of Virtual Enterprises recruited from SMEs have to be centered around the topics of start-up consultation, organization and management, innovation, ICT and matchmaking [vIZET, 2003]. However, it is important to stress, that online services have to be accompanied by off-line centers that further the creation and nurturing of mutual trust. Acknowledgement The work for this paper was co-funded as part of the BtoB-Markt Schleswig-Holstein project by the Multimedia Initiative Schleswig-Holstein, Ministerium für Wirtschaft, Technologie und Verkehr, and the Deutsche Telekom AG. Project partners were the Gesellschaft für Technologieförderung Itzehoe mbH – IZET Innovationszentrum Itzehoe (project leader), bidbizz AG, Lynx nbs GmbH, Lehrstuhl für Innovation, Neue Medien und Marketing of the Christian-Albrechts-Universität Kiel, and the Unternehmensverband Unterelbe-Westküste. References Albers, S., Wolf, J (Eds.): Management Virtueller Unternehmen. Deutsche Universitäts-Verlag, Wiesbaden, 2003. Albers, Sönke, Bisping, Dirk, Teichmann, Kai, Wolf, Joachim: Management Virtueller Unternehmen. In: Albers, S., Wolf, J (Eds.): Management Virtueller Unternehmen. Deutsche Universitäts-Verlag, Wiesbaden, 2003, pp.3-60. bidbizz AG: A BtoB-Market Place Platform. Kiel, http://www.bidbizz.com, 2002. BtoB-Markt Schleswig-Holstein: Regional Project Co-funded by the State of Schleswig-Holstein and Deutsche Telekom AG, http://www.btob-markt -sh.de, 2002. Camarinha-Matos, Luis M.: VOmap: Roadmap Design for Collaborative Virtual Organizations in Dynamic Business Ecosystems. Road-mapping session at eWork conference Prague, http://www.vomap.org, 2002. Hausner, Ulrich, Hussla, Ingo, Thiemann, Andrea: Virtual Business Incubator Itzehoe. In: Stanford-Smith, B., Chiozza, E., Edin, M. (eds.): Challenges and Achievements in E-business and E-work, IOS Press, Amsterdam, 2002, p. 101-108. Hussla, Ingo, Thiemann, Andrea: From Business Community Towards BtoB-Commerce. In: Stanford-Smith, B., Chiozza, E. (Eds.): E-work and E-commerce. IOS Press, Amsterdam, 2001, pp. 832-838. Katzy, Bernhard R., Horodyskiy, Vasyl I.: Reference Architectures for Virtual Organizations – Towards a Stateof-the-Art Compendium on European Developments. In: Stanford-Smith, B., Chiozza, E., Edin, M. (eds.): Challenges and Achievements in E-business and E-work, IOS Press, Amsterdam, 2002, p. 924-931. Teichmann, Kai, Borchardt, Andreas: Fallstudien zu Virtuellen Unternehmen. In: Albers, S., Wolf, J (Eds.): Management Virtueller Unternehmen. Deutsche Universitäts-Verlag, Wiesbaden, 2003, pp. 61-87. vIZET: A regional platform for the support of Virtual Enterprises. Project Proposal delivered to the State of Schleswig-Holstein with Request of Funding, IZET Innovationszentrum Itzehoe, http://www.vizet.de, 2003.