Partners, Collaborators and Co-opetitors

Because of the importance of rapid ramp up and high volume, it often makes sense for an information-intensive company to encourage others to join with it in providing services through a common network. Once a network is in place for one purposes (think of a telephone system again), it gains value as other products or services (e.g. fax, machines and Internet access providers) are added to it. This increased value, in turn stimulates the growth of the network and the cumulative volume through it. Joining with others to promote and exploit a network may even be advantageous if those same companies are competitors in other products or networks. Apple Computer, for example, benefits from having Microsoft provide software for its network of MacIntosh users, even though Microsoft is providing a Mac-like operating system for the rival personal computer network. Similarly, in order to speed up its own product development, Boeing shares its design tools with customers and components suppliers around the world even though both purchase from or supply its competitors.

As far as the ultimate customer is concerned therefore, the output of a network is not a single product but a system of complementary products that together have the potential to make each individual product (and the network as a whole) more valuable. Therefore,   the role of operations management is no longer confined to managing the production and delivery of a product or service through a series of steps within a single enterprise. Instead, it expands to facilitating and stimulating the production and delivery of compatible, often reinforcing, products through an extra-prise (sometimes referred to as a virtual organization) of partnerships and alliances with a shifting group of complementors and co-opetitors. Microsoft for example, seeks to create an ”ecosystem” in which hardware manufacturers  and other software companies can develop complementary products   that utilize Microsoft systems. In this light, cooperation among information-intensive companies can be as important as competition.

Since attracting customers to use their network is important to all these co-opetitors, compatibility is often as important to a company’s success as is differentiation. Therefore, while each participant might prefer to attempt to achieve a competitive advantage by differentiating its products and services, all are induced to design compatible products by adopting (or jointly designing) common standards, interfaces and platforms.

Essentially, all of the information an organization provides comes from public sources. The familiarity of its  subscribers  with Bloomberg’s format for displaying that information, and the tools it provides for analysing it, however, have forced other companies to make their products compatible with Bloomberg’s. Relatedly the increasing popularity of the Linux operating system and the Java programming language versus their windows counterparts is due largely to the fact that both  are non-proprietary and easily available, thereby facilitating the development of compatible products.

Old Economy companies have long recognized the importance of compatibility as well, of course. The reason Matsushita’s VHS format for the videocassette recorder prevailed over the Betamax format employed by Sony, despite the fact that Sony was the first to introduce a commercially successful VCR, was because Matsushita was able to induce a group of other companies to use and support the VHS format.  Similarly, the success of IBM’s design for the personal computer over the (technically superior) Apple  and Unix computers was because IBM made its PC design open to all and eventually  induced most other computer manufacturers and software manufacturers to standardize around it. More recently, the widespread adoption of CAD (computer-aided design) has been facilitated by the convergence of most equipment and software producers around two geometry engines for representing complex shapes. In information intensive companies, compatibility becomes the norm rather than the exception. The downside of compatibility of course, is that it reduces switching costs, which means that a company loses some of its ability to deter potential competitors.

In addition to controlling their internal operations directly operations managers have to use indirect means to ride herd on the often ambiguous and shifting relationships among its co-opetitors. The varied activities of the ever-changing membership of a network alliance do not constitute a stable process, and therefore cannot be controlled in the same way one manages an internal operating process. Instead, one must operate through negotiations, inducements, and threats.

In this sense an information intensive network often operates somewhat akin to the way  medieval Europe did, where individual kingdoms continually strove to  prosper at the expense of others, while at the same time  enlisting their support  (through a series of shifting alliances)   in their  mutual defence and aggressions. The fact that such fluid structures defy the kind of orderly analysis and measurement that operations managers have traditionally employed does not mean their management is impossible. Indeed, some of those old medieval kings and queens were quite good at it over rather long periods of time! Managers of information intensive operations, moreover, have a powerful advantage over those “old pros” in that their communications with other network participants are facilitated by the fact that information transmission today is instantaneous, accurate and almost costless. In addition, because of their relatively recent origin they are not encumbered by the baggage of a long history of competitive rivalry.