Introduction

• IT and the Internet have permeated the value chains of every business sector (Porter and Miller, 1985; Porter 2001)

• Deeply transformed the organization of firms (Dutton et al. 2005)

• “Digital capitalism” (Schiller 1999)

• Customers are central to business today, and IT has empowered consumers

• Virtual organizations epitomize the transformation of value chains

• The acceleration of technological change has led to the “commoditization, disintegration and instability” of value chains (Lüthje 2005)

Mastering Complexity with Technology

• “Organizational complexity is a key condition necessary for a firm to maximize the benefits it can derive from the new information technologies” (Sassen 2001)

• Trade off between complexity and overall efficiency

• Intertwined problems faced by companies:

  • Rise of customer power

  • Shortening of product lifecycles

  • Globalization of sales and purchases

  • Splintering of supply chain

• Requires increasing trust and cooperation between suppliers and purchasers

  • E.g. extended enterprise (Post et al. 2002)

• Bandwagon Effect

• Companies don’t just rely on marketing and technological innovativeness but also organizational innovativeness (Chesbrough and Teece 1996)

• Vernon (1966) and Day (1981) made popular the concept of product lifecycle

  • Leads to conceiving production in global terms

• Oracle marketed it s e-business suite as a single database for the entire product lifecycle (2003 marketing campaign)

• Management and administration are increasingly becoming parallel to core production processes

• Activities impact others much more

• CATIA software

  • Used by Airbus and Boeing

  • Boeings 777 was first plane to be designed and prototyped completely in digital form (launched 1990)

    • Information technologies were long in use before the Internet

  • Connects to collaborative software allowing global sourcing, value chain unbundling and engineering

• “Distinction between service and product is blurring” (Zysman 2005)

  • E.g. automobile-industry selling cars, insurance, repairs and credit

• Customer-centric enterprise (Tseng and Piller 2003)

  • Mass customization and increase in time-to-market requirements

• Market deregulation and free trade have spurred competition

• Marginal costs tending to zero

• Firms and management have had to learn to adapt to knowledge-based information economy

  • 4 key activities for firms:

    • Innovation

    • Coordination

    • Selection

    • Learning

    • E.g. Proctor and Gamble have developed an external...

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