professor abbe mowshowitz the city college of new york march 2007 copyright © 2007 by abbe...
TRANSCRIPT
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Professor Abbe Mowshowitz
The City College of New York
March 2007
Copyright © 2007 by Abbe Mowshowitz. All rights reserved.
Professor Abbe Mowshowitz
The City College of New York
March 2007
Copyright © 2007 by Abbe Mowshowitz. All rights reserved.
VIRTUAL ORGANIZATIONVIRTUAL ORGANIZATION
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A FIRST LOOKA FIRST LOOK
Simple illustration of
virtual organization
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SHIPPING DEPARTMENTSHIPPING DEPARTMENT
Services• overnight• three days• one week• two weeks+ same day- two weeks
Service Providers• postal service• inhouse courier• UPS• FEDEX+ DHL- inhouse courier
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WAYS AND MEANS OF DELIVERYWAYS AND MEANS OF DELIVERY
overnight
three day
one week
two weeks
postal service
in house courier
UPS
FEDEX
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UNIVERSITY DEPARTMENTUNIVERSITY DEPARTMENT
Services• Intro (C++)• Discrete Math• Data Structures• Software Design+ Intro (JAVA)- Intro (C++)
Service Providers• Regular Staff• Adjuncts
+ Adjuncts a,b,c- Regular staff x
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COURSES AND STAFFCOURSES AND STAFF
introduction
discrete math
data structures
software design
regular staff
adjuncts
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ADVANTAGES?ADVANTAGES?
• Leveraged use of resources
• Cost savings (e.g., lower overhead)
• Greater flexibility
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MANAGEMENT CHALLENGESMANAGEMENT CHALLENGES
• Grasping the Potentialities of Virtualizing Commercial Relations
• Planning for Change
Key: Virtual Organization
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TECHNOLOGICAL SUBSTRATETECHNOLOGICAL SUBSTRATE
Transport
Computing
Telecommunications
GLOBAL NETWORKING INFRASTRUCTURE
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OUTLINE OF TALKOUTLINE OF TALK
• Faces of virtuality• A unifying definition• Facilitators and impediments to
virtual organization• Illustrations and experience• Long Term Business Implications
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FACES OF VIRTUALITYFACES OF VIRTUALITY
• Virtual Corporation or Enterprise• Virtual Office• Virtual Team• Virtual Classroom
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FEATURES OF THESE FACESFEATURES OF THESE FACES
• Organizations without walls• Effective use of computer
communications• Alliances and joint ventures• Facilities moved at will over space• Distributed organization of work
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ABSENCE OF WALLSABSENCE OF WALLS
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SCIENTIFIC METHODSCIENTIFIC METHOD
“Simplest model is best.”
advises us to search for
UNDERLYING PRINCIPLE
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RELATED CONSTRUCTSRELATED CONSTRUCTS
• Virtual Memory (computers)
• Virtual Circuit (networks)
• Virtual Reality (multimedia)
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COMMON TO ALL?COMMON TO ALL?
SPLIT BETWEEN NEEDS AND MODES OF SATISFACTION
motivating the following
three-part definition
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DEFINITION (PART 1)DEFINITION (PART 1)
A virtual organization is a goal-oriented social unit operating under
metamanagement.
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DEFINITION (PART 2)DEFINITION (PART 2)Metamanagement is the management
of a virtually organized task. • Analyzing abstract requirements• Determining concrete satisfiers• Tracking allocations• Maintaining/revising allocation
procedure• Reviewing satisficing criteria
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DEFINITION (PART 3)DEFINITION (PART 3)
A virtually organized task consists of (1) abstract requirements(2) concrete satisfiers(3) (re)allocation procedure (switch)(4) ‘satisficing’ criteria
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SWITCHSWITCH
THE SWITCH ASSIGNS SATISFIERS TO REQUIREMENTS
ACCORDING TO THE SATISFICING CRITERIA
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SWITCHING COMPLEMENTS ESTABLISHED PRACTICES
SWITCHING COMPLEMENTS ESTABLISHED PRACTICES
Division of labor/specialization of function– task simplification–combinational flexibility
EFFICIENCY (Adam Smith)CHEAPER LABOR (Charles Babbage)
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CRITICAL MANAGEMENT ELEMENTS
CRITICAL MANAGEMENT ELEMENTS
• Abstract requirements• Concrete satisfiers• Assignment of satisfiers to requirements• Tracking assignments• Switching• Satisficing criteria
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LIMITATIONS OF SWITCHINGLIMITATIONS OF SWITCHING
• Excessive switching can nullify gains
• Advantages limited by analogue of thrashing in virtual memory systems
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CRITICAL INNOVATIONSCRITICAL INNOVATIONS
INCORPORATION OF SWITCHING IN MANAGEMENT PRACTICE
&
AUTOMATED DECISION SUPPORT
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RELATION TO FAMILIAR MODELSRELATION TO FAMILIAR MODELS
• Generalizes classical matching methods such as personnel assignment and resource allocation
• Requirements and satisfiers are fixed in classical methods and little or no switching is involved
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CLASSICAL MATCHING METHOD CLASSICAL MATCHING METHOD
TASKS WORKMEN
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DYNAMIC FEATURES OF METAMANAGEMENT
DYNAMIC FEATURES OF METAMANAGEMENT
• Requirements can vary• Satisfiers can vary• Procedures can vary• Systematic switching is supported
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GENERIC EXAMPLESGENERIC EXAMPLES
of virtual organization
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AUTOMOBILE ASSEMBLYAUTOMOBILE ASSEMBLY
COMPONENTS SUPPLIERS
SATISFICINGCRITERIA:cost-qualityrelationship
SWITCHING:change suppliers
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TAX MANAGEMENTTAX MANAGEMENT
TAX OBLIGATIONS OBLIGATION PER PLANT
SATISFICINGCRITERIA:minimize overalltaxes
SWITCHING:shift obligations between plants
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PORTFOLIO MANAGEMENTPORTFOLIO MANAGEMENT
INVESTMENT TYPES SPECIFIC INVESTMENTS
SATISFICINGCRITERIA:maximize risk return
SWITCHING:substitute investment
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HIGH TECH HELP DESKHIGH TECH HELP DESK
CLIENT SERVICES SERVICE PROVIDERS
SATISFICINGCRITERIA:maximize satisfaction- cost ratio
SWITCHING:substitute serviceprovider
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GENERAL OBSERVATIONSGENERAL OBSERVATIONS
• Switching model is applicable to a wide range of management problems
• Major advantages in cost and flexibility can be achieved
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CASE STUDY OF DISTRIBUTED NETWORK: VIRTUAL FACTORYCASE STUDY OF DISTRIBUTED NETWORK: VIRTUAL FACTORY
• Experience of Two Networks of Engineering Firms
• Bodensee Region of Switzerland
• Northwest & Central Switzerland
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BODENSEEBODENSEE
• Thirty Member Firms (2002)• Centralized Structure• Limited Liability Corporation • Assist in Acquiring New Business• Configure Groups for Projects• Fee Based Project Management
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NORTHWEST & CENTRALNORTHWEST & CENTRAL• Forty Member Firms (2002)• Decentralized Structure• Association Charter under Swiss Law• No Dedicated Representative• Each Member Represents Association• Reliance on Standing Committees
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ABSTRACT VIEWABSTRACT VIEW
Requirements• project types(e.g., making
machine, or component)
+ new type- existing type
Satisfiers• subsets of firms(e.g., member firms
a, b and c form joint venture)
+ new subset- existing subset
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SUCCESS AND FAILURESUCCESS AND FAILURE
Bodensee• ill-defined function
of central office• lack of trust among
member firms• individual interest• membership
deemed of marginal value
Northwest & Central• members represent the
network • association promotes
smooth interaction• collective interest• membership deemed
worthwhile
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SUCCESS FACTORSSUCCESS FACTORS• Commitment of member firms to
network• Shared protocols for cooperation• Willingness to share experience• Global sensitivity to membership
and markets
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PITFALLSPITFALLS
• Insistence on centralized management functions
• Absence of shared protocols• Too little attention paid to
consensus building
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WHAT MAKES VIRTUAL ORGANIZATION WORK?WHAT MAKES VIRTUAL ORGANIZATION WORK?
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PAST: ALL IN ONEPAST: ALL IN ONE
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FUTURE: ONE IN ALLFUTURE: ONE IN ALL
INFORMATION COMMODITIESSTANDARDIZATION
FINANCIAL INSTRUMENTSwill evolve as
FACILITATORS OF
VIRTUAL ORGANIZATION
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PAVING THE WAY TO VIRTUAL ORGANIZATION
PAVING THE WAY TO VIRTUAL ORGANIZATION
• Build information commodities
• Promote standardization
• Create appropriate financial instruments
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INFORMATION COMMODITIESINFORMATION COMMODITIES
• Goods or services furnishing information
• Computer-based types: software, databases
• Elements of information markets
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COMPUTER-BASED INFORMATION COMMODITIES
COMPUTER-BASED INFORMATION COMMODITIES
HAND/BRAIN TO COMPUTER
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INFORMATION MARKETS ARE TO VIRTUAL ORGANIZATION
INFORMATION MARKETS ARE TO VIRTUAL ORGANIZATION
what
LABOR MARKETS WERE TO THE FACTORY SYSTEM
what
LABOR MARKETS WERE TO THE FACTORY SYSTEM
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INFORMATION MARKETS UNDERWRITE:
INFORMATION MARKETS UNDERWRITE:
• Computer-based alternatives to human-borne knowledge
• Lower costs• Greater flexibility
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STANDARDIZATIONSTANDARDIZATION
• Technical– access (Wireless Application Protocol)– information exchange (XML based EDI)– interaction (conferencing protocols)
PROTOCOLS FOR ELECTRONIC COMMERCE
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STANDARDIZATIONSTANDARDIZATION
• High level business protocols
(‘socionomics’ and ergonomics)
INTERCHANGEABILITY OF
ORGANIZATIONAL PARTS
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SOCIAL PROTOCOLS: COSTUMESOCIAL PROTOCOLS: COSTUME
Soldier, Farmer, Laborer, Merchant
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FINANCIAL INSTRUMENTSFINANCIAL INSTRUMENTS
• Exchange– online payments – electronic wallets
• Financial management– derivatives– hedging strategies
• Tools for building new instrumentse.g., securitization
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BASIC SECURITIZATIONBASIC SECURITIZATION
LAND PLANT EQUIPMENT
SHARES (in concrete assets)
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HIGHER LEVEL SECURITIZATIONHIGHER LEVEL
SECURITIZATION
LEASES/SHARES MUTUAL FUNDS
SHARES (in abstract assets)
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CURRENT PRACTICESCURRENT PRACTICES• Outsourcing (‘cut & paste’)
– products and services– labor
• Inventory Management– just in time– quick response
• Electronic brokerage– customer order management– logistics management
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GLOBAL OUTSOURCINGGLOBAL OUTSOURCING
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SWITCHING IN E-COMMERCESWITCHING IN E-COMMERCE
Bizbuyer.com• Profiles submitted by Vendors• Vendor coverage: equipment &
services• Buyers submit Request for Proposal• Vendors selected to receive RFP• Client notified if vendor bids on RFP
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E-BROKERAGEE-BROKERAGE
REQUEST TYPES SUBSETS OF VENDORS
SATISFICINGCRITERIA:meet specs at minimal cost
SWITCHING:substitute subset
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COST-EFFECTIVE BROKERAGECOST-EFFECTIVE BROKERAGE
• Gather Information about vendors and potential buyers
• Update databases• Maintain allocation procedure
COMPONENTS OFSWITCHING COSTS
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COSTS OF VIRTUAL ORGANIZATION
COSTS OF VIRTUAL ORGANIZATION
• No free lunch
• Toward a taxonomy of costs
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NO FREE LUNCHNO FREE LUNCH
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MAXWELL’S DEMONMAXWELL’S DEMON
DEMON WORKS TRAP DOOR
HIGH VELOCITY CHAMBER
LOW VELOCITY CHAMBER
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DEMON COSTDEMON COST
ENTROPY DECREASE
equals
DEMON INFORMATION
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DIVISION OF LABORDIVISION OF LABOR
Adam Smith’s pin factory
INCREASE IN PRODUCTIVITY THROUGH TASK
RESOLUTION AND REDUCTION OF
SKILL REQUIREMENTS
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DIVISION OF LABOR COSTDIVISION OF LABOR COST
PRODUCTIVITY GAINS
partially offset by
SUPERVISORY OVERHEAD
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VIRTUAL ORGANIZATIONVIRTUAL ORGANIZATION
ADVANTAGES
limited by
SWITCHING AND HUMAN COSTS
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SWITCHING COSTSSWITCHING COSTS
• Assignment of new satisfier to requirement – transaction (e.g., accounts and database
changes)– legal (i.e., new contracts)– interfaces (e.g., new systems)
• Requirements analysis and satisfier scanning
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ACCOUNTINGACCOUNTING
• Switching benefits must exceed cost of re-assignment– not trivial to determine– dedicated activity is needed– include in switching costs
• Amortize costs over lifetime of need-satisfier pairing
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RESEARCH IN PROGRESSRESEARCH IN PROGRESS• Investigation of scientific methods
for implementing the functions of metamanagement
• Empirical studies of costs and benefits of switching
• Development of guidelines to assist organizations in exploiting the potential of switching
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voSWITCH
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LONG-TERM BUSINESS IMPLICATIONS
LONG-TERM BUSINESS IMPLICATIONS
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CLAIMCLAIM
Virtual Organization Will Prove Irresistible to Managers
becausePeople Act in What They Perceive to Be
Their Best Interests and
The Competitive Advantage of Virtual Organization Will Become Apparent
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BALANCE SHEETBALANCE SHEET
• Advantages–efficiency and effectiveness– responsiveness and flexibility
• Disadvantages–costs (intelligence, switching)–human relations (weaker ties)
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REQUIREMENTS OF SWITCHINGREQUIREMENTS OF SWITCHING
• Ease of forming, modifying and terminating relationships (‘coupling and decoupling’)–person to person–person to organization–organization to organization
• Mobility
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FACILITATING SWITCHINGFACILITATING SWITCHING
TRANSFORMATION OF TRUST AND LOYALTY
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ANONYMITY: FOCUS ON MUTUAL ADVANTAGE
ANONYMITY: FOCUS ON MUTUAL ADVANTAGE
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LOYALTYLOYALTY
Traditional: subjectiveBASED ON AFFECT
Post-modern: objectiveBASED ON COMMON INTEREST
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TRUSTTRUST
Traditional: staticLINKED TO SOCIAL STATUS AND
GROUP MEMBERSHIPPost-modern: dynamic
LINKED TO JOB FUNCTION AND ORGANIZATIONAL AFFILIATION
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CONDITIONS OF INTERACTIONCONDITIONS OF INTERACTION
Homogeneity(reliability ensured by authority and custom)
Diversity(reliability ensured by
standardization)
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COEXISTENCE OF NEW AND OLDCOEXISTENCE OF NEW AND OLD
STANDARDIZATION NEED NOT ELIMINATE RELIANCE ON AUTHORITY AND CUSTOM
metamanagement can partition its sphere of action
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VIRTUALITY REINFORCES FRAGMENTATION
VIRTUALITY REINFORCES FRAGMENTATION
• Decline of nation state power
• Devolution of power and authority onto ‘private’ organizations
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EMERGING POLITICAL ECONOMYEMERGING POLITICAL ECONOMY• Power and authority centered in
virtual organizations• Political power and authority
exercised by private organizations• Economic power based on globally
distributed resources
VIRTUAL FEUDALISM
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CONCLUSIONCONCLUSION
• Virtual organization offers competitive economic advantage
• Managers who ignore it do so at the peril of their companies
• A new world of business and government is in the making