Organizing social complexity in production networks

Journal of the Academy of Business and Economics, Jan, 2004 by Matthias Meyer, Jens Aderhold, Sigrid Duschek

ABSTRACT

We developed a procedure for exploring and describing the insufficiently explored relationship between role expectations in the network, subjective motives, experiences and identifications, which might be employed during the iterative process of network construction. This procedure is derived from the interplay between network development, role structures, defining competence profiles and the integrated bundling in network-based value creation processes. Due to dynamic and complexity, this unit of analysis requires (1) an intensive focus on the notion of person-related competency and its importance in the dynamic context of networks, and (2) a method for describing and presenting subjective network constructions in as up-to-date a way as possible. We especially want to explore the mutual perception of actors within the framework of a soft factor controlling. We can gather data on context-specific personal constructs by the grid technique. Based upon the applied methods, it is possible to provide information about the relevant structures within networks, which can be used for Personal selection and competency development

1. INTRODUCTION

Technological progress and the dissemination of new technologies, e.g. concerning information, communication or media, create new business opportunities especially for small and medium enterprises (SME) because of their high flexibility and their close relation to costumers (Benett, 1998; Naisbitt, 1994). But at the same time, this implies increasing competition. The participation in networks appears to be a valuable instrument to manage both dynamics (Gulati, 1999). But particularly the establishment of networks--or the entry into existing ones--represents a major challenge to SME. The constitution of networks is contingent upon various conditions and involves far-reaching consequences for the single partner, the network itself and the network environment (Ritsila, 1999). However, small and smallest enterprises cannot participate in this development--or not entirely--because of their structure and the limited resources. Consequently, present and future research has to be focused on organizational designs appropriate to enforce SME network building. Above all, appropriate design principles, which are able to maintain such complex and dynamic forms of cooperation are missing.

The following proposition of a competence cells network approach reflects current tendencies in management and economic science based on the core competence concept by Prahalad and Hamel (1990). The main ideas were developed and combined with an IT based planning and optimization scheme. The thereby created management model is a modification of the concept of Extended Value Chain Management (EVCM). It enables production networks to select and focus their competences according to specific orders quickly. Furthermore, it offers various possibilities to optimize the selection process. Besides the exact representation of all flows of information and material at any time, personal and social factors can be integrated and analyzed as well as economic, logistic and technical parameters. Especially for social factors we suggest the repertory grid method as principal research tool. The gained data is then used for polyhedral analysis, which will be described in detail in the end. The following insights descend from current research within the collaboration research centre "non-hierarchical production networks" (SFB 457), Chemnitz University of Technology.

2. THE CONCEPT OF LINKED COMPETENCE CELLS

The concept of competence cells refers to the core competence approach of Prahalad and Hamel (1990). It relies on the assumption that economic success is due to unique, identifiable competencies. These key competences represent the fertile ground of any company to create present or future products and services. Therefore they may be used directly or transformed by appropriate management measures. In general, core competences consist of technological abilities necessary to realize value creation. We assume that competence cells can be defined as the smallest indivisible, economically mostly independent, specialized units that temporarily link up to other competence cells to accomplish complex tasks. Companies may provide resources by forming autonomous competence cells, which act as elementary units in value creating cooperative processes.

Competence cells are then the basic bricks of our non-hierarchical competence cell network. Abstracting from concrete entrepreneurial structures, it assumes that, within a given region, there exist competence units, formed by a multitude of experiences, which can be interpreted as competence cells (see www.tuchemnitz.de/sfb457/en/). This regional network potential serves to enable differently orientated competence networks. We underline, that not a given entrepreneurial division is cooperating, but only a specific competence cell. This implies changes to the established system of labour division, to the dimensioning of competence cells and their linkage, to the temporal and special structure of production up to the size and equipment of production places. To enhance further network capabilities, it may be even conceived to introduce mobile competence cells offering specific production possibilities. This network scheme enforces flexibility since it enables individual value chains supported by a large variety of competence cell portfolios as it is appropriate to either a given problem, a specific order or a product, for example.