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Network orchestrator

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Network Orchestrator Companies are defined as:[1]

... companies [that] create a network of peers in which the participants interact and share in the value creation. They may sell products or services, build relationships, share advice, give reviews, collaborate, co-create and more. Examples include eBay, Red Hat, Visa, Uber, Tripadvisor, and Alibaba.

The concept was born in the early 1990s among several organizational behavior researches that were conducted by many scholars of that time such as Malone & Crowston,[2] Lipparini & Sobrero,[3] Powell et al.,[4] Simonin,[5] and many others. In 2001, the term "Network Orchestrator" was officially used by the authors Remo and Julian,[6] after that several researches that followed used this nomination when referring to this structure of organizational relationship.[7][8][9][10][11][12]

A November 2014 Harvard Business Review article used the definition presented in proposing a new kind of business model, moving from the past standard of industrial classifications to a standard considering the principal way an organization invests its capital to generate and capture value.[1] Their suggestion of a new kind of business model was constructed evaluating companies' descriptions of themselves in annual reports, revenues generated by different business units, capital allocation patterns such as R&D or COGS expenditure, and market perceptions including news articles and analyst reports.[1]

Characteristics

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Network Orchestrators Companies are considered as more profitable companies, which have a faster growth, higher return on assets, lower marginal costs and larger profit margins.[1]

The authors[1] also mentioned that as of 2013, Network Orchestrators Companies received valuations regarding their stock exchange shares or their value between two and four times higher, on average, than traditional companies.[1] This reflects the calculations based on companies' market valuation and revenues, which are values difficult to manipulate with accounting, reflecting investor expectations for future cash flows.[1]

This kind of companies shifted from physical to digital, enabling a digital platform in which people can congregate.[13]

Competences

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Network Orchestrators Companies' competences rely on:

  1. Intangibles knowledge, for example companies as Gerson Lehrman Group, AlphaSights, Third Bridge or Coleman Research.
  2. Relationships, for example companies as Facebook, Pinterest, or Instagram.
  3. Assets required by people, for example Uber, Airbnb, TripAdvisor, Red Hat, Lyft, or Instacart.
  4. New “non-management” and “non-ownership” competencies related to facilitating a network of individuals, their individual assets and relationships.

Intangible Assets

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See also: Intangible asset

Barry Libert, Yoram (Jerry) Wind and Megan Beck[1] also state that the Generally Accepted Accounting Principles (GAAP) usually categorize plant property and equipment as "assets" and all other costs such as people, trainings, and intellectual property as "others expenses", but this usual model does not include others important "assets" such as customers, sentiment, and networks relationships. This leads many companies to under-allocate capital to intangible assets.[1] This situation brings advantages to Network Orchestrators Companies because intangible assets make up approximately 80% of corporate market value.[1] Besides of that, Wharton University of Pennsylvania[14] stated that:

...many of the most valuable goods in our market — such as ideas, intellectual capital, and access — digitizable, but also our digital networks allow them to proliferate with great ease. The scaling cost is close to zero. When you add the network effect, where each additional participant (or node) in the network increases the value for every other participant, the network drives its own growth.

Intangible assets dominate the current market with over 80% of its value, when by 1975 it consisted of only 17%, reflecting an obvious and significant change from tangible (physical) to intangible assets.[15] Orban Mendoza Valiente[15] stated that:

The physical assets will always be relevant but they are a ghost of the industrial revolution where products were manufactured in workshops, with low wages, and insufferable conditions. Today it is different of course but there is a new revolution, the revolution for the intangible.

The evaluation of the intangibles are intuitive and are difficulty to measure,[14] for example the building of the U.S. interstate highway took about 35 years and was estimated in $425 billion, Facebook instead grew up to 500 million users in a little more than six years, indicating that digital technology and networks made a significant difference in current business models.[14]

References

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  1. ^ a b c d e f g h i j Libert, Barry; Wind, Yoram (Jerry); Beck, Megan (20 November 2014). "What Airbnb, Uber, and Alibaba Have in Common". Harvard Business Review. Retrieved 13 June 2018.
  2. ^ Malone, Thomas W.; Crowston, Kevin (1 March 1994). "The interdisciplinary study of coordination" (PDF). ACM Comput. Surv. 26 (1): 87–119. doi:10.1145/174666.174668. hdl:1721.1/2500. S2CID 2991709.
  3. ^ Lipparini, Andrea; Sobrero, Maurizio (March 1994). "The glue and the pieces: Entrepreneurship and innovation in small-firm networks". Journal of Business Venturing. 9 (2): 125–140. doi:10.1016/0883-9026(94)90005-1.
  4. ^ Powell, Walter W.; Koput, Kenneth W.; Smith-Doerr, Laurel (1996). "Interorganizational Collaboration and the Locus of Innovation: Networks of Learning in Biotechnology". Administrative Science Quarterly. 41 (1): 116–145. doi:10.2307/2393988. JSTOR 2393988.
  5. ^ Simonin, Bernard L. (October 1997). "The Importance of Collaborative Know-How: An Empirical Test of the Learning Organization". Academy of Management Journal. 40 (5): 1150–1174. doi:10.5465/256930 (inactive 1 November 2024).{{cite journal}}: CS1 maint: DOI inactive as of November 2024 (link)
  6. ^ Remo, Hacki; Julian, Lighton (22 June 2001). "The Future of the Networked Company". The McKinsey Quarterly: 26. Retrieved 29 June 2018.
  7. ^ Kilduff, Martin; Tsai, Wenpin (15 August 2003). Social Networks and Organizations. SAGE. ISBN 9781446230824. Retrieved 29 June 2018. {{cite book}}: |website= ignored (help)
  8. ^ Obstfeld, David (1 March 2005). "Social Networks, the Tertius Iungens Orientation, and Involvement in Innovation , Social Networks, the Tertius Iungens Orientation, and Involvement in Innovation". Administrative Science Quarterly. 50: 100–130. doi:10.2189/asqu.2005.50.1.100. S2CID 10622571.
  9. ^ Heck, Eric van; Vervest, Peter (1 June 2007). "Smart business networks: how the network wins". Commun. ACM. 50 (6): 28–37. doi:10.1145/1247001.1247002. S2CID 11970971.
  10. ^ Fung, Fung, Yoram. "Competing in a Flat World" (PDF). Online Access Center. Retrieved 29 June 2018.
  11. ^ Foster Borgatti, Candace (1 August 2011). "Gatekeeper search and selection strategies: Relational and network governance in a cultural market". Poetics. 39 (4): 247–265. doi:10.1016/j.poetic.2011.05.004.
  12. ^ Paquin, Raymond L; Howard-Grenville, Jennifer (1 November 2013). "Blind Dates and Arranged Marriages: Longitudinal Processes of Network Orchestration , Blind Dates and Arranged Marriages: Longitudinal Processes of Network Orchestration". Organization Studies. 34 (11): 1623–1653. doi:10.1177/0170840612470230. S2CID 144703421.
  13. ^ "Network orchestrators are the new path to profit". The Global and Mail. Retrieved 13 June 2018.
  14. ^ a b c "Network Revolution: Creating Value Through Platforms, People and Technology - Knowledge@Wharton". Knowledge@Wharton. Retrieved 13 June 2018.
  15. ^ a b "Networks: The Power of Connectivity – Sky Rocket Development". Sky Rocket Development. 19 January 2017. Retrieved 13 June 2018.
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