Vision

Companies are continuing to create a common computer network by connecting their computers by means of external networks. The companies then integrate their IT applications by having them exchange data by means of data communication. Thus, a network system is created that is used by a number of companies. Such a system is called an Interorganisational System (IOS). An IOS is an example of a collaborative system, because it supports the co-operation between companies and contributes to the integration and transformation of the business processes they have in common.

There is nothing new about the use of data communication between computer systems of different companies. Over the past 25 years, the world of finance has seen the development of an international network between computer systems of banks, investment companies and stock markets. This has resulted in a world-wide system for financial transactions. A similar development is seen in the travel business, where travel agents, tour operators, airline companies and hotels are connected to the reservation systems. In the world of retail, distribution and transport, too, the data communication between the computer systems of the participating companies has developed strongly.

In the above-mentioned applications of interorganisational systems the emphasis is mostly on electronic data interchange and on the production and processing of these messages by the mutual computer applications. For some companies, these applications are already leading to a further integration and even to transformation of the common business process. The development of an IOS usually goes through four stages:

1. data communication between the computers of different companies replaces the traditional 'paper' communication;
2. IT applications of companies integrate into an IOS;
3. corresponding business processes of different companies integrate by means of the IOS;
4. these business processes are transformed.
   
   

3.2.1 The Development Of Interorganisational Systems

At first, data communication between organisations is usually intended to replace the traditional communication on paper. Electronic Data Interchange (EDI) replaces the exchange of paper forms, such as order forms, receipts, invoices and payment orders between companies. These messages consist of formal, alphanumeric data that comply with a certain message standard, such as EDIFACT.
More and more organisations use electronic mail (E-mail) via internal and external networks. A successful external network is the Internet, which is open to all kinds of organisations as well as to private individuals. The open form of communication via E-mail offers more possibilities than EDI. Via E-mail, organisations can exchange all kinds of things, from concise, formal messages to complete electronic documents. Instead of the limited alphanumeric data used in EDI, people are switching to Electronic Object Interchange (EOI). With EOI it is possible to transmit complete electronic objects. These electronic, or immaterial objects contain data as well as the corresponding software functions.

In the next phase, organisations will integrate their IT applications by having their computer systems directly create and transmit electronic messages, while the system on the other end directly receives and processes them. The connection and integration of automatic transaction processing implies an enormous acceleration of the process as well as being an important money-saver.

Figure 3.2 A network system of companies and private individuals.

In the third phase, a great deal of attention and effort is spent on the integration of the business processes of the participating organisations. A precondition is usually that the internal computer systems of the participating organisations indeed form a network system that supports the internal human organisation in controlling and executing the business processes. Data communication between the computer systems of the organisations will then lead to a common network system through which people and business processes in the participating organisations are connected. Figure 3.2 shows a common network of internal network systems. In company 1, the internal network system supports the administrative procedures and the control of the manufacturing processes. Company 2 is an administrative organisation with a central office and a number of branch offices. Private individuals, too, can connect their home computers to the network via a telephone line. In future, the data communication between companies, home systems and mobile systems will run via the Digital Highway.

By communicating with each other, people in different companies are able to co-ordinate their tasks.
Communication between the automated applications opens the way to the integration of the control of administrative business processes in the various participating organisations. In this way, one control system is created for a conglomerate of administrative business processes that take place in different companies. A chain of production firms and shipping companies can also connect the various process control systems. This creates one control system for the production processes and the transport processes in between.
Organisations use the IOS to exchange data with each other. A manufacturer can for example use it to develop a new product in close collaboration with his suppliers.

 

3.2.2 Transformation Of The Common Business Operations By Means Of An IOS

An IOS allows the participating organisations to change the common business operation and their role in it.

An example of such a transformation is the so-called chain integration. This form of transformation is possible for organisations that form a value chain. In the value chain, they together produce and deliver products for customers. Chain integration results in the streamlining and improvement of the common production and transport process within the value chain. This not only leads to internal adaptation of the business processes in the organisations, it also leads to redistribution of parts of the business processes over the network of the participants. In case of redistribution - meaning a voluntary or forced reallocation of business processes - parts of a business process of an organisation move to its predecessor or successor in the process chain. The reallocation may even lead to the situation where a participating company completely disappears from the process chain. This phenomenon is called disintermediation. It occurs for example when companies and institutions directly borrow and lend money from and to each other in an electronic capital market, thus excluding the bank as intermediary.

Below, a few examples of transformation are given, based on existing applications of IOS.

Flight Reservations
Airline companies are always among the first to apply new IT, especially in their reservation systems. This started towards the end of the sixties, with on-line systems. American Airlines and United Airlines were among the first companies who applied network systems between organisations. A few years ago, they developed a network system called SABRE, to which the computers of travel agents were also connected. With this system, travel agents can easily get a list of all possible flights and the corresponding prices for a certain customer. Other airline companies recognised the advantages of this and started to use the American Airlines software for their own reservation systems. The fees travel agents and other airline companies pay American Airlines for the use of this software, constitute an important part of the revenues of American Airlines.

The system has a number of advantages. It provides airline companies with a sophisticated method of calculating the prices of seats. The system continually adjusts the prices for a certain flight on the basis of the demand for that particular flight with the travel agents, in combination with the number of booked seats and the number of days or hours before take-off. In this way the system prevents aeroplanes flying with a large number of vacant seats. Since it first started to be used, the system has been extended and linked to other reservation networks. It is not just aimed at flight reservations anymore, but covers everything a customer might want when travelling. The introduction of a network system has lead to the development of an interorganisation that includes airline companies, travel agents, hotels, car rental firms and theatres.

Supermarkets
Supermarket chains increasingly use network systems for the accurate co-ordination of the purchasing, distribution and selling of articles. Electronic cash registers and hand computers are important resources for keeping sales and stock records in shops. The network system passes on the data to the distribution warehouses, which in turn handle purchasing from the suppliers and replenishment of the stocks.
The IOS in this case leads to an interorganisation of shops, distribution warehouses, suppliers and a co-ordinating head office. The IOS promotes the autonomy of shops and distribution warehouses. Shop chains that are still managed by a central concern organisation, will more and more get the nature of decentralised franchise chains of independent entrepreneurs.

Clothing Industry
A well-known example is the way the Italian firm of Benetton works. This firm uses a network system with which it co-ordinates and manages the business processes of different independent companies. The firm has a network of 5000 shops in 79 countries and is supplied by 200 small ateliers. The shopkeepers and the owners of the ateliers are independent entrepreneurs. The Benetton head office in Treviso, Italy, handles the co-ordination for the entire organisation. Originally, this was done by means of the telephone and on paper. In 1985, the firm decided to install a computer network with PCs in the shops and at the agents' offices. The agents handle the co-ordination per country. At the head office, there is a central computer for the world-wide co-ordination. This way, Benetton is able to closely follow the sales figures across the entire world. On the basis of sales prognoses and the wishes of customers and shop owners, the firm has the desired types of clothing made in the desired colours. The delivery time of those clothes is very short. The ateliers are directly commissioned to make small series of clothes. Benetton provides them with the right materials in the right colours. The entire Benetton organisation is aimed at the flexible production of small series of exclusive clothes, for which there is an evident current demand among the customers.
Meanwhile, other firms in the clothing industry have also discovered this possibility, and Benetton is beginning to get some competition. For years, however, the firm has had a great advantage and has been able to grow in a market in which there was hardly any growth at all.

Aircraft Industry
Another example of electronic collaboration can be seen in the design and building of the new Boeing 777. In collaboration with its suppliers, Boeing completely designed this aircraft by means of the computer. To this end, Boeing and its suppliers connected their CAD systems. This allows the engineers of Boeing and its suppliers to collaborate on the design of the aircraft. To achieve this, Boeing had to force the suppliers to use the same CAD system Boeing used, since it turned out that the exchange of data between the different CAD systems did not function properly. This meant that many suppliers had to invest in a new system. This is therefore an example of how a dominating organisation in the value chain enforces collaboration. As a result of the collaboration, the engineers already make sure that all the components of the aircraft fit during the design phase. This gives them the certainty that the aircraft can actually be built. Customers of Boeing are also involved in the design process. A number of airline companies are co-operating to see whether the aircraft offers the right comfort for the passengers and whether it is easy enough to operate and maintain. The most important result is the fact that the need for building an expensive prototype has vanished. Boeing assumes that it will be able to produce the aircraft directly from the design and that the aviation authorities will approve the first normally produced specimens.

 

3.2.3 The Growth Of Front-Office And Extended Office

In many business sectors, companies are increasingly customer-oriented. They are offering larger ranges of products and services. At the same time, customers are emancipating and desire a more personal form of service. This requires a more direct customer approach.

Branch offices, for example, are ideally suited to approach customers directly. Many organisations therefore separate business units aimed at production or processing (the back-office or production plants) and business units aimed at customers and suppliers (the front-office). At the same time, the autonomy of the business components increases, so that the organisation more and more becomes an interorganisation of business units. Thanks to IT, telecommunications and transport these business units can be situated anywhere in the world. Distance is not important anymore.

More and more often, organisations 'deliver at home'. The home thus turns into an 'extended office' of the organisation. Account managers advise their private customers at home, or customers are approached by telephone or by mail. Conversely, the customer can also communicate by telephone or in writing, for example to make inquiries or to place an order. Examples of companies that work this way are mail order companies and 'direct writers'.

Customers and employees can connect their PCs to the computer systems of organisations by means of telecommunications. Thus, the PC functions as an electronic extended office. The organisation creates a home office for its customers and its employees.

In the long run, one large network will develop, to which the computer systems of all companies and private individuals are connected: the Digital Highway. Organisations with many private customers will at first use the network to bring their front-offices closer to their customers, either through branch offices or by means of electronic equipment. In the next phase, they will open up their own computer system for the computer systems of the customers, giving the latter the nature of an extended office. This leads to the creation of a virtual company: business processes that take place in people's homes or along the way. These business processes use infrastructures provided by third parties. The real company, the business processes that traditionally take place at the offices of the company and that use the company's own infrastructure, will become relatively smaller.

Below, a number of examples of applications of IT and telecommunications are given to illustrate the concepts of front-office and extended office.

The electronic front-office
With IT and telecommunications, organisations are able to set up electronic front-offices. An example of this is the so-called 'electronic information desk'. Customers often ask staff members for information. People are now given brochures that provide answers to complex questions, or staff members go through all kinds of information with the customers. A PC or a dedicated workstation in a quiet corner may serve as an electronic 'information desk' where the customer can request and look at all the information he needs. If necessary or desired, a staff member can provide assistance. This way, customers at a travel agent can go through the travel information and compare the different prices themselves. Another example of an electronic front-office is provided by the cash dispensers of banks, where the customer can withdraw money and inquire about his balance.

One front-office for different companies
Different companies may use the same front-office. Estate agents work like this, for example. On a PC at the estate agent's office, the customer can see which houses in the area are for sale, even houses that are being sold by other estate agents. An alternative is to use a network to create one counter, desk or branch office for different companies. This situation has arisen with some banks and insurance companies after a merger or the forming of a co-operation. The branch offices of the banks and the insurance agents provide a front-office for the services of the co-operating institutions. The head offices of banks and insurance company form the back-offices for the banking services and the insurance policies.
The Dutch post offices provide a good example of this. They serve as front-offices for various companies and institutions, such as the postal services, the government, the State Lottery and the Postbank.
A network system connects the front-office and the various back-offices. Via his workstation, an employee of the front-office communicates with the back-offices of the participating organisations. This way, the employee can easily perform tasks for the same customer that are related to the products and services of completely different organisations. He can also offer the customer a combination of those products and services right there and then.
This approach gives the customer the advantage of ' one-stop shopping'. He is no longer required to approach a different desk or even go to different offices in different towns for each product or service.

Extended office for customers and home office for employees
More and more people have a PC in their home that can communicate via the telephone line with the computer systems of others. Organisations can provide their customers with PC applications that communicate with their own computer applications. The Dutch Postbank, for example, provides a programme called Girotel. With the Girotel software, the customer can request balance statements and give payment orders on his own PC. The software can also be used to apply for a loan or an insurance policy. Thus, the customer's PC has become an extended office of the Postbank.
By using the possibility of extended office, an organisation can reach far more customers, and on top of that it is able to shift part of the work to its customers. The customer has the advantage that he can handle his business from his 'easy chair' through his home system (or from his car, by means of a mobile system). His home system becomes a front-office to all the companies in the world, which he contacts via the Digital Highway.
By means of the Digital Highway, employees can work from home or wherever they are, and talk to customers via videophone. Employees have an electronic home office. The existing front-offices often involve high costs. They will therefore be scaled down considerably in the long run. In many cases there is no longer a need for a front-office building to be able to talk to the customers. If there is a need for a personal conversation, the employee can just visit the customer at home.

 

3.2.4 Forms Of Collaboration Between People

A network system overcomes distances. Via the network, people on different locations can communicate and consult with each other. A network system therefore enhances the 'organic' aspect of an organisation, the informal collaboration between people. Employees in an organisation not only consult with each other, but also with employees of other organisations, with customers and with all kinds of people outside their own organisation. Through consultation, the parties involved reach agreements, deal with unexpected situations, exchange knowledge and find creative solutions.

The collaboration between people has a formal as well as an informal aspect. A group of individuals can enter into a formal co-operation with an agreed goal. The participants beforehand make agreements on the results they are to yield together and on the processes they will execute.
A group of individuals can also collaborate in an informal way. In close consultation, participants then continually define the results and the manner in which they collaborate. They can deal with changing circumstances in a flexible way.

Figure 3.4 Production lines, teams and interest groups.

We roughly distinguish three forms of co-operation, differing in the extent to which participants co-operate formally and informally.

The Production Line
If the products to be delivered, the services to be provided and the procedures to be followed are largely prescribed in advance, the co-operation is formal: a production line. A production line is aimed at a certain group of buyers who order the delivery of products or services. The people working in a production line have fixed tasks and are continually supposed to produce certain results. They did not design the organisation of the production line themselves. This is done by other people and departments of the company, such as staff personnel and facilitating departments.

Interest Groups
A group of people can voluntarily organise their own collaboration without an external assignment. To do so people will have an apparent common interest. This leads to an informal collaboration in the form of an interest group. This is a group of people exchanging knowledge on a certain subject and supporting each other in activities in which this subject plays a role. Examples are a philatelist association, in which stamps are the common field of interest, and a consumer association, defending consumers' interests.
Typical of an interest group is its self-organisation. A group of individuals spontaneously establishes an interest group. Others voluntarily participate because it is in their own interest. The participants together determine how the organisation should be set up. Usually, in interest groups with a higher degree of organisation a small, fixed group of people forms a 'company' as it were, that co-ordinates the rest of the organisation and represents it to the outside world.

Teams
In the third form of co-operation - the team - there is an equal balance between formal and informal co-operation. Take for example a team that is supposed to execute a complex assignment. One or more people take the initiative of setting up the team. The team works on an assignment in two phases. In the first, 'informal' phase, the team and the customer together decide on the results to be yielded and the approach to be followed. The team will recruit its own people and acquire the resources necessary to execute the assignment. Then the next, 'formal' phase follows, in which the team members collaborate in a more formal way to execute the assignment. During the execution, the team members will continue to consult with each other and with the customer and if necessary adapt the result and the work method.

All three forms of co-operation exist in organisations.

Teams enhance the flexibility and creativity of a company. Team members independently work on an assignment. They have a degree of autonomy and they decide which final result they will yield and how they organise and execute their tasks. Teams are therefore ideally suited for the execution of once-only assignments that require a great deal of ingenuity and creativity of the participants. Examples are project teams consisting of scientists, staff members or automation experts. Teams are good for delivering high-quality and innovative products, providing services or doing research in a creative and flexible way. We are referring to, for example, reorganisations, the design of products and production processes and setting up production lines.

A production line is useful if a company turns out the same products for a long period of time. With a production line, it is possible to efficiently deliver products of a constant quality. Many firms are reorganising in order to make production more flexible with the proper production monitoring, to be able to produce a broad and varying range of products. A similar trend can be seen in the service industry.

Interest groups play different kinds of roles in organisations. They can supply data and share insights that are important for forming the business strategy. Consumer organisations, for example, are important for a company to learn about the market. Experts in an organisation are often members of interest groups that focus on their expertise. In such interest groups they can exchange and build up knowledge and meet with their colleagues or soul mates.
Organisations together can also form interest groups to exchange knowledge, staff or production means, or to support each other. This in turn forms a solid basis for the development of interorganisations.

 

3.2.5 Network Systems And Informal Collaboration

Network systems stimulate the informal collaboration between people and the forming of teams and interest groups in various ways. This is based on the fact that network systems support the communication between people. To facilitate informal collaboration we use groupware applications. Groupware turns network systems into a collaborative system supporting the collaboration between people. Groupware applications are specifically aimed at group work, such as meetings, collaborating with a common goal and exchanging and building up knowledge. A precondition in all these cases is the sincere intention of those involved to collaborate. How the collaboration is organised remains for the people themselves to decide. The network system only supports people in setting up and maintaining the collaboration.

Support of communication
In informal collaboration, knowledge exchange and consultation are very important. For that reason, people who collaborate informally, communicate a great deal. As a result of the progress of communication technology, it is possible for increasing numbers of people to communicate with each other at different times and from different places. Telephone and fax are now standard technology for this.

Even more possibilities are available if the PC is used in combination with telecommunications. An important development in this area is the increasing use of electronic mail. With E-mail, users send each other electronic messages or documents such as texts and pictures, from their PCs at work or at home. Communication networks for E-mail, such as the Internet, are booming. The Internet now experiences an annual growth of 20 to 30%. People are eager to participate.

Electronic mail networks include file servers that handle the exchange of messages. On these servers, users can store data on certain subjects and make them available for retrieval by other users. This functions like a so-called bulletin board. There is a spontaneous formation of international interest groups consisting of users who exchange knowledge and ideas with each other via the bulletin board.

Until now, users primarily exchanged text by means of electronic mail. As soon as users have multimedia facilities on their workstations for recording, digitally storing and rendition of sound or video, they will also be able to transmit electronic documents including sound and images via the network.

The growing capacity of networks will soon also lead to a strong increase in the use of videophone. With that medium, two people using workstations with microphones and video cameras can have a telephone conversation in which they see as well as hear each other. This way, users on different locations can consult with each other. This videoconferencing can also take place between groups of participants. This is common practice in international trade and industry.

Preconditions for informal collaboration via the network
Network systems offer an excellent infrastructure for different kinds of informal collaboration. The infrastructure in itself is not enough, however. The present experience with company networks and the Internet shows that a number of important social preconditions must be met before the informal collaboration actually develops.

Common interest or intended result
Informal collaboration will only occur when the participants have something in common. They have to share an interest in the same subject and they have to want to exchange knowledge on this subject with each other, or they must have the intention as a team to collaborate to achieve a certain result. Mutual trust is of great importance in this matter. The development of collaboration is an organic process, not a systematic one. Many (small and short-lived) interest groups arise spontaneously when people find each other by chance, like on the Internet. In organisations, it is possible to set up temporary teams, that are instructed to work towards a certain result. Nevertheless, people only participate in an interest group or a team if their personal interest corresponds in any way with the common interest or the intended result. Many interest groups are disassembled as soon as the common interest disappears or the intended result is achieved.

Sense of security
The communication networks should be organised in such a way that people have the idea they can safely communicate with others, even on strictly personal matters. The protection of the privacy of both the groups and the individuals is therefore a precondition. The first mobile telephone networks, that everyone could listen in on, where unsuccessful for that very reason. And managers who want to look into the electronic mail messages of their employees will not exactly be stimulating the informal collaboration via the network.

Access for all
The communication network should be easily accessible for everyone. Each beginner must soon be able to find his way around in the network. It is essential that workstations are easy to operate and that a helping hand is always nearby: the help desk for questions and trouble shooting. Companies are wise to give as many employees as possible access to the network and to prevent electronic communication and the collaboration being something only available to a 'happy few'.

Acquiring new social behaviour
The Internet shows that electronic communication automatically leads to a new kind of social behaviour. In time, the users have developed their own way of communicating. Moreover, it appears that the users together make up rules regarding the use of the Internet. Directly sending advertisements to participants, for example is undesirable. Also, participants who disturb and pollute computer conferences or bulletin boards with nonsense messages, are barred. Moreover, these - initially unwritten - rules result in an improved organisation of the Internet, in which the participants themselves better organise and protect the access and use of the Internet.

Facility for consultation and conferencing
Telecommunications via the electronic network serves as the infrastructure for consultation between different individual discussion partners. This electronic conferencing can take place on one or more locations. The distance does not matter. A variety of software is available to support the combination of different forms of teleconferencing. If the technique of teleconferencing (tele-speech and tele-vision) is combined with telecorrespondence (tele-writing and tele-drawing), this may have interesting consequences. A condition is that all participants have their own workstation. Now, instead of everybody taking turns in spouting their ideas, all participants can enter them simultaneously at their workstations. The network system collects and distributes all the data 'entered': ideas in the form of texts or pictures. Anyone is allowed to 'speak' in writing without any restrictions. This written discussion can be completely or partly anonymous, if desired. At the same time, parallel to the written discussion, the teleconference simply continues. This way of working makes it easier to discuss issues in the meeting on which there is some kind of taboo. If desired, taking votes on ideas can also be done anonymously, simply by pressing a button. An advantage of this is that IT helps prevent the dominance of certain people. Considerable shifts of power can thus occur. Participants who hardly ever got a chance to speak in the past, are now able to contribute more. Another advantage of the electronic conference, finally, is the fact that the network system electronically stores all the ideas, documents and other matters that were entered. The computer can immediately produce the minutes and the agreed action lists.

Support of knowledge management and learning processes
A network system can be a fine tool for teams and interest groups in exchanging and building up knowledge. We would like to link this to the concept of the learning organisation. Experts, for example, often work in small, ever changing teams. The knowledge built up in a team during the execution of a task is easily lost, as soon as the team has completed the assignment and is disassembled. This underlines the importance of a long-lasting interest group of experts: it sees to the management of the knowledge that is built up. Consultants in world-wide operating consulting firms work this way, for example. Through the network, the experts for example use bulletin boards, common databases and archive systems to exchange and store knowledge.