The new wave business development highlights the importance of Internet of Things (IoT) and the connectivity of machines, equipment and other kinds of ‘things’. The digital connectivity of things enables the creation of smart technical ecosystems creating value through the generation of big data, data analytics through artificial intelligence and new types of data-driven services offered. This development refers to the technical ecosystem and from the business perspective, it serves as a source for new types of value creation and capture.
Considering the business ecosystem consisting of firms, business relationships, alliances, and wider networks, the connectivity of organizations becomes the key to form such ecosystems. However, as ecosystems and networks cannot be managed as such, each organization is responsible for making itself capable to connect with other organizations. So, when IoT refers to the digital connectivity of things, Internet of Organisations (IoO) refers to the connectivity of firms. In the current era of networked business, organisational connectivity has become a crucial organisational capability to be taken seriously in the formation of the firm’s set of strategic capabilities.
Digital connectivity as an organisational capability
An organization’s strategic capability is a configuration of resources, know-how and organisational processes that deploy resources and know-how with a certain rational logic. Digital connectivity relates to all of these three elements of strategic capability:
- Digital tools (software and hardware, local and cloud-based) represent the basic resources to be used,
- organization members’ knowhow of using the tools (digibilities) are crucial to get out all the potential benefits of ‘digital arsenal’ and
- organisational processes and practices that make use of digital tools and personnel digibilities.
These three sides of strategic capability are intertwined. Without employee digital competences all the advanced technology is useless and without strategically relevant (digitalized) organisational processes and practices the organisational resources and competencies do not have a sound logic of action to generate competitive advantage.
Three layers of organisational connectivity: data, information, and knowledge
In supply chain management context digitalization relates to gathering, storing, analyzing, creation and sharing of data, information, and knowledge. Firms are connected to each other for all the above purposes and the means to implement cross-border activities vary. Organisational connectivity thus gets different forms for each of the three layers of information: standardized data, information, and knowledge.
Standardized data refers to operative information sharing in cross-border business processes. Typically, it relates to order – delivery processes. The digital integration of ERPs represents a typical example of organisational connectivity that makes the sharing of standardized data smooth and effective. EDI solutions were the first wave of this type of connectivity, and it is now followed by the integration of ERPs over system interfaces. The challenge in automating data flows relate to the varying standardization of data between information systems.
The non-standardised information flows are manifold in cross-border contexts. Usually, the need to inform partners relate to situations where something has changed and needs actions throughout the supply chain. There are two main challenges in inter-organisational information sharing. First, due to the width of organisational interfaces, it is difficult to ensure that the information gets through to the right persons in a partner organization. Second, the amounts of information to be shared is enormous, which makes the right matching of information even more important. Firms typically use e-mail as the main information channel in business relationships. As is known, e-mail accounts are personal property and it is very common that business-critical information gets lost in personal e-mails. The other common practice is to e-mail a certain information ‘just in case’ to everyone, which causes overflow in e-mail traffic.
Knowledge creation and sharing represent the third layer in inter-organisational connectivity. In the context of business networks, knowledge creation usually means inter-organisational learning (IOL). IOL usually takes place in various instances where the parties of a relationship or wider network try to solve certain problems together. Typically, these situations relate to product development and quality management. In order to learn, it is not enough to solve a certain problem at hand, but to store the solution with rich background information to inter-organisational memory is important.
Software to boost organisational connectivity in business ecosystems – Case Jakamo
Like said, the organisational capability to connect with others in the ecosystem relates to transferring of standardized data, information sharing, and knowledge creation/learning. As a collaboration platform, Jakamois planned to tackle all these three issues related to inter-organisational information exchange. The development of standard digital interfaces between Jakamo and various ERP and PDM systems enables firms to transfer standardized data related to order – delivery process via Jakamo. This automation of a supply chain activity greatly streamline routine supply chain processes and decreases costs generated. Most importantly, the supply chain visibility achieved through the use of Jakamo means the parties of a relationship automatically share the same accurate information concerning the current status of their exchange.
What comes to the sharing of information, Jakamo serves as a common platform to arrange information and keep it available for those who really need it. All relationship-specific information is stored in a common repository and when firms agree on tagging principles, it is easy to find all relevant information whenever needed. Certain functionalities of Jakamo also make it possible to direct certain pieces of information to certain key individuals if necessary.
Inter-organisational knowledge creation and learning manifest themselves as embedded in business and organisational processes. As learning usually necessitates interaction, certain functionalities of Jakamo enables it. For example in the Claims –application supplier and customer are directed through a process to find a root cause for a defect and develop solutions to prohibit that kind of fault to appear again.
Jakamo thus enables organizations to develop their networking capabilities in terms of connectivity. As a general (not firm-specific) solution it also serves as a common platform in a wider network context, which makes it possible to achieve business ecosystem-level development of connectivity.
Professor, University of Vaasa
Co-founder of Jakamo
The Article was published in Jakamo’s Online Magazine Friction Free Community