Sense and Respond: : Capturing Value in the Network Era

Citation

Caglio, A. (1998), "Sense and Respond: : Capturing Value in the Network Era", Business Process Management Journal, Vol. 4 No. 3, pp. 263-267. https://doi.org/10.1108/bpmj.1998.4.3.263.1

To say that information technology is transforming business organization is rather commonplace: it is evident that the “Information revolution” is changing our economy. To define exactly what this transformation will require of enterprises and managers is certainly less obvious. In this respect, Sense and Respond represents an excellent overview of the key issues concerning management in the twenty‐first century. Based on papers presented at the 1995 Harvard Business School Colloquium “Multimedia and the boundaryless world”, this very readable book makes great strides in clarifying and demystifying the changes actually occurring in business practices, by focusing primarily on understanding the managerial implications of the newly emerging network technologies.

The whole book revolves around a rather simple ‐ but not at all banal ‐ research question ‐ how can companies create and capture economic value for themselves and their customers using the emerging network era technologies?

To answer this interrogation, the contributors investigate the organizations of the network era, adopting a three‐step approach.

First step: the authors set all the observations proposed in the volume within a framework consisting of three different ages ‐ the data processing era, the microcomputer era and the network era ‐ which represent phases in the transition from an industrial‐based to an information‐based economy. According to this perspective (which certainly constitutes a significant link with the two previous publications referring respectively to the 1987 and the 1991 Harvard Business School colloquia on the information technology revolution) the network era is interpreted and anlyzed as the epoch in which firms can create and capture economic value through the mastery of client/server and networking technologies.

Second step: drawing from both this stage’s framework and from their experience as academics and executives, the authors develop some general ideas about the consequences of extensive use of the network era technologies. While organizations are becoming “virtual” ‐ that is they are freeing themselves from the constraints of spatial and temporal proximity ‐ business practices are changing, specifically with respect to relationships with customers, as new IT technologies empower organizations with real‐time resource management.

Third and final step: a new framework ‐ disclosed by the title of the book ‐ is proposed, specifying that the aforementioned changes concern more specifically an evolution in competitive standards. The network era is said to be characterized by the presence of some resourceful organizations that have fully exploited the potentialities offered by the newest information technologies in order to be able to “sense” their customers’ needs and to “respond” in real time.

This paradigm shift from the traditional “make and sell” strategies to the “sense and respond” strategy is the key issue of the volume and the final answer to the initial research question.

The book explores in depth the major business implications of the “sense and respond” paradigm and it is coherently organized in four parts reflecting ‐ not surprisingly ‐ its title and the key components of the proposed framework.

In Part one, “Creating and capturing value”, the authors devote three chapters to examining the revolutionary changes brought about by the explosion of Internet technologies which have translated into new opportunities for companies to create and capture economic value. Information technologies are said to be the most significant technologies since the advent of the printing press as they raise a number of crucial strategic issues for every firm. In particular, Chapter 2 focuses on the so‐called “digital revolution” characterized by the convergence of the telecommunications, computer and entertainment industries into the emerging multimedia industry, while Chapter 3 addresses the problems of how much value can be created from new multimedia services and who is likely to capture the value from this emerging online industry.

Clearly, the tread of both papers is that “sense and respond” strategies will allow companies to create value in the new competitive environment of the network era. This reasoning represents the link with Part two, which takes the reader a step further along the proposed framework. “Sensing the customer” means sensing his or her needs in real time and represents the first key issue in the implementation of “sense and respond” strategies. This subject is developed through four chapters, each focusing on one crucial facet of the problem, pointing out the major challenges that result from technological innovations specifically in terms of meeting customer requirement. Therefore: Chapter 4 underlines the strategic uncertainties associated with the advent of online consumer interaction and provides a scenario analysis tool for dealing with such uncertainties; Chapter 5 suggests a framework for managing investments in the new media, which recommends that companies use WWW infrastructures as a way to build more stable customer relationships; Chapter 6 explores the potential applications of geographic information systems (GIS) which can provide businesses with significant strategic advantages in terms of sensing customer needs; finally, Chapter 7, the most enthralling of the four, suggests a tool, called the Zaltman metaphor elicitation technique, which exploits computer imaging to help customers express their deep and latent thoughts and feelings.

Part three, “Responding with capabilities” is integrative with respect to Part two, as it discusses the second key issue in the implementation of “sense and respond” strategies. The advanced multimedia technologies of the network era can be used to respond to customers in new and once inconceivable ways: freeing companies from their physical boundaries, these networking technologies enable firms to connect with customers in real time consequently enhancing their ability to meet needs and desires. The development of software products on the Internet is the subject of Chapter 8, which stresses the proactive nature of this flexible approach to R&D, suggesting the products to be gradually and systematically improved through consumer feedback. Experimentation and integration are also the key concepts of Chapter 9, which examines in detail some alternative approaches to Internetworked manufacturing, a collaborative environment in which several business partners (including final customers) share information and IT functionality regarding a product, a project or a process. Great attention should be devoted to Chapter 10, presenting the notion of the virtual value chain, an enlightening revision of the more traditional and well‐known Porter’s value chain. According to the author of this chapter, the possibility of structuring flows and exchanges of information differently from the past is opening new opportunities in terms of the configuration of value‐creating processes which emphasize the importance of virtual links between a company and its customers. With the advent of the network era, we are thus experiencing a shift from the marketplace to the marketspace which will lead companies to look for new successful business models based on a much more intensive interaction with customers through the virtual value chain. Finally, Chapter 11 provides a comprehensive description of virtual shopping with particular attention to the consumer’s point of view.

Part four, perhaps the most intriguing and thought‐provoking of the whole book, represents the final component of the framework proposed by the contributors: the central idea of “Transforming the organization” is that the implementation of “sense and respond” strategies will require organizations to develop totally new capabilities linked to the adoption of emerging networking technologies. This, in turn, will lead not only to a redefinition of traditional business models but also to the transformation of business organizations as a consequence of the growing use of network era technologies. At the same time, managers will be stimulated to undertake new challenges and to think beyond the traditional organizational boundaries; more precisely, in the network era, they will be required to actively manage and direct the influence of modern information technology on firm processes by understanding its functions within the mechanisms of value creation. In fact, electronic connections seem to facilitate partnerships among economic actors, each performing one part of the value‐added chain; as a result work will be accomplished through a complex web of interactions and the business processes of value creation will no longer be confined within the rigid boundaries of a single organization. Following this logic, Chapter 12 re‐examines the notion of decentralization; the possibility of making decisions closer to the customer is then seen as a key success factor of radically decentralized organizations which are able to exploit fully the possibilities of the new networking technologies. Interestingly, the author specifies that decentralization is not done by people at the top for people at the bottom, as one commonly thinks, rather it starts at the bottom. The theme of Chapter 13 is an often neglected one: the authors investigate the use of multiple technologies for managing geographically dispersed development groups providing practical suggestions to overcome the problems linked to long‐distance coordination of virtual teams. Chapter 14 concludes the section and the volume with a very interesting perspective on the concept of organizational boundaries, pointing out that the task of mapping them to “sense and respond” organizations is difficult not only because their role varies accordingly with organizational requirements but also because traditional notions and theories of organization are being challenged and need to be reviewed.

Generally speaking, the strength of the book is that theoretical considerations are always supported by extensive field work conducted at firms such as Microsoft, General Electric, Netscape, McConnell Douglas, Wal Mart, L.L. Bean. The breadth of these examples helps the reader to recognize the challenges to management in the network era and to concretize the comprehensive framework proposed in the four sections, leaving room for possibilities for further development and investigation. For this reason the book is very useful for not only scholars but also managers and entrepreneurs.

One limitation is that, even if it is evident that the “sense and respond” competitive standards rest on the capability of firms to use information technologies within relationships with customers, one does not find a clear description of the distinct roles consumers can play within the processes of value creation by businesses. Surprisingly, there is little discussion in the book about the differences existing between the situations in which companies use the new network era technologies to simply monitor their customers continuously and anticipate their needs, and the ones in which consumers participate interactively in the development of products, contributing directly by sustaining the knowledge‐creating processes of firms.

One more thing is worth mentioning: this book, being a composite collection of papers by executive leaders and leading academics in different fields, gives evidence that ‐ hopefully ‐ we are developing an interdisciplinary approach to the study of twenty‐first century organizations that will surely recall attention in the research agenda of management theorists. As a matter of fact, we still know very little of the new emerging phenomena of the network era, even if the use of terms such as “boundary less organization”, “lean enterprise”, “virtual corporation”, “extended enterprise”, “hollow corporation” begins to be widespread. This volume certainly helps us to foresee how the changes brought about by the use of networking technologies will affect management and competition among firms, which are turning into “relational systems”, that is into systems that do not rely any more on the capacity of physically transforming goods but rather on the ability of structuring and managing relationships and linkages among value‐added activities.