Interactive Business Communities

Accelerating Corporate Innovation through Boundary Networks

Mitsuru Kodama

• Publisher: Routledge
• Year: 2016
• ISBN:
  9781317114727
• Edition: 1
• Topic: Business
• Subtopic: Business Strategy
• Index: Business

Innovation in technology and services was once the result of specialist knowledge developed within a single corporation; now, a single focus on the development of new products and services is no longer enough. In Interactive Business Communities, Mitsuru Kodama shows how a new business approach can enable managers to access, share and integrate diverse knowledge both inside and outside the corporation using Boundary Networks to operate across more formal organizational and knowledge boundaries at all levels. Drawing on his studies of large corporations in America and the Far East, Mitsuru, shows how different companies have already started to take this path. He explains the kind of networks and strategic partnerships that have emerged and gives practical guidelines on how to begin forming in-house business communities and extending this to interactive business communities with customers and other organizations. This book is a valuable resource for business educators and researchers, and senior executives responsible for strategy, particularly in high-tech industries, will find insights and ideas to tackle 21st century market and business discontinuities.

Part 1 Background and Theoretical Framework

Chapter 1 Convergence and Collaboration

DOI: 10.4324/9781315589206-3

1.1 New Business Models Transcending Different Technologies and Industries

The most excellent core technologies in cutting-edge ICT, energy, automotive, semiconductor, biotechnology, medical, and material science fields are scattered across companies and organizations all around the globe. Innovation in these superior core technologies is the source of new products and services. Until recently, one of the strategic goals for high-tech corporations has been to develop and evolve products through independently sustained technological innovation. However, recent years have seen a growing demand for not only higher-functionality and higher-performance products, but also demands for investment in low-cost products, wider-ranging product lineups and shorter product development cycles. Conversely, increasingly diversified customer needs and value shifts have caused ‘disruptive innovation’ (Christensen 1997) that creates unexpected user needs born out of new product values.

Viewed in the context of the global market, international corporations are under pressure to come up with new global marketing and creative product strategies as demand expands in developing countries and matures in domestic markets. Thus, there is an increasing necessity for high-tech companies of the world to develop new products and services based on new technologies created through convergence of differing technologies in order to distinguish themselves from other companies in the area of new product development. The reason for this is that there are already a lot of cases of new and unconventional product and service development that merge technologies from differing fields. There is greater and greater need for business strategies that respond to convergence, as convergence is creating business structure, products and service developments that combine and integrate differing services and technologies across a range of industries.

ICT evolution has shortened business processes and supply chains in all sorts of industries, has sped up decision-making and streamlined management, and has given rise to new e-business models that merge and connect different industries (Kodama 2008). The biggest impact on the ICT industry is coming from companies like Google and Yahoo with their search and advertising businesses, multimedia distribution businesses with Apple’s market-leading iPod, iPhone and iPad mobile devices, NTT DOCOMO’s i-mode mobile phone business model, and Sony, Nintendo and Microsoft game businesses. These businesses do not only concern themselves with the technological aspect of product innovation in ICT development, but are the result of service innovations through new marketing strategies that create new markets. These product and service innovations promote ‘co-evolution’ across the whole ICT industry to create a dynamic ‘business ecosystem’. The fundamental source of the Internet businesses with i-mode/iPod/iPhone/ iPad, and game businesses such as PlayStation/DS/Wii/Xbox is this dynamically creative business ecosystem forged through this co-evolution (Kodama 2009a).

Higher technological performance, diversity and rapid evolution of ICT is bringing even more complexity to the business models that corporations should adopt. In this dramatically shifting modern corporate environment of rapid technological innovation, shorter product life cycles, mature markets in developed countries, expanding markets in developing countries, and the search for new business models in the evolving ICT field, companies have to strive to create new business models and develop new technologies. Companies need to pursue innovations that can provide customers with new value through the drivers of converging technologies and cross-industry ICT business creation. For these reasons, not only is the merging and integration of different specialist knowledge within companies important, but especially important is the integration of knowledge between corporations.

To bring about new products, services and business models through convergence that creates ICT businesses across industries and merges technologies, what sorts of strategies and organizational actions should a company undertake? What is the role of leadership and management in all of this? These are some of the many issues confronting many global corporations. Although there is diversity in the details of industrial and corporate strategies, in recent years, ‘collaboration’ is a key corporate concept for adapting to the ‘convergence’ world view (or for creating convergence individually) (see Figure 1.1).

Figure 1.1 Convergence and collaboration

In promoting these ‘collaborative strategies’, not only is it necessary to integrate the specialized knowledge among the different organizations within a company, it is of the greatest importance to create globalized networks with prominent international partners to integrate the specialist knowledge scattered around the world with the company’s own internal knowledge. The driver for collaborative strategies that accelerate knowledge integration within and outside companies is the formation of ‘interactive business communities’ (IBCs hereafter). An IBC is an ‘organizational platform’ that evolves core corporate knowledge within a company, actively searches for the best knowledge around the world, and integrates it with the company’s core knowledge. As described in Section 1.4, the concept of knowledge integration through the formation of an IBC involves the concept of simultaneously combining ‘closed innovation’ and ‘open innovation’ (hybrid innovation) (see Figure 1.1).

1.2 Collaborative Strategies through IBC Formation

As mentioned, patterns of corporate behavior and organization are changing as ICT evolves, technologies merge and business environments are transformed. This means that strategic business transformations through company-external strategic alliances, joint development and venturing, strategic outsourcing, M&A, virtual corporations, that include resources outside companies such as knowledge and personnel, not just the resources confined to business units in the conventional corporate organization, are becoming more and more essential. In the area of marketing as well, marketing strategies based on new concepts such as customer participatory marketing, supply of customized goods and services for specific customers, personalization, and customer dealings (meeting of hearts and minds, building confidence and trust etc.) that form new relationships with companies are also important.

The main issue in promoting business innovation with this kind of strategic view is not how to engage in strategic business and operations only with the company’s internal resources (knowledge, personnel etc.) but how to formulate IBCs of various collectives through collaborations (including virtual collaborations using ICT networks) with resources external to the company, including customers, and create innovative businesses.

Generally, this means a collective formed from range of elements both inside and outside the company working towards achieving the corporate organizations’ business goals. Organic collaboration is important to integrate knowledge between various organizations within a company (different business units and specialist organizations). IBCs are also human networks that consolidate diverse knowledge within and outside a company including customers’ knowledge. Companies that continue to create new knowledge (new products, services and business models) are engaging in strategic business and operations through organic linking of a range of IBCs both internally and externally.

Collaborations between different business units and specialist fields within a company promote total optimization of company business processes and supply chains by combining the entire company’s creativities and efficiencies (Kodama 2007a). The collaboration with external partners in different industries that accompanies convergence raises the potential to achieve new business innovation and solve new problems (Kodama 2007b). In other words, accessing and absorbing diverse knowledge inside and outside a company can be a trigger towards innovation (new knowledge creation). For example, project-based organizations that span across a company’s internal and external resources can enhance a company’s organizational capability to spur the new knowledge and creative work needed to form new products, services and business models (Kodama 2007c).

Figure 1.2 illustrates three general categories depicting corporate business communities that consider the external environment (external partners, customers etc.). Type One is a closed IBC within a corporate organization. This IBC is formed between all business units and specialist departments, and functions to share a variety of information, knowledge and decision-making (between the upper and lower levels of the organization; top, middle and lower layers; and between branch stores and offices etc.) in the daily running of the company as well as strategic business. Projects and CFTs (cross-functional teams) in a company are also a type of IBC organizational system.

The Type Two IBC is a collective of affiliates and outsourced companies, and functions to share a variety of information, knowledge and business creativity in routine outsourcing affairs and across strategic alliances. The Type Three IBC is a strategically-based direct channel and new marketing community between companies and customers from large corporate to general users (e.g. various systems for carrying out projects with special monitoring, consultation via private channels, customer-participatory development projects for new products and services that reflect various special customer needs and deal with complaints).

In the long-term, sustained corporate innovation and continued creation of new business depends on how the IBC is formed. Therefore, in analyzing future corporate strategic activity, rather than only considering one’s own company’s organizational architecture, it is important that strategic and organizational philosophies continue to be discussed with the IBC of internal and external collectives that includes customers, considered as an analytical unit for organization.

Figure 1.2 Types of interactive business communities

The following section introduces recent business cases (relating to PDAs, RFID solutions, the smart grid, solar cells business, automotive computerization and development and environmental vehicles) involving collaborative strategies through the formation of IBCs. Business innovation in these fields has created convergence at the technological and industrial level including ICT, and this has resulted not only in the formation of IBCs based around collaborative strategies for product and service innovation through knowledge integration within a company, but at the same time resulted in promotion of collaborative strategies through IBC formation with external partners.

Integration of new core internal and external organizational knowledge is accelerated within these IBCs and between different IBCs. Formed within and outside companies and including customers, organization networks that emerge from the formation of IBCs do not only encourage the knowledge integration process and expand existing value chains, they also promote ‘co-creation’ and ‘co-evolution’ among all stakeholders including one’s own company, other companies and customers (see Figure 1.1).

1.2.1 New ICT Business Centered On PDAs

With their global top-level service and technology, the Japanese mobile telephone services are producing new services and products through the merging of different technologies across the boundaries between different business areas, industries and organizations. These developments are creating value chains with new strategic frameworks.¹ As representative Japanese carriers NTT DOCOMO, KDDI and SoftBank move toward realizing the new products and services of the future, these companies are actively developing strategic affiliations across a variety of industries including manufacturers of mobile phone, computer and communications equipment, semiconductor vendors, content providers, international communications carriers, financial institutions and automobile manufacturers.

¹ Using mobile phones and smart phones, the digital content ‘mobile content market’ and the ‘mobile commerce market’ for goods, services and transactions are expected to grow dramatically in future.

The business strategies of NTT DOCOMO and other mobile communications carriers lie in the realization of product and service convergence (see Figure 1.3). Providing consumers with seamless usage environments through convergence that includes mobile, fixed, broadcasting and home networks, these companies are able to give users more comfortable and user-friendly services using their mobile telephones with information appliances, automobiles, broadcasting equipment and mobile terminals, and also with medical, social welfare and educational services. These converged methods of linking services and lifestyle tools with mobile phones are the strategic goals of mobile phone carriers.

‘Convergence strategies’ like this prompt the creation of new value chains through the expansion of business from existing corporate domains into new areas. Especially, the formation of IBCs among different types of businesses enables access to a range of different knowledge, and promotes dialogue between business people along the knowledge boundaries. The creative abrasion and productive friction between business people at the knowledge boundaries inspires new knowledge, and increases the creativity necessary to realize new business models (Kodama 2007b). Focusing on the mobile phone business in Japan in recent years, the new business models observed include electronic money businesses and credit card businesses, as well as the merg...