Requirements of Virtual Business Network
The sudden expansion of electronic commerce has resulted in many changes in the way business is done globally. The virtual business network is the buzz word among the business communities, internet community and freelance work seekers. Traditional business strategies relied on limitations such as location, manual process control systems, organization limit, restricted long-term associations, language barrier, and regional boundaries.
With the advent of internet technology and advancements in field of e-commerce all traditional limitations and barriers are no more a concern. Businesses whether small or medium scale, can now compete in international markets. These small businesses form groups also known as business networks to further improve their capabilities and reach. There are certain requirements which need to be met before creating a virtual business network. These requirements are explained below.
Technical capabilities: The virtual business networks exist on the electronic form on the internet. Hence the technical features of the network such as bandwidth, computing power and storage capacities are important aspect. Also advanced web features are introduced every year. A good network with software tools to aid in communication and collaboration is the first requirement before starting a virtual business network.
Establishing aim and vision: The aim and vision is the key factor in winning members and potential customers to join the network.
Formulating Membership eligibility conditions: The process of selective membership should be well defined. These policies should ensure only the like minded and positive businesses join the network as members.
Formulating Membership termination rules: These policies will guide the business network administers about how to terminate a poorly performing business member from the network.
Formulating Hierarchy: These rules will formulate a network hierarchy. Along with pre defined position in the chain, the associated responsibility and accountability will also be clearly formulated. The members will recognize the work flow and communication flow chains and result in effective use of the network.
Conflict Resolution policy: These policies will provide the coordination and conflict resolution solutions in the business network.
Risk and reward management policy: In a collaborative environment, the process of financial profit and loss computations is very complex. Hence they need to be formulated in clear terms before beginning the network.
Resilience and fault tolerance policy: The need for back up plans and tools to manage risks is also essential. The process of risk assessment and distribution rules, and conflict resolution processes should be clearly defined before beginning a virtual business network.
Factors that decide success
After formulating the policies and technical capabilities, there are few important factors which need to be considered for establishing a successful virtual business network. These factors are decisive in the success or failure of the network. The important factors that decide the success of the virtual business network are described below.
Simplifying technology support: There are complex technological features available nowadays. But to choose the most elementary and simple technological support features is the best way to begin a virtual business network.
Serious Collaborative Governance: The members and formulators of the virtual business network should take serious note of the collaborative governance rules formulated by them during the formation phase.
Collaborative Working Ethics: The member companies should abide by and follow the collaborative working ethics formulated by the virtual business network. Inter member conflicts should be addressed and mutually solved. This aspect determines the cohesiveness of the virtual business network.
Understanding Responsibility and Accountability: Each member of the network should understand their responsibilities and accountability in the process flow chain and the control and communication chain. This is very important aspect which if not followed will lead to disastrous consequences.
Implementing the Business Network
The implementation of the business network is a staged process. There are several stages and states though which the virtual business network has to go through before it is operational. The different states are Formation, Valuation, Expansion, Formulation, and Operational state. The formation state is the first state when the business network begins its existence. Valuation state indicates that the goals of the members are being analyzed and reorganized towards a common collaborative goal. In the expansion state further network alliances and expert service providers are being added to increase value to the network.
Formulation state decides the responsibilities, accountability and also creates a hierarchy and control chain. The last state is the fully operational state where all key elements of the Business Network are in place and operational. Apart from these states, the business networks also have to follow a setup process. The setup process involves several activities and these are described below.
Forming a founder group: This is the first activity in implementing the business network. Since the network cannot be started alone, it is necessary to join with know alliances and friends who are trust worthy. Together the founder group can be formed. This group can comprise of business or companies working in the same business industry but with complementary complimentary expertise and capabilities. This will avoid direct competition among the founder group at this early stage of formation of the virtual business network.
Expanding the network: After implementing the basic governance rules, new members can be permitted to join the network. The member selection process should be as per the accepted guidelines in the member policies devised for the virtual business network.
Common Resources: At the very beginning some kind of initial investment is needed to sustain the business network till contracts and works are obtained. For this the member companies or businesses can contribute collectively. Some help from government can also be available based on the regional location and policies.
Establishing collaboration tools: All the necessary communication tools among the member companies should be setup before the first project is allotted.
Running the virtual business network
After the successful implementation of the business network, there will be three unique groups in the virtual business network. These streams are mainly the Member Group, Marketing Group and the Network administration group. Each group plays a vital role in the success of the virtual business network. When each group is in place and operational setup a goal for sales and a business plan for at least 6 months ahead. This business plan should highlight the key waypoints and small steps to achieve success.