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The Three Roles of Network Orchestration

The dispersed factory is a different type of factory floor than the one Peter Drucker found himself on when he did his famous studies of management at General Motors. The management needed for these fixed factories is different from what is needed for these fluid, global networks. In the flat world, the traditional principles of management need to be augmented with skills in network orchestration.

What do network orchestrators do? The network orchestrator plays three primary roles related to the focus, management, and value creation of the firm or network, as Figure 1-4 shows. Each of these roles is the expansion of the role of a manager within a more limited fixed factory or traditional firm.

Figure 1-4

Figure 1-4 The movement from a traditional firm toward a network orchestrator requires a shift in focus from the firm to the network, a shift in management from control to empowerment, and a shift in value creation from specialization to integration. Because few companies are "pure" network orchestrators, and because the world is not completely flat, companies typically need to strike a balance somewhere between the inner circle and the outer one.

Role #1: Design and Manage Networks

First, the network orchestrator needs to shift from viewing the firm as the center of the universe to looking at the network. Companies don't compete against other companies. Networks compete against networks. Two retail stores on opposite corners in New York City might appear to be direct competitors, but this is an illusion. They are not competing against each other in isolation. Each store has a supply chain stretching from its shelves out to the world. The best supply chain will win. Before a customer walks into the store, often the game is over based on the superior supply chain. The best supply chain is drawn from a robust universe of suppliers. It is no longer possible to compete by looking at a company in isolation from the network. The network orchestrator also establishes the values and culture of the network, developing its guiding principles while absorbing the best wisdom and practices from the network itself. The orchestrator creates the broader network and then draws supply chains from it.

Role #2: Control through Empowerment

Second, in a world in which orchestrators do not own the means of production, they need a different form of leadership and control. A dispersed global network can devolve into chaos. What holds this network together? In contrast to rigid control systems used to manage factories, the network orchestrator relies not just on rewards, but also upon a combination of empowerment and trust, as well as training and certification, to manage a network that it does not own. In addition, it empowers its own managers and suppliers to act entrepreneurially. In contrast to command and control systems, the orchestrator works like a guest conductor in an orchestra. The conductor might not have the ability to hire or fire people, but he or she coordinates a highly skilled set of independent musicians.

Role #3: Create Value through Integration

Finally, orchestrators have a different way of creating value. Value in the traditional firm came from specialization, honing skills in specific areas, protecting trade secrets, and keeping out rivals and even partners. Value came from fighting for a piece of a limited pie and protecting specialized core competencies. Value in the flat world, in contrast, comes from integration, bridging borders as well as leveraging the company's value and intellectual property across the network. This integration also means spanning borders between functions within the company, such as looking to manufacturing in developing markets to identify new opportunities for marketing and sales. Orchestrators need to know when to open the doors wide to create value as integrators and when to produce value by focusing on the specialized resources of the firm.

The three roles of orchestrators are interconnected and work together. The more dispersed networks become, the more there is a need for empowerment rather than direct control. The more empowerment is given to suppliers and customers, the more managers need to look across the network rather than focusing on their own firms. The more organizations move toward orchestration, the more they need to be able to build and capture value across the network rather than within the firm. Together, these three roles move companies from the center circle of the figure to the broader outer circle of the networked enterprise.

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