Platt Perspective on Business and Technology

Innovation, disruptive innovation and market volatility 22: innovative development at the business-to-business collaboration level

Posted in macroeconomics by Timothy Platt on March 15, 2016

This is my 22nd posting to a series on the economics of innovation, and on how change and innovation can be defined and analyzed in economic and related risk management terms (see Macroeconomics and Business, posting 173 and loosely following for Parts 1-5 and Macroeconomics and Business 2, posting 203 and loosely following for Parts 6-21.)

I have been discussing business processes and business models, and innovation in them as they impact upon individual business organizations, as my primary point of focus for most of this series up to here. And ultimately, I will continue that approach in this installment too, and that assertion calls for some clarifying explanation. I stated at the end of Part 21 that I would turn here to expand my focus beyond the walls of the individual business, to consider business process innovation as it can arise at the supply chain and business-to-business collaboration level.

• Collaborative business-to-business synergies can create new levels and types of competitive strength and even competitive advantage, and for all participating partner businesses.
• And these collaborations are built as systems of connecting business-to-business processes, and as cumulatively developed shared histories of transactions entered into and completed that are based on how those processes perform.
• This means opportunity for process innovation at this collaborative level, and the development of competitively more valuable collaborative business process solutions.
• But ultimately the value that arises in these systems: the potential for increased competitive strength that arises out of all of this activity, is realized in the individual businesses that participate in them. The real measure of any business-to-business collaboration can only be found in the individual businesses participating in it and in their success or failure there.

So I will write here of larger business-to-business collaborations and of higher levels of overall organization than would be fully contained within any one participating member business. But ultimately the core of any such discussion has to be grounded in individual businesses and in their level of organization here, if it to offer any explanatory or predictive value.

And to perhaps complicate this more reductionist approach to understanding higher level multi-business organizational structure and its implications, and to help more fully connect this posting to Part 21 of this series with its focus on business friction and information access partitioning, I add to these initial orienting notes that:

• Business-to-business collaborations of all types add to the overall complexity of operational systems that member businesses face, as they all have to be able to work effectively with their own operational and strategic contexts, and with those of their partner businesses – and with that all carried out through special connecting processes that actually enact and embody those collaborations as such.
• This adds to the level and complexity of opportunity for realizing business systems friction,
• And in ways that individual participating businesses in these systems are going to be that much less able to directly manage or limit on their own, than would be the case for friction arising strictly within their own operational systems.
• But ultimately, all of this business friction faced is going to be experienced by the individual businesses and their systems. All real impact is going to be faced at that level too.

I have noted many times in the course of writing this blog that supply chain and other business-to-business collaborations can only survive long-term as stable business systems, if all of the businesses participating in these organizing networks see them as offering positive overall competitive value to themselves as participating members, net of all costs with added risk included there. The negatives that would have to be exceeded in this bookkeeping exercise definitely include the impact of this externally shaped but internal-to-the-individual business faced, collaborative systems level friction too.

• A business-to-business collaboration system cannot be any stronger than its weakest link: its weakest participating business agreement to participate.
• And its weakest link has to be strong enough to offer positive competitive value to that company, if this overall system is to remain functionally intact and not begin to unravel and shrink.

And with that, I turn to specifically consider at least a few of the key areas where business process innovation would most readily and significantly arise in business-to-business collaborations, and specifically at a higher collaboration network connecting level.

• Supply chain system enabling and strengthening innovation, and business-to-business collaboration enabling innovation in general, offers its value by improving the competitive value realized by all participating member businesses. If any participating members see themselves as being left out in this, that would create significant incentive for them to leave these agreements.
• And this means higher positive revenue flow going into these participating businesses, relative to costs faced from this participation. And that includes risk-based costs and that to a very significant degree means reduced business systems friction and a reduction of its direct and specific consequences.

Reducing friction within and between collaborating business partners can both be realistic goals for effective business-to-business collaborations. When participating businesses can outsource functional requirements that fall outside of their core competencies and the operational areas that they need to retain in-house this leads to simpler, leaner and more agile organizations. And that can help reduce both the number of operational systems nodes where friction can arise and the overall level of friction realized within those individual member businesses. And at the same time, innovation in the business-to-business connecting processes of a supply chain or other collaborative system can directly reduce friction there too, by improving and speeding up communications and critically important business information sharing between member businesses and by improving the competitive efficiency of business transactions collaboratively entered into.

My goal for this posting has been to at least begin a discussion of how supply chain and other collaborative systems are shaped by business systems friction, and in ways that largely parallel how this friction arises and acts in individual separate business organizations. I will return to this starting discussion again, but for purposes of this series and its ongoing narrative, I will turn in my next installment to consider market-facing and market-supportive business processes and practices, and how they can facilitate the marketing and sale of product and service innovation. And in this, I will consider both individual standalone businesses and business-to-business collaborative systems and how they connect into and meet the needs of markets and end-user consumers.

Meanwhile, you can find this and related postings at Macroeconomics and Business and its Page 2 continuation.

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