When we think of networks today, we call to mind technology. But ultimately, networks are about people: why they connect, where they collaborate, when they achieve their goals.
The Network Economy is also the Sharing Economy. The same new networks and norms that enable individuals to participate in the public narrative empower organizations to collaborate in the global sphere.
Networks are powerful. Networks are innovative. Networks are practical. They can connect disparate groups of people. They can solve global problems. And they can transform your organization.
* Courtesy of SAP futureofbusiness.sap.com
1. Conversations on the Future of Business
futureofbusiness.sap.com
Deep Dive: The Network Economy
Finding Power in Connections
2. Networked enterprises are 50% more likely to have
increased sales and be market leaders.
Conversations on the Future of Business
Source: McKinsey
The Network Economy
Challenges
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3. Conversations on the Future of Business
When we think of networks today, we call to mind technology. But ultimately, networks are about
people: why they connect, where they collaborate, when they achieve their goals.
As ever, it’s not what you know, but whom you know.
But even more now, it’s how you connect. Welcome
to the Network Economy.
From mobile platforms to the cloud, from social
media to machine-to-machine (M2M), people and
organizations are linked in more ways and by more
nodes than ever before. Those links confer
a new power to the connected—and a distinct
disadvantage to those who fail to leverage all
available contact points.
And the ante is continually raised. The network
effect adds exponential value. But leveraging the
new network density is ever more challenging. From
shifting demographics to emerging mobility, from
new cloud paradigms to greater interdependencies
and connectedness, organizations need to grapple
with new networked realities.
Networks Drive Net Worth.
How Connected Are You?
Shifting Demographics
Some 80 million millennials are flooding the
marketplace and the workforce. These are the
first digital natives. They eat, sleep, and breathe
networks. And they expect your business to do
the same.
But it’s not only Gen Y. The fastest-growing social-
media segment is the 45-to-64 set. Soon all your
customers, and all your employees, will demand that
you be mobile, social, always on, ever connected.
You may not be thinking about this yet, but you can
bet your competitors are.
Don Tapscott, Best-Selling Author and Business
Consultant, on the Network Economy
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4. Conversations on the Future of Business
Emerging Mobility
There are 1.5 billion smartphones worldwide,
and 6.8 billion mobile subscribers. And those
subscriptions are being used. Nearly 820 million
users now access the Internet from mobile devices,
a 60 percent jump over the past two years, while the
typical mobile user checks the phone
150 times a day.
Many organizations have struggled to keep up. They
know their customers and employees are mobile.
But they haven’t optimized their communications,
their processes, and their offerings to compete in a
mobile era. They risk being overlooked, becoming
irrelevant, and losing the war for customers
and talent.
New Cloud Paradigms
More and more business—and life—takes place
in the cloud. Today it’s no longer just a question
of onsite or off-premises. New, more complex
cloud strategies introduce greater levels of cloud
complexity. They also raise fundamental questions
around asset management, security, privacy,
organizational boundaries, and processes.
Networks of Networks
Organizations have been growing their electronic
networks since the ARPANET first connected the
U.S. Department of Defense to research universities.
But in the Network Economy, network density
and complexity is ever advancing. Today we have
networks connected to networks, and networks
within networks. Those networks aren’t just
connectors; they’re also disruptors.
Mobile networks disrupt customer touch points.
Social networks disrupt markets. Corporate
networks disrupt hierarchies. Cloud networks
disrupt processes. M2M networks disrupt supply
chains. The more you embrace networks, the more
you confront change and risk. The more you avoid
networks, the faster you fall behind.
“ The imperative for business leaders is clear: Falling behind in creating
internal and external networks could be a critical mistake.”
McKinsey Podcast, “Rise of the Networked Enterprise”
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5. Source: ZDNet
42% of leading companies say that
machine-to-machine technology (M2M)
is integral to their business performance.
Conversations on the Future of Business
Opportunities
The Network Economy
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6. Conversations on the Future of Business
The Network Economy is also the Sharing Economy. The same new networks and norms that
enable individuals to participate in the public narrative empower organizations to collaborate
in the global sphere.
That means tremendous new opportunities
to innovate and respond, serve and succeed.
The same network challenges that vex processes
and markets also position the forward-leaning
among us to outcompete and win in the
marketplace.
Shifting Demographics
At 80 million strong in the United States alone,
the millennials outstrip the boomers by millions.
U.S. millennials already spend more than $170
billion a year, a number that will only rise with
their influence. In 2014 they’ll account for 36 per-
cent of the U.S. workforce. By 2025, 75 percent.
The good news is that millennials know net-
works. They’ve never seen a time that wasn’t
connected. They embody the Network Economy,
and you can leverage their mindset to maximize
Collaborate, Create, Compete
network efficiencies within your walls and without.
You can also capitalize on their connectedness
through new channels and offerings.
Emerging Mobility
Mobile platforms enable you to connect with
information, enterprises, employees, and cus-
tomers any time, anywhere. Real-time access to
information enables you to analyze and respond to
changing market conditions in an instant. Ongoing
connections with suppliers and partners let you
morph supply chains and processes as demand
and other inputs ebb and flow. Constant contact
with employees empowers them to collaborate
and serve customers better. Continual interaction
with customers positions you to understand their
desires and meet their needs with a superlative
brand experience.
In short, the mobile enterprise leverages people,
process, and technology to run smarter, faster,
and better.
“With the Networked Age,
we have real-time systems
that instantly analyze and
evaluate what’s happening
and enable us to respond
infinitely more quickly.”
Don Tapscott
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7. Conversations on the Future of Business
New Cloud Paradigms
Cloud networks free organizations from the
burden of unnecessary infrastructure investment,
maintenance, and risk. Instead, they can focus
on serving their markets—with the ability to scale
resources and deploy new capabilities as needed.
But that’s just the beginning. “The emergence
and growth of cloud-based business networks
has created global communities of companies
just as diverse and accessible as communities of
individuals,” says Alex Saric, head of marketing
for Ariba, an SAP Company. “The integration of
such networks into enterprise software has made
leveraging these communities to crowdsource
a relatively seamless and simple process.”
Cloud-based collaboration enables established
enterprises such as Boeing to build better aircraft.
It allows startups to access crucial partners and
intellectual capital. And it equips every organization
to drive greater efficiencies and reach new markets.
Tim Minahan, CMO, SAP Cloud, on the Power
of a Networked Community
“Previously internal processes are now becoming increasingly
externalized. Cloud computing ... has let loose the imagination
of businesses to consider how to do commerce anew.
Dana Gardner, President, Interarbor Solutions
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8. Network of Networks
A network of one has no worth. Add nodes, and its
value emerges. Network the networks, and you have
the Network Economy. It’s Metcalfe’s Law
on steroids.
Business networks unleash
unprecedented insight, innovation,
and alignment. Participants can
find the tools and information
they need. Solve old problems and
uncover new insights. Reach new
customers and markets. Automate
inputs and processes for cost
savings and greater agility.
Internal networks enable
unrestricted information flow,
without regard to organizational
or geographic boundaries. They
can become destinations for data,
learning, tools, and knowledge.
They drive collaboration and
problem solving, optimize
processes, and speed time
to market.
Networking for
Market Share and Margins
Fully leveraging business networks can lead to greater market share and higher margins,
suggests a McKinsey study. Lessons from the research include:
• Foster network adoption. Limited deployment means fewer advantages.
• Drive day-to-day network usage. Integrating the network into daily work activities
compounds benefits.
• Remove barriers to change. Fully networked organizations have more fluid
information flows, McKinsey says. They also deploy talent more flexibility and drive
decision making throughout the enterprise.
“The imperative for business leaders is clear: Falling behind in creating internal and
external networks could be a critical mistake,” the study concluded.
Conversations on the Future of Business
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9. External networks bring together
partners, customers, and markets.
They empower you to capture
market inputs, reduce operational
risk, achieve more nimble supply
chains, and deliver superlative
customer experience.
Machine networks link sensors,
components, equipment, and
activities. By automating data col-
lection and operations, they enable
you to manage remote processes,
monitor trends, and gain new
levels of competitive advantage.
Don Tapscott, on the Networked Age
“Because the Internet radically drops transaction
and collaboration costs, traditional closed, vertically
integrated companies can now unbundle into networks.”
Don Tapscott
Conversations on the Future of Business
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10. By 2016, about 90% of network
traffic will be driven by smartphones,
laptops, and other portable devices.
Source: Cisco
The Network Economy
Imperatives
Conversations on the Future of Business
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11. Conversations on the Future of Business
Networks are powerful. Networks are innovative. Networks are practical. They can connect disparate
groups of people. They can solve global problems. And they can transform your organization.
But to truly realize the promise of networks, you
need to do more than simply connect. You need
to invest in all their permutations, explore all their
possibilities, and leverage all their capabilities.
Do It Faster
The Network Economy is a faster economy.
To realize success, you need to achieve escape
velocity. To that end, provide fast access to
resources. Leverage cloud computing and mobile
platforms to give your people the information and
tools they need to do their jobs, whenever and
wherever they need to do them.
Leverage real-time data. Make sure your networks
are capturing information—about customers,
competitors, and markets—quickly and consistently.
Then rapidly feed that insight to the people who need
it, those who can take action to alter your course as
you steer toward business improvement.
Networks on a Mission
Accelerate the pace of processes. Automate your
data feeds and connectivity wherever possible.
Replace your linear supply chain with a sophisticated
supply network that can respond quickly to demand
inputs and position you to reduce risk.
And bring innovation to your interconnections.
“A networked supply chain enables trading partners
to collaborate in real time,” says Christopher Rauen,
solution marketing manager for Ariba. One area of
opportunity, for example, lies in accounts payable.
Says Rauen: “Incorporating the accounts payable
function into a networked supply chain transforms a
largely tactical function into a strategic asset.”
Find the Savings
The Network Economy is a more cost-efficient
economy. Automating data flow through innovations
like M2M can deliver benefits direct to the bottom
line. Linking internal and external resources can give
you cost-effective access to expertise and capacity.
Pulling customers into the product design process
can result in more targeted offerings at a much
lower cost to your organization. It can also empower
customer service. A simple example is Apple
Support, which provides a forum for peer-to-peer
user help—and enables the company to provide
service faster and cheaper.
Set Innovation to Stun
The Network Economy is an innovative economy.
Connect employees so they can uncover hidden
expertise and collaborate on solving your most
vexing problems. Fold in external knowledge you can
scale up or down as needed to develop new products
or respond to market changes.
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12. Conversations on the Future of Business
Take advantage of data feeds to both understand
buyer behavior and monitor supply-chain processes.
Complementing your networks with Big Data and
predictive analytics can equip you to innovate
at both the front and back ends, better serving
customers and better running your operations.
And once again, leverage your customer nodes
by transforming consumers into producers. Such
“prosumers” are an invaluable part of your extended
ecosystem. One case in point is My Starbucks Idea,
a private social platform that allows the ubiquitous
beverage purveyor to collaborate with customers.
Leverage the Latest
The Network Economy depends on wise
technology investment. “If we look at this emerging
industry of peer-to-peer networks, there is so much
value is that locked and unused,” says Ramesh
Ramakrishnan, founder of RR Marketing Advisory.
“Technology helps extend the reach of this value
beyond one’s own immediate connections.”
Cloud computing lets you access resources, link
stakeholders, and deliver insights in real time.
Mobile platforms connect employees, partners, and
customers wherever they happen to be, whenever
they need to be connected.
Collaborative tools extend knowledge to all your
people, and bring in value from outside your walls.
In-memory computing and sophisticated analytics
complement the data your networks pull in, yielding
new insights and innovations.
Crowdsourcing Enters
New Terrain
Crowdsourcing has become a staple of the startup economy. Now, the concept is morph-
ing into new models.
Crowdsourcing practices range from crowd funding to the sharing economy. Kickstarter,
a peer-to-peer funding platform, has raised $900 million across 51,000 projects. Airbnb,
a marketplace for room rentals, is on pace to become a billion-dollar company.
These efforts bring together financial, intellectual, or other resources from large groups
of people. The practices are new but the implications vast. Various industries are leverag-
ing crowdsourcing to create new efficiencies and revenue streams:
Plane rentals: OpenAirplane—Airplane fleets are underused and therefore lose reve-
nues. Hobbyist pilots want to fly more but can’t afford to. OpenAirplane addresses both
problems by using mobile technology to connect pilots and fleets.
Facility rentals: Hire Space—Conference space often sits idle. Yet the price tag to
access a venue can be large. Hire Space bridges the gap by allowing businesses, schools,
and charitable organizations to put up unused facilities for hire.
Gift giving: Giftovus—Finding that perfect gift can be daunting. A referral from a friend
can help. Giftovus takes the concept to scale. It leverages social media to make available
relevant gift-giving ideas. Users can quickly identify that special something—while saving
up to one-third on related spending.
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13. Achieve the Advantage
Ultimately, the Network Economy is about reach-
ing new levels of success.
What’s your most valuable asset? Is it your employ-
ees? Your equipment? Is it your supply chain? Your
processes? Could it be your intellectual property?
Your customers?
Today, all those mission-critical elements can join
the network. All your differentiators can be linked
and cross-linked. The network effect is truly a net-
worth effect. Each time you add a node, you amplify
the value.
The Network Economy is not without risk and
challenge. But there’s power in connectivity.
And there’s profit in getting connected.
“Shaking up the status quo is enabling massive
efficiencies, with more active market benefits, shared by
more participants, as they cooperate and collaborate in
entirely new ways.”
Dana Gardner, President, Interarbor Solutions
Conversations on the Future of Business
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