SABI 2004: Business Systems -- Inside, Outside and Between (July 8, 2004, 1:00 p.m. to 3:00 p.m.)

[Parhankangas, Ing, Hawk, Dane & Kosits] | [Carral & Kajanto] | [Swanson] | [Wang]


Four papers have been clustered into a theme of "Business Systems -- Inside, Outside and Between". The authors will be each be asked to initiate discussions, each adding incrementally to the predecessors, in the 120-minute session

"Negotiated Order in Network Form Business" -- Annaleena Parhankangas, David Ing, David Hawk, Gosia Dane & Marianne Kosits

Through the 20th century, the industrial age roots of hierarchical top-down planning and command-and-control supervision have been relatively constant foundations in management thinking. At the turn of the millennium, many futurists and leading thinkers had declared that these static forms of business governance would give way to more dynamic network-form, knowledge-based businesses. Since only a limited history has been collected on these new organizational forms to date, descriptions of how these businesses are governed differently have generally been more speculative than grounded.

Since much of the success in business will shift from autonomous enterprises to inter-organizational relations, a renewed examination of negotiated order is now due. The growing need for negotiated order is presented in contrast to prevailing systems of legal order where incremental mandates, pre-established rules and fixed procedures ensured efficiency in placid environments. Industrial age businesses are presented as systems reaching their limits, following the perspective of Andras Angyal. Ideals in systems of negotiated order include the situated coordination of interests, flexible definition of initiatives and freedom of action amongst interested parties.

Attention is drawn primarily towards governance of the Linux community. In this example, architecture emerged from an amorphous group, and design and operational principles are collectively negotiated. The dynamism in purposes and directions is matched by continually-evolving inter-organizational alliances, and the voluntary assumption of responsibilities that benefit not only the individual contributor, but all parties. In addition to the Linux example, three more other businesses demonstrating features of negotiated order are discussed.

Negotiated order offers a platform for parties to innovatively deal with complex problems in the mess of inefficiencies, ineffectiveness and/or loss of legitimacies within and between organizations.

Keywords: Negotiated Order, Networks

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"Industry Demand Analysis to Better Sustain Major Organizations" -- Raul Carlos Carral Pavůn & Markus Kajanto

This paper presents and discusses a study on how intra-organizational industry demand analysis can be applied to support an organization's strategy making. A system is formed for analyzing industry demand, and it is applied in an industrial organization. Experiences of applying the system are presented and elaborated in the paper.

The research approach followed is constructive research suggested by Kasanen, Lukka, and Siitonen. Constructive research is defined as "problem solving through the construction of models, diagrams, plans, organizations, etc." Constructions are socially constructed artifacts providing solutions to explicit problems. Lukka mentioned that constructions are of "whatever type ranging from simple models in merely technical terms to complex management systems designs covering both technical and socio-technical elements to manifestations of news ways of approaching and doing things in an organization."

The system explained in the present paper has been formulated from systems thinking theory. A system, as defined by Ackoff, "is a whole that cannot be divided into independent parts without loss of its essential properties or functions." The system proposed is formed by 3 elements. These elements are model of analysis of the industry

demand, subsystem of application towards strategy making, and subsystem of resources and process to analyze the industry.

The overall result of applying the system in an industrial organization was that it served the purpose of better supporting strategy making. Through the effective alignment of industry demand analysis to the strategy process, the strategy execution in the organization has produced positive results in the overall financials, growth, and better performance compared to competitors. Moreover, the paper presents theoretical and practical implications of implementing the system.

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"Inter-Organizational Mediating Spaces, Living Systems Theory, and Accountability" -- G.A. Swanson

GŁney, Ing, and Simmonds (2004) consider plans, organizational identity, and mediating spaces in inter-organizational relations. Swanson (2004a) examines the question of accountability in the management and governance of business alliances. The concrete systems approach of living systems theory (LST) (Miller, 1978) provides vital connections among the ideas of mediating spaces and "sensemaking" and measurable, and consequently accountable, adjustment processes of organizations. This paper integrates those recent papers and LST with a view towards accountability.

Key words: mediating spaces, living systems theory, accountability, inter-organizational relations.

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Note: This paper refers to GŁney, Ing, and Simmonds (2004), which has been posted on another location on this web site.

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"The Strategic Triangle Model in Alliance Strategies" -- K.C. Wang

The purpose of this article is to apply the strategic triangle model, which is derived from the five elements theory of Chinese systems thinking, to formulate alliance strategies especially in the development of core competencies and selection of alliance partners in terms of business functions.

The Chinese believe that all phenomena can be categorized into five elements: Wood, Fire, Earth, Metal, and Water. The corporate business functions can also be represented by these five elements. There are five nourishing and five controlling effects in the five-element model, which constitute a holistic relationship in explaining the interaction of corporate business functions.

More importantly, the strategic triangle model derived from the five elements theory is proposed to aid in formulating alliance strategies. A strategic triangle is comprised of triangular links among three specific elements, such as Wood-Fire-Metal that symbolize the R&D-Marketing-Financial function in terms of business functions. Core competencies based on one of the strategic triangles can help utilize a firm's competitive capacities and sustainable advantage in forming alliance strategies in the global market. For example, a personal computer producer that excel in Wood-Fire-Metal, namely, R&D-Marketing-Financial function, can ally itself with other firms that are superior in Earth (i.e., the operations function) or Water (i.e., the innovation function) or both. Therefore, this strategic alliance can create a holistic relationship among the five elements and subsequently reach a new equilibrium.

Five basic strategic triangles will be discussed in detail, and their applications in developing core competencies as well as selecting alliance partners are illustrated with examples. Finally, it is concluded that the complementary alliance strategies can be developed through the functional related strategic triangle model.

Keywords: strategic triangle model; alliance strategy; five elements theory; Chinese systems thinking

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The main page for the Special Integration Group on Systems Applications in Business and Industry, for the 2004 ISSS meeting is at


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