Organizing social complexity in production networks

ABSTRACT

We developed a procedure for exploring and describing the insufficiently explored relationship between role expectations in the network, subjective motives, experiences and identifications, which might be employed during the iterative process of network construction. This procedure is derived from the interplay between network development, role structures, defining competence profiles and the integrated bundling in network-based value creation processes. Due to dynamic and complexity, this unit of analysis requires (1) an intensive focus on the notion of person-related competency and its importance in the dynamic context of networks, and (2) a method for describing and presenting subjective network constructions in as up-to-date a way as possible. We especially want to explore the mutual perception of actors within the framework of a soft factor controlling. We can gather data on context-specific personal constructs by the grid technique. Based upon the applied methods, it is possible to provide information about the relevant structures within networks, which can be used for Personal selection and competency development

1. INTRODUCTION

Technological progress and the dissemination of new technologies, e.g. concerning information, communication or media, create new business opportunities especially for small and medium enterprises (SME) because of their high flexibility and their close relation to costumers (Benett, 1998; Naisbitt, 1994). But at the same time, this implies increasing competition. The participation in networks appears to be a valuable instrument to manage both dynamics (Gulati, 1999). But particularly the establishment of networks--or the entry into existing ones--represents a major challenge to SME. The constitution of networks is contingent upon various conditions and involves far-reaching consequences for the single partner, the network itself and the network environment (Ritsila, 1999). However, small and smallest enterprises cannot participate in this development--or not entirely--because of their structure and the limited resources. Consequently, present and future research has to be focused on organizational designs appropriate to enforce SME network building. Above all, appropriate design principles, which are able to maintain such complex and dynamic forms of cooperation are missing.

The following proposition of a competence cells network approach reflects current tendencies in management and economic science based on the core competence concept by Prahalad and Hamel (1990). The main ideas were developed and combined with an IT based planning and optimization scheme. The thereby created management model is a modification of the concept of Extended Value Chain Management (EVCM). It enables production networks to select and focus their competences according to specific orders quickly. Furthermore, it offers various possibilities to optimize the selection process. Besides the exact representation of all flows of information and material at any time, personal and social factors can be integrated and analyzed as well as economic, logistic and technical parameters. Especially for social factors we suggest the repertory grid method as principal research tool. The gained data is then used for polyhedral analysis, which will be described in detail in the end. The following insights descend from current research within the collaboration research centre "non-hierarchical production networks" (SFB 457), Chemnitz University of Technology.

2. THE CONCEPT OF LINKED COMPETENCE CELLS

The concept of competence cells refers to the core competence approach of Prahalad and Hamel (1990). It relies on the assumption that economic success is due to unique, identifiable competencies. These key competences represent the fertile ground of any company to create present or future products and services. Therefore they may be used directly or transformed by appropriate management measures. In general, core competences consist of technological abilities necessary to realize value creation. We assume that competence cells can be defined as the smallest indivisible, economically mostly independent, specialized units that temporarily link up to other competence cells to accomplish complex tasks. Companies may provide resources by forming autonomous competence cells, which act as elementary units in value creating cooperative processes.

Competence cells are then the basic bricks of our non-hierarchical competence cell network. Abstracting from concrete entrepreneurial structures, it assumes that, within a given region, there exist competence units, formed by a multitude of experiences, which can be interpreted as competence cells (see www.tuchemnitz.de/sfb457/en/). This regional network potential serves to enable differently orientated competence networks. We underline, that not a given entrepreneurial division is cooperating, but only a specific competence cell. This implies changes to the established system of labour division, to the dimensioning of competence cells and their linkage, to the temporal and special structure of production up to the size and equipment of production places. To enhance further network capabilities, it may be even conceived to introduce mobile competence cells offering specific production possibilities. This network scheme enforces flexibility since it enables individual value chains supported by a large variety of competence cell portfolios as it is appropriate to either a given problem, a specific order or a product, for example.

From a managerial point of view this implies a two step selection process. First, the region is scanned for potential network partners. Their competences are integrated through bringing them into the form of competence cells by specific management measures. The second challenge consists of creating dynamic, temporarily cell network structures to satisfy the variety of costumer needs.

The couplings originate to solve concrete problems of costumers and therefore dissolve after the task-accomplishment. It is assumed that the interdependences between the single cooperation partners are homogeneous. The coordination arises by supply and demand instantaneously. This means, that task specific coordination and decision-making competences are distributed among the concerned network actors. However, an overall integrating method is necessary to build and maintain non-hierarchical net works between competence cells. Incompatible information systems prevent value creation from being effective by causing high administration and coordination costs. Instruments to represent all flows of information and material exactly at any time are otherwise missing which would ensure appropriate reaction in case of disturbances or later introduced customer demands.

Consequently, it is necessary to centralize the planning for products and processes to ensure the continuity of informational and material flows between the single SME. Therefore we adopt the Extended Value Chain Management (EVCM) as a central management system (Teich et al., 2002). Combined with the repertory grid technique and the polyhedral analysis, this system allows IT based case specific selection and over all optimization of workflow in competence cells networks.

2. A BRIEF MANAGEMENT CONCEPT

As we have outlined in the previous section, the given network consists of a pool of competence cells each having specific capabilities (Gorlitz, 2002). The main function of the Extended Value Management System (EVCM) is the creation of the inquiry-specific, temporal supply network. We will illustrate our explanations with our new developed prototype. In its origins, this prototype included a market place-solution, which served as an entry possibility to the EVCM (see Teich 2002). However, we will concentrate here on the fundamental EVCM functions. The conceptual framework of competence cell (CC) selection model is based on a life cycle model. Starting with the phase "Decomposition of the Value Chain" the temporal procedure will be pursued up to the "Evaluation inside the Network".

Figure 2 shows the organizational sequences of the mentioned case-specific sub-network building. The selection of the competence cells, the evaluation and optimization of the temporary production networks depends different components. The Knowledge about the Connection between the competence cells deals with a retrospective consideration of the cooperation. A successful cooperation between CCs does not only depend on the technological suitability of the single candidate cells and their optimal use during the manufacturing procedure. The success of cooperation is also determined by a trustful collaboration and the cultural consensus between the competence cells involved. While the step programming of the offer creation" points out a methodical repertoire to clear out economic key factors by applying the bullwhip effect, the step "soft fact integration" serves to take social characteristics into account relevant

[FIGURE 2 OMITTED]

The model is supposed to support the quantification of delivery logistic and price fixing. The concept works as outlined in figure 3. A customer shows issuing an inquiry to the marketplace. The inquiry may also be automatically generated by a supply chain management system. Via the marketplace, potential first level suppliers for the final product are identified. Each supplier disassembles the value adding chain only according to the part it has technological or manufacturing competence for. Inquiries for other parts are repassed on to the marketplace. In case a supplier does not need to further disassemble the value adding chain, the roll out process in this branch stops and the supplier returns a tender. Subsequently, in the roll back phase, the tender is returned to the inquiring instance. A supplier receiving tenders for outsourced parts has to calculate his own tender. To optimize the selection of the most suitable supplier according to a set of received tenders, advanced planning and scheduling tools have been integrated. The roll back phase is sketched in the right site of figure 3. In the end, the customer receives tenders for the final product from first level suppliers.

[FIGURE 3 OMITTED]

3. CONCEPTION AND METHOD OF SOFT FACT INTEGRATION

At first sight, the identification and analysis of soft facts causes big problems. The main problem of networks consists of not clearly fixed responsibilities, missing confidence and unclear rules concerning the transfer of know-how. However, the non-professional competences (soft facts), such as the ability of cooperation and communication, are gaining more and more importance for networking success. We aim to implement a routine, which serves to select network partners automatically. The initial scenario can be described as follows: Given a predefined value chain (production network), the most suitable partners are to be selected from a pool of cooperation partners (competence cell network). As we have already underlined, this selection should refer not only to professional competences, but also to economic, logistic and social compatibility.

The EVCM was until now used to optimize cooperative value partnerships under economic and logistic aspects (Ant-Colony Optimization) because related concrete measurable values were easily available. It is much more complicated to integrate so called soft facts into this system. The development of social network analysis seems to offer a promising way to investigate into network relations and in their design principles. However, we suppose that it is not sufficient only to observe human actions in a system of socially linked structures and analyse or categorize interpersonal relations. Exclusive relational analysing does not offer the possibility to conclude which underlying criteria or categories are employed to valuate the quality of a relationship. The social structure of a network is no impartial entity. It depends on recent observations and evaluations by the participants, as it were a contingent blue print of the social constellation of interpersonal interaction. To overcome the static and actor centred observational point of view of the cited network analyse we will now show a new way, how subjective value patterns of network relations can be seized and mathematically proceeded. Our research for an appropriate method led us to the Repertory Grid Method by Kelly (1991) and the Polyhedral Analysis by Atkin and Casti (1977). A combination of these ideas serves to inquire into personal and socio-structural criteria (holes, connectivity and eccentricity) not only in a qualitative manner, but also to transform them, so that the collected data can be inserted in the EVCM. The grid contributes images of present relational constellations, and the polyhedral analyse furnishes the algorithms to estimate social compatibility. Finally, the optimization of value chain partnerships based on soft facts can be realized. It is further on possible to provide information for the partner selection and optimization of relational structures within the network.

The Repertory Grid methods refer to a repertory of personal or situational specific elements. Besides other, information of individual subjective orientation knowledge and experience is gained, e.g. role expectations (of colleagues) or existing group relations (department). Additionally, personal estimations of situations (e.g. rites) or objects (e.g. products) are seized. By means of description in dichotomy dimensions (so called constructs), for instance good versus mean and innovative versus conservative, the explored elements are evaluated by the participant himself on an ordinal scale. Then, the resulting numerical values are regrouped in a grid (see figure 4). Usually the elements or topics are regrouped in columns, the description or evaluation dimensions (constructs) are filled into the rows. Subsequently the numerical values collected during the interview are placed to the according rows and columns. For organizational search ends, the questionnaire can be adapted to the specific element of interest, for example the situation, persons, whole departments or groups (e.g. a tradition keeper--someone who resists to changes; a change agent--a person who hails any change, etc.). The procedure pursues as follows: within a special standardized discrimination task, notions (elements) of his field of experience are offered to the candidate. Then, he is invited to evaluate them individually. From a methodical point of view, the grid production is an evaluative task. Every element is evaluated according to several evaluation dimensions (constructs). There are several methods to transform the results into numerical values, e.g. nominal scales, hierarchical procedures ore multilevel rating scales. In the end, we obtain a matrix, which represents the individual model of present relational representations.

We assume a scale ranging from 1 to 6--if the right pole is given a 6, this means that this pole is fully right. The same is true for the left pole (see figure 4). Finally, we receive a matrix produced by the repertory-grid-method In a second step, all elements are assessed with regard to dimensions individually formed by the interviewee (scaling). Finally, the researchers receive a completed matrix; the personal elements can be presented as assessment spaces by means of the matrix's cell values. In the cluster analysis to be carried out, the assessed elements and constructs are compared based on their similarity. The construct pole "obstinate" contrasts the construct pole "co-operative". In the following argumentation, we do not deal with the dimensions because the argumentation would become too complex. At the end of the process, the data in the cells of the matrix can be computed and entered into a database. For example, the elements 'I ideal', 'network coordinator' and 'network culture of tomorrow' are assessed as similar elements of the person asked. Due to clarity, further interpretations based on the connection measures are not discussed here.

[FIGURE 4 OMITTED]

4. DESCRIPTION OF THE STRUCTURE AND NETWORK OPTIMIZATION

The focus is on the definition and evaluation of social, communicative and cognitive competences in the network. The ascertainment of the relevant attributes (soft facts) for the evaluation of the network is realized by means of the repertory grid methodology. The polyhedral analysis is a group-theoretical approach of modelling the relationships between the attributes of the objects. It provides a mathematic scope for the analysis of the relationships of the objects and the complete structure. Based on the data from the Repertory Grid we show, how a binary relationship between two abstract sets can be interpreted as a complex of objects with specific traits of attributes. The algebraic topology serves for analysis the global system structure and for gaining new insights into the connectivity of the individual system elements.

For a further integration to the competence cell network approach, it is necessary to quantify the individual "view of the world" like a "cognitive map" (Brown, 1992) described by elements and pairs of constructs. The above mentioned grid-matrix serves as starting point and data base. The initial idea of our approach consists of a demanded equality of elements and pairs of constructs although they originate from person specific interviews. First, the different construct poles are put into vectors of n elements, which further on built a vector space Rn. Each dimension represents an element, which means a column of the grid matrix. Now, cluster analysis is used to determine construct poles of elements, which means that the vector space is scanned for accumulations or so called clusters. Further on, each cluster will be labelled with a representative pair of constructs. They substitute the originally individual constructed ascertained by the repertory grid method. That means, a single representative pair of constructs replaces a pole of constructs within a specific cluster. As a result we obtain a new matrix in which each representative pair of constructs only occurs once. Finally the matrices of all competence cells are structures identically.

It depends on the structure of the created distribution of elements and constructs within the network, how the thereby described attributes are actually involved in network activities (see Meyer/Aderhold/Feich 2003). For example unique attributes or competences of a certain partner won't be of interest, if this partner remains isolated due to external reasons. Since the social constellations within in the network change with regard to specific tasks, the conclusions drawn from repertory grid and polyhedral analysis may also vary. The polyhedral analysis takes into consideration the particularities of competence cell networks more appropriately than the usually applied graph based methods of empiric social research because a group/social constructional approach is used to shape relations of attributes of objects. The polyhedral analysis explores the relation or the degree of relatedness, so called simplexes, and provides measurement values such as length of chains, connectivity or eccentricity. An appropriate identification of these simplexes allows applying the methods of polyhedral analysis. This research method serves as a mathematical framework to derive further structural statements. It explores the relation between individuals and the overall network with regard to individual competencies.

5. CONCLUSION

Due to the challenge to adapt to highly flexible markets, temporary, inter-organizational co-operation is of increasing importance. Although, even the inner-organizational coordination between different departments tends to be inefficient or incomplete. In general, the probability of failure of inter-firm co-operative arrangements is extremely high. Therefore, managers as well as theorists are searching for tools and methods to create an effective co-operative design to support such complex processes. We introduced a general model to manage temporal production chains, which we have linked with a special routine to face the particularities of the partner selection within a non-hierarchical network. This routine consists of the repertory grid method to assure individual adaption to the existing points of view, which we connected in a second step with polyhedral analysis to estimate the homogeneity of selected sets of partners, which combines advantages of group psychological methods with mathematical analyses.

FIGURE 4: THE FILLED GRID MATRIX

                                                 Self      Self (Other)

egoistically                 participating         4             4
Qualification in          Qualification in         4             4
  subranges                     Multimedia
mental limits                  open minded         5             4
indifferently          mental relationship         4             3
uncontrolled wisdom             Experience         5             5
are lazy              concentration on the         3             3
                               substantial
not sizably            to have Personality         3             4
pure Business                   Creativity         4             4

                                                                NW
                                             Ideal Self    Coordinator

egoistically                 participating         3             4
Qualification in          Qualification in         5             5
  subranges                     Multimedia
mental limits                  open minded         5             5
indifferently          mental relationship         5             5
uncontrolled wisdom             Experience         4             3
are lazy              concentration on the         3             4
                               substantial
not sizably            to have Personality         5             5
pure Business                   Creativity         5             5

                                             NW Culture       Direct
                                                             Partner

egoistically                 participating         3             5
Qualification in          Qualification in         4             2
  subranges                     Multimedia
mental limits                  open minded         5             2
indifferently          mental relationship         4             3
uncontrolled wisdom             Experience         4             2
are lazy              concentration on the         5             2
                               substantial
not sizably            to have Personality         4             3
pure Business                   Creativity         4             3

                                             NW Culture     NW Partner
                                              (Future)        (Now)

egoistically                 participating         3             2
Qualification in          Qualification in         5             3
  subranges                     Multimedia
mental limits                  open minded         5             4
indifferently          mental relationship         4             4
uncontrolled wisdom             Experience         5             4
are lazy              concentration on the         4             4
                               substantial
not sizably            to have Personality         5             3
pure Business                   Creativity         5             3

                                                                NW
                                             NW Partner    Participant
                                              (Future)        (Now)

egoistically                 participating         3             3
Qualification in          Qualification in         2             2
  subranges                     Multimedia
mental limits                  open minded         5             4
indifferently          mental relationship         5             4
uncontrolled wisdom             Experience         4             4
are lazy              concentration on the         4             3
                               substantial
not sizably            to have Personality         5             4
pure Business                   Creativity         4             4

                                                 NW
                                             Participant    Person of
                                              (Future)     Confidence

egoistically                 participating         3             5
Qualification in          Qualification in         2             4
  subranges                     Multimedia
mental limits                  open minded         5             5
indifferently          mental relationship         5             5
uncontrolled wisdom             Experience         4             5
are lazy              concentration on the         4             5
                               substantial
not sizably            to have Personality         5             4
pure Business                   Creativity         4             5

                                                             Regular
                                                Enemy        customer

egoistically                 participating         5             4
Qualification in          Qualification in         1             4
  subranges                     Multimedia
mental limits                  open minded         2             3
indifferently          mental relationship         2             5
uncontrolled wisdom             Experience         1             3
are lazy              concentration on the         1             3
                               substantial
not sizably            to have Personality         2             4
pure Business                   Creativity         3             4

                                               desire      Competition
                                              customer       network

egoistically                 participating         4             4
Qualification in          Qualification in         4             2
  subranges                     Multimedia
mental limits                  open minded         5             5
indifferently          mental relationship         5             5
uncontrolled wisdom             Experience         5             2
are lazy              concentration on the         4             2
                               substantial
not sizably            to have Personality         4             4
pure Business                   Creativity         5             5

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Meyer, M., Aderhold, J., and Teich, T., "Optimization of Social Structure in Business Networks by Grid-Technique and Polyhedral Analysis", Journal of Business and Psychology, 17(4), 2003, 451-472.

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Teich, T., The Extended Value Chain Management--aspects of intelligent co-ordination in Supply Webs. In: B. Katalinic (Ed.) DAAAM International Scientific Book 2002, DAAAM International Vienna, 2002.

Teich, T. et al., Distributed Scheduling in Extended Value Chain Management. In: Proceedings of the 12th International Conference on Flexible Automation & Intelligent Manufacturing. Eds.: Sullivan et al., Dresden, Germany, July 15-17, 2002, pp. 319-328.

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