Cloudonomics: The Business Value of Cloud Computing, + Website

The Networked Organization

The pinnacle of success 100 years ago was the vertically integrated corporation. Ford’s River Rouge plant was not just a plant but an entire automotive production ecosystem in a square mile, from iron ore through finished vehicle.

Today’s corporation is not a single entity but what some call a network corporation, a business web, or a virtual corporation. Mobile virtual network operators are a brand and a logo, with cellular services delivered by other operators, and the hard work of deploying cell sites and laying fiber left to the operators. The operators, meanwhile, have outsourced such things as mobile device design and tower construction and ownership to others. Meanwhile, the mobile device manufacturers rarely do manufacturing but outsource production to companies such as Hon Hai Precision Industries, better known as FoxConn. P&G does some research in house but leverages open collaboration through a network of researchers and innovation marketplaces. Even the tightly integrated Inditex uses a network of madre-and-padre shops as suppliers, and Toyota is not just a firm but the glue holding together thousands of suppliers.

In an inversion of Coase’s theory of the firm as an entity that would exist to minimize search and transaction costs, the new theory of the firm is that of the minimum focus needed to succeed in its chosen market.33

There have been seismic shifts in the global marketplace over the past years, revolutionizing organization structure ...