Benefits of virtual organizations

Summary

This work is about Virtual Organizations. Why this new type of organization exists, what it is and how it works. The factors that differentiate them and how they are composed. We will also discuss the tools that facilitate them and make them possible.

Introduction

The information revolution and the Internet have allowed changes to take place in the way organizations and individuals relate. However, many times the means or the tools are confused with the objectives. The Internet and all information technology tools are not the goal itself. Many people involved in the fever of the Internet have lost sight of the biggest changes that are happening around us. The way that individuals and organizations relate is changing. These changes are forced by phenomena such as globalization, the knowledge economy and competition. We will call these factors structural phenomena.Individuals and organizations respond to these structural phenomena by implementing strategies that allow them to compete in the new environment. The strategies that can be implemented are limited to the available technology. This is where information technology comes in. All these technologies allow us to communicate and relate in different ways, which potentiates new strategies.

In this article we will discuss the new type of organization that is emerging due to structural phenomena and potentialized by information technology, the Virtual Organization.

Text body

Virtual Organizations

Business organizations are essentially mechanisms for coordination. They exist to guide the flow of work, materials, ideas, and money. How they organize themselves is largely determined by available coordination technologies. When it is cheaper to transact internally within the organization's boundaries, organizations grow but when it is cheaper to transact externally in the market, with independent organizations, then organizations remain small or shrink.

Coordination technologies of the industrial age - the train, the telegraph, the car, the telephone, the mainframe computer, the copier and the fax - made internal transactions possible and advantageous. Companies were able to centrally manage large organizations, achieving economies of scale in manufacturing, marketing, distribution, and administration. In this situation it was logical and advisable to control a large number of functions and operations directly. Companies centralized most operations, performed as many tasks as possible, and hired large numbers of people to perform them. Being big is good.

The arrival of powerful personal computers, extensive electronic networks and new software applications are the new coordination technologies. This changes the paradigm of organizations. Because information can be instantly shared at low cost by many people in distant locations, the value of centralization and bureaucracy decreases. Individuals can manage themselves, coordinating their work electronically with other individuals. Now being small is good.

Coordination technologies allow in a way to return to pre-industrial organizations. Autonomous small organizations transacting with other small organizations on the market. But there is a crucial difference between, now thanks to electronic networks, micro organizations can connect to large information banks, technology and financial markets that were previously only available to large organizations. Small organizations enjoy many of the benefits of large ones without losing flexibility, focus, and creativity.

This may seem like a science fiction or fantasy story, but the business world shows us several examples where this trend is already here and it is here to stay. During the 1920s and 1940s the film industry was controlled by large studios such as MGM and Columbia. These studios employed actors, directors, writers, advertisers, and countless other staff. Film studios were the model for the great industrial organization. But by the 1950s this model began to disintegrate and power gradually changed from large studies to individuals. Actors, directors and writers became independent "freelancers", they decided which project to work on, the duration of the project and their remuneration.Currently independent producers initiate film projects, hire, finance and form teams of "freelancers" to work together temporarily. Once the project is finished the organization disappears, but its members rejoin other projects. The shift in the film industry from large, permanent organizations to small, temporary organizations demonstrates how an entire industry can change from a paradigm of hierarchical, large and centralized organizations to one of networks, small and agile. These changes are not limited to Hollywood, large manufacturing organizations are implementing radical “outsourcing” strategies and leaving external agents to carry out many of their traditional activities. (Zillur Arman, SK Bhattachryya, Singapore Management Review, 2002).They finance and form teams of "freelancers" to work together temporarily. Once the project is finished, the organization disappears, but its members rejoin other projects. The shift in the film industry from large, permanent organizations to small, temporary organizations demonstrates how an entire industry can change from a paradigm of hierarchical, large and centralized organizations to one of networks, small and agile. These changes are not limited to Hollywood, large manufacturing organizations are implementing radical “outsourcing” strategies and leaving external agents to carry out many of their traditional activities. (Zillur Arman, SK Bhattachryya, Singapore Management Review, 2002).They finance and form teams of "freelancers" to work together temporarily. Once the project is finished, the organization disappears, but its members rejoin other projects. The shift in the film industry from large, permanent organizations to small, temporary organizations demonstrates how an entire industry can change from a paradigm of hierarchical, large and centralized organizations to one of networks, small and agile. These changes are not limited to Hollywood, large manufacturing organizations are implementing radical “outsourcing” strategies and leaving external agents to carry out many of their traditional activities. (Zillur Arman, SK Bhattachryya, Singapore Management Review, 2002).Once the project is finished the organization disappears, but its members rejoin other projects. The shift in the film industry from large, permanent organizations to small, temporary organizations demonstrates how an entire industry can change from a paradigm of hierarchical, large and centralized organizations to one of networks, small and agile. These changes are not limited to Hollywood, large manufacturing organizations are implementing radical “outsourcing” strategies and leaving external agents to carry out many of their traditional activities. (Zillur Arman, SK Bhattachryya, Singapore Management Review, 2002).Once the project is finished the organization disappears, but its members rejoin other projects. The shift in the film industry from large, permanent organizations to small, temporary organizations demonstrates how an entire industry can change from a paradigm of hierarchical, large and centralized organizations to one of networks, small and agile. These changes are not limited to Hollywood, large manufacturing organizations are implementing radical “outsourcing” strategies and leaving external agents to carry out many of their traditional activities. (Zillur Arman, SK Bhattachryya, Singapore Management Review, 2002).The shift in the film industry from large, permanent organizations to small, temporary organizations demonstrates how an entire industry can change from a paradigm of hierarchical, large and centralized organizations to one of networks, small and agile. These changes are not limited to Hollywood, large manufacturing organizations are implementing radical “outsourcing” strategies and leaving external agents to carry out many of their traditional activities. (Zillur Arman, SK Bhattachryya, Singapore Management Review, 2002).The shift in the film industry from large, permanent organizations to small, temporary organizations demonstrates how an entire industry can change from a paradigm of hierarchical, large and centralized organizations to one of networks, small and agile. These changes are not limited to Hollywood, large manufacturing organizations are implementing radical “outsourcing” strategies and leaving external agents to carry out many of their traditional activities. (Zillur Arman, SK Bhattachryya, Singapore Management Review, 2002).Large manufacturing organizations are implementing radical outsourcing strategies and letting external agents carry out many of their traditional activities. (Zillur Arman, SK Bhattachryya, Singapore Management Review, 2002).Large manufacturing organizations are implementing radical outsourcing strategies and letting external agents carry out many of their traditional activities. (Zillur Arman, SK Bhattachryya, Singapore Management Review, 2002).

An extreme example of this trend is the Topsy Tail company that makes accessories for the fashion industry. This company currently generates revenues of US $ 80 million but only has three employees and never touches the product throughout the manufacturing or distribution process. The company contracts with manufacturing companies to manufacture its products, design agencies to design the products and packaging, and an independent network of storekeepers, distributors, and sales representatives are responsible for distributing and selling. (Zillur Arman, SK Bhattachryya, Singapore Management Review, 2002).

The competitive environment is forcing more and more companies to leave behind the old paradigm of trying to master all the disciplines necessary to produce and market goods and services, instead they are hiring external agents who can perform these tasks in a better way. Managing this intricate network of partners, contractors and freelancers is becoming as important as managing internal operations. The old business model that relied on fixed assets, financial capital and economies of scale is vulnerable to smaller organizations that use new coordination technologies to be more agile, reduce costs and be experts in their “core competences”.

To this new business model, the organization of the new century is called Virtual Organization. Virtual is defined as something that does not exist in reality. So a typical definition of virtual organization is "a temporary network of independent agents linked by technology to share knowledge, costs and access to markets." Other definitions focus on organizations that do not have a fixed physical location “an organization geographically distributed and whose work is coordinated through electronic communication.

Characteristics of a Virtual Organizations

• Individuals have a shared vision or goal and a protocol for collaboration.

• They group activities according to their “core competences”.

• They work together in teams in order to contribute their “core competences” to the value chain.

• They process and distribute the information in real time throughout the entire network. Allowing them to make decisions and coordinate actions quickly.

• Members are added to the network, as new core competences are needed.

Benefits of Virtual Organizations

The main beneficiaries of this new trend are individuals and organizations that focus on being outstanding in their areas of knowledge or “core competence”. Organizations or individuals who cannot be distinguished or possess outstanding skills will be the worst affected.

These new trends will drive companies to search for niche markets where they can excel, focus their efforts on exploiting their best skills, and specialize in some of the activities of the production process. The companies that will obtain the greatest economic benefits will be those that can create brands, the other activities such as manufacturing, quality control and distribution will be delegated to external agents. As an example of the above we have the business unit of screens for PC of the Nokia company. Myyar Moragjhi managed to develop this new business unit against strong competition from US companies. In 1992 Moragihi invested the US $ 100,000 he had in marketing and information brochures.Currently, the company has 6% of the 17-inch screen market in the US with sales of US $ 160 million. All this with a staff of five people. Moraihi and an assistant control the brand and marketing activities while Moraihi and two financial specialists manage financial affairs. Local partners with extensive knowledge of the market are responsible for serving customers in the USA, customer service is performed by independent technicians in Raleigh, North Carolina, logistics is performed by an outsourced company in Charleston, South Carolina, promotion and advertising. They are carried out by another company in Montanview, California and manufacturing is carried out in Salo, Finland (Fulk, J and DeSanctics, G, Electronic groups at work, Organizational Science, 1995).All this with a staff of five people. Moraihi and an assistant control the brand and marketing activities while Moraihi and two financial specialists manage financial affairs. Local partners with extensive knowledge of the market are responsible for serving customers in the USA, customer service is performed by independent technicians in Raleigh, North Carolina, logistics is performed by an outsourced company in Charleston, South Carolina, promotion and advertising. They are carried out by another company in Montanview, California and manufacturing is carried out in Salo, Finland (Fulk, J and DeSanctics, G, Electronic groups at work, Organizational Science, 1995).All this with a staff of five people. Moraihi and an assistant control the brand and marketing activities while Moraihi and two financial specialists manage financial affairs. Local partners with extensive knowledge of the market are responsible for serving customers in the USA, customer service is performed by independent technicians in Raleigh, North Carolina, logistics is performed by an outsourced company in Charleston, South Carolina, promotion and advertising. They are carried out by another company in Montanview, California and manufacturing is carried out in Salo, Finland (Fulk, J and DeSanctics, G, Electronic groups at work, Organizational Science, 1995).Moraihi and an assistant control the brand and marketing activities while Moraihi and two financial specialists manage financial affairs. Local partners with extensive knowledge of the market are responsible for serving customers in the USA, customer service is performed by independent technicians in Raleigh, North Carolina, logistics is performed by an outsourced company in Charleston, South Carolina, promotion and advertising. They are carried out by another company in Montanview, California and manufacturing is carried out in Salo, Finland (Fulk, J and DeSanctics, G, Electronic groups at work, Organizational Science, 1995).Moraihi and an assistant control the brand and marketing activities while Moraihi and two financial specialists manage financial affairs. Local partners with extensive knowledge of the market are responsible for serving customers in the USA, customer service is performed by independent technicians in Raleigh, North Carolina, logistics is performed by an outsourced company in Charleston, South Carolina, promotion and advertising. They are carried out by another company in Montanview, California and manufacturing is carried out in Salo, Finland (Fulk, J and DeSanctics, G, Electronic groups at work, Organizational Science, 1995).North Carolina, logistics is performed by a subcontracted company in Charleston, South Carolina, promotion and advertising is carried out by another company in Montanview, California, and manufacturing is carried out in Salo, Finland (Fulk, J and DeSanctics, G, Electronic groups at work, Organizational Science, 1995).North Carolina, logistics is performed by a subcontracted company in Charleston, South Carolina, promotion and advertising is carried out by another company in Montanview, California, and manufacturing is carried out in Salo, Finland (Fulk, J and DeSanctics, G, Electronic groups at work, Organizational Science, 1995).

The process of being a multinational organization consisted of establishing offices with company personnel in different countries. This usually required legal work, financial supervision, and staff mobilization. In order to manage these operations, it was necessary to coordinate and consolidate information, which required qualified personnel at headquarters and usually took time. This cost represented a barrier to entry for new participants. The Internet and electronic communication allow access to communications at low cost. An Internet portal can receive visits from people around the world and take orders directly from the consumer. You can make global contacts and become a multinational in a few weeks.Emerging e-commerce technologies are democratizing business opportunities. Individuals and small organizations can operate internationally through a personal computer from their own home.

Attitudes and Behavior

This new business structure and new way of interaction and coordination called Virtual Organization requires changes by employees and administrators. Technology with all its advances cannot replace the basic need for clear goals, effective leadership and adequate human relationships. Technology is a facilitator tool that enables us to do activities differently and more quickly, but the content and direction, the ones that make the difference between success and failure, is still determined by humans. For this reason, certain attitudes and behaviors are necessary to guarantee the success of virtual organizations. Zillur Arman, SK Bhattachryya, Singapore Management Review, 2002). Trust is essential to achieve cooperative and cooperative work.An entrepreneurial spirit and risk tolerance and a commitment to excellence are also necessary.

Other issues to be addressed by the Virtual Organizations are: identifying the current “core competences” of the company and the desired “core competences”, providing the technological infrastructure that allows collaboration and communication of geographically dispersed teams, measuring improvements in the customer service, stimulate learning, change the old time-based remuneration system of the industrial age to a new performance-based remuneration system for the information age.

The concept of Virtual Organization is closely related to four other concepts: groupware, virtual teams, telework and virtual office. Below we will explore each of them.

Groupware is used to encompass the electronic technology, information technology, and group processes that support organizations and teams (O'Hara Devereaux and Johansen, 1994, p.78). They can be subdivided into three categories: face to face, conventional and Internet-based. Although face-to-face communication is not through an electronic medium, experts cite that it is the most efficient way to establish personal relationships which are essential for the work of virtual teams. According to the experts, face-to-face communication gives the opportunity to understand the motivations and communication styles of the individual, making electronic communication easier later on. Therefore it is considered part of the groupware. The conventional means of groupware are fax, telephone, or letter.Experts highlight the use of the phone as a means of facilitating personal relationships. Usually phone calls are used when teams form to meet other participants or "break the ice." Some people argue that the high cost of calls makes the telephone an obsolete means of communication. However, experience indicates that the high initial cost of establishing personal relationships avoids misunderstandings later that can be much more expensive. Internet-based groupware is: email, instant message or chat, discussion groups, Internet portals, and teleconferencing. Studies have shown that email is the most widely used virtual communication channel. In some cases due to financial limitations it is the only means available.Its advantages include speed, low cost, accessibility and the ease of sending you attachments. To ensure good communication through email, it is necessary to establish a communication protocol. This protocol should establish clear rules such as response time, a title by email, a message by email, an idea by email. Instant messaging software facilitates informal communication and the creation of closer relationships. Previously, video conferencing was limited due to its high cost. The Internet has made it possible for more people to access this service at a lower cost.This protocol should establish clear rules such as response time, a title by email, a message by email, an idea by email. Instant messaging software facilitates informal communication and the creation of closer relationships. Previously, video conferencing was limited due to its high cost. The Internet has made it possible for more people to access this service at a lower cost.This protocol should establish clear rules such as response time, a title by email, a message by email, an idea by email. Instant messaging software facilitates informal communication and the creation of closer relationships. Previously, video conferencing was limited due to its high cost. The Internet has made it possible for more people to access this service at a lower cost.

Virtual teams are a relatively new phenomenon. They are usually defined as geographically dispersed, culturally dispersed, temporary work teams that communicate electronically (Jarvenpaa and Leidner 1999). Virtual teams can communicate synchronously or asynchronously through technologies such as email, discussion groups, audio / video / data conferences, electronic voting, and collaborative work. Some of the benefits of virtual teams are that they facilitate the sharing of information and knowledge without the cost of having to travel. According to the Department of Labor of the Government of the United States of North America, between 13 and 19 million people currently work from places far from their office.

Teleworking is the professional activity carried out by people - teleworkers - who are not physically present in the company for which they work. This requires, in addition to a professional qualification, a mastery of new technologies (computers, modem, fax, telephone, Internet and all the software that supports the operation of these) since these will be your work tools. The advantages of teleworking are. Autonomy, being one "your own boss", teleworkers will carry out their duties without leaving home, arranging and organizing their time, which can be done in other fields (family, hobbies, relationships). The development of professional activity in other places is also possible, not necessarily the home. Companies consider that this system involves cost and space savings.Saving time and money on travel. Less environmental pollution.

On the other hand, there are the disadvantages: Need for large doses of self-discipline, the teleworker must direct his activity towards the effective provision of services, for which those who lack the power of self-organization or self-discipline will have a great competitive disadvantage. Psychological or relational problems, since it can produce a feeling of isolation in the teleworker. Difficulty motivating remote workers and making them part of the company's objectives, which can lead to the company losing part of its corporate strength. In most countries, especially developing nations, there is no legal framework regulating telework. Companies must place special emphasis on information security, both physically and at the network level.

The virtual office is essentially the “outsourcing” of the secretarial services. This usually includes receiving messages, answering the phone, preparing mail, but may also include other services such as keeping accounting books, coordinating the agenda, preparing itineraries and travel reservations. All these services can be marketed under an infinite number of names, lately the names of telecommuting and virtual assistants seem to be the most fashionable. The advantage of these services is the savings in fixed costs. It is estimated that in the United States of North America savings are obtained for each worker who works from home of US $ 5,000 per annum only, and increases in productivity and decrease in absenteeism achieve savings of another US $ 10,000 per worker per year..

Conclusions

Information technology is transforming the way we interact and work. There is no longer a need for a meeting place where people and company information are concentrated. People and organizations can collaborate and share information from distant points. The challenge for companies is to transform this new tool into something that adds value to their product or service and maximize the benefits of this new possibility.

The new organizations or Virtual Organizations will be networks of individuals who meet to carry out activities with very specific objectives and communicate through electronic means. These organizations will be dedicated to specific activities in which their level of knowledge allows them to differentiate themselves from the competition. Very few organizations will try to manage the entire production chain. Organizations will focus on those activities where they can add the most value to the process and leave the other activities to other experts.

These virtual organizations will be made up of highly mobile individuals with very flexible working relationships. They will usually work in virtual groups. This new way of working will be possible by groupware tools.

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