A Study of Virtual Organizations

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TDT4735 Project in Software Engineering

A Study of Virtual Organizations

- in mobile computing environments -

Kristoffer Jacobsen

Advisor: Carl-Fredrik SrensenCoordinator: Alf Inge Wang

Norwegian University of Science and TechnologyDepartment of Computer and Information Science, NTNU

Fall 2004


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Abstract

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Abstract

This project explores the domain of Virtual Organizations (VOs), presenting an

overview of the concept, and describing enabling technologies. An analysis of

dynamic collaborative organizations in mobile computing environments isprovided, along with a comparison between these new organizational forms and

the existing VO taxonomy.

Motivated by the work performed by the MOWAHS project, this report aims to

contribute in understanding VOs, and in continuously assessing and improving the

work processes within these.

The first part of the report addresses several perspectives of the VO, such as key

characteristics, factors of emergence, organizational benefits, knowledgemanagement, and coordination. Along with an overview of contemporary research

and enabling technologies, this part constitutes the State-of-the-art evaluation.

The second part of the report aims to challenge the way the look at VOs today,

and provides a scenario analysis of dynamic collaborative organizations in mobile

computing environments. The comparison of these organizations to the traditional

VO characteristics, results in an extension of the VO taxonomy to include what we

define as Mobil Ad Hoc VOs (MAHVOs).

MAHVOs are temporary dynamic networks of independent actors with

complementary core competencies, working towards a common goal in a nomadic

environment. The co-operation is based on Information and Communication

Technology (ICT) as the main facilitator for sharing knowledge and fostering trust.

These organizations are enabled through the use of ICT, and the work processes

can be improved by using emerging technologies in ubiquitous and mobile

computing, thus operating in intelligent environments. The latter part of the report

applies the knowledge and experiences from traditional VOs to the future working

environments. This includes extensive use of sensors and actuators serving bothas supporting tools, and as actors in the organization.

Keywords: Virtual Organizations, Strategic Alliances, Knowledge Management,

Mobile Work, Ad hoc Networking, Intelligent environments.


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Abstract

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Preface

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Preface

This report has been written in the context of the course TDT4735 at IDI, NTNU.

The project description was given by the Mobile Work Across Heterogeneous

Systems (MOWAHS) project. The report is result of the work carried out byKristoffer Jacobsen during the autumn 2004.

I would like to take this opportunity to thank my supervisor, PhD Fellow Carl-

Fredrik Srensen, for providing valuable and inspiring guidance and feedback

through all phases of this project.

Trondheim, November 2004

Kristoffer Jacobsen


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Preface

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Table of contents

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Table of contents

PART I: Introduction

1. Introduction ........................................................................................................................ 11.1 Motivation .................................................................................................................... 1

1.2 Project context ............................................................................................................. 2

1.3 Project objective .......................................................................................................... 2

1.4 Readers guide............................................................................................................. 3

2. Research method ............................................................................................................... 7

2.1 Literature study............................................................................................................ 7

2.2 Scenario analysis......................................................................................................... 7

PART II: State-of-the-art

3. Literature study .................................................................................................................. 9

3.1 Introduction.................................................................................................................. 9

3.2 The concept of Virtual.................................................................................................. 9

3.3 The concept of Virtual Organization .......................................................................... 11

3.4 Definitions.................................................................................................................. 12

3.5 Characteristics........................................................................................................... 153.6 Trends toward Virtual Organizations ......................................................................... 24

3.7 Benefits and Drawbacks............................................................................................ 25

3.8 Typology of Virtual organizations............................................................................... 27

3.9 Examples of Virtual Organizations............................................................................. 36

3.10 Knowledge Management / Work processes ............................................................ 38

3.11 Modeling of the Virtual organization ........................................................................ 40

3.12 Summary ................................................................................................................. 44

4. VO research initiatives..................................................................................................... 47

4.1 VOmap....................................................................................................................... 47

4.2 TrustCoM................................................................................................................... 50

4.3 Other research........................................................................................................... 53

5. Enabling technologies..................................................................................................... 55

5.1 Introduction................................................................................................................ 55

5.2 Collaborative Engineering Communities.................................................................... 56

5.3 Computer Supported Cooperative Work.................................................................... 595.4 Ubiquitous and Mobile computing.............................................................................. 61
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Table of contents

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PART III: Own contribution

6. Problem elaboration......................................................................................................... 65

6.1 Introduction................................................................................................................ 65

6.2 Scenarios................................................................................................................... 65

7. Scenarios .......................................................................................................................... 67

7.1 Introduction................................................................................................................ 67

7.2 Traffic accident .......................................................................................................... 67

7.3 Crime scene investigation.......................................................................................... 70

7.4 Voluntary communal work ......................................................................................... 72

7.5 Experts in Team......................................................................................................... 75

7.6 Traffic......................................................................................................................... 77

7.7 Summary ................................................................................................................... 80

8. Extension of the VO taxonomy ....................................................................................... 85

8.1 Ad hoc alliances......................................................................................................... 85

8.2 Characteristics........................................................................................................... 86

9. Future trends .................................................................................................................... 89

9.1 Technology ................................................................................................................ 89

9.2 Working environments............................................................................................... 89

PART IV: Evaluation and conclusion

10. Evaluation and discussion............................................................................................ 91

10.1 Evaluation................................................................................................................ 91

10.2 Discussion ............................................................................................................... 91

11. Conclusion and further work ........................................................................................ 93

11.1 Conclusion............................................................................................................... 93

11.2 Further work............................................................................................................. 93

PART V: Appendix

Bibliography ......................................................................................................................... 95

Appendix A: Projects......................................................................................................... 103
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List of figures

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List of figures

Figure 1. Virtual objects (Scholz, 1997) ................................................................................. 11

Figure 2. Traditional vs. ad hoc corporate structures............................................................. 17

Figure 3. Characteristic dispersion of VOs (McKay & Marshall, 2000) .................................. 20

Figure 4. Virtual organization life cycle model (Strader et al., 1998)...................................... 21

Figure 5. The Virtual Face...................................................................................................... 28

Figure 6. Co-alliance Model ................................................................................................... 28

Figure 7. Star-alliance Model ................................................................................................. 29

Figure 8. Value-alliance Model............................................................................................... 29

Figure 9. Market-alliance Model............................................................................................. 30

Figure 10. Virtual Broker ........................................................................................................ 31

Figure 11. Virtual alliance models (Burn & Ash, 2000)........................................................... 31

Figure 12. Three layers in the VO model (Saabel et al, 2002)............................................... 35

Figure 13. Model towards a Virtual Organization (Saabel et al., 2002).................................. 36

Figure 14. Modeling viewpoints of a VO (Camarinha-Matos & Abreu, 2003)......................... 41

Figure 15. Positioning of modeling approaches ..................................................................... 43

Figure 16. Interpretation of the VO concept ........................................................................... 45

Figure 17. The VOmap vision (Camarinha-Matos, 2003)....................................................... 48

Figure 18. The VOmap roadmap (Camarinha-Matos, 2003).................................................. 49

Figure 19. The VOmap consortium (www.vomap.org) ........................................................... 50

Figure 20. The TrustCoM framework, conceptual model (www.eu-trustcom.com) ................ 52

Figure 21. The TrustCoM consortium (www.eu-trustcom.com).............................................. 53

Figure 22. Types of online activities....................................................................................... 55

Figure 23. Differentiation of groups using interaction and identity ......................................... 57

Figure 24. Categorization of collaborative engineering communities..................................... 58

Figure 25. Successful VO collaboration ................................................................................. 60

Figure 26. Decentralized broker............................................................................................. 86
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List of tables

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List of tables

Table 1. Overview of the report................................................................................................ 3

Table 2. Sections addressing the research questions.............................................................. 4

Table 3. Concept of Virtual..................................................................................................... 10

Table 4. Authors and their main focus on virtual organization ............................................... 12

Table 5. Selection of organizations in case study (Bultje & van Wijk, 1998).......................... 22

Table 6. Primary and secondary characteristics (Bultje & van Wijk, 1998)............................ 23

Table 7. Typology of VO in case study (Bultje & van Wijk, 1998) .......................................... 33

Table 8. VO types comparison on multiple dimensions (Palmer & Speier, 1997).................. 34

Table 9. Inter-organizational partnerships vs. VOs (Mertens & Faisst, 1996)........................ 34

Table 10. Experienced problems with SigSys........................................................................ 37

Table 11. Challenges in concurrent engineering.................................................................... 59

Table 12. Properties of ad hoc networking............................................................................. 62

Table 13. VO characteristics in the scenarios........................................................................ 81

Table 14. Classification of scenarios...................................................................................... 81
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Part I

Introduction


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Introduction

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1. Introduction

This chapter describes the motivation for this project, outlines the report context,

introduces the project objective, including the research questions, and provides a

reading guide.

1.1 Motivation

New ways of organizing businesses are continuously evolving with the Information

and Communication Technology (ICT) as an enabling factor along with increasing

pace and globalization of the market. Individuals and businesses now collaborate

from geographically dispersed locations in a much larger degree than before. The

technology is now enabling individuals to connect to the Internet and carry out

their work anywhere, anytime. This is referred to as nomadic computing by(LaPorta et al., 1996). As this concept of work matures in organizations, new

challenges and issues emerge related to the computer interfaces and information

systems the users interact with. The explosive growth in the number and type of

devices connected to the Internet requires more flexible frameworks for working

across heterogeneous systems.

The research on Virtual Organizations is considered to be inconsistent in the form

of having lots of contributors proposing their own definitions to the concept, thus

leading to a diversity of terms and descriptions of the phenomenon. The main

focus for the first part of the project has been developed together with a

representative from the organization SINTEF1 and the supervisors at NTNU, to

map the different approaches to the subject and provide an overview that clearly

presents the concept of VOs.

The second part of the project will be related to mobility and how businesses can

utilize mobile technology in VOs to increase the efficiency of their work. This is an

important and interesting issue for many organizations which gives me an extra

motivation towards this project by providing a study that is valuable to various

research establishments.

The own contribution in this project is a creative effort to challenge the way we

look at VOs today. It provides thoughts and suggestions for an extension of the VO

taxonomy. This is carried out by taking the characteristics of a VO into a different

setting, and discuss whether the new scenarios qualify as types of VOs.

1. SINTEF: http://www.sintef.no


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Introduction

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1.2 Project context

The project description for this thesis was developed in co-operation with the

research project MOWAHS1 (MObile Work Across Heterogeneous Systems). The

MOWAHS project is carried out jointly by IDIs software engineering and database

technology groups. The project is supported by the Norwegian Research Council.

The MOWAHS goals are threefold (www.mowahs.com):

G1) Helping to understand and to continuously assess and improve work

processes in virtual organizations.

G2) Providing a flexible, common work environment to execute and share real

work processes and their artifacts, applicable on a variety of electronic devices

(from big servers to small PDAs).

G3) Disseminating the results to colleagues, students, companies, and the

community at large.

One of the research challenges in MOWAHS is to provide an efficient and user-

friendly environment for helping people in virtual organizations to perform and

coordinate their work at their current location, time and device configurations.

The focus for this thesis will be to assist the MOWAHS project in achieving

primarily the first goal, G1, providing a deeper understanding of what a virtual

organization is and how it is organized, and partly G2 by studying enabling

technologies.

1.3 Project objective

The main task of this project is to examine Virtual Organizations, and give an

overview of the related research presented in the literature. The goal is to present

an explanatory study of the concept of VOs and related discussions, and identifythe work processes in these organizations. The following research questions have

been identified as the foundation for this research:

RQ1) What is a virtual organization?

RQ2) What are the characteristics of a VO?

RQ3) Why do VOs emerge?

RQ4) What are the types of VOs?

1. MOWAHS: http://www.mowahs.com


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Introduction

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RQ5) What are the benefits of adopting the VO?

RQ6) What is the role of information technology in VOs?

RQ7) What is the difference between a VO and an inter-organizational project?

The main part of the contribution is a creative effort to introduce scenarios and

analyze new organizational forms with regards to the existing taxonomy of VOs.

The scenarios are focused on everyday collaborating organizations in mobile

computing environments, and the work processes related to mobile work in such.

The latter part of this report will discuss issues and challenges of mobile work and

mobile collaboration in VOs, and will prepare the ground for a master thesis by

identifying research propositions for further work on VOs and mobile collaboration.

1.4 Readers guide

This section is provided for the readers convenience and briefly describes what

the report contains and how it should be read. Table 1 outlines the main chapters

in this report and indicates if a chapter is dependent on another. Reading the

table, one can see that e.g. Chapter 3 is dependent on the information found in

Chapter 1 and Chapter 2.

Part I - Introduction

Chapter 1: Introduction

This chapter contains background information about the project such as

motivation, project context, problem definition and this readers guide.

Table 1: Overview of the report

Chapter Chapter overview Chapter Dependency

1 Introduction --

2 Research method --

3 Literature study Chapter 1 and 2

4 VO research initiatives Chapter 3

5 Enabling technologies Chapter 3

6 Problem elaboration Chapter 2, 3

7 Scenarios Chapter 3, 5 and 6

8 Extension of the VO taxonomy Chapter 3, 6 and 7

9 Future trends Chapter 3, 5 and 8

10 Evaluation and discussion All previous chapters

11 Conclusion and further work All previous chapters


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Introduction

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Chapter 2: Research method

This chapter describes the work process and the methodologies used in the

project. It motivates the choice of research methods, and relates them to

software engineering.

Part II - State-of-the-art

Chapter 3: Literature study

This chapter is the result of an extensive literature study on VOs, and aims to

examine and answer the research questions defined in section 1.3. Table 2

shows which sections in the chapter that address the different research

questions.

Chapter 4: VO research initiatives

This chapter describes contemporary research initiatives on VOs, and presents

the vision and roadmap for European research on VOs towards 2015.

Chapter 5: Enabling technologies

This chapter presents different enabling technologies for the type of VOs

depicted in the literature study, and describes challenges to the use of

Information and Communication Technology in such organizations. Emerging

technologies within ubiquitous and mobile computing are also presented, andrelated to the context of the report.

Part III - Own Contribution

Chapter 6: Problem elaboration

This chapter elaborates on the problem definition for the contribution of this

report. It describes, in more detail, the work process of relating the concept of

VOs to mobile computing environments.

Table 2: Sections addressing the research questions

Research

questionSection

RQ1 All sections

RQ2 Section 3.5

RQ3 Section 3.6 and 3.7



RQ6 All sections

RQ7 Section 3.8, 3.9 and 3.10


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Introduction

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Chapter 7: Scenarios

This chapter presents scenarios of collaboration in mobile environments, and

provides an analysis of the work processes to the characteristics of VOs.

Chapter 8: Extension of the VO taxonomy

This chapter presents the results of the scenario analysis, and describes theobservations as an extension of the VO taxonomy, in terms of characteristics

and qualities of such organizations.

Chapter 9: Future trends

This chapter further discusses the results of the analysis applied to future

working environments, and presents opportunities and requirements towards

coordination in intelligent environments.

Part IV - Evaluation and Conclusion

Chapter 10: Evaluation and discussion

This chapter evaluates the work with regards to research method and achieved

results, and discusses possible weaknesses in the context of the research.

Chapter 11: Conclusion and further work

This chapter concludes the work, and presents research propositions for further

work.


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Introduction

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Research method

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2. Research method

The research activities for this report in the domain of Virtual Organization are

mainly divided in two approaches:

Literature study

Scenario analysis

2.1 Literature study

The literature study constitutes the major part of this project. It was chosen as the

best way to get an overview of the domain, and to explore the topics related to the

research questions. The background and resources for this part of the report areresult of an extensive literature study of articles, journals, books, web pages and

forum discussions related to the concept.

The approach to this study has been to find the most cited authors and the most

referred publications. In this way, we have been able to get an insight in which

contributors that are most acknowledged and accepted among other researchers.

We have been able to present a selection of contributions that reflect the research

topics in a reasonably good way, after following innumerable links between the

authors.

We have tried to balance the work of these acknowledged authors with a number

of more specific research contributions in order to make the review of the domain

as complete and consistent as possible, taking into consideration the fairly short

project time period.

This approach to the literature study was chosen after conferring the experiences

with software engineering research methods described in (Glass et al., 2002).

2.2 Scenario analysis

The second part of the research is a scenario analysis of the concept of Virtual

Organizations. It is an effort of bringing a new contribution and thoughts into a

research field that is highly abundant, with the purpose of continuing the respected

and innovative work within the MOWAHS project. The distinct goals of employing

this research method in the project are to:

Challenge the existing view of the Virtual Organization concept.


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Research method

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Identify new problem definitions and challenges, creating synergy effects

between the VO research and mobile computing.

Get a deeper understanding of the subject, by applying the gained knowledge

of VOs in a different setting.

Scenario analysis as a research method in software engineering, is mainly related

to requirements engineering, as described in (Sutcliffe, 1998). However, for the

purpose of visualizing and extracting valuable knowledge of mobile environments,

scenarios are used as the foundation for this approach to VOs. This method of

modeling a domain is a sort of use case modeling. In software engineering,

scenarios are defined in the following way:

A scenario is a sequence of steps describing an interaction between a user

and a system. (Fowler, 2000)

The scenarios in this report are textual use cases focusing on describing the

different actors in the organization, their roles and responsibilities, and the rules of

which the organizational entities acts according to. The technology and systems

the users interact with are described both in terms of method, and the role of the

technology in each specific organization.

When describing the scenarios, we used qualitative methods to provide correct

information and to secure consistency of our interpretation of the domain. Thesestudies were carried out in good software engineering practice, as described in

(Seaman, 1999).


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Part II

State-of-the-art


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Literature study

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3. Literature study

This chapter gives an overview of the literature that describes the concept of

Virtual Organizations (VO). We take a broad approach to the subject and try to

cover most of the topics that are relevant to answer the presented researchquestions.

3.1 Introduction

(Mowshowitz, 1986) used the term Virtual Organization for the first time in 1986.

Since then, there has been a lot of research on this type of networked

organizations and how they will revolutionize the way we work in the 21st Century.

There are numerous definitions of a VO because many authors and research

groups use their own definition for their work. In the book "The VirtualCorporation", (Davidow & Malone, 1992) presented one of the first extensive

approaches to the subject. The focus for their conception of a Virtual Corporation

relates to the concept of a Virtual Product. The ideal virtual product according to

them, was a product or service that "is produced instantaneously and customized

in response to customer demand."

Throughout this chapter, we will present different approaches to the subject based

on the literature, and try to give an overview of the characteristics of a Virtual

Organization.

In the literature, there exist various synonyms to the term Virtual Organization:

Virtual Corporation (VC), Virtual Enterprise (VE) and Virtual Company (VCo) are

all related to the same concept of co-operation between different organizations or

individuals.

3.2 The concept of Virtual

According to Oxford Concise Dictionary the term virtual is defined as: that issuch for practical purposes, though not in name or according to a strict definition.

Related to this definition, (Fairchild, 2004) says that an organization may be

thought of as a number of individuals systematically united for some end or work.

He proposes that a virtual organization may be viewed as a number of individuals

united with a practical purpose, or a practical purpose for the 21st century.

(Bultje & van Wijk, 1998) claim that the different definitions of a VO partly depend

on the view the authors have on the concept of "virtual". Table 3 presents four

different views that describe the meaning of virtual:


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Literature study

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(Bultje & van Wijk, 1998) analyzed different definitions of a VO, and concluded

that all four views on virtuality presented in Table 3 could be found among the

definitions.

The examples given by Franke on the different views of the term virtual are based

on a model presented in (Scholz, 1997) of virtual objects. Figure 1 shows how

Scholz divides a virtual organization into an intra- and inter-organizational

perspective, where the concept Virtual Corporation is considered inter-

organizational.

Table 3: Concept of Virtual

View of VirtualInterpretation

(Bultje & van Wijk, 1998)

Example

(Franke, 2000)

Unreal, looking real Originated from optics. Discrimination between a real

picture and a virtual picture. Both pictures look the

same, but as opposed to a real picture, a virtual picture

cant be caught on a photographic paper.

Virtual reality

Immaterial,

supported by ICT

Used in expressions like virtual library, virtual

classroom, etc. In this view, functions that are often

performed by people are replaced by the use of ICT.

Virtual

shopping mall

Potentially present Only active if a certain opportunity comes along. It candirectly unfold new activities if a new project is initiated.

Virtual memory

Existing, but

changing

Something exists, but the composition is temporary and

is possibly changing every day.

Virtual

corporation


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Literature study

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The term virtualness was introduced by (Venkatraman & Henderson, 1996) and

related to what the concept of virtuality mean for organizations. They proposed

that:

Virtualness is the ability of the organization to consistently obtain and

coordinate critical competencies through its design of value-adding business

processes and governance mechanisms involving external and internal

constituencies to deliver differential, superior value in the market place.

This emphasizes that an organization does not become virtual simply by using ICT

and nominating themselves as a VO, but as a result of how the organization is

managed.

3.3 The concept of Virtual Organization

Virtual organizations are given attention by researchers within a wide range of

fields, from social anthropology and organizational theory to computer science.

They have not yet agreed on a mutual definition of the concept, and there is no

theoretical framework available to give a better understanding of the concept.

Figure 1: Virtual objects (Scholz, 1997)

Virtual

Objects

Virtual

Organisation

Virtual

Holidays

Virtual

Product

Virtual

Reality

Virtual

Memory

Intra-organisationalInter-organisational

Virtual

Department

Virtual

Office

Virtual

Corporation

Virtual

Markets


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Literature study

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There are a lot of different contributions to the subject, and many of them are

related to functional aspects, such as the role of information technology in VOs,

legal issues, socio-economic issues, and so on.

Other authors relate the concept to business concepts such as knowledge

management, flexible or dynamic networking, agile competition, business processredesign and supply webs.

The focus on VOs can be divided into two main categories:

Structure perspective.

Process perspective.

Contributions from different authors are mainly within one of these categories. Thestructure perspective focuses on the building blocks of the VO and its properties,

while the process perspective focuses on behavior and operation.

Table 4 from (Saabel et al., 2002) shows how the literature reflects the two views.

3.4 Definitions

Analysis of the definitions of a VO provided by authors and scholars is a

reasonable way to determine the attributes of a VO. This section presents different

views on what defines this type of organization.

Table 4: Authors and their main focus on virtual organization

Perspective Author Terminology

Structure Byrne (1993)Aken et al. (1998)

Strader et al. (1998)

Wildeman (1998)

Grenier and Metes (1995)

Wtrich and Phillips (1998)

Mertens et al. (1998)

Goldman et al. (1995)

Davidow and Malone (1992)

NetworkNetwork

Network

Alliance

Alliance

Form of co-operation

Form of co-operation

Combination of core-competencies

Combination of activities

Process Hale and Whitlaw (1997)

Venkatraman and Henderson (1998)

Mowshowitz (1997)

Katzy (1998)

Continuous or institutionalized change

Strategic approach

Management approach

Action or ability


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Literature study

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(Grimshaw and Kwok, 1998) presents five major attributes of a VO:

Alliance for a common goal

Underlying Information and Communication Technology

Vertical Integration

Globalization

Collaboration

The presented attributes are based on definitions in the literature:

"In a virtual organization, complementary resources existing in a number ofco-operating companies are left in place, but are integrated to support a

particular product effort for as long as it is justifiable to do so." (Goldman et

al., 1995)

"Virtual organizations are distributed 'business processes'. These processes

may be 'owned' by one or more organizations acting in partnership. For a

specific project, resources are assembled to perform a business process on

behalf of the project owner(s), and then disassembled on completion of the

contract." (Wolff, 1995)

These definitions characterize the VO as an alliance for a common goal. The

authors describe the co-operation between the companies as a sort of partnership

or joint venture where all members contribute their core-competencies. It is

interesting to note that they do not mention the role of Information and

Communication Technology (ICT) to support co-operation. ICT as a facilitating

mechanism for VOs is emphasized by other authors:

"The key to understanding the virtual corporation is the profound effect that

information technology has as it distorts traditional relationships of

management and work to time and space." (Coates, 1994)

"The conjunctional grouping, based on the Net, of companies, individuals,

and organizations to create a business." (Tapscott, 1996)

"Increasingly, executives are turning to alliances, partnerships and joint

ventures, often formed to produce particular products and then disbanded.

These enable costs to be shared, development times to be shortened andeffective use to be made of design, manufacturing and marketing skills inside


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and outside the company. Such linkages - variously described as virtual

corporations or agile enterprises - are made easier by computer technology."

(Fisher, 1993)

Vertical integration as an attribute to VO was introduced by (Pastore, 1993) and(Klein, 1994), and was based on the suggestion that the companies in a VO

should include both suppliers and long-term customers into the VO to increase the

efficiency of their value-chain.

"In order to have a rapid response to the market (customers), companies

have to reorganize themselves around response to customer demand,

forging tight relational and technological bonds with core suppliers and long-

term customers. That is the shape of the corporation of the future, a virtual

corporation." (Pastore, 1993)

"Virtual corporation consists of the company that faces the customer and a

network of other companies that co-operate to achieve what none of them

could achieve alone. This arrangement permits each participant to

concentrate on what each does best and to limit its risks and investments to

its core competencies." (Klein, 1994)

Globalization of the VO was mentioned in (Wolff, 1995) and (Coates, 1994) and

describes how various departments of an organization could be spread over

several countries. The authors also discuss potential benefits from distributing the

operations globally.

"To achieve maximum benefits for the project owners, the majority of the

resources are independent sub-contractors working from home or local

centres. They could be distributed globally." (Wolff, 1995)

"The virtual corporation can be taken to be one with a relatively small

headquarters operating with many different internal units, alliances and

subcontractors. The largest of them will operate on a global scale." (Coates,

1994)

The last attribute discussed by (Grimshaw and Kwok, 1998) is collaboration. This

is one of the most important features of the VO, and is highlighted by (Dubinskas,

1993).

"The terms 'virtual team' and 'virtual organization' evoke the special status of

groups created through the use of groupware such as computer

conferencing. Virtual organization is important in shaping organizational


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outcomes. Virtual teams become part of the ongoing process of structuration,

while also providing a new tool for organizational design. Virtual team exists

through the use of groupware, but it appears to the user to have attributes

and functions of a conventional social group. Virtual organization is the larger

scale ordering and linking of virtual groups." (Dubinskas, 1993)

From all these definitions, we observe the different attributes of the VO and these

make the foundation to start talking about the formal characteristics of a VO.

(Byrne, 1993) provide the most widely accepted and cited definition of the term

Virtual Corporation within the academic literature:

"A virtual corporation is a temporary network of independent companies -

suppliers, customers, and even rivals - linked by information technology to

share skills, costs, and access to one another's markets. This corporate

model is fluid and flexible - a group of collaborators that quickly unite to

exploit a specific opportunity. Once the opportunity is met, the venture will,

more often than not, disband. In the concept's purest form, each company

that links up with others to create a virtual corporation contributes only what it

regards as its core competencies. Technology plays a central role in the

development of the virtual corporation. Teams of people in different

companies work together, concurrently rather than sequentially, via computer

networks in real time." (Byrne, 1993)

This definition has clearly a structural perspective, and gives a detailed picture of

the building blocks of a virtual organization. (Hale & Whitlaw, 1997) on the other

side provide a definition from a process perspective within the subject of

organizational development.

"The virtual organization is the name given to any organization which is

continually evolving, redefining and reinventing itself for practical business

purposes." (Hale & Whitlaw, 1997)

They emphasize that the concept is not so much about managing in the sense of

planning, controlling, directing and organizing, but more concerned with the notion

of continuous or institutionalized change.

3.5 Characteristics

To answer the question What is a Virtual Organization?, it is important to review

the different characteristics of a VO. The selection of characteristics discussed in

this section is based on the work of (Bultje & van Wijk, 1998). They performed anextensive literature research to map the different properties that constitute a VO.


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The characteristics in section 3.5.1 are, according to several authors, key factors

of a VO. The characteristics described in section 3.5.1 and section 3.5.2 are a mix

of proven properties of companies referred to as VOs in the literature and different

authors view of a VO. Therefore, the list of characteristics has to be evaluated by

performing further empirical studies, and can for the time being be considered to

be a sort of proposition.

3.5.1 Key characteristics

The characteristics presented in this section are considered key factors for a VO

by several authors.

KC1 Based on core competencies

Each partner in the VO contributes with its core competencies. The initiator

determines the most suitable business process related to the complementary skillsprovided by the different companies in the VO. The synergy effect that is the result

of combining all the core competencies enables the organization with a flexible

way of meeting the customer demands. The goal is to produce a sort of all-star

team.

KC2 Network of independent organizations

The designation of a VO as a network of independent organizations is widely

accepted in the literature. This means that we focus on the VO from an inter-

organizational perspective (see Figure 1), and that we discuss the concept VirtualCorporation when we talk about VOs according to the model provided by (Scholz,

1997).

KC3 One identity

According to (Aken et al., 1998), the VO must have its own identity. If the identity

of the partners remains visible in addition to the VOs identity, it is considered a

Soft VO. A Hard VO looks from the outside like one common organization.

KC4 Based on Information Technology

Different authors have their own view on Information and Communication

Technology as a factor in VOs. (Mowshowitz, 1994) regards the advances in

transportation, communication and computing as important for a VO. (Byrne,

1993) considers an information network as essential for companies to link up and

work together. The vision of VOs presented by (Davidow & Malone, 1992) is

strongly based on ICT.

KC5 No hierarchy

The equality of the partners in a VO leads to an organization without hierarchy. It iscalled an egalitarian structure by (Sieber, 1998). Other authors also state that


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there is no hierarchy in a VO. The positive effects of this structure would be

enhancing the efficiency and the responsiveness of the organization, and

decreasing the overhead (Bultje & van Wijk, 1998). The term adhocracies was

introduced in (Toffler, 1970) as part of his predictions for the future, and later

acknowledged in (Malone & Rockart, 1993) as a description of the management

structure in networked organizations. It is the large amount of unpredictable lateralcommunication that makes this organizational structure extremely coordination-

intensive. Figure 2, inspired by (Malone & Rockart, 1993), shows a comparison

between the traditional hierarchy and the notion of an adhocracy.

KC6 Distinction between strategical and operational level (~ separability)

According to (Mowshowitz, 1999), the logical separation of need from need-

fulfillment is the foundation of VO. He emphasizes that there, on a managerial

level, is a clear distinction between the abstract requirements and the concrete

implementation to reach the organizational goals. This is called the switching

principle.

3.5.2 Other characteristics

The characteristics presented in this section are considered characteristics of a

VO by several authors, but is not regarded as essential to define a VO.

OC1 Small sized partners: Small companies and/or parts of large companies

The core competencies of a partner are usually not the whole company, unless it

is a small company that has specialized its operations within a niche. The smaller

size of partners leads to more flexibility and makes it easier for the organization to

take advantage of opportunities in the market. Several authors point to the fact

that larger companies often are slower in decision making and innovation, whichare essential factors in responding to opportunities.

Figure 2: Traditional vs. ad hoc corporate structures


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OC2 Vague/fluid boundaries

It is not easy to determine where one organization begins and another ends when

talking about VOs. This is the result of more co-operation among competitors,

customers, suppliers, designers, etc. (Bultje & van Wijk, 1998). The boundaries of

the traditional organizations are redefined by the VO. (Mowshowitz, 1994)

distinguishes internal and external boundaries, where the latter is between the VO

and the outside world as opposed to boundaries between the internal partners

(units) in the VO.

OC3 Semi-stable relations

According to (Byrne, 1993), the relations in a VO are less formal and less

permanent. The relations create dependencies among the partners, but the

partners can also survive without them (Aken et al., 1998).

OC4 Dependent on opportunism

Part of the most widely accepted definition of a VO by (Byrne, 1993), describes

how companies band together to meet a special market opportunity, and are most

likely to fall apart once the need disappear. When a company partners with others

in a VO, they enlarge their scope and scale of opportunities available. Small

organizations, limited by size and lack of capital, often cannot take advantage of

emerging business opportunities alone.

OC5 Shared risks

As described above, VOs respond to opportunities in the market, and risks are

shared by every partner in the VO. (Chesbrough & Teece, 1996) provided

informative lessons on how to analyze risks within networked organizations. The

authors present a framework to help managers when to innovate by going virtual,

when to form alliances, and when to rely on internal development. They state that

as market-based incentives become greater, the risk-taking will increase.

OC6 Based on trust

Since VOs are based on sharing information and knowledge, there must be a high

amount of trust among the partners. Especially since each partner contribute with

their core competencies. The most important contribution on the subject of trust

within VOs was provided in (Handy, 1995).

Virtuality requires trust to make it work: Technology on its own is not

enough. (Handy, 1995)

Handy discusses how you can manage people whom you do not see, and defines

the rules of trust, based on common sense. An interesting comment on working in

a VO is that a shared commitment still requires personal contact to make it real.


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Paradoxically, the more virtual the organization, the more its people need to

meet in person. (Handy, 1995)

Related to trust is also co-destiny discussed by (Byrne, 1993), which means that

the fate of each partner is dependent on the fate of other partners.

OC7 Shared ownership

This characteristic is related to the fact that every independent partner has its own

interests in the VO, and that parts of the VO can be owned by different partners

(Bultje & van Wijk, 1998). (Aken et al., 1998) state that a partner will, or can, step

out of the VO once its goals have been met.

OC8 Shared leadership

According to (Aken et al., 1998), every partner controls its own resources but notautomatically the resources of the whole VO.

OC9 Shared loyalty

Along with shared ownership comes shared loyalty. Every employee of every

partner in the VO must identify themselves with the VO, and at the same time with

their own company. It is important to build a culture within the organization. As

Sieber puts it:

People determine the success of a VO. (Sieber, 1998)

The concept of a Virtual Culture is discussed by (Ash & Burn, 2000), who describe

it as a perception of the entire VO held by its stakeholder community. In other

words, it is the feeling of collectivity with respect to value sharing and time-space

arrangement. For example, each clients expectations are satisfied in the product

accessed, and each partner has the feeling of a continuous access to the

organization and its products.

OC10 Dynamic networkThe description of a VO as a dynamic network is related to the fact that

organizations or individuals can enter and leave the network at any time.

OC11 Dependent on innovation

As described earlier, the VO is often based on market opportunities, and the

essential element is the corresponding responsiveness. (Chesbrough & Teece,

1996) state that the adequate way to react to a market-based incentive, is through

innovative products and services. This is not necessarily only in a technical

perspective, and could for instance be related to innovation in organizationaldesign.


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OC12 Geographical dispersed

Several authors state that the partners in a VO are geographically dispersed. The

definition of geographical dispersed in the work of (Bultje & van Wijk, 1998) is

that a company is geographical dispersed if the buildings are separated. Figure 3

shows a classification of geographical dispersion related to business alliances.

This factor is one of the most important for the use of ICT in VOs. Technology

enables the companies to collaborate independently of location and time, and

could give the members of a virtual team a sense of presence and connectivity

even though they are miles apart.

OC13 No organization chart and meta-organization

The VO can be looked upon as some sort of umbrella organization, a meta-

organization. There are all kinds of organizational structures within the

cooperating companies, which make it difficult to draw an organization chart.

Another implication is the dynamic characteristics of the VO, where the

stakeholders in some instances come and go dependent on whether their goals

for the co-operation have been met.

OC14 Customer based and mass-customization

Mass-customization is related to individual services and products to satisfy the

particular needs and wishes of the customers. A concretization of this is the

concept of the Virtual Product introduced by (Davidow & Malone, 1992) based on

strong interaction with the customer.

OC15 Lifespan of co-operation: temporary vs. permanent

The lifetime of a VO is widely discussed in the literature, but most of the authors

are focusing their definition towards VO as a temporary network of independentcompanies as stated by (Byrne, 1993). The underlying notion is that they unite

Figure 3: Characteristic dispersion of VOs (McKay & Marshall, 2000)


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quickly, exploit an opportunity and disband afterwards. Other research uses the

interpretation of VO as a temporary organization that also can exist on a long-

lasting base (Aken et al., 1998). Van Aken introduces the concepts Project for

temporary organization, and Program for the long-lasting organization. As an

example, a VO can be disbanded in the event of project completion, but can also

have an undetermined duration in the case of the organization remainingfunctional for as long as customer demands exist and/or the participants find their

collaboration to be beneficial (Jgers et al., 1998).

The life cycle of a VO has been discussed in more detail by (Strader et al., 1998),

and they proposed a model of the life cycle of a VO as presented in Figure 4.

The authors define two or more major decision processes for each of the four

stages of the life cycle; Identification, Formation, Operation and Termination. The

identification phase involves opportunity identification and opportunity evaluation

and selection. These decisions are sequentially related. Once the best available

market opportunity has been selected to be pursued, the formation phase of the

VO begins by partner identification followed by selecting the most suitable

partners for partnership. Once the organization has been formed, it can begin its

operation phase. Important decisions are categorized into five functional areas of

design, marketing, financial management, manufacturing, and distribution. When

the market opportunity is fulfilled or has ceased to exist, the VO will be terminated

by two major decision processes in the termination phase; operation termination

and asset dispersal.

Figure 4: Virtual organization life cycle model (Strader et al., 1998)

Opportunity

Identification

Opportunity

Selection

Partner

Identification

Partner

Selection

Partnership

formation

Operation

Termination

Asset

Dispersal

Design

Marketing

Financial

Management

Manufacturing

Distribution

Identification Formation Operation Termination


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OC16 Balance of power: equality of partners vs. core-partners

Because of the high dependency between the partners in a VO, the participant

relations become more equal. (Jgers et al., 1998) state that the former culture of

control is replaced by a culture based on the desire to share skills and information.

On the contrary, (Aken et al., 1998) make a distinction between a VO with or

without a core-partner. They state that a core-partner is some sort of leader of a

VO to which the other partners have to comply. Worth noting here is that since

members of a virtual alliance may be partners in one venture but competitors in

others, they have less incentive to be open and share data than within hierarchical

organizations or within their alliance with suppliers and customers.

OC17 Mission-overlap: partial vs. complete

Partners that do business outside the context of the VO, in addition to the work

within the alliance, are considered having partial mission-overlap. While partners

performing all business within the organizational context, have complete mission-overlap. The literature describes both kinds of VOs (Bultje & van Wijk, 1998).

3.5.3 Case Study

(Bultje & van Wijk, 1998) have performed an empirical study on the selection of

characteristics. The sample source for their case study was six existing

companies, described in literature as VOs and differing on three points; small

versus large, Dutch versus international, and ICT based versus non-ICT based.

The companies are listed in Table 5, where Company X and Company Y

denote the columns for the criteria comparison.

The case studies were performed by mapping the characteristics on each

company, conducting interviews with employees. An analysis of the results was

performed to distinguish different levels in the list of characteristics. Three levels

were defined: primary, secondary, and no characteristic. Based on the

selection of companies, characteristics that fit all VOs were considered primary

characteristics, while the ones that fit four or five VOs were considered secondary

characteristics. Characteristics that met less than four organizations were ruled

out of the list. The results of this level analysis are shown in Table 6.

Table 5: Selection of organizations in case study (Bultje & van Wijk, 1998)

Criteria Company X Company Y

Small VOs vs. Large VOs Prolion Nike

Dutch VOs vs. International VOs ING Airbus

ICT-based VOs vs. no ICT-based VOs Amazon.com TMG


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The analysis divides the list into seven primary and five secondary characteristics,

where only two of the key factors mentioned in section 3.5.1 (Based on corecompetencies and Network of independent organizations) are considered primary

characteristics. Out of the four other key factors, only (No hierarchy) does not

comply to the secondary characteristics condition, matching only three

companies.

To enhance the readability of their study, (Bultje & van Wijk, 1998) formulated their

definition of a VO, divided in two parts according to the two levels of

characteristics:

A Virtual Organization is primarily characterized as being a network ofindependent, geographically dispersed organizations with a partial mission

overlap. Within the network, all partners provide their own core competencies

and the co-operation is based on semi-stable relations. The products and

services provided by a Virtual Organization are dependent on innovation and

are strongly customer-based. (Bultje & van Wijk, 1998)

Further, a Virtual Organization is secondarily characterized by a single

identity with loyalty being shared among the partners and the co-operation

based on trust and information technology. In addition, there is also a cleardistinction between a strategic and an operational level. (Bultje & van Wijk,

1998)

3.5.4 Summary

Although the study carried out by (Bultje & van Wijk, 1998) gives a good overview

on how the characteristics of a VO discussed in the literature maps to the reality

and existing organizations, it can be questioned whether all of the companies

investigated in this study really are VOs. This study should also be supplementedwith other empirical studies of the domain. Some of the characteristics do not fit

Table 6: Primary and secondary characteristics (Bultje & van Wijk, 1998)

Primary characteristics Secondary characteristics

Partial mission overlap One identity

Customer based & mass-customization Based on trust

Network of independent organizations Shared loyalty

Semi-stable relations Based on information technology

Geographical dispersed Distinction between a strategical and

operational level

Based on core competencies

Dependent on innovation


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the general definitions of a VO used by authors and researchers throughout the

world, and it is therefore interesting to deduce a typology of the concept of virtual

organizations. This view has captured the attention from several authors and

some of this research is discussed in section 3.8.

3.6 Trends toward Virtual Organizations

One of the interesting things about VOs is that the factors causing them to form,

existed long before the age of computers. In the construction industry, groups of

independent operators formed organizations to build houses and buildings. The

same applies for the movie industry when producing films. What has changed is

according to (Fairchild, 2004), that the trends that leads to VO have increased.

The trends towards VOs are reviewed by (Bleeker, 1994) and are widely cited in

the literature. Bleeker proposes that the four key trends are:

Pace

Cost

Personalization

Globalization

3.6.1 Pace

(Bleeker, 1994) comments on Alvin Tofflers predictions in (Toffler, 1970), about

businesses running at warp speeds, demanding immediate responses -

anywhere, anytime. Toffler predicted that the business market would turn into

survival of the fastest, not the fittest. Today, this can be witnessed by the

compressed life cycles for all activities in the value chain, and hierarchical

organizations that cannot respond to new demands (Fairchild, 2004).

3.6.2 Cost

The second trend (Bleeker, 1994) points to, is the decreasing cost of market entry,

particularly in the information services and other technology-driven industries. In

these industries, even small undercapitalized startups can have an enormous

impact on innovation (Bleeker, 1994), far beyond the apparent limits of their size

(Fairchild, 2004).

3.6.3 Personalization

Personalization, or customization, is made possible in a higher degree by

computerized manufacturing, which has made it economical to produceassembly-line product runs of a few dozen items instead of a few thousand


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(Bleeker, 1994). Not only do organizations save money by not needing large

manufacturing facilities, customization also allows organizations to produce

tailored products for a wider group of customers. Corporations are now driven

more by customer demands than by internal needs. Today, customers get what

they want or go elsewhere (Bleeker, 1994).

3.6.4 Globalization

Competition includes companies all over the world, rather than only with their

nearest located rivals.

Taken together, these factors in many instances have made a hierarchical

organization an inappropriate solution to the markets needs and have made

Virtual Organizations viable options. (Fairchild, 2004)

Underlying all these trends is Information Technology, which enables an

organization to quickly gather, integrate and analyze large amounts of information,

and disseminate it accurately to consumers throughout the world. VOs could

probably exist without ICT, like general contractors have existed in the building

industry for generations. However, its scope and the areas in which it operates

would be limited by time and space constraints (Fairchild, 2004). This is also

reviewed by (Bleeker, 1994), who talks about the unwired society and how

employees will work independently of time and space constraints.

Its the age of emancipation. Time and space will collapse, and the barriers

to communications will fall away. (Bleeker, 1994)

3.7 Benefits and Drawbacks

There are several reasons why VOs emerge, as depicted in the previous section.

The benefits of adopting the VO model have become more noticeable. This

section presents benefits and drawbacks identified by (Grimshaw & Kwok, 1998)

from a case study of established VOs. A discussion of strategic reasons for

organizing the business as a VO is also provided here.

3.7.1 Benefits

VOs extend the strategic reach of an organization. This involves extending the

scope and scale of opportunities that are available to the organization, quantified

by the factors size, time and space. A VO can help the companies within the

partnership to take advantage of emerging business opportunities they could not

have done alone because of limited size or lack of capital. As part of a VO, thecompany could also respond more quickly and mobilize to take advantage of


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market opportunities. By strategically teaming up with other companies around the

world, a company can enter previously closed markets.

All the examples described above show how a VO breaks the size, time and

space constraints, broadens the strategic horizon and thereby offers great benefits

for the organizations.

The results of the case study by (Grimshaw & Kwok, 1998), identify the following

benefits within the investigated VOs:

Increasing competitive capabilities

Flexibility

Greater responsiveness to market (customers)

Improving customer service

Cost benefits

Improving communication and internal control

3.7.2 Drawbacks

The complexity of a VO has some implications for the organization, and brings the

following challenges according to the case studies in (Grimshaw & Kwok, 1998).

High costs

The main costs are related to investment in ICT and the subsequently high

operational costs, including training and maintenance. Looking at the general

trends in technology costs, this issue is likely to be of reducing significance.

Legal problems

VOs are established fast and efficiently to respond to market opportunities or

tackle specific projects. This can result in complex legal problems as theboundaries between the organizations become vague or fluid. For instance, there

may be discussions on which partner holding the copyrights to the final design or

products.

Trust and respect issues

Trust and respect are one of the most important factors for a successful VO. This

applies both for knowledge sharing and the group dynamics for collaboration.

Again, the pace of VO establishment and geographical dispersion can imply

serious trust and respect issues. Empirical studies reveal that many companiesabandon co-operative arrangements due to problems with trust and control.


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Cultural issues

Co-operation in VOs may involve working across cultures. This is a big challenge

to many managers, and requires them to transfer their business policies and

culture to work with dispersed business teams - spanning organization,

geography, and cultures.

3.7.3 Discussion

According to (Goldman et al., 1995), the benefits offered by the VO concept

outclass the drawbacks. They suggest that the VO is dramatically better than

business as usual for a network of companies sharing a business opportunity and

propose six strategic reasons for adopting the VO model:

1. Sharing infrastructure, R&D, risk and costs

2. Linking complementary core competencies

3. Reducing concept to cash time through sharing

4. Increasing facilities and apparent size

5. Gaining access to markets, and sharing market or customer loyalty

6. Migrating from selling products to selling solutions

3.8 Typology of Virtual organizations

The list of characteristics provided in section 3.5 does not comply to every

organization referred to as a VO in the literature or in the industry and commerce.

It is therefore reasonable to think that VOs exist in many different forms of

business models. This section aims to provide an overview of the different kind of

VOs, describes the distinctions between them, and questions whether all of theseconcept models really refer to what the most common interpretation of a VO is.

During the 1990s the term Virtual Organization became a buzzword, possibly

resulting in businesses calling themselves VOs for marketing purposes.

3.8.1 Models of virtuality

Organizations denoted as VOs can be related to one of the six models of virtuality

suggested by (Burn et al., 1999).


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The Virtual Face

An easy way to describe a virtual face is that it is a cyberspace incarnation of a

non-virtual organization. These kinds of VOs are usually created to add value by

providing the same transactions and services to the customers over the Internet.

For instance, web shops or newspapers on the web. Figure 5 shows a model of

the virtual face, inspired by (Burn & Ash, 2000).

Co-alliance model

Shared partnerships where each partner brings approximately equal amounts of

commitment to the VO are denoted as the Co-alliance model. The partners form a

consortium, where the composition may change in order to reflect market

opportunities or the core competencies of each member. The links within the co-

alliance are usually contractual for permanent alliances, or by mutual convenience

on a project by project basis. Figure 6 shows a model of the co-alliance, inspired

by (Burn & Ash, 2000).

Star-alliance model

Coordinated networks of interconnected members, where each member reflects a

core surrounded by satellite organizations, is the definition of a star-alliance model

(Burn & Ash, 2000). The core is normally a leading actor (star) in the market and

Figure 5: The Virtual Face

Figure 6: Co-alliance Model


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supplies the members of the alliance with competency or expertise. Figure 7

shows a model of the star-alliance, inspired by (Burn & Ash, 2000).

Value-alliance model

Based on the value or supply chain, the value-alliance model gathers a range of

products, services and facilities into one package. The coordination is normally

provided by the general contractor, but participants may also come together on aproject by project basis. In cases where longer term relationships have been

developed, the value alliance tends to adopt the form of constellations, with

complex strategic relations between the suppliers and the companies in the value

chain. Figure 8 shows a model of the value-alliance, inspired by (Burn & Ash,

2000).

Figure 7: Star-alliance Model

Figure 8: Value-alliance Model


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Market-alliance model

Like the value-alliance model, the market-alliance also brings together a range of

products and services and facilities into one package. In this case, they may be

offered separately by individual organizations, and the market-alliance exists

primarily in cyberspace. The concept of virtual communities could also be related

to this model. Figure 9 shows a model of the market-alliance, inspired by (Burn &

Ash, 2000).

Virtual broker

The virtual broker can be described as a designer of dynamic networks. Virtualbrokers seek strategic opportunities either as third-party value-added suppliers or

as a kind of information broker of specific business information services. This is

the most flexible purpose-built VO that is actually created to fill a window of

opportunity and is dissolved when that window is closed. When (Miles & Snow,

1986) introduced the concept of dynamic networks, they suggested that this kind

of network needed a coordinator, a net-broker. In (Snow et al., 1992), three net-

broker roles; architect, lead operator and caretaker have been identified.

Responsible for respectively the selection of suitable partners and web members,

the overall project management and maintenance, and supporting the process of

learning to cooperate and cooperate to learn. Figure 10 shows a model of thevirtual broker, inspired by (Burn & Ash, 2000).

Figure 9: Market-alliance Model


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Summary of the virtual alliance models

Each of the presented alliances has a different degree of virtuality based on the

tensions related to autonomy and interdependence within the organization. A

measure of flexibility is the substitutability of the virtual links within the

organization to allow the creation of new competencies. (Burn & Ash, 2000)

present an overview of the different models with regards to the degree of virtuality.

This overview is shown in Figure 11.

Figure 10: Virtual Broker

Figure 11: Virtual alliance models (Burn & Ash, 2000)


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3.8.2 Types of VOs

The background for this section is the VO typology studies of (Bultje & van Wijk,

1998) and (Palmer & Speier, 1997), which have been widely adopted by

researchers. They are approaches towards classifying the organizations specified

as VOs in the literature.

The study by (Bultje & van Wijk, 1998) is based on previous work in (Campbell,

1997), and proposes a typology of VOs divided into four concepts; internal VO,

stable VO, dynamic VO and web-company.

Internal VO

This kind of VO could be described as one organization that aims at operating with

internal teams. The VO consists of several business units that are composed of

autonomous groups and teams. Management tasks are performed in adecentralized manner, and the availability of employees from different places is

the key factor for the flexible structure of the organization.

Stable VO

The foundation for this kind of VO is the co-operation between different

organizations and it aims contracting non core-competencies out by a core

partner. The committed suppliers of core-competencies are closely related to the

core partner.

Dynamic VO

The dynamic VO co-operates on a large scale basis with other organizations.

Opportunism and temporality are the foundation for the relations between them.

Co-operation in these VOs are dependent on the occurrences of market

incentives, offering a great deal of flexibility to the organization.

Web-company

The web-company, oragile organizations, is a temporary network of specialized

organizations based on the use of Internet (Bultje & van Wijk, 1998). The Internetis enabling the organization to offer their products and services on a global scale,

and the key factors for a well functioning organization are knowledge management

and knowledge sharing.

From the case study performed by (Bultje & van Wijk, 1998), the six companies

(also listed in Table 5) are distributed among the VO types as shown in Table 7.


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The study by (Palmer & Speier, 1997) is a survey of 55 organizations employing

the virtual model. Through survey responses and additional background

information supplied by the organizations, they developed a typology of VOs

divided into four concepts; virtual teams, virtual projects, temporary VOs and

permanent VOs.

Virtual teams

The concept of virtual teams is generated by the internal organizational use of the

virtual concept, and is in use in a large variety of organizations. The virtual teams

normally come from specific functional, process or strategic business units within

a larger organization. This notion is strongly related to the concept of an internal

VO discussed previously.

Virtual projects

The concept of virtual projects is based on organizations that form alliances or

consortiums to bring complementary organizations together to meet market

opportunities. It is most common that the partnering organizations are based

around similar industries or company types.

Temporary VOs

The concept of temporary VOs is an extension of the virtual project design,

established to take on multiple projects and develop responses to a specific

market opportunity. This is in other words similar to the initial virtual organizational

model proposed by (Byrne, 1993) among others.

Permanent VO

The concept of permanent VOs is that the VO, from its inception, is designed to

bring together market players and respond to opportunities for both improved

revenue-generating activities as well as cost savings (Palmer & Speier, 1997).

During the case study performed by (Palmer & Speier, 1997), the respondents

identified the scope of their work, the projected length of time spent in virtual work,types of projects, the range of involvement and the number of personnel involved.

Table 7: Typology of VO in case study (Bultje & van Wijk, 1998)

Type Researched organizations

Internal VO -

Stable VO Nike, ING, Airbus

Dynamic VO TMG, Prolion

Web-company Amazon.com


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These criteria suggested the distinct VO types presented above, and Table 8 gives

a comparison of the VO types on the dimensions discussed.

3.8.3 Inter-organizational partnerships vs. VOs

Table 9 presents the major differences between the VO concept (with the notion of

VO as a temporary network of complementary organizations) and other forms of

inter-organizational partnerships from organizational theory.

Table 8: VO types comparison on multiple dimensions (Palmer & Speier, 1997)

Virtual teams Virtual projects Temporary VOs Permanent VOs

Range of

involvement

Internal to an

organizational

function or

departmental

unit

Across functions

and

organizations

Across

organizations

Across

Organizations

Membership Small, local Indeterminate Typically larger Typically

smaller, but

scalable

Mission Teams on

specific, ongoing

tasks

Multiple

organizational

representativesworking on

specific projects

Multiple

functions

responding to amarket

opportunity

All functions and

full functionality

as a workingorganization

Length of

project

Membership

varies, but form

is permanent

Temporary Temporary Permanent

Use of IT Connectivity,

sharing

embedded

knowledge (e-

mail, groupware)

Repository of

shared data

(databases,

groupware)

Shared

infrastructure

(groupware,

WANs, remote

computing)

Channel for

marketing and

distribution,

replacing

physical

infrastructure

(Web, Intranet)

Table 9: Inter-organizational partnerships vs. VOs (Mertens & Faisst, 1996)

Inter-organizational partnershipDifference in characteristics compared

to a VO

Strategic Alliance - a less closed relationship

- hardly any virtual added value processes

- mainly formed by large corporations

- existence beside the core business

Conglomerate - dependency agreement

Cartel - aims to limit competition

Consortium - existence of formal agreements

Franchise - long lasting dependency agreement

Joint Venture - establishment of a new businessKeiretsu - stable membership of partners


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3.8.4 Summary of VO typology

The study of the VO typology shows that there are many different incarnations of

VOs. They all have a certain set of characteristics in common, and some that are

em

Documents

A Study of Virtual Organizations