Business Network Governance
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Traditionally the cooperation between a number of companies has been regulated by frame contracts, written agreements that determine the terms of business interactions between the partners. As a result of the hierarchical structure of the value chain, these frame contracts were usually between a small set of firms, often bilateral. Recently these value chains have evolved into value networks with a considerably more complex interaction pattern among an increasing number of members. In this situation governance has become a serious challenge that can no longer be solved by bilateral negotiations. Hierarchical coordination is not an option as each network partner is a self-controlled organization. Pure market coordination can also be ruled out because the interaction cannot be reduced to a simple exchange of products and services. As a consequence the contract is still the instrument of choice but the conventional written form would be hard to negotiate in a multilateral environment and even harder to enforce. There are several ways to manage the complexity of such agreements. One is to devise a structured procedure for deriving the contract. As the agreement is supposed to regulate the cooperation process of the network it should incorporate a model of this process. The procedure for creating the frame contract can therefore be seen as a modeling procedure. In [R07c, R06c, R06d] I introduce such a procedure. |
The idea of using a process model-based contract to coordinate business processes can be applied in a number of areas. One such area is that of process change. How can we deal with situations where changes in the environment require changes in the business process? We distinguish between planned and ad-hoc changes. The former refer to fundamental, long-term changes and imply a revision of the underlying process model. The latter are minor, short-term changes. [R06e] shows how model-based contracts can solve these issues.
An increasing number of business transactions is performed via the web. In this form of electronic commerce we often make use of so-called web services, web-accessible IT artifacts that encapsulate business services. Coordinating the invocation of such services can also be supported by model-based contracts [R07d].
But even conventional business interactions between different organizations usually involve information systems. But different organizations also mean different IT systems so the integration of their business processes has to be accompanied by a corresponding integration of their information systems. Again model-based contracts provide a useful help [R07e].
All these examples show that contracts based on process models are a powerful tool to govern business networks. But if models are useful for network governance it is certainly worthwhile to take a closer look at the way they are created. How do we arrive at a model? What are the criteria for a quality model? It is obvious that the quality of the underlying process model will significantly affect the quality of governance so the suggested approach is contingent upon the availability of a quality model. Traditionally the quality of models has been ensured by a procedure called chauffeured modeling which involves an experienced modeling expert who leads a group of domain experts during a modeling session.
But creating a model is a process that shares many similarities with that of creating a contract. In both situations the critical issue is a consensus between the people that are involved. To put it in other words: The modeling process is essentially a negotiation process. If we start from that assumption we can make use of a rich inventory of methods and tools that support the negotiation process. It also facilitates the enactment of the resulting models/contracts. This idea is elaborated in [R07f].
[R06c] Rittgen, Peter: Integrating Organizations in a Supply Chain with Electronic Contracts. In: Soliman, Khalid S. (ed.): Managing Information in the Digital Economy: Issues & Solutions. Proceedings of the 6th International Business Information Management (IBIMA) Conference, June 19 - 21, 2006, Bonn, Germany, IBIMA, Mineola, NY, 2006, pp. 44-51
[R06d] Rittgen, Peter: Supporting Interactions Between Organizations with Language-Action Models. In Khosrow-Pour, Mehdi (ed.): Emerging Trends and Challenges in Information Technology Management, 2006 Information Resources Management Association International Conference, Washington, DC, USA, May 21-24, 2006. Hershey, PA: Idea Group Publishing, 2006, pp. 172-175
[R06e] Rittgen, Peter: Supporting Planned and Ad-Hoc Changes of Business Processes, in: Latour, Tibout; Petit, Michael (Eds.): The 18th International Conference on Advanced Information Systems Engineering (CAiSE 2006). Proceedings of Workshops and Doctoral Consortium. 7th Workshop on Business Process Modeling, Development, and Support (BPMDS'06), “Requirements for flexibility and the ways to achieve it”, Luxembourg, 5 – 6 June 2006, Presses universitaires de Namur (Namur University Press), Namur, Belgium, 2006, pp. 105-111
[R07c] Rittgen, Peter: Coordinating Interorganizational Business Processes via Trading Partner Agreements. Systems, Signs and Actions (to appear)
[R07d] Rittgen, Peter: Supporting the Design of Service Contracts with Interaction Models, International Journal of Internet and Enterprise Management 5 (2007) 1, pp. 5-22
[R07e] Rittgen, Peter: Integrating Business Processes and Information Systems in an Interorganizational Context, in Cunha, Manuela; Cortes Bruno; Putnik, Goran: Knowledge and Technology Management in Virtual Organizations: Issues, Trends, Opportunities and Solutions, Hershey, PA: Idea Group, 2007, pp. 136-153
[R07f] Rittgen, Peter: Designing and Implementing Contracts for Smart Business Networks, Paper presented at the SBNi Discovery Session (Smart Business Networks initiative), Kasteel De Vanenburg, Putten, The Netherlands, 14-16 June 2006