Network Management and Development of new Business Opportunities: a Case Study in Finnish Metal Industry Network

This paper describes the development of new business opportunities through a strategic network. The case network is a Finnish metal industry network of seven small and mediumsize enterprises (SMEs). The objective of the research is to recognise and define the mechanisms of how multilateral strategic networks generate new business. The strategic cooperation is seen as a means for SME networks to compete. Network strategy is the tool to create common understanding on strategic issues, e.g. growth strategy, in the network. The Partnet project, within which this research is conducted, consists of three different enterprise networks, each of which has started to evolve towards a strategic network. Juha Lemponen Oy is one of the three core companies and the core of the case network. The network of Juha Lemponen created a vision of the future of the network including agreement on the growth strategy. The network gained a new customer with whom they had a chance to start practising the new way of operating. The researchers actively participated in the development process. The research suggests that the strategic co-operation of an SME network brings along possibilities to create new business opportunities. INTRODUCTION It is widely recognised that the degree to which companies are collaborating to compete is increasing and the co-operation is reaching new and greater forms. Strategic alliances are often seen as a tool for large conglomerates for managing the market and the supply chain. However, strategic bilateral and also multilateral co-operation is diffusing into relatively small companies, too. In Finland, the large globally operating companies have outsourced their functions to a great extent and will continue to do so. There is relatively few middlesized companies capable of providing the larger entities outsourced by the big businesses. One approach suggested as a solution is an SME network where a group of small companies would be responsible for system deliveries (Hyötyläinen et. al, 1999). The potential for system supplying can be seen to depend on the level of network co-operation (Lamming 1993). Turning an SME network into a collaborative system supplier requires several alterations both in the operations of individual companies and in co-operation modes. Close co-operation means that the companies are becoming increasingly involved with each other's strategies. This has brought the concept of strategic enterprise network into discussion. (Jarillo, 1993, Hines et.al 2000, Hyötyläinen 2000) Strategic network co-operation exceeds the bilateral relationship, for there is a shift towards multilateral operations. The aim of the paper is to describe the development of a strategic SME network. The focus is on developing the network's product-market strategy, with an objective of finding new business opportunities. STRATEGIC NETWORK The long-term partnerships of multilateral networks can be seen as strategic enterprise networks. A strategic enterprise network is based on mutual co-operation between companies and has long-term plans and a shared vision of the future. Strategic network may have its own goals, organisational structures or communication mechanisms. (Jarillo 1993, Kuivanen & Hyötyläinen [ed.] 1997, Hyötyläinen, 2000). One of the bases of successful co-operation is that the companies possess complementary competencies and resources (Moss-Kanter, 1994). Close co-operation of companies generates new knowledge of products, technologies and processes. The close and open multilateral cooperation also provides great insider views to companies with different material and technology bases. The new knowledge in networks is one factor that allows visioning new opportunities and facilitates the creation of new business. NETWORK STRATEGY Strategy typically concerns an individual company and states its position among other companies. There are not many studies about making a strategy for a business network, e.g. a supply chain. (Mikkola & Kettunen, 2002) There is a notion of co-operative strategy making as a part of so-called power school of strategy making. Power school views the strategy making as a process of negotiation (Mintzberg et al, 1998). It is noted that the rapidly increasing co-operation such as joint ventures, alliances, and outsourcing in the modern business development may lead to co-operative or collective strategy making becoming a strategy school of its own in the future (Mintzberg et al, 1998) The basis for a strategic network is shared vision of network activity, products, and product development. The networks' operating principles and development visions can be combined into a common network strategy (Hyötyläinen, 2000). Strategy creation and implementation in an enterprise network poses several challenges and complexities. Subcontractors and suppliers have usually multiple customers which may even operate in different businesses. Each company in the network has its own objectives and at the same time they have to see the potential of multilateral strategic co-operation. The traditional Ansoff Matrix (Ansoff, 1965), conventionally used in individual company context (Figure 1), is one tool to utilise in the network strategy process.