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St.Gallen Business Review Winter 2012

St.Gallen Business Review
Winter 2012

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ESPRIT St.Gallen Business Review<br />

The Future of<br />

Business Networks<br />

Jim Hagemann Snabe<br />

Co-CEO of SAP AG<br />

Every day, billions of consumers aro<strong>und</strong> the<br />

world use websites like Facebook, Twitter,<br />

and Amazon to manage personal connections,<br />

share, engage and shop. We form networks of<br />

friends and families, exchange advice and opinions,<br />

and browse millions of products and services. We are<br />

well-informed consumers in a collaborative online<br />

world. As John Dunne wrote: “no man is an island.”<br />

But neither is a business. Now, these same technologies<br />

are finding their way into corporations,<br />

allowing for the creation of collaborative networks<br />

among business users. Every company is part of a rich<br />

ecosystem of suppliers, vendors, partners and customers.<br />

And the most successful companies find innovative<br />

ways to engage players at all levels. Thanks to<br />

cloud-based technology, this is becoming easier than<br />

ever.<br />

«I call this the age of<br />

the Networked<br />

Enterprise»<br />

The Consumer Network of Today<br />

The idea of the business network is nothing new.<br />

Business leaders have long <strong>und</strong>erstood the power of<br />

strategic partnerships. Starbucks, for instance, is a<br />

master at collaboration, from supplier to consumer.<br />

Starbucks starts with an integrated supplier ecosystem,<br />

investing in farmers and communities to establish<br />

a stable supply of coffee beans. Then the company<br />

engages in high-profile partnerships with Barnes<br />

& Noble, PepsiCo, and United Airlines to ensure the<br />

Starbucks brand is widely distributed to a coffee-loving<br />

customer base. The brand has dominated the industry<br />

with this well-nurtured network.<br />

During the economic downturn, consumer goods<br />

makers such as Kraft and Kimberly-Clark plugged into<br />

key retailers to obtain point-of-sale data on a daily basis.<br />

With more-timely information on hand, the manufacturers<br />

could spot buying trends earlier, allowing<br />

them to capitalize on promotional opportunities and<br />

ensure that the right products in the right amounts<br />

reached consumers.<br />

PPG, a leading coatings and specialty products<br />

company, is a prime example of a large enterprise<br />

currently using Ariba Discovery, the premier service<br />

for matching buyers and sellers globally delivered<br />

via the Ariba Network. The US$15 billion company is<br />

able to quickly expand its pool of sellers beyond local<br />

bo<strong>und</strong>aries, gain unique qualifying information from<br />

network-based transactional history and member-generated<br />

performance ratings and increase competition<br />

in their sourcing events worldwide.<br />

Online companies built on the fo<strong>und</strong>ation of networking<br />

have been particularly collaborative. Amazon<br />

is one of the best examples offering more goods by<br />

contracting with other companies, making its site a<br />

one-stop-shop and efficiently connecting sellers with<br />

buyers. Amazon has extended its consumer network<br />

know-how to the Kindle. The Amazon Kindle was not<br />

the first e-reader on the market, but because Amazon<br />

<strong>und</strong>erstood the publishing industry it beat out a previously<br />

developed Sony product. While Sony failed to<br />

address the economic and legal challenges of e-books,<br />

Amazon created conditions that made joining its e-<br />

book network an attractive proposition for publishers.<br />

This allowed Amazon to accompany the Kindle<br />

product with an e-book retail service. Amazon has<br />

realized how important it is today to create services,<br />

rather than simply sell goods. The Amazon platform<br />

provides a service for consumers looking for the perfect<br />

product or e-book, as well as for independent<br />

merchandisers expanding their reach.<br />

At Facebook, a personal networking site, successful<br />

partnerships have come in the forms of apps<br />

and games. This includes Spotify, a popular music<br />

subscription service. Last September Facebook and<br />

Spotify announced a deep integration where users<br />

cannot access one service without subscribing to the<br />

6<br />

Winter 2012

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