A conceptual model of a SME’s management virtual
system
Sanda Berar
„The Internet doesn't replace people.
It makes them more efficient” Bill Gates
Abstract: Focusing
on the implications that IT and Internet technologies have on SME, the paper
presents a model for the development of management support systems for virtual
SME. The model is based on the integration of economic and technical
perspectives. The economic model
sustains all the business activates in the SME and integrates the information
and communication processes between the company's employees and external
partners, such as the company’s suppliers and clients. The technical model
sustains the economic model by sustaining the informational-based management
processes thought the organization.The economic model will be described in the
first part of the article, while the second part of the paper will describe the
technical model. The implications of the model for the management of SME
together with the inherent limitations of the model are investigated in the
final part of the article
1.
Introduction
The model presented in the paper is the result of a study that had
investigated the different economic and technical aspects related to the
management of virtual Small and Medium Enterprises (SME). The model is based on the changes in the decisional
process in the management of virtual SMEs and in the organisational structure
of virtual organizations identified in previous research [Bergeron98, Berman99,
Chang98, Charlton97, Davidow92, Reinermann96, Igbaria99, Ketler97, Kalakota00,
Iacovou95, Faucheux97, Gramingoli99, Ledoux98, Ludwig99, Mowshowitz94, O’Leary97, Pike00, Vlahos92]. In addition,
the results of previous studies regarding the impact of IT and especially
Internet and communication tools on SMEs, and the models and the patterns used
for modelling and designing virtual distributed systems have also been included
in the analysis [Ambler97, Apears88, Booch98,
Fitzgerald88, ISEL95, Jessup93,
Patel97, Prins97, Suter98]
The formalization of conclusions from this previous
research, including both economic and technical perspectives, has led to the
conceptual model described in the following paragraph. The model aims to
identify the main issues that need to be addressed when developing management
support system for virtual small/medium businesses.
2.
A
Conceptual Model of an eManagement Support Virtual System
The virtual system is developed in a 4-conceptual level space. Tanenbaum
has identified the advantages offered by this environment [Tanenbaum89], which refer to the reduction of
complexity, the hierarchical organization of terms, and to the identification
of interdependencies. The four levels on which the eMSV system model is built
are described in the following figure.
Figure 1
The levels of the eMSVS model
The first level of the model
describes the system specifications from the economic perspective: the
organizational structure, the type of managerial control, and the business
relations.
Any economic activity is based on a
multitude of processes. Each of these processes can be defined using an
economic template event. The application domain of each economic activity is
defined based on a collection of objects (consumer, products, resources). The
purpose of the informational system is to pattern the static and dynamic sides
of the economic reality. In this regard an accurate analysis and design of the
objects and processes involved is requested. Consequently, the second level of
the model identifies the relevant type of processes, while the third one
describes the systems of objects and the interfaces. For different kind of
economic objects, the systems’ non-functional features are constant and they
specify the type of implemented services, the data storing mechanisms, the
platforms used for server/client applications, the network structure, the
interfaces, and the security problems.
2.2.
The
Economic Model
The economic model is based on previous studies that have looked the
features of virtual SME, in areas such as the impact of IT on the structure and
management of SMEs [Bergeron98, Ketler97, Iacovou95], the re-engineering process in small business
[Berman99, Chang98,] and the way in which virtuality is transfroming
traditional organisaitons [Davidow92,
Reinermann96, Igbaria99, Faucheux97, Ledoux98, Lomow00, Ludwig99, Mowshowitz94,
O’Leary97, Pike00].
Integrating the results of this research, a descriptive model of virtual
SME has been developed, emphasising the relation between information and
communication. The formal economic model is then based on this descriptive
model.
2.2.1.
A
descriptive model of the virtual firm
The descriptive model of virtual firm represents an adaptation for SME
of the Reinermann model for public services. In [Reinermann96], the author identifies four perspectives of
the information-communication relation that have an impact on the government
and administration: citizen/administration relations, de‑coupling areas
of action, process orientation, and flexibility of labour.
As the Reinermann model is restricted to government and administration,
we have developed a similar model for virtual SME, where the fours views are
changed in order to correspond with the characteristics of SME activities.
Consequently, the model includes the following perspectives: firm/partner
relations, flexibility of labour, process orientation, and control
distribution.
The
relation between the firm and its partners.
There are two kinds of external partners for a SME: clients and
suppliers.
From the perspective of the client, a virtual firm is characterized by:
- The
uses of the communication and software techniques to electronic publish
services&products.
- Up-to-date
information related to the services and products, prices, facilities and
any other offerings.
- Orders
are typically made using the electronic environment (i.e. Internet/e-mail)
keeping the human interaction at minimum.
- The
usage of different electronic payment methods
- The
client may interact with the firm and request/suggest new types of
services or products.
- Also,
in first phases the client may collaborate with the firm in order to help
the firm to develop a new kind of service or to target a new type of
client. In other words, the client’s input is not only allowed, but
required
An American psychologist wrote, „The human has the odd inclination to
become what he believes he will become”. Adapting this for the virtual firm, we can say, „the virtual firm
has the inclination to become what the customers believes it will become”
From the supplier’s perspective, the virtual firm is characterized by:
- Transparency
in structure and competences
- Velocity
in approval operations for different types of requests (i.e. payment
order). Reduction of the red tape.
- The
implementation of a provision and distribution value chain that allows the
automation of orders and answers to these orders.
- The
use of electronic payment.
- Protected
access at catalogue information updated in real time.
- Flexibility
in work relations. Quick adaptability for the partner (supplier) firm.
Flexible working hours
The employee of any organization,
either in the public or private sector, has two main objectives: to achieve the
work targets, and to fulfil the role he/she has inside the organizations while
at the same time achieving personal objectives.
From the firm’s view, the personal
objectives of its employees are important only in regard with the improvement
of the level of living, the needs to distinguish oneself socially and
professionally, and the availability to work (overtime, calculated in units of
time allocated to job)
The virtual jobs are less connected
to time, space and hierarchy. The employee is free to manage by himself the
time allocated to work, to choose the place/environment in which to work, and
the pressure of a strict hierarchy does not affect him, as it would stress a
normal employee.
To provide a balance between these
two roles it is mainly the employee responsibility. He is forced to impose its
own restrictions and to develop a working algorithm.
On the other side, the time, space
and hierarchy independence has strong effects not only on each individual
employee, but also on the communication and cooperation processes inside the
firm.
From this perspective, it is the
firm’s role to allocate general tasks and responsibilities to each employee,
without specifying all the details related to time, space, and hierarchy. In
this way, the firm activity is based not so much on manager’s power and
qualities, but rather on trust (that each employee has the capacity to accept the responsibility of his own
work), and on the creativity, curiosity and imagination of each employee.
Process orientation
In this context the virtual firm can be defined as a horizontal
arrangement of its processes [Wysoki97].
The firm’s activity is not considered any more as the sum of independent
functions carried out more or less in isolation inside the firm’s different
departments, but as a chain of processes initiated by a certain data or event.
According to Reinermann, the term “value-added chain” suggests that the aim is
to eliminate, as much as possible, any redundancies in work, and to provide to
all participants up-to-date and uniform information. [Reinermann96]
Efficient communication, correct flow of information, strong mechanisms
for involving the employee represent key conditions for a successful virtual
firm.
In this manner it is avoided to keep in stock a product for which there
is no immediate demand on the market, it becomes possible to set-up, in real
time, a new type of service, following the changes in consumers needs and
requests. In addition, it could be possible to narrow the consumers complaints
related to certain delays in products and/or services distribution.
Control Distribution
The progresses achieved by information technology and materialized in
the capacity to have fast and direct access to up-to-date information, in the
increases of communication speed and quality, allow the implementation of the
concept of fractal organization within the firm’s structure [Reinermann96]. In fractal organization, the
firm’s groups/departments has both organizational and control autonomy.
In this way, the employee can first focus on it’s own responsibility,
and then collaborate in order to achieve a greater profit. The firm is not lead
any more by only one manager, but the responsibility and decisional power becomes
shared inside a group of decidents. Every member of this group could become,
depending on the problem in question, the leader or the mediator of the
discussion.
2.2.2.
The
Economic Model description
The economic level is a formal representation
of the descriptive model of the virtual SME. In the economic model, the electronic commerce
scripts are integrated in one single system led by a group of managers. The
model follows the functional/organizational principles described in the
descriptive model of a virtual firm. Operational decisions are still the
responsibility of the correspondent manager – one for each “electronic
department” of the firm. However, the strategic decisions are taken based on a
negotiation process between the members of the leading group. As part of the
decision support system, both decisional components and intelligent components
(based on IA technology) are used.
The following figure describes the basic structure of the economic
model.
The basic
purpose of this model is to establish a balance between the different types of
commercial activity (sales, marketing, provision, publicity) on one hand, and
business management on the other. Additionally, the system aims to ensure a
steady information flow through decisional departments, to eliminate
redundancy, to enhance coordination and leadership based on a negotiation
process and to provide access to up-to-date and accurate information.
Every
commercial department is responsible, at operational level, of its own
implementation and management of data.
The standardization of the processes inside the systems together with
the shared access to communication and coordination tools ensure a better
management of the client interface and a homogeneous decisional process.
The efficiency
of this system is based on the selective usage of the potential offered by
different types of relations, i.e. technological resources, cost and time
benefits, knowledge transfer. [Weber96].
Consequently,
the virtual system magnifies the essential characteristics of a competitive
manager:
q Cooperation, or
the capacity to collaborate, is a fundamental feature for a system based on the
negotiation process.
q Creativity,
or the capacity to react and to initiate changes; it is also essential in an
environment that continually recreates itself.
q Knowledge,
or the capacity to learn continually, is also required for a manager who leads
a firm concentrated on the information gathering.
q The abstract ability allows the manager to shape the practical events into
theoretical, abstract notions that can be considered then as inputs of the
virtual system. Also, the correspondent ability to transform the theoretical
and conceptual aspects into practical situations and contexts is also a
fundamental feature of a good manager.
2.3.
The
Processes Model
The structure of this model has been identified from the economic model
and is based on the three-tier scheme proposed by Malone [Malone90]. The there-tier scheme underlines
the hierarchical relations between communication, cooperation and coordination.
According to the author the communication is the fundamental requirement based
on which cooperation activities are accomplished, and which, consequently
generate the coordination activity. On the other side Piepenburg [Piepenburg91] defines communication as
“allocation of the cooperate subsystems to a functional whole” and Malone [Malone90] as “the act of managing the
interdependencies between the different activities”.
Suter adapted the Malone’s there-tier scheme for virtual corporations
activity modelling. [Suter98]
These three essential types of processes – communication, cooperation
and coordination represent the base of any virtual management structure. The
virtual organization could be either a virtual firm led by a group of
decidents, or a virtual corporation composed by a number of firms that
collaborate for a limited time frame in order to achieve a common target. The
main difference between the above-mentioned virtual organizations is the
‘priority’ characteristic. For a virtual corporation, each of the composed
firms runs their basic activity independently, and they collaborate only in
specific areas/for solving specific problems. By contrast, in virtual SME, the
basic activity is additionally accomplished through a communication-cooperation-coordination
process.
The virtual communication process describes the information
exchange between the internal/external partners. Internet related communication
channels are used.
The virtual cooperation process involves adding value [Suter98] through the collaboration of geographically
distributed partners. Each of the internal partners has to contribute in a
well-defined manner to business leadership and management.
The virtual coordination process consists in a planned, uniform
and co-ordinate way of meeting the objectives.
This process is defined in Sydow&Windler1
as being formed from four management functions – selection, allocation,
legislation and evaluation. At
operational level every decisional manager is responsible for the selection of
new partners/customers, for correct allocation of the resources inside its own
commercial department. At tactical level the decisional managers should
cooperate for legislation and evaluation of the results and consequences
obtained from individual decisions. Also they are together involved in the
selection and allocation of new strategic partners and services. This coordination is supported with
different communication technologies, from e-mail to complex support system for
group decisions.
2.4.
The
Objects Model
The virtual management system has to mirror, in accurate terms, the
management activity of a SME. The virtual firm is modelled as a collection of
economic event oriented objects, concurrent executable in a distributed
heterogeneous environment.
The development model proposed by Prins, Blokdijk and Oosterom in 1997
has been used in analysing the economic area and also in the construction of
economic objects. [Prins97]
The model is represented in interface terms by specifying the
fundamental functions and attributes assigned to every individual object. A
more detailed and specialized model should be developed during the systems
design and implementation.
The first step of the process represents the identification of external
events that can initiate different managerial operations.
Second, the static objects model description is constructed through the
identification of all the economic objects, the persistent associations, and
the inheritance relations between them (OMT diagrams could be used [Booch91]).
In order to complete de objects model, the dynamic model must be also
described. The dynamic model consists in all the actions (implemented as
methods) defined by every operation in which an object is involved.
Figure 3 Identification of
economic objects based on the external events - adaptation [Prins97]
Every action specifies the attributes requested to obtain the result. In
the present model, the formal specification of the actions has been realized
using the following five elements suggested by Prins [Prins97]:
1.
The
behaviour-state precondition.
2.
The
data-state precondition (e.g. enforcing a maxim interval on an expiration date)
3.
The
data-state transformation (e.g. updating a decisional criterion)
4.
The
behaviour-state transformation
5.
The
condition that has to be monitored correlated with the generation of a certain
event (e.g. correlation between the enlargement of the decisional group with a
new manager and the actualisation of the criterion and variants decisional set)
Each one of these five elements may contain a variable number of entries
(0-n). The sum of all entries represents the contractual specification of an
action.
The following basic entities have been identified as involved in the
virtual management system:
§
Decision
– it is characterized
by formulation, criterions, alternatives, consequences, decisional applied
model, decisional persons, mediator, result;
§
Decisional
criterion – it is
characterized by description, maxim and minim value, weight;
§
Alternative – it is characterized by description;
§
Consequence – it is characterized by the
environment state, value, correspondent criterion and alternative;
§
Decisional
Person – it is
characterized by name, position, specialisation, competence, responsibilities;
§
Consumers
– it is characterized
by name, age, education level, job type, geographical location, e-mail address,
history relation with the firm;
§
Client/Supplier
Firm – it is
characterized by name, manager, connection person, code, phone, e-mail address,
mail contact addresses, bank account, history relation with the firm, type of
activity, geographical location, discount, partnership contracts.
§
Service/Product – it is characterized by
name, price, guarantee conditions
§
Stock
– it is
characterized by product, data, quantity, value
§
Product/Services
catalogue – it is
characterized by name by the catalogue data, information related to the
presented products/services.
2.5.
Services
& Infrastructure
The objects and processes models complete the functional characteristics
of the information system.
There are also non-functional characteristics to be meet. They mainly
refer to the system’s infrastructure. In the analyse stage, the focus is on
functional objectives, while during the design and implementation phases, the
non-functional features have to be solved.
This fourth level of the model contains the definition of the
technological services that ensure the support for the
communication-cooperation-coordination processes.
The following figure pictures the services taxonomy together with their
infrastructure.
Figure 4 Services and
Infrastructure
The communication
and cooperation services are tools such as discussion boards or
electronic mail that allow the employee of the virtual firm to efficiently
exchange information. The information exchanged in this manner represents
relevant data for the cooperation process, data that cannot be found in data
services component.
The coordination
services provide IT support for the basic management
functions. In this category are included the negotiation and group decision
support system, components for different decisional models, expert system,
tools for strategic information gathering and selection.
Data services include the components that deal with
information storage, with input data processing and output data representation.
They solve the operational management problems and are also known as
transactional systems.
Technological
infrastructure is structured on three hierarchical levels. Every
one of these levels provides more functionality and ensures the
interoperability between the heterogeneous component systems.
The first level, computers and
networks provides the connection between physical entities,
ensures the access transparency from the users point of view and also solves
the security problems. Basically, the role of this level is to distribute the
objects over the available resources.
The data and objects
management level includes the objects administration tools and
provides data access (physical independent). The structures for objects
administration like CORBA (Common Object Request Broker Architecture) and ODBMS (Object
Database Management Systems) represents an environment, which allows
independent development of applications (on any type of computers, in any
programming language) and also provides integration possibilities.
The information
exchange level receives the requests sent by the services
components, localizes the needed information, executes the data transformations
and eventually sends notifications to the systems. The main function of this
level is to free the services from the problems related to the searching and
matching the information activities.
During the services and infrastructure implementing phase three main
principles shall be followed: standardization/portability (e.g. CORBA, JAVA),
modularity (combining the components, reuse) and environment distribution (the
system should work in a geographical distributed environments and also
asynchronous)
3.
Conclusions
The principal scope of this model is to realize a balance between the commercial and the management activities within a virtual SME.
The coordination processes achieved based on the negotiation process, the continue flow of information through the decisional departments, the real-time access to accurate and up-to-date data from any part of the system, and the redundancy elimination are just few of the conceptual elements included in the model.
Through design and
implementation the system proves itself technically accurate. Also, from the
economic point of view, the system follows the decisional and managerial
process of a SME. The model is not only valid
technically and economic, but the integration of the two perspectives provides
managers with a validated model that can be used in order to achieve
virtualisation and to take advantage of the benefits offered by the new
technologies
However, modelling and implementing such a system does not represents an evaluation measure and does not answer the questions related to the utility, performance or efficiency.
For a real validation of the model, an empirical investigation of the virtual firms and especially of the virtual management teams is required. In this way, the model would be validated based on the participant’s point of view.
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