The big picture: Capturing value from global value networks

Posted on 4 Dec 2012

For large manufacturers, global value networks are a vital source of competitive advantage. Dr Jagjit Singh Srai, head of the Centre for International Manufacturing at the University of Cambridge’s Institute for Manufacturing, explains that in today’s interconnected world, companies should be designing their networks with a view to developing ‘meta-capabilities’.

What do we mean by a global value network? Essentially, it’s the activities undertaken by a network of businesses across the globe, from basic R&D, through all aspects of the supply chain to marketing and after-sales service.

Today, these activities are likely to be dispersed among a network of interacting players scattered around the world, creating a complex industrial system that needs to respond rapidly to changing market, technological and geopolitical conditions. Therein lies the challenge.

The Centre for International Manufacturing at the IfM has been researching how companies might best design and operate these geographically dispersed networks. We have focused on two separate but linked themes: how to develop critical capabilities and organisational routines to manage the network, and how to design and set-up the right configuration of resources to underpin those capabilities. Results from our work with more than 30 multinational companies suggest that – counter-intuitively, perhaps – it may be easier to reconfigure a supply network to deliver a particular outcome rather than invest in capability development processes alone.

Our other key finding is that it is the combination of specific individual capabilities that creates distinctive competitive differentiation. For example, a company aiming to compete via innovative product leadership might need to combine capabilities such as new product development, defect minimisation, manufacturing processes and customer connectivity. It is the way in which companies optimise and combine these individual capabilities that is important.

We have developed a process for operationalising the ‘meta-capability’ concept for international manufacturing businesses. Our work with companies suggests they need to do more than just manage their global operations at a functional or firm level – they need processes to develop inter-firm meta-capabilities that are valuable, difficult to imitate, and by doing so, achieve real competitive advantage.