How To Measure What You Can't Touch

Measuring performance in an extended enterprise takes specific knowledge and management skill -- and makes technology into a commodity.

The extended enterprise is no longer a theory; it’s a reality today and happening on a global basis in nearly every industry. Executives and managers practice corporate virtualization almost unconsciously, but the idea of having people not tied to the company acting as agents of the company and the company having little leverage over the various facets of production still makes many managers uneasy. How do you measure performance in a virtual enterprise? How do you impose accountability? Where are the benchmarks for a virtual enterprise when there’s recognition that no two organizations will have the same structure, need or execution strategy?

Applying metrics and benchmarking a virtual enterprise is an arduous task. Measuring the performance and applying accountability to a virtual operation rarely comes from cookie-cutter templates. Each extended organization is unique and operates within a unique ecosystem. Metrics, therefore, must be tailored to the specific business models, operating conditions and market dynamics of the virtual enterprise. It’s precisely the reason technology is little more than a commodity, since the governance of an extended enterprise is a business process and has little to do with the technology infrastructure. 

The time when corporations could dictate terms to partners and customers has passed; tell a customer to pound sand and they’ll likely end up in a competitor’s camp. The same goes for suppliers and partners. Loyalty is earned on a continual basis, and performance is rooted in mutually agreed upon factors and expectations. In the new paradigm, governance itself is a melding of management and diplomacy between parties that are not quiet equal but share varying levels of dependence and benefit from the intertwined relationship. This is why the term “governance” sometimes seems arcane - too harsh and proscriptive for a fluid and ever-evolving enterprise. Just look at the words we use for it: value web, network, and ecosystem.

Technology, of course, makes the extended enterprise possible. And technology makes it necessary: the new markets, the globalization of business, the lower thresholds to entry for competitors, the speed of everything, the novelties in business models and products – all of these are the devilish work of technology. And the key to getting a grip on it is managing technology wisely -- within your four walls and outside across the extended enterprise.

Transformation, personal relationships, common vision, collaboration and trust are the radical ideas that are the underpinning of governance in the age of the virtual extended enterprise. Such intangibles are rarely attained easily, but a continual process toward these characteristics and goals will bring a virtual enterprise many steps closer toward true virtual governance.

Faisal Hoque (www.faisalhoque.com) is the founder and CEO of BTM Corporation (www.btmcorporation.com). A former senior executive at GE and other multi-nationals, Faisal is an internationally known entrepreneur and thought leader. He has written five management books, established a non-profit institute, The BTM Institute, and become a leading authority on the issue of effective interaction between business and technology. © 2010 Faisal Hoque