Discussions

The support for H1(a)-(c), H2(a)-(b), and H3(a)-(b) is consistent with the contention of co-evolving dynamics between IOS use and network structure. A firm may initiate a

collaborative relationship first and then customize its IOS use to support that collaboration. In an automotive network of electronically interconnected relations, structurally similar firms are likely to use IOS in a similar manner, while firms with a similar IOS usage tend to interact with similar others (e.g., those with similar technological capabilities) in that network. Firms with a high centrality, being central for many (significant) relationships, are more likely to observe opportunities and benefits of a greater IOS use than less central competitors, and thus are more likely to have an extensive IOS reach and range. Meanwhile, aggressive IOS users, by extending IOS reach and range to many (significant) partners, are more likely to locate themselves centrally in a network than less aggressive users. As such, a firm’s structural position in a network

influences its IOS usage, while the firm’s IOS use can also change its structural position in that network.

Figure 9.1 illustrates a co-evolving pattern between network structure and IOS use in the automotive industry. The recent technology development and increasing IOS use in the

automotive industry have enabled many new, significant links (relationships) that would be impossible conventionally. These IOS-enabled new interorganizational links have induced structural changes in the automotive network.

Supplier (Tier 2)

Components/Parts

Supplier (Tier 1) Automaker Dealer Car Fan/Consumer

External Design Partner (Financial) Service Provider

Car Buyer/Customer 3-Party Logistics

New links enabled by IOS Traditional links

Figure 9.1 IOS-induced structural changes in the automotive network

The link between automakers and customers

Traditionally, it is difficult for automakers to reach and collect information directly from customers, because federal laws inhibit automakers from selling cars directly to individual

customers (including rental car companies, auto repair shops, corporate buyers, and individual car buyers). Dealers must sit in between them. Now an increasing number of automakers, such as Ford, GM, DaimlerChrysler and Volkswagen, have taken the initiative in selling cars online. The Web-based sales are conducted via integrated systems that link the automakers’ back-end systems to those information systems of their customers, dealers, and even banks and other financial institutions. These Web-enabled links not only allow customers to negotiate prices and place orders with dealers directly online and apply for financing and loans in real-time, but also enable automakers to gather information directly from individual buyers and immediately transform that information into factory-floor actions.

A few automakers have even classified customers into fine-tuned segments and

customized their IOS links to maximize the reach to those segmented customers. For example, Ford has segmented its customers into dealers, potential car buyers, car owners, car fans, female car buyers, young car buyers, and so forth. To maximize its reach to those customers, Ford has tried many alternative ways. These include DealerConnection portal (for providing details on local inventories and special deals), BuyerConnection portal (for providing local dealer price quotes and insurance applications), OwnerConnection portal (for providing a virtual community of owners and building ongoing customer relationships), community sites (such as iVillage for women, digital entertainment network for young people), as well as CarClub portal (for

providing automotive-related products and services) (Computerworld September 22, 1999). In

addition, through joint services with Microsoft’s CarPoint automotive portal, Ford lets individual

car buyers order custom-built cars directly from Ford’s factory (Computerworld November 15,

1999). Ford also links its corporate site to Priceline.com and lets car buyers bid prices for new cars. Customers who visit the automaker's Web site can click on a button and arrive at

Priceline's Web site. Once there, they can submit bids for the cars of their choice. Those bids are then sent to car dealers near the customers, and the dealers can decide whether to accept the offer or not.

Take BMW as another example. BMW is testing a customer innovation lab, an innovative new multimedia Internet tool, for fostering customer community and leveraging creative thinking of customers. The customer innovation lab (www.bmw.com/innovationlab) provides car fans or interested customers a sort of online toolbox to help them shape and develop their own ideas. Depending on the scenario chosen, users can choose from a selection of

appropriate pictures and keywords to help them define their maybe vague ideas with greater precision. For example, to submit a suggestion to the customer innovation lab, the user must first log on by giving a user name and an e-mail address. Then each idea is assigned to a certain scenario: e.g., "vacation," "business trip," "highway," "city driving," etc. Following that rough classification, the creative user can describe the concrete everyday situations in which the new service would be useful, or an idea and its technical implementation if possible. Finally, the best ideas will be selected by the automaker and pursued in collaboration with their originators (news release at www.bmw.com August 21, 2003).

The link between dealers and parts suppliers

Following the initiatives for linking automakers and customers in 1999, some automakers launched Web portals to link dealers and parts suppliers for providing better service to dealers. For example, GM developed a Web portal (www.gmde.com) to offer dealers an easier way to order equipment than faxing or phoning in orders. The Web portal lets dealers read the latest service and equipment news, browse equipment specials, make equipment purchases online, and contact suppliers directly for better information. The portal offers more than 10,000 service equipment items from over 100 suppliers, whose Web sites are hot linked for dealers who need additional information on designed gears. After entering their dealer codes, dealers can order

items such as lifts, alignment equipment, wheel balances, and battery chargers (Computerworld

November 16, 1998).

The link between automakers and Tier-2 suppliers

Traditionally, many automakers only maintained direct contacts with a selected number of Tier-1 suppliers. Establishing direct ties with Tier-2 suppliers would be costly. The

proliferation and growing sophistication of automotive electronic marketplaces have enabled automakers to manage their extended supply chain (including Tier 1 and Tier 2 suppliers) on a common application platform and reap the benefits of economies of scale and scope.

Covisint represents a first joint effort of such an attempt by the Big-Three automakers – GM, Ford, and DaimlerChrysler – to weave together the back-end systems of the automakers and their extended suppliers. Covisint can handle up to $300 billion in automotive business each year. It helps cut time, costs and wastes in both the exchange process and the collaborative

Failing to support H2(c) and H3(c) suggests that diversity of IOS use may not relate to network structure (centrality). A possible rationale is that a high centrality may not involve a firm’s direct engagement in diverse business operations and thus its IOS support for diverse operations. Likewise, a diversity of IOS use may not involve a firm’s engagement in a large number of (significant) relationships, and thus may not relate to a high centrality.