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Virtual Organization

by Mr. Mohammad Reza Haririan
Tehran Mohaseb Consulting Engineers


The 20th century is considered to be the base for human growth and development in various fields, such as; culture, economy and so on, in order to accelerate the human financial and industrial growth.

The industrial revolution brought forth series of continual great changes and developments in economical and social systems. Human thought and instrumental capacities placed the century to the point where it facilitated  fundamental changes in all the relations and regulations in systems and organizations, which consequently led to the new era resulted from the rule of data and communication .

One of the main devices of this alternation was the transition of calculating machines and their gradual development to intelligent instruments which progressively expedited and enhanced the human's capabilities which was led into a revolution in the world .

In the world today, the inherited property of individuals, communities and even nations do not play the principal role while this is the amount and quality of access to information and the relation governing on them that provides the power of play to individuals, institutions and organizations and even furthermore to rule over others from economical aspects of ultimately political and military affairs, therefore; at the present time any community which can well organize its acquiring systems of absorbing data and information and analyze , interpret and make use of them in time shall be more successful and progressive . In this connection, one of the most important instruments is the INTERNATIONAL Computer Network (Inter-net) a very sophisticated man-made electronic device which will strongly define and dictate the future and much more it has tremendously influenced and affected all the human's affairs that will result in an overall transformation of the classic and conventional relations governing the social , economical and cultural relations confronting them with modern definitions, which the potency of flexibility and adjustment to it will be the success, otherwise the result shall be retardation and extermination .

Wave effects on economical Organizations:

Regarding the change in conventional relations governing the human communities especially economical organizations and the continuity of this ceaseless change and perhaps infinite, the defined systems in the world of economy and commerce being indicated with escalating curves have been greatly developed in different time phases; and now they are at such a state that all the conventional managing, organizing, producing, marketing , selling etc? being affected by the astonishing speed resulted from this wave ,not only they have been subjected to this transformation but also they have adapted themselves to this change current . For example; in the 19th century or early 20th century, car manufacturers were defeated by the idea of mass production offered by Ford and later on this company was defeated by Japanese Toyota company through its agile production. In this regard, the method and the new system resulted from the revolution in the world of communication and data - processing, is on the verge or ruling, a phenomenon called Agile Production which we will discuss in detail, later on.

The basic rule in this system, is the flexibility and the speed of agility of organizing the procedure of the concerned company to stand against unpredictable quick changes and developments of the work and business atmosphere in the  future, whereas; in these conditions the available conventional systems are not responsive and they gradually lose their applicability.

Commercial organizations, especially industrial ones, are basically dependent on future prediction, so that they buildup, organize and plan their inter-organizational structure according to that, coping their activities with market demands, like different standard systems that are available and planned according to the optimized technological production, agile production etc?/p>

As stated before, in these systems, purchasing time of materials, manufacturing and processing the aforesaid has been predicted and finally will be optimized, but the subject under the present conditions which has been resulted from the overwhelming atmosphere of data , information and communication explosion being brought forth is the fact that the prediction of future has become uncontrollable and impossible, processing much intricacy, and this also has been resulted from the nature of changes which is continuously proceeding , and that is the word " change " that does not alter. Therefore; the former systems have lost their applicability, and that modern systems should be defined with powerful and more flexibility, inducing the nature of change in their existing organization and structure, so that they can be responsive to unpredictable and variable needs of the community. In this connection, from early 90's and later, much effort has been carried out and different researchers especially American scientists suggested futuristic methods, but the fact is that the prediction of future has practically become more impossible day by day. Therefore; as stated before, we should change our point of view and look into the problem from other dimensions, and thus if we can not predict the future and base our activity on system creation, we have to enhance our strength and speed of conformity with the environment, conditions and changes. This thought was initiated at early 90's where later on, work and research on it brought forth an idea called agile production that is now progressing and wide spreading.

This idea originated from a defense project by U.S. Department of Defense, which was due to design and plan for two-purpose industry, so that this plan while being competitive at civil industries, it should, with a quick change, be converted into another plan for military activities.

This plan was designed at Leigh University. It was defined and understood as agile production plan, the concept of which is the capability of work at an environment full of unexpected and continuous changes, an environment in which prediction is impossible.

In the following years, the plan was researched and sustainability improved by other organizations, and a lot of interested industrial sectors as well as concerned companies were invited to participate in carrying out the experimental plan which finally through ceaseless efforts and activities resulted in success and turned into a new achievement for small and medium sized industries, and the delivery time for a project which was expected to be 20 weeks, was reduced to 8 weeks, and the increase in the sale rate raised to many times more. Some define the agile production term as successful capability in an environment full of unpredictable and continuous changes. In this method, the main target is the customer's consent. The customer's share benefit from the products and services resulted from value- added is the main criteria.

Here in this motion, the knowledge and the skillfulness of employees as well as consolidation among the sale-agents, designing and production sectors, are the major principles of this idea so that they should all be continuously fed with information regarding the customers. At present, one of the main instruments to attain to this affair, is the access to the International Network (Inter-Net) to establish simple, inexpensive, and effective communication among producer, supplier and customer.

The other principal in this idea is the profound spirit of co-operation of employees with one another, the co-operation of which must be extended to counterpart companies. Co-operation among companies while being precisely outlined, it must be quick and simple, facilitating the implementation of the project, justifying the role and expectations of the concerned sides.

This philosophy constitutes and states the fundament of Virtual Organizations. The next principle, the most fundamental of which is the preparedness in agile production will not be sufficient for the change, because of this fact that the future will be full of unpredictable changes and uncertainty, organizations should be under such circumstances reconstruct themselves to benefit from the hidden occasions.

Some of the worth-mentioning cases are; the closer contact with customers, perceiving and understanding the beliefs of all the company's employees on and about the organizational views and policies, generalization of specialty as being " soft and coverable" to all dimensions of the organization (Targets, rules, equipment, organizational structure, employees, etc?

Foundation of Virtual Organizations:

In 1995 the Massachussett institute of Technology (MIT) and Leigh University presented a joint essay for airplane and car- manufacturing companies based on agile production in which suggested a web organization for agile producing companies. The web - organization is a complex of complementary companies connected to an effective juridical regime and a computerized system. In this connection, in spite of the former conventional communication possesses unstable and convertible nature. A joint activity which none of the web-companies can carry out a project alone. In these companies, managers know that they should concentrate their management on the web, not their own companies. This outlook, as well as the skills provide valuable facilities for the managers to adapt themselves to it. Every member in the web acts as a customer and safeguard of the other member's interests. As long as this role is played well, the web remains firm and stable, otherwise, by replacement of the members, the web shall take a new and more suitable structure. Establishing the necessary interchanges among the members of the web who may be thousands of kilometers away from one another, necessitates the employment of a device which effectively consolidates virtually the main activities of a business and trade.

Consolidation is defined in the following four items:

1. Consolidation of the necessary processes from forming an idea to designing and production for implementing a project.
2. Consolidation of work progress.
3. Consolidation of the projects in the framework of the main plan.
4. Consolidation of the virtual structure (suppliers, sale- agents and producers ).

To achieve this goal, it is necessary to consolidate all technical, administrative and managing procedure, the implementations of which is performed by means of computer technologies. To attain to the required technologic instrument for consolidation of technical processes, every thing such as; designing , testing and process designing are performed with the aid of computer. In administrative activities, also the computerized word processing, wide-screen pages, electronic mail, distant conferences and electronic calendar are considered as well.

In management grounds also project soft - ware management, control of work procedure, document management, electronic libraries and general standards are parts of the primary elements of consolidation. For these consolidations as well as the establishment of required communications, the use of Inter-net is the suitable and practicable solution. The use of Inter -net enables the customer to receive and transmit pictures or specifications of the work, its details, size and measures, the concerned controls, and finally he completes, amends and dispatches his orders to the manufacturer. The colleague companies in the web organization can also inform the concerned colleague about the stages and details of product's production as well as the required parts, and harmonize the step by step activities. As it has been stated before, there exists the flexibility in covering the customer's demand. It should not be neglected that the speed in action combined with flexibility play the prime role.

As the aforementioned explanations show, one observes that in this way some complementary companies, organizations or even individuals having different possibilities, but geographically being far from one another, can form a virtual business center through Inter-net which facilitates their virtual co-operation in finalizing the product and delivering it to the customer at the end of the  project. ie, without direct contact, inter-transportation or presence of either side and even the customer being at his job site.

This system is a revolution at companies or small industries that form Virtual Organizations and offer their products to the market. They also compete with multi-national companies and may defeat them in the future. This system does not need vast bureaus, extensive workshops and macro equipment. Every web member can create great achievements with its limited possibilities, and thus; new organization entitled " Virtual Organization " came into competition and shook the conventional relations.

Practical samples of use

One of these companies which is constituted from 19 small and medium companies, is the " Agile Web incorporation " (AWI). It is administered by a board of directors of five members, compromising of five managing directors from the member companies. The  AWI possesses all the necessary resources from the stage of finding an idea to designing and production, and it also acts as an individual and goes into business with the customer. The member companies have the abilities of producing electronic systems, precise mechanical spare parts, printed circuit boards, injection parts, advanced communication equipment precise metal sheet fabrication as well as metallurgic powder. Nowadays, they supply 2200 products for customers throughout the world and make a profit of over 250 million dollars annually.

Another company of the type agile production or Virtual Organization is  J.M.Mold with 35 employees. Establishing an electronic network with work capability of multi- communication system, not only does it facilitate rapid, useful interchanging of information among the companies, but also it enables them to install cameras to supervise the daily progress and hand it to the designing engineers of the purchaser company, and reciprocally receive their views. It is worth mentioning that the substructure of the company is a little bit more than 1000 square meters. This company had a 31% growth in 1995 and two years later it enjoyed a growth rate of 25%. Today this company with its 35 personnel manufactures spare parts for the passenger plane Boeing 777. The well-famed Whirlpool Company is also in the list of their customers. They believe that in the world of business and trade fluctuations, companies should be unburdened, rapid and flexible, otherwise one must recall the dinosaurs' extinction, an inevitable fate which once shall occur to giant companies someday.


Generally with such an explanation, the future community will inevitably be a Virtual community and instead of conventional communications, an electronic communicative network will rule. In this community, every thing such as; customer, salesman, money, organizations, and the production will be virtual and only the salesman's interest on the purchaser of the commodity and the work process can be touchable.

In such virtual communities, there will be no need for man to go to a place where work and business activities exist but these are business activities that go to a place where man exists. (Important incidence which we have to comprehend its dimensions and accept and harmonize ourselves with it). This is an inevitable transformation that will cover all human's community and influence his general culture.

This modern system was discussed by producers and service sale agents, by using the system of web companies, customer's state of affairs will basically be the subject to changes. Customers can select and order their requirements through the web in facile condition without physical reference to stores or department stores. In such state the customer enjoys a high and full right of selection as a result of competition between web sale- agents and supplies his demands in good quality competitive prices.

The ongoing process of growth in this system will cause customers to provide their purchasers through putting low tenders. Sellers in low tenders, try to comply with the customer's suggested price for a commodity. In this system, the customer can refer to all sales departments in half an hour time and without being partial to any seller's views or the false discussion between them, he obtains information about their situation and then he goes into action and makes his order.

Nowadays, sales departments without increasing their stock to be stored for months; instead they take measures to adjust the level of their production to meet the customer's demand.

The growth of web organizations in mid- term has overshadowed the role of department stores, and supermarkets scattered here and there, in cities. They are inevitably subject to fading away someday. This is also true about customers in industry and trade sections.

Regarding to these swift developments due to the new millennium, and the current wave and its effects on companies in the developing countries, especially those of Consulting Engineers, thinking about how to face the Globalization, especially through the concept of Virtual Organization might be comprehensive and beneficial. This notion might also be beneficial for specific organizations such as;  FIDIC- International Federation of Consulting Engineers - and FCIC -Federation of Consultants from Islamic Countries.


1. Agile Competitors& virtual organizations.
2. The virtual work place (series in information technology management).
3. Intelligent systems for manufacturing Multi-Agent systems & virtual organizations.
4. Infrastructures for virtual Enterprises. Networking industrial Enterprises. (International federation for information processing volume 27).
5. Virtual Organizations, by Vafa Ghafarian, no97 Tadbir magazine.

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