The my-way-or-else approach to business integration is doomed if businesses don’t do it right, says Joanne Friedman, CEO of ConneKted Minds Inc., an IT advisory firm in Richmond Hill, Ont. She outlines the pitfalls of what she calls “the corporate d’oh!” of prescriptive collaboration and offers a better way in an interview with Stefan Dubowski.
IT Focus: What is the corporate d’oh?
Joanne Friedman: It’s the major oops, the major design flaw in prescribed collaboration: I do not operate the same way you do; and because we operate differently, and you’re not considering the trading partners as part of the collaboration design equation, you’re automatically going to drive up your costs if you’re the large enterprise. You’re going to be forced into system plurality and further down the line you’ll not be able to get corporate value out of it.
IT Focus: But prescribed collaboration is supposed to do away with system plurality. How does it foster that which it’s supposed to fight? Friedman: Right now an Intel or an HP or a Cisco may have five or more systems all doing exactly the same kind of message transfer. They’ve been forced to do that, because if I’m even a mid-sized company that has no ERP — I don’t need an ERP — my back-office systems integration is non-existent. I’m forcing you to put up a portal for me to access your information….The plurality is what has evolved.
IT Focus: So why shouldn’t an enterprise simply cut those partners unable to participate in the prescribed collaboration scheme out of the equation?
Friedman: If you look at what it costs to on-board a trading partner, it’s as much as $5,000 just to find the trading partner. Then you have to go through a series of qualifications, which cost money. You also have to make sure they can negotiate contract pricing. You have to go down many, many steps. All told, it becomes a very expensive proposition. Moreover, if you have a good relationship with that company you’re now going to drop because they won’t play ball on technology the way you do, you’re really shooting yourself in the foot. It’s the cost of replacing that supplier, plus the cost of renegotiating contracts with a new supplier.
IT Focus: How might prescriptive collaboration hurt mid-tier suppliers?
Friedman: For the large enterprise, being a trading partner of choice in an industry means extreme customer service, better pricing, going the extra mile. For a mid-tier company, if all of their competitors have the same product, and all of the pricing has been driven down, how do they win business? How they run their business becomes the key differentiating factor. In the course of differentiating myself, I run my business a certain way. You, as a customer, now come to me and say, “Thou shalt do it my way.” In order to get you the data you need at the right time, at the right system, I have to reverse engineer all of my business processes, the systems and the data to make sure I can accommodate your request.
In doing so, I will highlight some gaps. I can’t change this business process because to satisfy you, Mr. Large Enterprise, I am now going to put at risk all my Tier 2 customers, my supply chain, my service providers. It may be part of process I’m changing, but things are connected together. If I change that one part, I’m really changing a much, much larger picture.
IT Focus: So it’s not just one piece. Prescribed collaboration can affect the entire value network for the mid-tier company.
I do not operate the same way you do; and because we operate differently, and you’re not considering the trading partners as part of the collaboration design equation, you’re automatically going to drive up your costs if you’re the large enterprise.Joanne Friedman>Text
Friedman: It has a ripple effect. It’s a cascade. And the other flaw is, right now the way business process integration and its predecessor B2B are structured, you’re actually doing pieces of processes. You’re not doing a full order-to-cash process. You’re automating parts — invoicing, purchase ordering, advance shipping notices. Those are artifacts being automated.
When we do business together and you want me to do it your way, I’m looking at a point-in-time reference, like a forecast….It’s a step. That step has an effect on other business operations. And the more steps I automate that are not linked together, the more jeopardy I put myself in. I’m changing a part of one process, a part of another. My business is not going to look the same after the fact.
IT Focus: How should an enterprise collaborate in such a way as to mitigate ill effects on partners and itself, then?
Friedman: It’s called supplier relationship management, which starts with something as dead simple as asking. Survey your trading community. Can they handle a business process change? Can they handle the commitment to technology, both in capital resource and business process enabled by the technology? Find out what they’re capable of. That’s really the first step.
The second step is to define the thou-shalt in strata….Create a codification on trading partners that can handle the process change, but can’t handle the infrastructure; those that can handle the infrastructure, but can’t handle the process change. Find out about your trading community that lets you say, “My trading partners have eight different classes. At the lowest level, they have a non-persistent Internet connection. At the highest level, they’re my peer.” Then break it down into chunks. Not only does it reduce time to deployment, it reduces cost. It also decreases…the charge to supplier relationship management, which is really not reported by IT. It’s the increase in communications costs, the increases in sales costs, the increases in marketing costs.
IT Focus: Is the idea for the enterprise then to get to a just-enough system?
Friedman: Yes, it’s called just enough technology — JET. At one level, just enough technology says I have a non-persistent Internet connection. I have no capital or resources to commit to this, but I’m trying to accommodate your need….Give me the capability of taking an Excel spreadsheet and creating exactly what you want and sending it off to you when I can connect. That’s the just enough technology for that class of company. Just enough technology one level above that says, I have not an ERP, but an accounting system. I have an inventory control capability. I have a provider that gives me 24-7 access to the Net….Give me the something out of my accounting package that allows me to produce what you want and send it to you, knowing that it’s the lightest weight for that tier. It’s a spectrum. The codification of trading partners that goes with this is basic browser at worst, or e-mail at worst.
By creating this stratification I can also calculate and measure, from the large enterprise’s point of view, things like, hmm, here’s a typical mid-tier provider that bills me $1 million a year for parts. But the value they contribute is actually greater than the amount I’m paying them, because they’re one of a kind. Perhaps they go the extra mile, always deliver on time, jump high hurdles. I don’t want to lose them as a supplier because they’re critical to my business.
IT Focus: So the partner analysis provides a value analysis that the enterprise can use.
Friedman: It’s technology value management. That’s what we’re saying this for.
IT Focus: But isn’t this difficult for an enterprise to do?
Friedman: It’s not difficult. It’s more time consuming, but here’s the benefit: lower costs; greater on-boarding and adoption; a more seamless flow of information. Instead of it costing $2,800 to bring a trading partner on board, you’ll end up with a repeatable process, you’ll eliminate some of those plural systems and have a lower SRM (supplier relationship management) charge. It’s not really a matter of shifting responsibility. If anything it divides the responsibility equally.
IT Focus: What examples have you seen of companies avoiding the corporate d’oh?
Friedman: Fujitsu, Panasonic, IBM. They’re part of E2open, a high-tech exchange. They have, as a solution, set the capabilities I’ve described. They go from the top tier down the smallest trading partner….They did it thoughtfully.