As we approach the new millennium, we find ourselves in the midst of a radical change in the way business is conducted. The internal focus and geographic boundaries that once defined traditional business are being swept away. A new business model has evolved, bonding customer, partner and supplier organizations into one distinct entity: the ‘extended enterprise’.
Driving this new model is the need for organizations to enhance customer relationships, to adapt to changing local and global markets, to rapidly create unique products and services, and to optimize operational efficiencies. The ability to meet these needs is largely being provided by the convergence of computing and telecommunications. These once disparate entities are having a profound effect on day-to-day business operations. With low-cost access to a global intelligent network through an easy-to-use interface, business communications can be amazingly effective. Global business can be transacted in real time, transcending geographic boundaries and time zones.
Winning in this new business environment is largely dependent on using the network to connect every group with which a company conducts business. More than just an ‘extended enterprise’, many organizations are on the road to what we might call the ‘network enterprise’. This article provides a road-map to help you navigate that road.
TEAMING UP FOR THE JOURNEY
Today, businesses must be able to react immediately to customers’ needs and competitors’ challenges, changing internally and externally as required to accommodate more demanding and more informed customers. Besides improved customer service, companies must also provide innovations to their products and services that differentiate them in the marketplace, offering worldwide choice and accessibility.
This requires a new strategic way of thinking about what a business is, how products and services are developed and marketed, who is buying, and why. In order to achieve success, companies must evaluate the significance and worth of each contributor in their value chain, working with them cooperatively at both an operational and a strategic level.
The network enterprise is more externally focused than any previous model of the enterprise. Those that succeed with this model will think of their business as encompassing customer and supplier organizations into one distinct team, creating benefits for all players. Electronic links and resulting convenience will also extend to the referees – the regulatory agencies – and to the team’s backers – banks and financial institutions.
One of the keys to the success of the network enterprise business model is how instead of restricting information, it shares it across company boundaries, to the mutual benefit and profit of all the players.
Often, the most challenging first step is defining what kinds of information can be shared and by whom. Because alliances change, because customers are sometimes competitors, and because partners often supply competitors, significant effort must be expended both to protect proprietary data and to make available as much information as possible to ensure the enterprise’s maximum effectiveness. As the network enterprise must be, by definition, a collaborative effort, all participants will ultimately rely on two qualities that have nothing to do with technology and everything to do with business relationships: trust and common sense.
A good example of the benefits of a cooperative approach can be seen in the Automotive Network Exchange (ANX). This past year ANX, one of North America’s most ambitious extranet projects to date, unveiled plans to link with a similar European organization to ensure compatibility with ANX efforts on both continents, standardizing the supply chain processes over the public network. The result: suppliers are able to use the same network and data formats to communicate with GM, Ford and Chrysler as they would with Renault and Saab.
Why would the world’s automotive companies work together to increase the efficiency of the entire industry’s supply chain? Because it has changed the economics of the industry, reducing costs across the entire value chain, resulting in higher margins for every organization in the industry, delivering over $1 billion in savings annually and increasing overall industry revenue and profitability.
FOUR IMPORTANT LANDMARKS
There are four key landmarks that an organization will encounter on the road to creating a true network enterprise, and none of them can be skirted. Companies must seamlessly integrate all four of the following: outwardly extended business processes, network-enabled business applications, a robust technical architecture, and an intelligent network.
Outwardly Extend Business Processes To create a network enterprise, business processes must be updated to extend outward into the customer, supplier and partner organizations that make up the extended enterprise.
The core value of convergence is its ability to link broad communities together to exchange value at a higher volume and lower cost than ever before. To accomplish this, a company must think “outside of the box” of the organization and directly engage other organizations. It needs to understand the connections to its customers, its internal processes and links to its suppliers; it must integrate those connections into one complete end-to-end process; and it must use the network to facilitate and accelerate processing.
To increase effectiveness and reduce costs, it is highly advisable to establish flexible ‘community processing’ standards. Without commonality in such basic procedures as e-mail and financial data transfer, a network enterprise can quickly become a source of aggravation.
Outward extension of business processes must be done with scrupulous attention to the affect of your actions on business partners. Some years ago, aerospace manufacturer Boeing tried to implement an EDI interface with its key customers, 600 major airlines around the world. This EDI system was intended to provide spare parts ordering for their customers with less paperwork, fewer errors and automated processing. However, after about ten years only 50 customers were using the system. The EDI system required customers to change their business processes, and the cost of implementation was high. After talking with its customers, Boeing finally developed a new approach, which eliminated the cost of implementation and required only modest changes to each customer’s existing ordering process. After seven months, the new ordering system had over 150 customers actively ordering parts, resulting in significant savings for all of the participating organizations.
Network-Enable Your Business Applications Like business processes, business applications need to be updated to support a network enterprise. Although the application portfolio fundamentally remains the same (sales, operations/production, administration and workgroup collaboration), a number of distinct advantages are derived from applications that operate on the network.
Applications built on convergence enable business processes to function with tremendous speed, automating many actions and providing links to the right resources when required. When business applications are network enabled, a number of operating barriers are removed, including the effects of time zones, geography, and interoperability.
Even more significant is the ability to extend workflow over the network. The unique value of network-enabled applications is their ability to initiate actions based on pre-defined criteria. By sharing, collaborating and routing information, dependency on human effort can be reduced as key actions, such as order confirmations, are automated to increase speed, reduce costs and increase accuracy.
Build on a Robust Technical Architecture The technical architecture provides the foundation to exploit the network environment and to support the design, development and operation of network-enabled applications. Its value can be measured by its ability to deliver reliability, integrity, performance, security and cost effectiveness.
Running a network enterprise in an environment without these elements would be equivalent to running a business in a country where utilities aren’t dependable, where the currency value changes daily, where employees do not come to work, and where law is not enforced. It’s possible to operate under these conditions, as some developing countries are demonstrating, but it’s a difficult environment for business to thrive in.
One distinguishing characteristic of network enterprise applications is that they directly touch the customer – there is no human intermediary. If they fail, your customer may have no choice but to go to your competitor. Systems used directly by customers are by definition “mission critical”. Hence the need for a robust technical architecture.
Implement on a High-Performance, Global Intelligent Network To successfully operate network-enabled business applications, integration with a high-performance, high-capacity network with global reach is required.
Unlike building a proprietary and very expensive path to the Internet, a cost-effective, shared environment is readily available to support the network enterprise. With redundancy and peak-load-handling maximizing reliability, business-oriented value exchange can be supported, delivering a number of striking benefits to businesses: higher revenues, lower costs, enhanced customer satisfaction and increased loyalty.
The intelligent network has two defining characteristics: intelligence and location. Intelligence allows simplified process, applications and technical architecture by leveraging logic and data in the network. However, all networks are not created equal. The choice must be based on business needs. For instance, significant users of call centres have to have ‘smart’ routing – the ability to use a simple recorded filter to move calls, based on customer-selected options – to help ensure that callers talk to the right person right away.
Location is important for two reasons. First, the ubiquitous network allows the network enterprise to extend its processes both locally and globally. Second, high-performance systems located directly on the Internet backbone can maximize customer responsiveness while optimizing costs.
Large public data networks function much the same as power grids, routing and rerouting electricity across cities, regions, and even countries to handle unusual demand or local equipment failure. Last year’s stock market volatility provided a great test of the reliability of the Internet under peak loads. While major exchanges run on their own private high-speed networks, more than 30 per cent of individual trading is now done through Internet-based brokerages. As the NYSE and NASDAQ were setting records with over 1.2 billion trades per day, these Internet traders were capably handling a crush of online traffic. The Internet and the leverage of it by high-performance industries like trading has significantly improved since these same systems experienced challenges in the market spikes of October 1997.
On the Internet backbone, bandwidth can be provided more flexibly than from any other source. More adaptable business applications can be built by leveraging the intelligence embedded in the network. These applications can take more automated actions based on information in the network (phone number, name, address, etc.) and link telecom functions to business applications (in which an automated application may send a message out by pager, fax, voice mail and e-mail).
CONVENIENT ROADSIDE SUPPORT
Many network enterprises are finding the Internet to be a convenient, relatively inexpensive place to erect a ‘service centre’ to support their customers. Take Motorola Inc., for example. One of the world’s largest suppliers of two-way private radio systems, it relies on a global network of more than 8,000 independent contractors to support its popular devices.
When Motorola’s Service and Support (MSS) organization decided it wanted to make customer information available to these contractors electronically, it built Eugene’s World, a corporate Internet site that puts valuable, up-to-date customer information at the contractors’ fingertips. Its architecture and links to existing Motorola databases provide a sound framework to interface with key customers.
The Web site has dramatically improved response time and quality. Trouble tickets that previously had taken days to handle via telephone and fax are now being handled in a matter of hours. And with contractors entering data into Web-based forms, there is less room for data-input errors.
ARRIVING AT YOUR DESTINATION
Conventional business wisdom used to have it that companies could either be small and fast or big and slow. With the evolution of network enterprises, that assertion is no longer valid.
The very nature of business is changing everywhere. Be assured that at this very moment your competitors are evaluating how they conduct business with customers and suppliers, and how information can be utilized to the best advantage among all parties.
Today’s and tomorrow’s business world demands a huge amount of high-quality information, shared at dizzying speeds along well-maintained expressways. To survive and thrive will require nothing less than a reorientation of the way an organization does business, focusing especially on its customers, suppliers and partners. Armed with a detailed and current road-map, companies must act now to ensure their place in the fast lane.
Marvin Richardson is Chief Technology Officer of SHL Systemhouse, responsible for company-wide technology strategy, research and development, and technology leadership for major accounts. He can be reached at [email protected]