SAP is one of the most enthusiastic proponents of networked business models and sponsors over 40 industry value networks. Below is an excerpt from their recent article Built to Adapt authored by Chakib Bouhdary, Chief Value Officer of Global Field Operations, SAP AG
The rise in consumer power, facilitated by easy access to capital and the Internet, is converging with technology to drive rapid commoditization, necessitating the continuous assessment, reinvention, and innovation of business models at greater speeds. But the task of retooling and transforming business processes is rife with formidable challenges. The answer to any successful business transformation is the establishment of open communication channels woven throughout the firm and its network of partners, making it a hotbed of inventive ideas. An organizational structure must facilitate and nurture those ideas so they can quickly find their way to the top and become strategic assets.
Information technology is breaking boundaries yet again. Consider this reality: According to Wireless Intelligence, the mobile data service of the GSM Association, there are more than 3.5 billion mobile phones in use worldwide, and the lion’s share of these handheld devices perform highly specialized tasks that required the most powerful supercomputers less than a quarter century ago. The power that consumers possess in the palm of their hands is unprecedented. Hyper-convergence such as this means that markets are more volatile than ever, moving at exceptional speeds.
To succeed in this environment, it’s important to recognize the power of business networks. Enterprises are rapidly adopting collaborative networks—which drive innovation by bringing together companies, their partners, and customers—and coordinated networks, which use automated processes to help organizations quickly and efficiently scale up operations profitably. Collaboration through such technology can reap significant results. For example, Harley-Davidson, working through its dealer network, has created remarkable brand strength, ranking in the top 50 strongest global brands. But the company needed better access to customer information to streamline the process of moving a potential customerfrom merely dreaming about biking to actually owning one. Harley-Davidson achieved this, in part, by investing in owner loyalty groups such as the Harley-Davidson Owners Group (HOG). The company also implemented SAP’s customer relationship management (CRM) system so that its dealership sales force could harness the power of its business and customer networks to provide more consumer intimacy and drive long-term relationships.
A Maturity Model
When a successful business spots a new opportunity, its basic instinct is to seize it. Leaders realize that opportunity must be embraced quickly because there is often just one chance to exploit it to full advantage. Geoffrey Moore and Philip Lay, business strategy consultants for technology companies at TCG Advisors, have outlined a step-by-step business and network transformation process to help enterprises achieve strategic objectives. Their model is a logical, attenuated ascension from entrenched client-server based IT systems geared toward internal processes such as communications and transactions, to highly nimble systems optimized for external processes such as collaboration with suppliers and customers, and greatly enhanced market visibility to help discern and exploit emerging opportunities. Following are several of those steps:
1. Extend business access.
This first step involves organizing your enterprise with all of the systems needed to support acquisition and integration. With an internally integrated organization in which business and IT strategies are aligned, it is much easier to move to the next steps where companies enter new markets or geographies, integrate partners and suppliers, and leverage visibility through the global network to drive overall performance.
2. Focus on diferentiation.
The second step is perhaps the most challenging for firms. Companies often cling to those processes they’ve executed for years. They take offense when their cores are encroached upon, when competitors have caught up to them. But this is the market dynamic. How you respond to this market movement determines the success or failure of the firm in the future.
2. Innovate as a network.
Always ask: How can my organization bring innovations to market via a collaborative network of suppliers, customers, and third-party alliances built to co-innovate products and services? Develop a plan for prioritizing selective investments and aligning internal priorities to drive that network. (Valero is now turning its attention to the supply chain to increase the efficiency of collaborating with suppliers.) Making this jump to a high-performing enterprise based on strategic partnerships will allow a company to derive greater competitive advantage with decreased time-to-market.
4. Compete as a network.
Each step in the maturity model demands a new IT architecture. But each also presents businesses with the need to surmount formidable political challenges. Total visibility into business networks and markets necessitates the sharing of accurate data, something your network partners may be loath to do. Many companies fear that data sharing is merely the wholesale giveaway of competitive advantage. There is oftentimes an inherent lack of trust, especially with powerful network concentrators that may use data to dictate price points or demand concessions.
Truth be told, companies can no longer have an arms-length relationship with their customers and suppliers. They need to optimize performance across a dynamic network of partners with whom they are outsourcing, in-sourcing, off-shoring, and on-shoring to drive the greatest competitive advantage and win the game. This is the stage in the model where enterprises are able to bring coordinated network products and services to market in a systematic way. Cell phone service providers forge alliances with marketing firms or financial service providers to alert specific customers with targeted information via mobile devices. Step four pushes the frontiers of current enterprise collaboration because its effectiveness is dependent on total visibility of the market by integrating thirdparty data and business network partner data with yours to anticipate market fluctuations in a comprehensive way. By focusing on the data at the edges of markets where growth and change are occurring—as Valero does with its metadata—companies can detect early market shifts and drive enterprises to adapt their models and shift roles within the business network based on the changing competitive situation or customer preferences.
The Big Picture
The ultimate goal is a highly focused, 360-degree view of business processes and customer and market dynamics so that information can be leveraged as a strength that enables the truly successful enterprise to remain agile and competitive. Beyond that, high-velocity adaptability to change requires a streamlined approach, one where IT and core business strategies are aligned. Coupled with an enterprise’s ability to reinvent and rapidly adapt its processes and infrastructure to market forces and partnerships, these are the fundamental components of creating an innovative operation capable of immediate response. Only then can the typical enterprise hope to make the strategic decisions necessary to thrive in an evershifting global market climate driven by speed. What gave your business a competitive edge in the past may no longer hold an edge in the future. The successful enterprise of the future must steer clear of commoditization and focus relentlessly on new features and a new core to keep a step ahead of competitors. Rigorously examine the core, analyzing and deciphering what it is that sets your business apart from the rest of the market. Resources must focus on all those processes that help generate and exploit competitive advantage in exchange for premium margins for your business. Everything else is dispensable; thus prepare to off-load processes that are no longer an essential element of that core. Follow the Valero example—strive for unparalleled business process efficiencies. |
