Executives have been advised to do all kinds of big, bold, visionary things with their businesses in recent decades: downsize, upsize, consolidate, re-engineer, unbundle, rebundle, outsource, re-model, and, most certainly, computerise.
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Management thinking
Suppliers and thinkers don't all agree on the technologies, the architectures or the antecedents of the 'Dynamic Enterprise', any more than they agree on the terminology. But these are some of the drivers and the technologies involved:
The Internet: In the late 1980s, the rapid advent of the Internet, and in particular of B2C (business to consumer) commerce, quickly created a big technical and management problem for businesses wishing to do business online. They could not provide up-to-date information, or they could not complete business processes – such as completing orders – without building real-time two-way links to existing systems. That created a requirement for 'always on', scalable, systems that are reliably linked, usually through application servers, to back end applications.
Collaborative Commerce: Real time business is also about extended business. Emarketplaces, eprocurement and supply chain management all involve building links between different members of a supply chain. Now the focus is on ensuring that the members of this chain can exchange real time information – just as if they were all part of one company.
Application Integration (EAI): The need for organisations to react quickly across various applications has been partly answered by one type of software – enterprise application integration (EAI). Companies such as Tibco, SeeBeyond and Webmethods provide direct links between applications so that each system can be queried and updated in real time.
Unified applications: The need for many different application modules to tightly interact in real time does not necessarily have to involve a lot of EAI software. An alternative is, to use, as far as possible, a core suite of lightly customised applications, with a few specialist applications attached via special two way adaptors, or, increasingly, web services based standards. It is an approach favoured by the big ERP companies, such as SAP, PeopleSoft and Oracle.
Process level integration: Integrating completely different applications together does not have to involve EAI – it can also be done by linking systems as by interweaving the processes together using tight, one-to-one links. Cisco, a big Oracle applications customer, used this approach to link its supply chain together. Asera, a software company, has now developed a toolkit to help other companies do it in a more packaged way.
Process management: Some software companies and experts are taking process level integration a stage further, and are building process management systems to hold flexible code and workflow rules that bind different business processes together. These process links are held separately from both the applications and the data. – making them highly flexible.
Web services: Cynics will say that web services is just another way of linking distributed software components together using an agreed set of standards; evangelists say it will revolutionise business and lead to the "unbundling of the corporation". Either way, web services are a way of providing loose, flexible 'plug and play'links between all kinds of applications and services, spread all over the world. They will become increasingly important – perhaps event the dominant technology – for building dynamic businesses.
Real time reporting: Analytics, reporting systems and alert driven systems are a way of providing intelligence, data based analysis of what is happening to a business – in real time. Traditionally, processing limitations have meant that analytics is an underused and often secondary function based on old data. New techniques mean that information can often be delivered to the person who most needs – and when they need it.
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Some of these actions and strategies have reaped enormous dividends, while others, quite evidently, have not.
Now, there is a new set of imperatives. This time, the promise is as great, if not greater, as any of the big management or computer-based initiatives that have gone before.
But this time, there is also a difference: there is no single revolutionary thinker, no single underlying technology, and no common vocabulary. But the proponents do agree on the objectives, on the enormous scope and scale of the projects, and on the many benefits.
Some of these proponents say it is all about 'processes' and extended process management; some that it is all about ‘extended or collaborative business'; others that it is about ‘real-time' business. The terms 'the adaptive business', 'dynamic business' and 'business agility' are frequently used.
To make matters more confusing, little of this is entirely new. This is a movement that combines several theoretical streams and several different technologies, most of which are here today. As consultant and author Michael Hammer says, "The next big thing usually extends the last big thing". As the box, Gurus of dynamic business, shows, there are a lot of 'big things' mixed up in the so-called 'dynamic enterprise'.
Whatever the headline terms, it is clear, first, that something very significant is happening in business and in systems design, development and delivery; and second, that there really is an emerging consensus on where business is or ought to be going, even though a variety of competing or complementary approaches, methodologies, terminologies and technologies are involved.
This can be seen, not least, in the many examples of companies that are now being cited in the business books as pioneers: Dell, Cisco, CSFB, Carrefour, Ciba, GE, Charles Schwab, Reuters, eBay, UPS, EMC, Solectron. While all of these companies are inventive, flexible and proactive – and heavy users of technology – they also face a wide variety of business issues and are using a wide variety of technologies.
Deconstructing real time
What is the 'real-time business', or the dynamic enterprise, all about? Michael Hammer, now closely associated with this area, recently said, quoting the 60s pop group Buffalo Springfield, "Something is happening here, but what it is, ain't exactly clear."
The over-riding goal is for businesses to be able to quickly execute end-to-end business processes in such a way that excessive bureaucracy, expensive and error prone human involvement, processing delays and other kinds of 'transaction friction' are reduced or eliminated.
This sounds simple enough – but building such systems in practice quickly becomes extremely difficult, especially where external customers or partners are involved.
Take, for example, the simple 'process' of purchasing some basic office machinery such as a PC. This can involve the customer configuring the product, clearing the purchasing process internally, making price,
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Gurus of dynamic business
Michael Hammer
One of the co-authors of Re-Engineering the Corporation in 1993, Hammer has since become a "process person". His most recent book, The Agenda, advocates a thorough overhaul of corporate architecture and thinking, with the objective of building flexible, responsive organisations that can be easily integrated with other organisations.
www.hammerandco.com
James Champy
Champy co-wrote Re-engineering the Corporation with Michael Hammer and is also now preaching the same message as his former colleague. He uses the term X-Engineering to describe how companies should re-organise themselves their whole supply chains by building flexible systems to support cross company processes.
www.jimchampy.com
Craig Conway
The dynamic CEO of PeopleSoft is an unlikely business guru. But he has worked hard to associate himself with business visionaries such as Jack Welch and Michael Hammer. He is credited with saving PeopleSoft from falling behind in the enterprise software race by re-engineering the company's software around a highly integrated core and a browser interface. He has put forward a credible technical definition of how real time business systems should perform.
www.peoplesoft.com
Vivek Ranadive
The founder of electronic application integration (EAI) software company Tibco put himself at the spearhead of a new movement with his 1999 book The Power of Now. This describes how the Internet and other IT systems will increasingly require organisations to build integrated systems that can react in 'real time'. While not everyone agrees with his solution, which involves extensive use of integrating middleware, he helped set the agenda.
www.tibco.com
Pete Solvik
As the CIO and chief architect of all of Cisco's systems, Pete Solvik is seen as both a hero and a villain. He designed the highly technical, cross-company systems that bind the giant network equipment maker to its supply chain through integrated 'real-time' business processes. Cisco's ability to produce financial results quickly, labelled 'virtual close', helps the company to operate much more efficiently than rivals and led to his appointment to the board of Asera, a heavily funded company that builds and sells real-time operating system software. Why villain? Because Cisco's systems famously failed to help it foresee the extent of its sales collapse in 2001.
www.cisco.com
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quality and delivery comparisons between suppliers, raising a purchase order, and tracking delivery and quality. For the supplier, it might involve checking inventory, checking parts and delivery status with suppliers, credit checking, customising pricing, calculating delivery schedules, confirming the order, issuing an invoice, tracking the delivery and managing ongoing customer support.
This is just one cluster of business processes, and there are many others. Producing a set of financial results, for example, can be a complex process that might involve executives, sales staff, inventory managers, business partners, external consultants, internal and external accountants and auditors.
Organising a business to support such processes in something approaching real time is a massive task, especially as it will not work unless the business processes are very clearly understood and documented. That means business processes may need to be re-engineered, not only within organisations but beyond them and into the supply and customer chains.
There are also some significant technical implications. First, end-to-end business processes now matter much more than software applications – a statement that is evident through the increasing use of terms such as 'source to settle' or ‘req to cheque' for e-procurement or 'order to cash' for sales.
Craig Conway, the CEO of PeopleSoft, points out that when everything is online, the stages in an end-to-end process are no longer linear, but immediate. For example, the process of selling a product might involve marketing and sales force (CRM), ordering and inventory management (SCM), invoicing, accounts receivable, collections (financials), and after sales (CRM again). Depending on the circumstances, any of the major applications, or sub components of a system, might have to be accessed.
Second, the systems must be tightly integrated, be online, and the service be delivered in an appropriate way to the user – whether he or she is a customer or an employee or a trading partner. That might involve, for example, the use of a role-based portal that delivers all the appropriate data, access to key applications as well as alerts and analytics.
Another implication: the process must always be on. That means it must not fail, and it must be accessible to anyone, from anywhere, at any point in the process.
Many systems are in place today that accomplish most of these objectives. But almost everyone involved agrees that even the more advanced projects are only in the early stages and that, as more and more business partners collaborate to form integrated supply chains, or integrated 'business webs', the benefits will multiply.
Furthermore, the new wave of technologies involved in process management and web services will allow much greater flexibility in building and changing business systems than ever before. These technologies – when they mature – could mean that organisations can dynamically find, develop or tap into the systems, services and the resources they need to support their business goals. They will be able to do this much more quickly, and – so the theory goes – more cheaply than before. It is – potentially – the advent of 'plug and play' business.
Some of these benefits are some way off and are unproven. But there is already clear evidence from dozens of companies that have already re-engineered their processes, and installed advanced, integrated systems to support these processes, that there are real, measurable benefits. These include : fewer customer complaints; fewer inventory problems; lower administration costs; faster product development and delivery; lower error rates and fewer returns; higher customer and partner satisfaction; improved working capital metrics; and greater predictability.
As Jack Welch, the former CEO of GE put it, "As companies digitised, their internal processes came out and went straight to the bottom line."
Conway of PeopleSoft concurs: "As companies become real-time enterprises, it is completely transforming their businesses. It sounds like an exaggeration, but I don't know what else to call it. The transformations are stunning."
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The 12 imperatives of real-time systems
What are the starting points to building a real-time infrastructure? Craig Conway, the CEO of PeopleSoft, has set down 12 rules below, (summarised and edited by Infoconomy). Not everyone will agree with all them, but they are worthy discussion points:
1. Standardise business processes: Business processes need to be standardised across subsidiaries, geographies, and divisions.
2. Pure Internet Architecture: Eliminate all code on the client. It makes support expensive and reduces flexibility.
3. Minimise customisations: Some customisation is good, but extensively customised packaged software becomes "customised software", with all its disadvantages.
4. Hold software vendors accountable: Use the software vendor's implementers to complement systems integrators. Projects go better where the software company is engaged.
5. Accommodate multiple databases: Companies need application software that runs on multiple databases. It gives more flexibility.
6. Highly scalable applications: With the potential of every customer, supplier, employee and partner connecting directly to business processes, applications ultimately need to scale to millions of users.
7. Multilingual, multicurrency: Every organisation needs to have the capability to operate on an international basis. Enterprise applications must be multilingual and multicurrency.
8. Interoperability between vendors: A real-time enterprise cannot be built with applications from only one vendor- it's unrealistic and impractical. Applications must be interoperable with other vendors' applications and with internally developed systems.
9. Embedded business analytics: Analytics should be embedded in the applications where the people who use the applications are. Make the analytics available to customers, suppliers, employees and partners.
10. Few vendors, broader product lines: When business processes are online and in real time, you can't afford to have systems go down. Reliability is greater if fewer systems and suppliers are used.
11. Change management: People don't like change. Anticipate a certain amount of change management.
12. Strong CIO: You need a strong CIO to pull the team together and make things happen.
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