THE AGILE ENTERPRISE
THE
AGILE ENTERPRISE Reinventing your Organization for Success in an On Demand World
NIRMAL PAL...
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THE AGILE ENTERPRISE
THE
AGILE ENTERPRISE Reinventing your Organization for Success in an On Demand World
NIRMAL PAL
eBusiNt;ss RESEARCH CENTER SMEAL COLLEGE OY BUSINESS PENNSYLVANIA STATE UNIVERSITY
• DANIEL C. PANTALEO STRATEGIC ISSUES GROUP
SAPAG
fyA Springer
Library of Congress Catalog ing-in-Publication Data A CLP. Catalogue record for this book is available from the Library of Congress. ISBN 0-387-25077 -8 (HC)
ISBN 0-387-24373 -9 (SC)
e-ISBN 0-3S7-25078-6
Printed on acid-free paper. © 2005 Springer Science*Business Media, Inc. All rights reserved. This work may not be translated or copied in whole or in part without the written permission of the publisher (Springer Scienc&4-I}usiness Media, lnc. t 233 Spring Street, New York, NY 10013, USA), except for brief excerpts in connection with reviews or scholarly analysis. Use in connection with any form of information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now know or hereafter developed is forbidden. The use in this publication of trade names, trademarks, service marks and similar terms, even it' the arc not identified as such, is not to be taken as an expression of opinion as to whether or not they arc subject to proprietary rights. Printed in the United States of America, 9 8 7 6 5 4 3 2 1 spnngeronline.com
SPIN 11363873
Dedication To the corporate sponsors oj the (Business Research Center at the SMEAL College of Business at the Pennsylvania State University for their financial and material support, as well as their enthusiasm in publishing this book, —Nirnial Pal —Daniel C. Pantaleo
To my wife, Mitra, my daughters Nee/a and Nupur. and my grand children Nina and Nilihilfor their sustaining love and support. —Nirmal Pal
To my wife. Judy, and all of my children, Elizstbeth, Sarah, Schotland, and Briumion, for their sustaining love and support and for the innovation and agility they each demonstrate in doingso, —Daniel C Pamaleo
Table of Contents Acknowledgements Introduction: The Agile Enterprise: Reinventing Your Organization for Success in an On Demand Vforld
xiii 1
BY NIRMAL PAL AND DANIEL C. PANTALEO
Chapter 1: Emergence of the Agile Enterprise: Building Organizations for the Global, Digital Economy
11
BY N:RMAL PAL AND MICHAEL LIM
Introduction Em erging Agility Agile Enterprise Organizing for Agility Visions and Values Breakthrough Culture Adaptive!Innovative Team
Adaptive Infrastructure Conclusion
Chapter 2: Business Process Automation: A Framework foi Combining Best and Next Practices for the Agile Enterprise
33
BY MATHIAS KIRCHMER AND DANIEL C. PANTALEO
Introduction Business Agility Through Best and Next Practices Business Process Automation as Enabler The Business Process Factory; A Critical Link
Chapter 3: Services are the Language and Building Blocks of an Agile Enterprise BY MICHAEL URAM AND BILL STEPHENSON
Introduction Agile Enterprises Deliver Value in the Form sfServices
49
viii
THE AGILE ENTERPRISE
The Architecture of Agility: Services art- the Building Blocks of an Agile Enterprise Architectural Change From What and for Whom to How Management of Change Aligning the Tactical for Strategic Intent Summary
Chapter 4: The On Demand World: Mapping the Government Genome
87
BYJANETCALDOW
The Government Genome On Demand Information Technology Infrastructures Case Study: On Demand Arizona Understanding Where We've Been and Where Were Going
Chapter 5: Innovation Management in an Agile Enterprise
101
BY ANTHONY C. WARREN AND MARKTURRELL
Introduction Background The Collapse of Protective Barriers New Models of Innovation Corporate Culture Innovation Management Conclusion
Chapter 6: Agile Enterprises and Offshore Outsourcing
127
BY RAVI KALAKOTA
Introduction What is Offshore Outsourcing? The Offshore Outsourcing Process Landscape Executing Offshore Outsourcing Summary C h a p t e r 7 : Adaptive I n n o v a t i o n M a n a g e m e n t BY VtNKATHSH SHANKAR AND JELENA SPANJOL Introduction Solutions-based Innovation Management: Agility versus Adaptivity What is Adaptive Innovation Management? The Model
151
TABLE OF CONTENTS
ix
Moving fiom Prodtici-to-Customer to Capability-to-Customer Problems Linking Burrten to Deep Capability to Customer Problems Linking How Can Firms Move from Conventional to Adaptive Innovation Management? Implications of Adaptive Innovation Management
Chapter: 8 The DNA of Organizational Agility
167
BY RALPH W K L B O R N AND ViNCt KASTEN
Uncertainty is the Mother of Invention—and Agility Con' Challenges to Organizational Agility Root Causes The DNA of Organizational Agility—Answering the Question of the How The 3D Business Blueprint—Creating Semantic Consistency Fred Skinner Faces a Crisis Building the Agile Court System Success in Western Australia A 90-Day Plan: Converting the Agility DNA to Use From Tacit to Executable—'The Crux for Agility—One More Time
Chapter 9; Agile and Adaptive: Making Organizations More Responsive to Customers - A Xerox Case Study Bv DI/VNL-: M C G A R R Y AND FRUD HELLER
The Solution—A New Way of Keeping Satisfied Customers... Keeping Customers Satisfied The Sentinel Customer Satisfaction Assurance System How Sentinel Works How Sentinel is Deployed Comparison With Satisfaction Surveys Experience-Based Learning Information Management Never Had Measures ofSuccess Customer Experiences With Sentinel Future Deployment National Integrated Healthcare Delivery System XBRG Findings on the Xerox Satisfaction Measurement Process—Seeing the Forest, Not the Trees
195
x
THE AGILE ENTERPRISE
Chapter 10: Implementing the Agile Enterprise: The E-Business Opportunity Model
219
Bv DAVID SCHUFF, JACQUELINE ZINN, AND MUNIR MANDVIWALLA
Executive Overview Understanding the Potential of E-Business Technologies Building the E-Business Opportunity Model Contextual Opportunity factors Product Opportunity Factors Transactional Opportunity Factors Opera tionalizing the EOM as the EOl Application of the EOl: Life Insurance and Pharmaceutical Manufacturing Common E-Business Opportunities across Industries Common E-Business Challenges across Industries Drawing Lessons from the E-Business Opportunity Model Chapter 11: Security and Privacy for the Agile Enterprise
255
;
BY BRIAN GEFFERT AND latAN SAII
Security aridPrivacy's Role m the Agile Enterprise Not the Roadblock hut a Process Breakdown Root Cause: Lack of Common Risk Language Additional Factors Leading to Security and Privacy Breakdown Silo Security and Privacy: Ineffective and Inefficient Use of Resources Impact of the Security and Privacy Breakdown on the Organization Agile Enterprise Approaches to Security and Privacy Strategic Approach to Enterprise Security and Prmacy Impact on Current Initiatives Security and Privacy: The Enabling Foundation Agile Security and Privacy: Strategic Approach and Foundation
Chapter 12: Small Manufacturers and the Agile Enterprise BY DAVE CRANMER
Introduction Today's Environment
Infrastructure Business Processes Manufoctu ring Processes System Requirements
277
TABLE OF CONTENTS
xi
Relationships Basic Components in the Agile Enterprise Tomorrow's Strategies Conclusion
Chapter 13: IT and the Agile Government: The Role of Information Technology in Improving the Efficiency of Government Functions
295
BY SAMIR SHAH AND ARTHUR STEPHENS
Introduction Customer Drivers of Agility Agility Barriers The Agility Framework The Pennsylvania Technology Case Study IT Governance Strategic Planning IT Projects Must Measure-Up Focusing on Customer Service is Key to Success Being Efficient and Effective is Always a Process Developing a Committed IT Workforce Takes Managerial Commitments Consistent Communications is Critical Conclusion About the Contributors Index.....
.,
309 321
Acknowledgments Leading business publications, university and corporate studies, and anecdotal conversations with corporate leaders, make very clear that corporate ability will continue to dominate corporate thinking and drive business and technology decisions imo the near and longer term future. The 211' century has brought with it an increase in the already rapid pace ot change in all spheres of life and business. Successful enterprises are beginning to respond rapidly to these changes with business process innovations and using technology to support those innovations. Agility is competitive power and depends on the ability to successfully connect thought and action, theory and practice, and business and technology. To fully understand the pervasive implications of agility in industry, government, and academia requires a wider collaboration among technologies, competencies, policies, and business models. That is precisely why we invited recognized thought leaders representing each of these segments [o share [heir experiences and insights on the opportunities and challenges associated with corporate responsiveness and flexibility. All of them are well known in their respective fields of work, and they are all very busy individuals. Yet they made the time to address these issues because of the importance of agility. We are eternally grateful to our chapter authors and acknowledge their contributions. We also thank our publisher, Kiuwer Academic Publishers, and specially Sean Lorre, for recognizing the potential of this book and encouraging us to complete the manuscript with speed. We thank Danielle Wolfe and, Ray Liddick of Open Door Visions tor helping us with copy editing and typesetting respectively. We thank our student intern, Blair Goldberg, for his untiring efforts in coordinaring activities ar various stages of this book. Finally, we thank our colleagues at the eBusiness Research Center (www.ebrc.org) at the Pennsylvania State University and our corporate sponsors for their help, support, and enthusiasm. Nirmal Pal University Park, Pennsylvania Daniel C Pantaleo Newton Square, Pennsylvania December 2004
"53).%33 02/#%33 !54/-!4)/. ) ! &RAMEWORK FOR #OMBINING "EST AND .EXT 0RACTICES FOR THE !GILE /RGANIZATION -!4()!3 +)2#(-%2 #%/ )$3 3#(%%2 !-%2)#!3 !.$ *!0!. !&&),)!4%$ &!#5,)49 #%.4%2 &/2 /2'!.):!4)/.!, $9.!-)#3 5.)6%23)49 /& 0%..39,6!.)! $!.)%, # 0!.4!,%/ 6)#% 02%3)$%.4 342!4%')# )335%3 '2/50 ',/"!, #/--5.)#!4)/.3 3!0 !'
).42/$5#4)/. !GILE ENTERPRISES MUST ADAPT TO CONTINUALLY CHANGING BUSINESS ENVIRONMENTS IN ORDER TO SURVIVE IN THE LONG TERM 4O DO SO THEY HAVE TO COMBINE BEST AND NEXT BUSINESS PRACTICES "EST PRACTICES ENSURE EFlCIENCY NEXT PRACTICES REALLY LEAD TO COMPETITIVE ADVANTAGES 4RADITIONAL BUSINESS PROCESS AUTOMATION SOLUTIONS LIKE %20 3#- OR #2- SYSTEMS FOCUS ON THE IMPLEMENTATION OF BEST PRACTICES .EXT GENERATION PROCESS AUTOMATION ENABLES THE IMPLEMENTATION OF NEXT PRACTICES AT AN ECONOMICALLY ACCEPTABLE COST LEVEL 4HIS IS POSSIBLE THROUGH A mEXIBLE INTEGRATION OF BUSINESS PROCESS DElNITION AND SOFTWARE APPLICATION SUPPORT 4HE APPROPRIATE SOFTWARE
4(% !'),% %.4%202)3%
SUPPORT MUST BE DYNAMICALLY ADAPTABLE TO THE BUSINESS PROCESSES DElNITION SO THAT IT SUPPORTS THE EXECUTION OF ENTERPRISE SPECIlC PROCESSES "USINESS PROCESS MODELS REmECTING BEST AND NEXT PRACTICES DRIVE THE CONlGURATION OF NEXT GENERATION PROCESS AUTOMATION SOLUTIONS WHICH hORCHESTRATEv THE APPROPRIATE APPLICATION SUPPORT 4HEY BECOME THE CRITICAL LINK BETWEEN STRATEGY AND EXECUTION
"53).%33 !'),)49 4(2/5'( "%34 !.$ .%84 02!#4)#%3 %NTERPRISES HAVE TO INNOVATE CONTINUOUSLY IN ORDER TO SURVIVE ON THE LONG TERM )T IS NOT SUFlCIENT JUST TO IMPLEMENT BEST BUSINESS PRACTICES OR TO REDUCE COST "EST PRACTICES MAY ENSURE AN EFlCIENT SURVIVAL OF THE ORGANIZATION BUT NOT REAL SUCCESS 2EAL PROGRESS IS MADE THROUGH INNOVATION )NNOVATION IS KEY IN THE AGILE ORGANIZATION !ND INNOVATION REQUIRES THE VISION DEVELOPMENT AND EXECUTION OF NEXT BUSINESS PRACTICES RESULTING IN NEW PROCESSES 3UCCESSFUL ENTERPRISES HAVE TO COMBINE BEST AND NEXT PRACTICES TO ACHIEVE BUSINESS PROCESS EXCELLENCE AND WITH THAT COMPETITIVE ADVANTAGES 3CHEER "USINESS 0ROCESS %NGINEERING
)NNOVATION REQUIRES NEXT BUSINESS PRACTICES !N ENTERPRISE CAN DRIVE INNOVATION IN VARIOUS WAYS 4HE KEY TYPES OF INNOVATION ARE % 0RODUCT INNOVATION % #OLLABORATION INNOVATION % 0ROCESS INNOVATION 4HESE TYPES OF INNOVATION ARE INTERRELATED AND TOGETHER COMPRISE A CONTINUOUSLY EVOLVING BUSINESS MODEL %ACH INmUENCES THE OTHERS 0RODUCT INNOVATION MAY ALSO IMPLY COLLABORATION AND PROCESS INNOVATION AND SO ON 4HE TYPES OF INNOVATION AND THEIR INTERRELATIONS ARE VISUALIZED IN &IGURE 4HE CLASSIC FORM OF INNOVATION IS PRODUCT INNOVATION 4HE TERM PRODUCT IS HERE USED IN A WIDE SENSE INCLUDING GOODS SERVICES RIGHTS OR ANY OTHER OFFERING THAT IS SOLD ON THE MARKET +IRCHMER -ARKET AND 0RODUCT /RIENTED $ElNITION 0RODUCT INNOVATION MEANS THAT A NEW PRODUCT IS BROUGHT TO THE MARKET OR THE FEATURES OF AN EXISTING ONE ARE INCREASED OR IMPROVED ! NEW DIGITAL CAMERA MAY HAVE A BETTER RESOLUTION AND AN EASIER INTEGRATION WITH A 0# A CAR AN ADVANCED
"53).%33 02/#%33 !54/-!4)/.
&IGURE 4YPES OF )NNOVATION
ON BOARD COMPUTER OR A CONSULTING COMPANY OFFERS A NEW SERVICE SOLUTION FOCUSED ON THE 3ARBANES /XLEY ACT #OLLABORATION )NNOVATION HAS BECOME MORE AND MORE IMPORTANT (ENRY #HESBROUGH IN HIS BOOK h/PEN )NNOVATION4HE .EW )MPERATIVE FOR #REATING AND 0ROlTING FROM 4ECHNOLOGYv POINTS TO THE INCREASING WISDOM FOR COLLABORATION WITH EXTERNAL PARTNERS TO MAINTAIN CORPORATE INNOVATION IN THE FACE OF INCREASINGLY COMPLEX CHALLENGES AND BUSINESS PROCESSES .EW FORMS OF COLLABORATION RESULT IN COMPETITIVE ADVANTAGES EG NEW OFFERINGS !N EXAMPLE FOR THIS TYPE OF INNOVATION IS THE h/N 3TARv SERVICES '- lRST OFFERED IN THE #ADILLAC %SCALADE 4HROUGH /N 3TAR THE DRIVER CAN CONNECT TO A SERVICE OFlCE 4HERE THEY LOCATE THE CAR GIVE DIRECTIONS OR OFFER CONCIERGE SERVICES 4HE CAR ITSELF WAS NOT REALLY AN INNOVATION WHEN IT CAME TO THE MARKET BUT THE COMBINATION WITH /N 3TAR WAS 4HIS INNOVATION WAS POSSIBLE THROUGH A UNIQUE COLLABORATION BETWEEN A CARE COMPANY AND A WIRELESS NETWORK PHONE COMPANY 4HE COLLABORATION INNOVATION RESULTED IN AN ENHANCED OFFERING A PRODUCT INNOVATION 4HE THIRD TYPE OF INNOVATION IS PROCESS INNOVATION )N THIS CASE INNOVATION IS DRIVEN THROUGH NEW OR UNIQUELY IMPROVED BUSINESS PROCESSES #OMPANIES LIKE $ELL !MAZONCOM OR %BAY ARE BUILT ENTIRELY ON THE BASIS OF PROCESS INNOVATION $ELL DIDNT INVENT THE 0# BUT A NEW PROCESS OF BRINGING IT TO MARKET !MAZON DIDNT INVENT THE BOOK BUT A NEW WAY OF SELLING IT AND %BAY OFFERS A NEW UNIQUE WAY OF PARTICIPATING IN AUCTIONS .EW PROCESSES LEAD IN THOSE CASES TO A NEW WAY OF COLLABORATION AND NEW OFFERINGS 4HE AVAILABILITY OF A NEW TECHNOLOGY CAN ALSO DRIVE NEW OR ADAPTED BUSINESS PROCESSES !S CORPORATIONS EXPLORE AND ADOPT 2&)$ TECHNOLOGY FOR EXAMPLE THE KNIFE EDGE OF COMPETITIVE ADVANTAGE IN THE MARKET PLACE MAY WELL DEPEND ON WHO lRST DEVISES THE MOST EFFECTIVE BUSINESS PROCESS
4(% !'),% %.4%202)3%
MODEL TO INCORPORATE THE INFORMATION AVAILABLE FROM THIS TECHNOLOGY )T IS NOT AT ALL CLEAR THAT COMPANIES HAVE YET ACHIEVED HIGH LEVELS OF 2/) FROM THE INTRODUCTION OF MOBILE TECHNOLOGIES &ROM OUR PERSPECTIVE THIS FAILURE BY COMPANIES TO EXPLOIT THUS FAR THE OPPORTUNITIES MADE POSSIBLE THROUGH SUCH TECHNOLOGIES IS DUE TO THE LACK OF BUSINESS PROCESS RESEARCH AND ANALYSIS )N GENERAL EACH TYPE OF INNOVATION IMPACTS THE BUSINESS PROCESSES IN PLACE 4HIS IS OBVIOUS IN THE CASE OF PROCESS INNOVATION "UT ALSO A NEW FORM OF COLLABORATION REQUIRES THE APPROPRIATE NEW PROCESSES IN THIS CASE INTER ENTERPRISE PROCESSES !ND NEW OR MODIlED PRODUCTS THAT HAVE TO BE PRODUCED AND BROUGHT TO THE MARKET MAY RESULT IN NEW MARKETING SALES PRODUCTION OR DISTRIBUTION PROCESSES 4HOSE INNOVATION DRIVEN PROCESSES ARE MOST LIKELY TO BE UNIQUE WHEN THEY ARE lRST IMPLEMENTED 4HEREFORE THEY REQUIRE NEXT BUSINESS PRACTICES SINCE BEST PRACTICES ARE NOT AVAILABLE FOR THOSE BUSINESS PROCESSES 4HE AGILE ORGANIZATION HAS TO BE ABLE TO ADOPT NEXT BUSINESS PROCESS PRACTICES QUICKLY AND EFFECTIVELY
%FlCIENCY REQUIRES BEST BUSINESS PRACTICES (OWEVER INNOVATION IS NOT NECESSARY IN ALL AREAS OF AN ORGANIZATION /THERWISE THE AGILE ORGANIZATION WOULDNT BE AFFORDABLE )N CONTRARY MANY CONSULTING RESEARCH PROJECTS HAVE SHOWN THAT OFTEN OR MORE OF THE BUSINESS PROCESSES OF A COMPANY CAN BE STANDARDIZED BASED ON INDUSTRY BEST PRACTICES WITHOUT ANY IMPACT ON THE DESIRED COMPETITIVE ADVANTAGES OF AN ORGANIZATION 4HIS REDUCES COST AND RISK FOR IMPLEMENTATION AND MANAGEMENT OF THOSE PROCESSES +IRCHMER "ROWN AND (EINZEL +IRCHMER 4YPICAL EXAMPLES FOR THE USE OF SUCH BEST PRACTICES ARE PROCESSES THAT ARE HIGHLY INmUENCED BY LEGAL REGULATIONS EG IN THE lELD OF lNANCE ACCOUNTING OR HUMAN RESOURCES ADMINISTRATION )N GENERAL IT WOULDNT MAKE SENSE TO INVENT NEW PROCESSES IN THOSE AREAS BUT ALSO IN AREAS THAT ARE WIDELY RECOGNIZED AS IMPORTANT FOR CREATING COMPETITIVE ADVANTAGES THE IMPLEMENTATION OF BEST PRACTICE BUSINESS PROCESSES CAN MAKE SENSE 4HE DISTRIBUTION PROCESSES OF A SUPPLY CHAIN MAY BE CRUCIAL AND VERY UNIQUE FOR SOME PHARMACEUTICAL OR CONSUMER PACKAGED GOODS COMPANIES 4HEY MAY BE LESS RELEVANT FOR AN ENTERPRISE IN THE CAPITAL GOODS INDUSTRIES (ERE THE USE OF BEST PRACTICES IS THE MOST EFlCIENT SOLUTION )NDUSTRY ORGANIZATIONS LIKE THE 3UPPLY #HAIN #OUNCIL DEVELOP BEST PRACTICE REFERENCE MODELS THAT ALLOW THE EFlCIENT AND EFFECTIVE USE OF SUCH BUSINESS PROCESS STANDARDS !N EXAMPLE FOR SUCH A REFERENCE MODEL IS SHOWN IN &IGURE 4HE 3#/2 REFERENCE MODEL STRUCTURES THE SUPPLY CHAIN PROCESSES ON HIGHER LEVELS BASED ON BEST PRACTICES AND LEAVES ON THE LOWEST DESCRIPTION LEVEL THE APPROPRIATE CHOICE OF A COMPANY SPECIlC EXECUTION OF THOSE PROCESSES INCLUDING THE IMPLEMENTATION OF NEW PROCESSES
"53).%33 02/#%33 !54/-!4)/.
&IGURE 3#/2 REFERENCE MODELBEST PRACTICE MODEL FOR THE SUPPLY CHAIN
4HE SYSTEMATIC USE OF SUCH BEST PRACTICE MODELS IS KEY FOR AN ORGANIZATION TO EFlCIENTLY REACH THE NECESSARY PROCESS IMPROVEMENTS IN AREAS IN WHICH THEY DO NOT NEED TO ACHIEVE SPECIAL COMPETITIVE ADVANTAGES (ERE A COMPANY HAS TO MAKE SURE TO BE AT LEAST AS GOOD AS THE COMPETITION AND THIS WITH AS LITTLE EFFORT AND ADDITIONAL RESOURCES AS POSSIBLE 4O TRY TO DElNE NEXT PRACTICES IN THOSE AREAS WOULD LEAD TO UNNECESSARY COST AND THEREFORE EVEN IMPACT THE BUSINESS SITUATION OF AN ENTERPRISE NEGATIVELY 4HE EFlCIENT AND EFFECTIVE APPLICATION OF BEST PRACTICES OFTEN BECOMES AN IMPORTANT COMPETITIVE ADVANTAGE OF THE AGILE ORGANIZATION
"53).%33 02/#%33 !54/-!4)/. !3 %.!",%2 "EST AND NEXT BUSINESS PRACTICES HAVE TO BE IDENTIlED COMBINED AND THEN EFFECTIVELY IMPLEMENTED IN THE AGILE ORGANIZATION 4HIS REQUIRES A SYSTEMATIC APPROACH TO BUSINESS PROCESS LIFECYCLE MANAGEMENT ! FRAMEWORK THAT ENABLES SUCH AN APPROACH IS THE !2)3 (OUSE OF "USINESS 0ROCESS %XCELLENCE )T ORCHESTRATES THE DESIGN IMPLEMENTATION EXECUTION AND CONTROL OF BUSINESS PROCESSES BASED ON BEST AND NEXT PRACTICES (OWEVER THE DESIRED BUSINESS RESULTS CAN lNALLY ONLY BE FULLY ACHIEVED IF THE EXECUTION OF THE PROCESSES IS SUCCESSFUL 7IDELY USED STANDARD APPLICATION SOFTWARE
4(% !'),% %.4%202)3%
SOLUTIONS LIKE %20 3#- OR #2- SYSTEMS SUCH AS THOSE PROVIDED BY 3!0 SUPPORT THE EXECUTION OF PROCESSESBUT LEAD IN GENERAL TO THE REALIZATION OF BEST PRACTICE SCENARIOS 4HE IMPLEMENTATION OF NEXT PRACTICES REQUIRES mEXIBILITY IN EXECUTION THAT UP TO NOW HAS NOT BEEN AVAILABLE OR ONLY AVAILABLE AT AN UNACCEPTABLE COST !S A RESULT MANY PROCESSES ARE NOT OR NOT SUFlCIENTLY AUTOMATED +ALAKOTA AND 2OBINSON SO THAT THEY CANNOT BE EXECUTED AND CHANGED WITH THE SPEED NECESSARY IN AN AGILE ORGANIZATION 2ESULTS ARE REDUCED PERFORMANCE AND PRODUCTIVITY 4HEREFORE THE USE OF NEW BUSINESS PROCESS AUTOMATION TECHNOLOGIES BECOMES CRUCIAL 4HEY DELIVER THE mEXIBILITY IN THE PROCESS EXECUTION NECESSARY TO IMPLEMENT NEW BUSINESS PROCESS PRACTICES AT AN ACCEPTABLE COST LEVEL
"USINESS PROCESS LIFECYCLE MANAGEMENT !N ENTERPRISE PREPARED TO ADAPT TO BUSINESS PROCESSES ON THE mY CAN RESPOND QUICKLY TO CHANGING BUSINESS ENVIRONMENTS TRIGGERED THROUGH EVENTS LIKE NEW OR CHANGING CUSTOMERS SUPPLIERS OR OTHER MARKET PARTNER REQUIREMENTS NEW OR MODIlED MARKET OFFERINGS CHANGING LEGAL REGULATIONS AVAILABILITY OF NEW OR IMPROVED TECHNOLOGIES OUTSOURCING OF SPECIlC ACTIVITIES MERGERS AND ACQUISITIONS NEW BUSINESS MODELS OR CULTURAL DIFFERENCES IN VARIOUS LOCATIONS "USINESS PROCESS BASED ORGANIZATIONS THAT PRACTICE BUSINESS PROCESS LIFECYCLE MANAGEMENT GAIN A DISTINCT ADVANTAGE IN THE MARKET OVER COMPETITORS WHO ARE NOT AS RESPONSIVE OR AGILE 4HE PRIZE IS THE ABILITY TO FULlLL SHORT TERM NEEDS AND MAINTAIN LONG TERM SUCCESS 2ECENT SOFTWARE ADVANCES PERMIT THE AUTOMATED AND RESPONSIVE MANAGEMENT OF BUSINESS PROCESS LIFECYCLES &OR EXAMPLE THE ENTIRE LIFECYCLE OF BUSINESS PROCESSES CAN BE MANAGED BASED ON THE !2)3 HOUSE OF "USINESS 0ROCESS %XCELLENCE SHOWN IN &IGURE 3CHEER AND *OST +IRCHMER AND 3CHEER LEADING TO A PROCESS CENTERED ORGANIZATION 7HILE SPECIlC TO THE !2)3 SOFTWARE THIS MODEL ALLOWS US TO EXAMINE THE PROCESS OF PROCESS MANAGEMENT "USINESS PROCESS MANAGEMENT STARTS ON THE STRATEGY LEVEL OF AN ORGANIZATION (ERE A PLANNED INNOVATION IS IDENTIlED AND THE RESULTING BUSINESS PROCESS STRUCTURE AND STRATEGY AS WELL AS THE BUSINESS GOALS ARE DElNED 0ROCESSES THAT REQUIRE NEXT BUSINESS PRACTICES IN ORDER TO LEAD TO COMPETITIVE ADVANTAGES ARE IDENTIlED 4HEN THE UNDERLYING APPLICATION SYSTEM ARCHITECTURE IS WORKED OUT ACCORDINGLY 4HE GUIDELINE FOR A PROCESS CENTERED ORGANIZATION IS DElNED 4HIS GUIDELINE IS PASSED FROM THE STRATEGY LAYER TO THE PROCESS SPECIlCATION LAYER /N THIS LEVEL THE BLUEPRINT FOR THE RESULTING BUSINESS PROCESSES IS SPECIlED USING TECHNIQUES LIKE SIMULATION OR !"# COSTING 0ROCESSES REmECTING NEXT PRACTICES ARE DESIGNED DE NOVO 4HE SPECIlCATION OF BEST PRACTICE BASED PROCESSES
"53).%33 02/#%33 !54/-!4)/.
&IGURE !2)3 (OUSE OF "USINESS 0ROCESS %XCELLENCE
CAN BE SUPPORTED BY USING THE ALREADY MENTIONED REFERENCE MODELS /N THE SPECIlCATION LAYER ALL THE NECESSARY BUSINESS PROCESSES ARE DESCRIBED IN DETAILED SO THAT THIS DESCRIPTION CAN BE USED TO DRIVE THE PROCESS EXECUTION 4HE RESULT IS A BLUEPRINT CONSISTING OF BUSINESS PROCESS MODELS "ASED ON THESE PROCESS MODELS THE IMPLEMENTATION OF ALL PHYSICAL AND INFORMATION PROCESSING ACTIVITIES IS CARRIED OUT WITHIN AND ACROSS ENTERPRISES (ERE PROCESSES ARE EITHER EXECUTED USING STANDARD APPLICATION PACKAGES LIKE %20 3#- OR #2- SYSTEMS THAT GENERALLY SUPPORT BEST PRACTICE PROCESSES OR PROCESSES MUST BE EXECUTED BASED ON MORE mEXIBLE APPLICATION SOLUTIONS THAT CAN REmECT NECESSARY NEXT PRACTICE APPROACHES 4HESE ARE NEXT GENERATION BUSINESS PROCESS AUTOMATION SOLUTIONS 4HE PROCESSES THAT ARE ACTUALLY EXECUTED ARE MEASURED AND CONTROLLED ON THE SO CALLED CONTROLLING LEVEL )F THERE ARE DIFFERENCES OBSERVED BETWEEN PLANNED KEY PERFORMANCE INDICATORS +0)S DElNED BASED ON THE GOALS IDENTIlED ON THE STRATEGY LEVEL AND THE ACTUAL VALUES EITHER A CONTINUOUS IMPROVEMENT PROCESS IS INITIATED THROUGH THE PROCESS SPECIlCATION LAYER OR THE SITUATION IS RESOLVED ON A STRATEGIC LEVEL IF THE BUSINESS ENVIRONMENT HAS CHANGED SIGNIlCANTLY !LL THE DESIGN AND SPECIlCATION AS WELL AS THE CONTROLLING ACTIVITIES CAN BE SUPPORTED BY BUSINESS PROCESS MANAGEMENT SOLUTIONS LIKE THE !2)3 0ROCESS 0LATFORM 4HESE SOLUTIONS ALSO DRIVE THE PROCESS EXECUTION THAT MAY BE BASED ON TRADITIONAL PROCESS AUTOMATION OR NEXT GENERATION PROCESS AUTOMATION SOLUTIONS
4(% !'),% %.4%202)3%
0ROCESS AUTOMATION BASED ON STANDARD APPLICATIONS $URING THE LAST TEN TO lFTEEN YEARS MORE AND MORE BUSINESS PROCESSES HAVE BEEN SUPPORTED BY STANDARD SOFTWARE SOLUTIONS INCLUDING 3!0 %20 3#- OR #2- SYSTEMS +IRCHMER 4HIS HAS NUMEROUS ADVANTAGES COMPARED TO INDIVIDUALLY DEVELOPED SOFTWARE SYSTEMS ! KEY ADVANTAGE OF THESE TRADITIONAL PROCESS AUTOMATION SOLUTIONS IS THAT THEY DO NOT ONLY DELIVER A TECHNOLOGY TO EXECUTE A SPECIlC PROCESS 3TANDARD SOFTWARE ALSO SUPPLIES BEST BUSINESS PRACTICES INCLUDED IN THE SOFTWARE 4HE SUCCESSFUL USE OF STANDARD SOLUTIONS LIKE %20 SYSTEMS IMPLIES ALSO THE DElNITION AND EXECUTION OF BUSINESS PROCESSES ACCORDING TO THE SOFTWARE SOLUTION 3TANDARD SOFTWARE SYSTEMS INCLUDE A PROCESS DElNITION THAT IS TYPICALLY CODED IN THE SOFTWARE $EPENDING ON THE VENDOR THIS MAY ALLOW NO OR ONLY MINOR CHANGES OF THE PROCESS DElNITION -ODIlCATIONS TO THE PROCESS LOGICIAN OF THE SOFTWARE RESULT IN TREMENDOUS COST AND MAY LIMIT THE EFFECTIVENESS OF THE SOLUTIONS -ANY UNSUCCESSFUL IMPLEMENTATIONS OF STANDARD SOFTWARE SOLUTIONS CAN BE TRACED TO ONE OF TWO CAUSES 4HE lRST CAUSE IS A LACK OF REALIZATION ON THE PART OF THE CUSTOMER THAT THEIR BUSINESS PROCESSES WILL CHANGEUSUALLY FOR THE BETTER ! SECOND CAUSE IS A DESIRE ON THE PART OF THE CUSTOMER TO SO MODIFY THE PROCESS IN THE SOLUTION TYPICALLY IN AN ATTEMPT TO PRESERVE PRE IMPLEMENTATION PROCESSES THAT THE BENElTS OF THE SOLUTION ARE COMPROMISED 4HOSE PROCESS DElNITIONS DELIVERED THROUGH STANDARD SOFTWARE ARE MORE AND MORE OFTEN DESCRIBED IN SO CALLED SOFTWARE REFERENCE MODELS 4HOSE SOFTWARE REFERENCE MODELS DOCUMENT THE BEST PRACTICES SUPPORTED BY THE APPLICATION SYSTEM !N EXAMPLE IS THE 3!0 2 REFERENCE MODELS .EXT BUSINESS PRACTICES ARE GENERALLY NOT SUPPORTED 4HE REASON THEREFORE IS THAT THEY REQUIRE NEW PROCESSES THAT NOBODY THOUGHT OF DURING THE STANDARD SOFTWARE DEVELOPMENT /NLY WHEN A NEXT PRACTICE BECOMES OVER TIME A BEST PRACTICE IT WILL BE INCLUDED IN THE TRADITIONAL SOFTWARE SOLUTION 4HE lX INTEGRATION OF PROCESS DElNITION AND SOFTWARE TECHNOLOGY IN TRADITIONAL STANDARD SOFTWARE SYSTEMS IS VISUALIZED IN &IGURE !LTHOUGH APPLICATION SOFTWARE SYSTEMS LIKE FOR EXAMPLE 3!0S MY3!0 ALLOW THE CUSTOMIZING OF THOUSANDS OF TABLES TO INmUENCE THE PROCESS LOGIC RESULTING IN ALTERNATIVES IN REFERENCE MODELS IT STILL JUST REmECTS VARIOUS BEST PRACTICES )F A CUSTOMER DOES NOT WANT TO FOLLOW THE PROJECT LOGIC OF AN %20 OR OTHER STANDARD SOFTWARE SYSTEM THIS CAN CAUSE CHALLENGES WHICH CAN ONLY BE RESOLVED THROUGH MAJOR SOFTWARE DEVELOPMENT INVESTMENTS NOT ONLY FOR THE DEVELOPMENT OF ADD ONS BUT ALSO FOR THEIR INTEGRATION AND MAINTENANCE 4HIS LEADS TO DRAMATICALLY INCREASED TOTAL COSTS OF OWNERSHIP !S A RESULT NEW BUSINESS PROCESSES USED NOT TO BE SUPPORTED APPROPRIATELY BY TRADITIONAL SOFTWARE SOLUTIONS 4HIS SITUATION DID NOT PERMIT IMPROVEMENTS OF PRODUCTIVITY AND PERFORMANCE BASED ON NEXT PRACTICES
"53).%33 02/#%33 !54/-!4)/.
&IGURE 4RADITIONAL STANDARD SOFTWARE lX INTEGRATION OF PROCESS DElNITION AND SOFTWARE
4HEREFORE NEXT BUSINESS PRACTICES HAVE TO BE SUPPORTED THROUGH NEW SOFTWARE ARCHITECTURES THROUGH NEXT GENERATION PROCESS AUTOMATION WHICH ENSURES THE NECESSARY mEXIBILITY COMBINED WITH AN ACCEPTABLE COST 4HIS IS A KEY ENABLER OF THE AGILE ORGANIZATION
.EXT GENERATION PROCESS AUTOMATION 4HE BASIS OF THE NEXT GENERATION OF BUSINESS PROCESS AUTOMATION IS THE SEPARATION OF THE APPLICATION SOFTWARE ITSELF THE INTEGRATION TECHNOLOGIES AND THE BUSINESS PROCESS DESIGN 4HE APPLICATION SOFTWARE PROVIDES THE NEEDED FUNCTIONALITY TO SUPPORT A BUSINESS PROCESS 4HE INTEGRATION TECHNOLOGIES OFTEN CALLED BUSINESS PROCESS AUTOMATION ENGINES CONSIST LOGICALLY OF A WORKmOW COMPONENT THAT ENFORCES THE NECESSARY PROCESS LOGIC AND A DATA INTEGRATION COMPONENT SO CALLED ENTERPRISE APPLICATION INTEGRATION %!) THAT ENSURES THE AVAILABILITY OF THE REQUIRED DATA 4HIS STRUCTURE IS SHOWN IN &IGURE .EW BUSINESS PROCESSES ARE DElNED IN PROCESS MODELS REPRESENTING THE PROCESS DElNITION "ASED ON THE MODELS THE WORKmOW ENGINE IS CONlGURED MORE OR LESS AUTOMATICALLY 4HIS IS POSSIBLE THOUGH THE USE OF STANDARDS FOR DEVELOPING THE PROCESS MODELS LIKE THE BUSINESS PROCESS MODELING LANGUAGE h"0-,v HTTP WWW"0-)ORG OR THE BUSINESS PROCESS EXECUTION LANGUAGE h"0%,v "USINESS 0ROCESS %XECUTION ,ANGUAGE 4HESE STANDARDS ENSURE THAT THE WORKmOW ENGINE UNDERSTANDS THE PROCESS DElNITION
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&IGURE #OMPONENTS OF NEXT GENERATION PROCESS AUTOMATION 0ROCESS DElNITION INTEGRATION APPLICATION
4HE WORKmOW ENGINE THEN ORGANIZES WHEN WHICH APPLICATION FUNCTIONALITY IS NEEDED AND ACTIVATES IT ACCORDINGLY 4HE %!) ENVIRONMENT ENSURES THE AVAILABILITY OF THE NECESSARY DATA WHICH IS TRANSFORMED INTO A NEUTRAL FORMAT SO THAT IT CAN BE FORWARDED FROM ONE APPLICATION TO THE NEXT AS REQUIRED THROUGH THE PROCESS DElNITION 4HIS PROCEDURE IS VISUALIZED IN &IGURE 4HIS NEXT GENERATION BUSINESS PROCESS AUTOMATION IS TECHNICALLY IMPLEMENTED BASED ON NEW SOFTWARE ARCHITECTURES %XISTING APPLICATION MAY BE SPLIT OR COMBINED IN ORDER TO DELIVER THE APPROPRIATE FUNCTIONALITY NEEDED IN VARIOUS PROCESSES 4HE APPLICATION FUNCTIONALITY COMBINED WITH THE INVOLVED DATA AND THE LOGICAL PROCEDURE OF APPLYING THE FUNCTIONALITY ON THE DATA IS OFTEN CALLED A COMPONENT 3UCH A COMPONENT DELIVERS A SERVICE THAT THEN CAN BE USED BY ANOTHER COMPONENT ACCORDING TO THE DElNED BUSINESS PROCESS LOGIC 4HIS ALLOWS AN INTEGRATION OF APPLICATIONS WITHOUT USING DIFlCULT TO MAINTAIN INTERFACES )F SUCH A SERVICE IS OFFERED THROUGH THE )NTERNET USING SPECIlC STANDARDIZED PROTOCOLS IT IS CALLED A WEB SERVICE )4 ARCHITECTURES THAT SUPPORT SUCH mEXIBLE NEXT GENERATION BUSINESS PROCESS AUTOMATIONS ARE CALLED %NTERPRISE 3ERVICE !RCHITECTURES +ALAKOTA AND 2OBINSON 7OODS %NTERPRISE 3ERVICE !RCHITECTURES 4HESE NEXT GENERATION PROCESS AUTOMATION ENVIRONMENTS DELIVER THE mEXIBILITY NECESSARY FOR SUPPORTING NEXT BUSINESS PRACTICES AT AN ACCEPTABLE COST LEVEL %XISTING APPLICATION SOFTWARE IS USED AS FAR AS POSSIBLE ONLY REALLY MISSING FUNCTIONALITY HAS TO BE DEVELOPED .O SPECIlC INTERFACES ARE TO BE DEVELOPED AND MAINTAINED WHICH AGAIN REDUCES THE TOTAL COST OF OWNERSHIP 7OODS "RUCKERT AND 'RASMAN
"53).%33 02/#%33 !54/-!4)/.
&IGURE .EXT GENERATION PROCESS AUTOMATION HOW IT WORKS
4HEREFORE NEXT GENERATION PROCESS AUTOMATION ENVIRONMENTS ARE A KEY ENABLER FOR THE AGILE ORGANIZATION .EXT GENERATION PROCESS AUTOMATION SOLUTIONS CAN BE USED TO SUPPORT PROCESSES WITHIN AN ENTERPRISE OR ACROSS MULTIPLE ENTERPRISES 4HUS THEY ENABLE INTRA AND INTER ENTERPRISE PROCESSES (OWEVER SUCH AUTOMATION SOLUTIONS REQUIRE A VERY THOROUGH PROCESS DElNITION 4HE DEVELOPMENT OF APPROPRIATE BUSINESS PROCESS MODELS IS KEY FOR THE SUCCESSFUL USE OF SUCH PROCESS AUTOMATION SOLUTIONS AND WITH THAT FOR THE EXECUTION OF THE DElNED PROCESS STRATEGY 4HE AGILE ENTERPRISE REQUIRES DETAILED PROCESS DESIGN AND THE DOCUMENTATION IN FORMAL PROCESS MODELS 3!0 .ET7EAVER AND ITS INTEGRATION WITH THE !2)3 "USINESS 0ROCESS 0LATFORM IS AN EXAMPLE OF AN )4 ENVIRONMENT THAT SUPPORTS SUCH AN AUTOMATION OF NEXT GENERATION PROCESS AUTOMATION "RUCKERT AND 'RASMAN 4HE PROCESSES ARE DElNED IN THE !2)3 $ESIGN ENVIRONMENT "ASED ON THE PROCESS MODELS THE 8) 0ROCESS !UTOMATION ENGINE IS CONlGURED SO THAT IT CALLS THE APPROPRIATE APPLICATION COMPONENTS DURING THE PROCESS EXECUTION !FTER THE EXECUTION THE BUSINESS PERFORMANCE OF THE PROCESS CYCLE TIMES FREQUENCIES IS MEASURED THROUGH THE !2)3 0ROCESS 0ERFORMANCE -ANAGER 4HIS ENVIRONMENT IS SHOWN IN &IGURE -ICROSOFT )"- /RACLE "%! AND NUMEROUS SMALLER VENDORS BUILD AND DELIVER SIMILAR SOLUTIONS 3CHULTE
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&IGURE 3!0 .ET7EAVER AND !2)3 0ROCESS 0LATFORM%XAMPLE FOR .EXT 'ENERATION 0ROCESS !UTOMATION
#OMPOSITE APPLICATIONS 4HIS NEW GENERATION OF PROCESS AUTOMATION ALLOWS AS EXPLAINED THE COMBINING OF EXISTING APPLICATIONS WITH NEW APPLICATIONS SEAMLESSLY AVOIDING INTEGRATION CHALLENGES EXPERIENCED WITH TRADITIONAL APPLICATION ENVIRONMENTS 4HIS ALLOWS THE INTEGRATION OF BEST AND NEXT PRACTICES IN AN AGILE ENVIRONMENT (OWEVER IN ORDER TO AUTOMATE NEXT PRACTICE BUSINESS PROCESSES YOU MAY NOT EVEN NEED NEW NOT EXISTING APPLICATION FUNCTIONALITY )T MAY BE SUFlCIENT TO USE EXISTING APPLICATION FUNCTIONALITY IN A NEW PROCESS LOGIC .EXT GENERATION PROCESS AUTOMATION ENVIRONMENTS ALLOW THE RAPID DEVELOPMENT OF SUCH COMPOSITE APPLICATIONS 4HEY DELIVER A PROCESS DElNITION AN APPROPRIATELY CONlGURED WORKmOW AND DATA INTEGRATION AND USE ONE OR SEVERAL EXISTING SOFTWARE MODULES #OMPOSITE APPLICATIONS SUPPORT A SPECIlC NEW BUSINESS PROCESS WHICH HAS NOT BEEN SUPPORTED BY THE EXISTING SOFTWARE SOLUTION 4HEY REPRESENT BUSINESS CONTENT OF NEXT GENERATION PROCESS AUTOMATION SYSTEMS 4HESE COMPOSITE APPLICATIONS MAY BE BUILT BASED ON ALREADY IMPLEMENTED STANDARD SOFTWARE PACKAGES LIKE %20 3#- OR #2- SYSTEMS 7OODS 0ACKAGED #OMPOSITE !PPLICATIONS ALLOWING AN ENTERPRISE TO USE THOSE SYSTEMS IN A NEW WAY 4HESE COMPOSITE APPLICATIONS MAY ALSO ADD THE FUNCTIONALITY OF AVAILABLE SPECIALIZED THIRD PARTY SOFTWARE IN ORDER TO SUPPORT THE DElNED BUSINESS PROCESS
"53).%33 02/#%33 !54/-!4)/.
&IGURE #OMPOSITE APPLICATIONS .EW PROCESSES BASED ON EXISTING APPLICATIONS
4HE IDEA OF THOSE COMPOSITE APPLICATIONS IS VISUALIZED IN &IGURE 4HESE COMPOSITE APPLICATIONS BUILT ON EXISTING STANDARD SOFTWARE CAN BE OFFERED AS PACKAGED SOLUTIONS ON THE MARKET A WAY OF DISTRIBUTING NEXT BUSINESS PRACTICES 7OODS 0#! 3OFTWARE OR CONSULTING COMPANIES OR EVEN END USE COMPANIES MAY DEVELOP SUCH COMPOSITE APPLICATIONS AND OFFER THEM AS NEXT PRACTICES 4HESE NEXT PRACTICES ARE LIKELY TO EVENTUALLY BECOME BEST PRACTICES %XAMPLES FOR PACKAGED COMPOSITE APPLICATIONS ARE 3!0 X!PPS 3TOLZ THAT ARE OFFERED BY 3!0 AND ITS PARTNERS PROVIDING NEW PROCESSES SOLUTIONS BASED ON EXISTING 3!0 APPLICATIONS
4(% "53).%33 02/#%33 &!#4/29 ! #2)4)#!, ,).+ +EY FOR THE EFlCIENT AND EFFECTIVE USE OF THOSE NEXT GENERATION PROCESS AUTOMATION SOLUTIONS IN AN AGILE ENVIRONMENT IS THE STRUCTURED AND REUSABLE DElNITION OF THE BUSINESS PROCESSES TO BE SUPPORTED 4HOSE BUSINESS PROCESSES REmECT THE COMBINATION OF BEST AND NEXT PRACTICES 4HESE PROCESSES ARE DElNED IN PROCESS MODELS ON THE SPECIlCATION LAYER OF THE !2)3 (OUSE OF "USINESS 0ROCESS
4(% !'),% %.4%202)3%
&IGURE "USINESS PROCESS FACTORYEFlCIENT AND EFFECTIVE
%XCELLENCE DESCRIBED ABOVE 3CHEER 4HEY ARE THE KEY ENABLER FOR THE AGILE ORGANIZATION !S EXPLAINED ABOVE THOSE MODELS ARE THE BASIS FOR THE SUCCESSFUL USE OF NEXT GENERATION PROCESS AUTOMATION ENVIRONMENTS 4HEY HAVE TO BE DEVELOPED AND MODIlED FREQUENTLY IN ORDER TO SUPPORT A CONTINUOUS INNOVATION AND IMPROVEMENT REmECTED IN CONCEPTS LIKE THE ADAPTIVE ENTERPRISE OR THE REAL TIME ENTERPRISE 4HE BUSINESS PROCESS FACTORY IS THE ENVIRONMENT THAT ENABLES PRODUCTIVITY AND PERFORMANCE THROUGH THE MANAGEMENT OF BUSINESS PROCESS MODELS +IRCHMER "ROWN AND (EINZEL )TS THE CRITICAL LINK BETWEEN THE STRATEGIC DECISION TO INNOVATE AND IMPROVE AND THE OPERATIVE REALIZATION AND EXECUTION OF THOSE DECISIONS 4HAT MEANS THE PROCESS FACTORY IS A CORE APPLICATION ENVIRONMENT FOR THE AGILE ORGANIZATION 4HE CONCEPT OF THE PROCESS FACTORY IS SHOWN IN &IGURE "EST PRACTICES ARE AVAILABLE ON THE MARKET IN THE FORM OF PROCESS REFERENCE MODELS 4HEY ARE DELIVERED BY INDUSTRY ORGANIZATIONS SUCH AS THE 3UPPLY #HAIN #OUNCIL 2OSSETTA.ET "0-) OR /ASIS AND BY CONSULTING COMPANIES OR BY SOFTWARE COMPANIES +IRCHMER "USINESS 0ROCESS /RIENTED )MPLEMENTATION 4HOSE MODELS ARE STORED IN A DATABASE CALLED THE BUSINESS PROCESS WAREHOUSE 4HEY CAN BE USED AS BEST PRACTICE PROCESS COMPONENTS FOR THE SPECIlCATION OF ENTERPRISE SPECIlC BUSINESS PROCESSES )N THE PROCESS MANUFACTURING AND ASSEMBLING UNIT OF THE BUSINESS PROCESS FACTORY ENTERPRISE SPECIlC BUSINESS PROCESS MODELS ARE EITHER ASSEMBLED USING THOSE
"53).%33 02/#%33 !54/-!4)/.
AVAILABLE PROCESS COMPONENTS OR NEW PROCESSES ARE MANUFACTURED BASED ON THE PLANNED INNOVATIONS OF AN ENTERPRISE 4HE RESULT IS THE DESIRED COMBINATION OF BEST AND NEXT PRACTICES REmECTED IN THE ENTERPRISE SPECIlC PROCESS MODELS 4HOSE ENTERPRISE SPECIlC MODELS HAVE TO BE CONSISTENT AND REmECT EXACTLY THE DESIRED FUTURE BUSINESS PROCESSES %VERY MISTAKE IN THE PROCESS MODELS LEADS TO A MISTAKE IN THE FOLLOWING EXECUTION 4HEREFORE THE SIMULATION OF PROCESSES THE DEVELOPMENT AND COMPARISON OF VARIOUS SCENARIOS AND A THOROUGH COST AND TIME ANALYSIS OF THE DESIGNED PROCESSES IS EXTREMELY IMPORTANT AND A CORE COMPONENT OF THE PROCESS ASSEMBLING AND MANUFACTURING 4HOSE PROCESS MODELS ARE FORWARDED TO THE NEXT GENERATION PROCESS AUTOMATION ENVIRONMENT WHERE THEY DRIVE THE CONlGURATION OF THE WORKmOW AND INTEGRATION SOLUTION 4HIS ENSURES A PROCESS EXECUTION ACCORDING TO THE DEVELOPED PROCESS DESIGN 4HE PROCESS MODELS ARE ALSO STORED IN THE PROCESS WAREHOUSE 4HIS ALLOWS THEIR LATER REUSE FOR A ROLL OUT TO OTHER LOCATIONS OUTSOURCING OR OTHER PARTNERS NEW HOLDINGS REALIZED THROUGH MERGERS ACQUISITIONS OR JUST A FURTHER IMPROVEMENT OF THE PROCESS 4HE PHYSICAL REALIZATION OF THIS PROCESS FACTORY CAN BE DONE USING THE !2)3 "USINESS 0ROCESS 0LATFORM 4HE !2)3 0ROCESS 0LATFORM AS PART OF THE OVERALL PROCESS LIFECYCLE MANAGEMENT EXPLAINED ABOVE 4HE INTEGRATION OF THE !2)3 SOLUTIONS INTO PROCESS AUTOMATION ENVIRONMENTS LIKE FOR EXAMPLE 3!0S .ET7EAVER OR SOLUTIONS FROM VENDORS LIKE 7EB6 )NTALIO 3AVVION OR 6ITIRIA ALLOWS THE SEAMLESS HAND OVER OF THE PROCESS MODELS AND THEIR REUSE IN THE AUTOMATION ENVIRONMENTS TO DRIVE THE CONlGURATION 4HE BUSINESS PROCESS FACTORY ENABLES THE BUSINESS DRIVEN EFlCIENT USE OF NEXT GENERATION PROCESS AUTOMATION ENVIRONMENTS TO ACHIEVE COMPETITIVE ADVANTAGES 4ECHNOLOGY ENABLERS ARE ENVIRONMENTS LIKE THE !2)3 BUSINESS PROCESS PLATFORM "EST AND NEXT BUSINESS PRACTICES CAN BE IMPLEMENTED BASED ON THE CONCEPT OF THE BUSINESS PROCESS FACTORY %LZINA 'ULLEDGE AND ,EE 3CHEER ET !LL "Y BEING PREPARED TO IMPLEMENT AND DYNAMICALLY MANAGE THE LIFECYCLES OF BEST AND NEXT BUSINESS PRACTICES AN ENTERPRISE CAN BE TRANSFORMED TO AN AGILE ORGANIZATION THAT IS BETTER PREPARED FOR LONG TERM SUCCESS
2EFERENCES h4HE !2)3 0ROCESS 0LATFORMv "USINESS 0ROCESS %XCELLENCE )$3 3CHEER HTTPWWWIDS SCHEERCOM "RUCKERT 3 AND $ 'RASMAN h4HE "ENElTS OF 3!0 .ET 7EAVERv 3!0 )NFO n 1UICK 'UIDE 3!0 .ET7EAVER n 4HE 0OWER OF ,OWER 4#/ !PR !BSTRACT
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h"USINESS 0ROCESS %XECUTION ,ANGUAGE FOR 7EB 3ERVICES ;"0%,73= v 4HE #OVER 0AGES %D 3 4HATTE /!3)3 /RGANIZATION FOR THE !DVANCEMENT OF 3TRUCTURED )NFORMATION 3TANDARDS -AY HTTP8-,COVERPAGESORG h"USINESS 0ROCESS -ODELING ,ANGUAGE n "0-. 3PECIlCATION v "USINESS 0ROCESS -ANAGEMENT )NITIATIVE %D "0-) HTTPWWW"0-)ORG h"USINESS 0ROCESS -ODELING .OTATION n "0-. 3PECIlCATION v "USINESS 0ROCESS -ANAGEMENT )NITIATIVE %D "0-) HTTPWWW"0-)ORG %LZINA $ 4 'ULLEDGE AND # ,EE "USINESS %NGINEERING .P .ORWELL +ALAKOTA 2 AND - 2OBINSON 3ERVICE "LUEPRINTS n 2OADMAP FOR %XECUTION "OSTON .EW 9ORK ET ALL NP +IRCHMER - "USINESS 0ROCESS /RIENTED )MPLEMENTATION OF 3TANDARD 3OFTWARE n (OW TO !CHIEVE #OMPETITIVE !DVANTAGE %FlCIENTLY AND %FFECTIVELY ND EDITION ED "ERLIN .EW 9ORK ET ALL NP +IRCHMER - h-ARKET AND 0RODUCT /RIENTED $ElNITION OF "USINESS 0ROCESSESv &OREWORD "USINESS %NGINEERING %D $ %LZINA 4 2 ,EE AND # 9 .P .ORWELL +IRCHMER - ' "ROWN AND ( (EINZEL h5SING 3#/2 AND /THER 2EFERENCE -ODELS FOR % "USINESS 0ROCESS .ETWORKSv "USINESS 0ROCESS %XCELLENCE n !2)3 IN 0RACTICE %D ! 3CHEER ET AL "ERLIN .EW 9ORK ET ALL NP +IRCHMER - AND ! 3CHEER h"USINESS 0ROCESS !UTOMATION n #OMBINING BEST AND NEXT PRACTICESv "USINESS 0ROCESS #HANGE -ANAGEMENT n !2)3 IN 0RACTICE %D ! 3CHEER ET AL "ERLIN .EW 9ORK ET ALL NP +IRCHMER - AND ! 3CHEER h#HANGE -ANAGEMENT n +EY FOR "USINESS 0ROCESS %XCELLENCEv "USINESS 0ROCESS #HANGE -ANAGEMENT n !2)3 IN 0RACTICE %D ! 3CHEER ET AL "ERLIN .EW 9ORK ET ALL NP 3CHEER ! !2)3 n "USINESS 0ROCESS &RAMEWORKS ND EDITION ED "ERLIN .EW 9ORK ET ALL NP 3CHEER ! !2)3 n "USINESS 0ROCESS -ODELING ND EDITION ED "ERLIN .EW 9ORK ET ALL NP 3CHEER ! ET AL EDS "USINESS 0ROCESS #HANGE -ANAGEMENT n !2)3 IN 0RACTICE "ERLIN .EW 9ORK ET ALL NP 3CHEER ! ET AL EDS "USINESS 0ROCESS %XCELLENCE n !2)3 IN 0RACTICE "ERLIN .EW 9ORK ET ALL NP 3CHEER ! ET AL EDS "USINESS 0ROCESS !UTOMATION n !2)3 IN 0RACTICE "ERLIN .EW 9ORK ET ALL NP 3CHEER ! AND 7 *OST h"USINESS 0ROCESS -ANAGEMENT ! #ORE 4ASK FOR ANY #OMPANY /RGANIZATIONv "USINESS 0ROCESS %XCELLENCE n !2)3 IN 0RACTICE %D ! 3CHEER ET AL "ERLIN .EW 9ORK ET ALL NP 3CHEER ! 7 ED "USINESS 0ROCESS %NGINEERING n 4HE .EW 7AVE )N )$3 3CHEER )NC 0HILADELPHIA 0ROCEEDINGS OF 0ROCESS 7ORLD 3CHULTE 2 #LIENT )SSUES FOR !PPLICATION )NTEGRATION .P 'ARTNER 'ROUP 3TOLZ ( h#OMPOSITE !PPLICATIONS &RAMEWORK n $ESIGNING #ROSS 3OLUTIONSv )NFO n 1UICK 'UIDE 3!0 .ET7EAVER n 4HE 0OWER OF ,OWER 4#/ !PR 7OODS $ %NTERPRISE 3ERVICE !RCHITECTURES "EIJING #AMBRIDGE +OELN ET ALL ND 7OODS $ 0ACKAGED #OMPOSITE !PPLICATIONS "EIJING #AMBRIDGE +OELN ET ALL NP
).42/$5#4)/. 4(% !'),% %.4%202)3% ) 2EINVENTING YOUR /RGANIZATION FOR 3UCCESS IN AN /N $EMAND 7ORLD .)2-!, 0!, %8%#54)6% $)2%#4/2 E"53).%33 2%3%!2#( #%.4%2 3-%!, #/,,%'% /& "53).%33 0%..39,6!.)! 34!4% 5.)6%23)49 $!.)%, # 0!.4!,%/ 6)#% 02%3)$%.4 342!4%')# )335%3 '2/50 3!0 !' !.$ #(!)2 !$6)3/29 "/!2$ /& 4(% E"53).%33 2%3%!2#( #%.4%2 0%..39,6!.)! 34!4% 5.)6%23)49
-OST CHANGE INITIATIVES THAT END UP GOING NOWHERE DONT FAIL BECAUSE THEY LACK GRAND VISIONS AND NOBLE INTENTIONS 4HEY FAIL BECAUSE PEOPLE CANT SEE THE REALITY THEY FACE ,IKEWISE STUDIES OF CORPORATE MORTALITY SHOW THAT MOST &ORTUNE COMPANIES FAIL TO OUTLAST A FEW GENERATIONS OF MANAGEMENT NOT BECAUSE OF RESOURCE CONSTRAINTS BUT BECAUSE THEY ARE UNABLE TO hSEEv THE THREATS THEY FACE AND THE IMPERATIVE TO CHANGE h4HE SIGNALS OF THREAT ARE ALWAYS ABUNDANT AND RECOGNIZED BY MANY v SAYS !RIE DE 'EUS h9ET SOMEHOW THEY FAIL TO PENETRATE THE CORPORATE IMMUNE SYSTEM RESPONSE TO REJECT THE UNFAMILIARv 3ENGE ET AL 0RESENCE (UMAN 0URPOSE AND THE &IELD OF THE &UTURE P
)N THE 3PRING OF )"- CONDUCTED A MASSIVE GLOBAL SURVEY OF #%/S /VER #%/S FROM LARGE MEDIUM AND SMALL ENTERPRISES ACROSS MANY INDUSTRIES RESPONDED TO THE SURVEY AND MANY SPENT TIME ONE ON ONE WITH )"- CONSULTANTS TO PROVIDE QUALITATIVE COMMENTS 7HEN ASKED WHAT WOULD HAVE THE GREATEST IMPACT ON THEIR ORGANIZATION OVER THE NEXT THREE YEARS AN OVERWHELMING MAJORITY OF THE #%/S
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IDENTIlED CONTINUOUS CHANGES IN MARKET FORCES TO HAVE THE GREATEST IMPACT 4HEY TALKED ABOUT THE INTENSE AND EVER INCREASING COMPETITION CONTINUOUS CHANGES IN MARKET DYNAMICS AND RAPID CHANGES IN CUSTOMER NEEDS AND WANTS AS THE MAJOR MARKET FORCES 6ERY FEW OF THEM SAID THEY CONSIDERED THEIR ORGANIZATIONS TO BE READY TO RESPOND TO THESE CHANGES AND MOST TALKED ABOUT 2ESPONSIVENESS !GILITY AND &LEXIBILITY AS THE NEW KEY COMPETENCIES TO SURVIVE AND SUSTAIN !MONGST MANY THINGS THE #%/S TALKED ABOUT WANTING TO URGENTLY IMPLEMENT THE FOLLOWING TWO STAND OUT AS THE SUMMARY OF THEIR COMBINED WISDOM h7E HAVE TO IMPLEMENT A COMPETITIVE INTELLIGENCE CAPABILITY SO THAT THE ORGANIZATION CAN REACT QUICKLYv h7E HAVE TO BE QUICKER AND MUST ANTICIPATE AND RESPOND ALMOST INTUITIVELY TO CHANGING CUSTOMERS NEEDSv 4HESE RESULTS ARE REINFORCED BY THE RESULTS OF THE #ONFERENCE "OARD #%/ #HALLENGE SURVEY 4HIS SURVEY ASKS #%/S TO IDENTIFY THE TOP TEN CHALLENGES THAT THEY FACE 3ECOND ONLY TO h3USTAINED AND STEADY TOP LINE GROWTHv h3PEED mEXIBILITY AND ADAPTABILITY TO CHANGEv WAS IDENTIlED BY OF THE #%/S RESPONDING TO THE SURVEY )N HER KEYNOTE TALK AT THE 'ARTNER 3YMPOSIUM #ARLY &IORINA #HAIRMAN AND #%/ OF (0 CITING $ARWINS THEORY OF EVOLUTION SAID h4HE COMPANY THAT THINKS ITS DONE IS DONE $ARWIN SAID ITS NOT THE MOST INTELLIGENT OR STRONGEST THAT SURVIVES BUT THOSE THAT ADAPT THE MOST READILY TO CHANGE )TS NOT ABOUT lXING A COMPANY AND STOPPING IT BUT ITS ABOUT A COMPANY BEING ABLE TO ADAPTv )N HIS BOOK !DAPT OR $IE #LAUS (EINRICH A MEMBER OF THE 3!0 %XECUTIVE "OARD DESCRIBES HOW ADAPTIVE BUSINESS NETWORKS CAN HELP BUSINESSES MEET THE EXTRAORDINARY CHALLENGES OF THE ST CENTURY AND WHAT THEY WILL NEED TO CHANGE IN ORDER TO SURVIVE h&ALLING MARGINS ACCELERATING INNOVATION AND PRODUCTION CYCLES AS WELL AS GLOBALIZATION ARE FORCING COMPANIES TO BECOME MORE mEXIBLE IN ORDER TO MEET THESE CHALLENGESv (E EXPLAINS WHY THIS NEW BUSINESS MODEL IS NECESSARY FOR SURVIVALAND NOT MERELY AN OPTION h2ESPONDING TO INTENSE PRESSURES ORGANIZATIONS ARE TRYING TO BECOME MORE AGILE AND RESPONSIVE TO CUSTOMER DEMANDS v SAYS A 8EROX REPORT "ILL 'ATES TALKED ABOUT THE VELOCITY OF CHANGE (E SAID THE S WERE ALL ABOUT COMPUTING THE S WERE ALL ABOUT BANDWIDTH AND THIS DECADE WILL BE ALL ABOUT CHANGE AND THE INCREASED VELOCITY WITH WHICH EVERYTHING WILL BE CHANGING 4HE COMMON THREAD THAT RUNS ACROSS ALL OF THE ABOVE PROPHECIES BY VISIONARIES IS AGAIN THAT OF CHANGE AND SPEED ! COUPLE OF YEARS AGO WE HAD A MASSIVE STRIKE OF DOCK WORKERS WHICH IDLED ALL OF THE PORTS ALONG THE WEST COAST OF 53! FROM ,OS !NGELES TO 3EATTLE FOR DAYS
).42/$5#4)/.
$ELLS BUSINESS PROCESS MODEL OPERATES WITH ONLY A COUPLE OF HOURS OF INVENTORY IN THEIR !USTIN PLANT WITH SUPPLIES COMING IN JUST IN TIME FROM THEIR SUPPLIERS IN !SIA 7HEN THE STRIKE HIT MANY INDUSTRY WATCHERS THOUGHT THAT $ELL WOULD SOON RUN OUT OF MATERIALS AND PRODUCT PRODUCTION WOULD GRIND TO A HALT LEADING TO PLUMMETING SALES )NDEED MANY MANUFACTURERS AND RETAILERS SUFFERED EXACTLY THAT FATE DURING THAT SAME PERIOD "UT THIS DIRE PREDICTION WAS NOT REALIZED AT $ELL 3HOWING A REMARKABLE ABILITY TO ANTICIPATE THE STRIKE IN ADVANCE AND RESPONDING WITH SPEED $ELL CHARTERED "OEING S AS MANY AS IN NUMBER AND MUCH BEFORE OTHERS TRIED TO DO THE SAME TO BRING IN SUPPLIES FROM !SIA 4HEY HAD ALREADY BOOKED THESE CHARTERED mIGHTS IN ADVANCE WITH A VERY GOOD PRICE BREAK WHILE OTHERS SCRAMBLED TO lND PLANES TO CHARTER AND PAID EXORBITANT PRICES 4HIS IS AGILITY IN ACTION )T IS NO SURPRISE THAT THE ADVISORY BOARD OF THE E"USINESS 2ESEARCH #ENTER E"2# WHICH IS COMPRISED OF SENIOR EXECUTIVES OF LEADING !MERICAN AND GLOBAL CORPORATIONS IDENTIlED ADAPTIVE ORGANIZATION AS THE TOP FOCUS AREA FOR RESEARCH IN )N -AY E"2# ORGANIZED A WORKSHOP IN .EW 9ORK #ITY 4HOUGHT LEADERS FROM THE INDUSTRY AND ACADEMIA CAME TOGETHER TO DELIBERATE WITH A GROUP OF SELECTED PARTICIPANTS ON THE ISSUES OPPORTUNITIES AND CHALLENGES OF AN ADAPTIVE ORGANIZATION 4HE DELIBERATIONS AT THIS WORKSHOP LED TO THE CONCLUSION THAT AGILITY IS A MORE APPROPRIATE TERM TO USE TO DESCRIBE THESE ISSUES FROM A STRATEGIC PERSPECTIVE AND ADAPTABILITY FROM A TACTICAL PERSPECTIVE 4HE FOLLOWING TWO KEY STATEMENTS SUMMARIZE THE DELIBERATIONS OF THIS WORKSHOP &ROM SENSE AND RESPOND TO ANTICIPATE AND LEAD )F YOU ARE PLANNING TO SENSE THE CHANGES AND THEN RESPOND IT IS ALREADY TOO LATE RATHER ANTICIPATE THE COMING CHANGES AND EXECUTE WITH SPEED TO LEAD &ROM ALIGNMENT TO SYNCHRONIZATION !LIGNING YOUR INFRASTRUCTURE TO CHANGING NEEDS AND WANTS IS NOT SUFlCIENT )NSTEAD SEEK TO SYNCHRONIZE YOUR INFRASTRUCTURE CHANGES TO THE CHANGES OF THE ENVIRONMENTA CHARACTERISTIC OF A REAL TIME ENTERPRISE 3AM 0ALMISANO )"- #HAIRMAN AND #%/ RECENTLY SAID THAT TODAY hPEOPLE ARE TRAPPED BY THEIR TRAINING BUT ST CENTURY WORKERS WONT BE ABLE TO lND ANSWERS IN THE PAST BECAUSE THINGS ARE RAPIDLY SHIFTING AND NEW OPPORTUNITIES ARE ARISING SO FREQUENTLYv )F ANSWERS CANNOT BE FOUND FROM THE PAST THEY MUST BE FOUND BY POSTULATING THE FUTURE )T IS WITH THIS THOUGHT IN MIND THAT THOUGHT LEADERS IN ACADEMIA AND PRACTICE WERE BROUGHT TOGETHER AROUND THIS BOOK AND ASKED TO SHARE THEIR PERSONAL INSIGHTS AND WISDOM ABOUT AGILITY ISSUES &ROM THEIR DELIBERATIONS RECOMMENDATIONS WERE BUILT ABOUT WHAT ORGANIZATIONS CAN DO AND SHOULD DO TO BECOME AN !GILE %NTERPRISE
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4HE VARIOUS CHAPTERS IN THIS BOOK COVER THE hWHYv THE hWHATv AND THE hHOWv FROM THE PERSPECTIVES OF THE CONTRIBUTING EXPERTS 7E THE EDITORS OF THIS BOOK DID NOT ATTEMPT TO RATIONALIZE THE VARIOUS CHAPTERS INTO ONE COHERENT THOUGHT )NSTEAD WE MAINTAINED THE ORIGINALITY AND THE INTEGRITY OF THE ANALYSIS AND THE INSIGHTS SO THAT YOU THE READER WILL HAVE A FEAST OF IDEAS TO THINK ABOUT AND lND THE MOST THAT SUIT THE INITIATIVES WITHIN YOUR ORGANIZATION !LSO THE PREMISE OF THIS BOOK IS NOT TO BE PRESCRIPTIVE AS PRESCRIPTIONS WILL VARY CASE BY CASE 7E ATTEMPTED TO BE DESCRIPTIVE USING ANECDOTES TO MAKE A POINT CASE STUDIES TO DELIBERATE ON KEY ISSUES AND PERSONAL EXPERIENCES AND INSIGHTS TO IDENTIFY EMERGING BEST PRACTICES
/2'!.):!4)/. /& 4(% "//+ 4HE BOOK CHAPTERS HAVE BEEN ORGANIZED IN AN ORDER THAT SEEMED TO MAKE THE BEST SENSE SO THAT IF THE READER READS THE CHAPTERS SEQUENTIALLY THE TOPICS WILL UNFOLD IN A LOGICAL AND ORDERLY PROGRESSION "UT THIS BOOK CAN BE READ FROM BACK TO FRONT BECAUSE THE CHAPTERS ARE RELATIVELY INDEPENDENT IN CONTENT )T IS THE OVERALL THEME OF AGILITY THAT PROVIDES THE LINKAGES BETWEEN THE CHAPTERS #HAPTER SUMMARIES ARE PROVIDED BELOW WHICH WILL HELP THE READER TO GET A QUICK OUTLINE OF THE WHOLE BOOK AND TO CHOOSE THE READING ORDER THAT SUITS THE READERS CURRENT NEEDS AND PERSPECTIVES
#HAPTER SUMMARIES #HAPTER %MERGENCE OF THE !GILE %NTERPRISE "UILDING /RGANIZATIONS FOR THE 'LOBAL $IGITAL %CONOMY 4HE EMERGING GLOBAL DIGITAL ECONOMY IS FORCING BUSINESSES TO DEVISE NEW STRATEGIES DEVELOP NEW CAPABILITIES DESIGN NEW ORGANIZATIONAL STRUCTURES AND DEPLOY NEW BUSINESS MODELS 4HE DISRUPTIVE EFFECT OF FAST TECHNOLOGICAL INNOVATIONS AND ADOPTIONS REDElNE THE ESSENCE OF TODAYS COMPETITIVENESS 4RADITIONAL FORMS OF ORGANIZATION CAN NO LONGER RESPOND EFFECTIVELY TO THE NEW MARKETPLACE DYNAMICS "USINESSES CANNOT COMPETE WITH INmEXIBLE INFRASTRUCTURES OUTMODED BUSINESS MODELS AND lXED PRODUCTS AND SERVICES !CROSS THE BUSINESS LANDSCAPE WE ARE WITNESSING THE EMERGENCE OF !GILE %NTERPRISE )N ORDER TO THRIVE SUCCESSFULLY THESE ENTERPRISES ADOPT NEW VISIONS VALUES EMBRACE BREAKTHROUGH CULTURE CULTIVATE ENTREPRENEURIAL TEAMS AND CONSTRUCT ADAPTIVE INFRASTRUCTURES
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7E USE THE CONCEPT TO ACCENTUATE THE IMPERATIVENESS OF TODAYS ORGANIZATIONS TO ANTICIPATE CHANGES ADAPT SWIFTLY TO THE CHANGES AND ASSERT EFFECTIVELY FOR STRATEGIC GAINS 4HIS CHAPTER ELABORATES AND EXPLORES !GILE %NTERPRISE WITHIN THE CONTEXT OF TODAYS MARKETPLACE
#HAPTER "USINESS 0ROCESS !UTOMATION ! &RAMEWORK FOR #OMBINING "EST AND .EXT 0RACTICES FOR THE !GILE %NTERPRISE !GILE ENTERPRISES MUST ADAPT TO CONTINUALLY CHANGING BUSINESS ENVIRONMENTS IN ORDER TO SURVIVE IN THE LONG TERM 4O DO SO THEY HAVE TO COMBINE BEST AND NEXT BUSINESS PRACTICES "EST PRACTICES ENSURE EFlCIENCY NEXT PRACTICES REALLY LEAD TO COMPETITIVE ADVANTAGES 4RADITIONAL BUSINESS PROCESS AUTOMATION SOLUTIONS LIKE %20 3#- OR #2- SYSTEMS FOCUS ON THE IMPLEMENTATION OF BEST PRACTICES .EXT GENERATION PROCESS AUTOMATION ENABLES THE IMPLEMENTATION OF NEXT PRACTICES AT AN ECONOMICALLY ACCEPTABLE COST LEVEL 4HIS IS POSSIBLE THROUGH A mEXIBLE INTEGRATION OF BUSINESS PROCESS DElNITION AND SOFTWARE APPLICATION SUPPORT 4HE APPROPRIATE SOFTWARE SUPPORT MUST BE DYNAMICALLY ADAPTABLE TO THE BUSINESS PROCESSES DElNITION SO THAT IT SUPPORTS THE EXECUTION OF ENTERPRISE SPECIlC PROCESSES "USINESS PROCESS MODELS REmECTING BEST AND NEXT PRACTICES DRIVE THE CONlGURATION OF NEXT GENERATION PROCESS AUTOMATION SOLUTIONS THAT hORCHESTRATEv THE APPROPRIATE APPLICATION SUPPORT 4HEY BECOME THE CRITICAL LINK BETWEEN STRATEGY AND EXECUTION
#HAPTER 3ERVICES ARE THE ,ANGUAGE AND "UILDING "LOCKS OF AN !GILE %NTERPRISE ! FUNDAMENTAL PRECEPT OF hSERVICESv IS THAT THE CUSTOMER IS THE JUDGE OF THE VALUE )T IS CRITICALLY IMPORTANT TO DELIVER VALUE INTERNALLY AND EXTERNALLY AS FORMALIZED SERVICES BECAUSE FORMALIZED SERVICES ARE THE CUSTOMER DRIVEN GOVERNANCE MECHANISM OF AN !GILE %NTERPRISE &ORMALIZED SERVICES BY THEIR VERY NATURE CAN SERVE AS THE COMMON LANGUAGE BETWEEN AN ENTERPRISE AND ITS CUSTOMERS AND BETWEEN THE ,/"S AND )4 "Y UTILIZING A HORIZONTAL ARCHITECTURAL MODEL SUCH AS $ARWIN FORMALIZED SERVICES CAN SERVE AS THE BUILDING BLOCKS OF AN !GILE %NTERPRISE ! SERVICE MATURITY MODEL THAT IDENTIlES WHAT SERVICES ARE DELIVERED TO INTERNAL AND EXTERNAL CUSTOMERS CAN SERVE AS THE FRAMEWORK FOR JUDGING PROGRESS ALONG THE !GILE %NTERPRISE JOURNEY 4HIS SERVICE MATURITY MODEL CAN BE EXTENDED ACROSS MULTIPLE MANAGEMENT OF CHANGE DISCIPLINES TO GUIDE PROGRESS REDUCE RISK AND MAXIMIZE RETURN ON INVESTMENTS 4HE TACTICAL CHANGES EXPERIENCED BY EVERY ENTERPRISE ON A REGULAR BASIS CAN BE LEVERAGED TOWARDS THE STRATEGIC INTENT OF TRANSFORMING INTO AN !GILE %NTERPRISE
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#HAPTER 4HE /N $EMAND 7ORLD -APPING THE 'OVERNMENT 'ENOME 4HE GOVERNMENT GENOME IS AN EXCELLENT STRUCTURE TO UNDERSTAND INFORMATION mOWS AMONG COMPONENTS 4HE ENTERPRISE ARCHITECTURE DElNES THE STANDARDS GOVERNING HOW INFORMATION IS MANAGED AND EXCHANGED 4HE )4 CAPABILITY INCLUDES COMPUTING PLATFORMS OPERATING SYSTEMS SOFTWARE DATA AND NETWORKS REQUIRED TO SUPPORT THE COMPONENTS IN THE OVERALL BUSINESS MODEL 4HE ENTERPRISE ARCHITECTURE PROVIDES THE FRAMEWORK FOR SELECTING SPECIlC PRODUCTS AND BUILDING A CAPABILITY THAT CAN ADAPT TO CHANGING REQUIREMENTS OVER TIME )4 IS THE LIFELINE TO ENABLE INTEGRATED BUSINESS ACTIVITIES TO WORK BY SEAMLESSLY CONNECTING GOVERNMENT DEPARTMENTS PARTNERS AND SUPPLIERS 4HE CUMULATIVE RESULT OF THESE TECHNOLOGY INFRASTRUCTURE CHANGES IS A REAL OPPORTUNITY TO LEAPFROG INCREMENTAL CHANGE TO INTEGRATE DISPARATE STANDALONE OPERATIONS INTERNALLY AND EXTERNALLY AND OPTIMIZE THEM AS AN INTEGRATED WHOLE SO THEY WORK BETTER TOGETHER AND DELIVER ADDITIONAL VALUE
#HAPTER )NNOVATION -ANAGEMENT IN AN !GILE %NTERPRISE 4HIS CHAPTER LOOKS AT THE KEY ROLE INNOVATION MUST PLAY WITHIN AN ENTERPRISE FACED WITH UNCERTAINTY IN A RAPIDLY CHANGING GLOBAL ENVIRONMENT 4O SET THE SCENE WE BRIEmY DISCUSS THE MACRO ECONOMIC TRENDS THAT MAKE INNOVATION MANDATORY NOT A LUXURY 4HESE TRENDS LEAD TO FUNDAMENTAL CHANGES IN THE NATURE OF INNOVATION FROM A PURELY PRODUCT OR SERVICE FOCUS TO CONTINUOUS AND HOLISTIC CREATIVITY IN ALL ASPECTS OF BUSINESS 4O SUCCEED THE ENTERPRISE BECOMES AN hINNOVATION ENGINEv 4HIS DEMANDS NEW MANAGEMENT SKILLSSKILLS THAT MOST OF YOU WILL NOT HAVE LEARNED AS EVEN NOW THEY ARE JUST APPEARING IN EDUCATION CURRICULA 9OU WILL GAIN INSIGHT INTO THESE hNEWv INNOVATION FORMS THROUGH SOME SHORT CASES ILLUSTRATING THE SEVEN MAJOR NEW ATTRIBUTES THAT SUCCESSFUL hINNOVATION ENGINESv EXHIBIT 7E ALSO DISCUSS HOW AS MANAGERS YOU CAN LEAD YOUR CORPORATE CULTURE TO SUPPORT CONTINUOUS AND AGILE INNOVATION &INALLY YOU WILL LEARN HOW INNOVATIONS IN INNOVATION MANAGEMENT ITSELF CAN BE USED TO MINE THE KNOW HOW EXPERIENCE AND CREATIVE CAPACITY OF YOUR ORGANIZATION IN REAL TIME WHILE UNDERPINNING A SUPPORTIVE CULTURE
#HAPTER !GILE %NTERPRISE AND /FFSHORE /UTSOURCING )NTERNET ENABLED OFFSHORE OUTSOURCING IS ENABLING lRMS TO BECOME AGILE 4HE STRATEGY HAS MATURED CONSIDERABLY OVER THE PAST lVE YEARS AND OFFERS SIGNIlCANT ADVANTAGES TO COMPANIES THAT KNOW HOW TO DO IT RIGHT #OMPANIES LOOKING TO CUT OPERATING COSTS FOCUS ON CORE COMPETENCIES EXTEND CUSTOMER SERVICE COMPLY WITH
).42/$5#4)/.
NEW REGULATIONS OR ACHIEVE OTHER GOALS NOW COUNT OFFSHORE OUTSOURCING AS ONE ORGANIZATIONAL STRATEGY THEY CAN USE TO PROCESS AND ABSORB CHANGE /RGANIZATIONAL STRATEGIES TEND TO COME AND GO BUT OFFSHORE OUTSOURCING HAS STAYING POWER )T IS A POWERFUL IDEA ALBEIT A DIFlCULT ONE TO IMPLEMENT THAT CAN PRODUCE SUBSTANTIAL REWARDS !DAPTIVE ENTERPRISES SUCH AS $ELL )"- (0 AND '% HAVE ALREADY SEIZED THIS MODEL TO CREATE NEW VALUE PROPOSITIONS #HANGE IS CONSTANT IN THE BUSINESS WORLD )NmEXIBILITY IN ANY FORM WHETHER IN LEGACY SYSTEMS OR EMPLOYEE ATTITUDES IS THE ENEMY OF ADAPTIVE COMPETITIVE COMPANIES )F AGILITY IS THE GOAL OFFSHORE OUTSOURCING IS ONE OF THE METHODS ORGANIZATIONS CAN USE TO ATTAIN IT
#HAPTER !DAPTIVE )NNOVATION -ANAGEMENT 4HIS CHAPTER IDENTIlES THAT MANAGERS WHO PRIMARILY FOCUS ON INCREASING THE SPEED OF THEIR INNOVATION PROCESSES LOSE SIGHT OF THE LONG TERM STRATEGIC IMPLICATIONS OF THEIR INNOVATION DECISIONS -OREOVER AGILITY DEMANDS AN UNDERSTANDING OF CUSTOMER DEMANDS AND RELIANCE ON CUSTOMER FEEDBACK )RONICALLY SIMPLE CUSTOMER FEEDBACK MASKS THE UNDERLYING CUSTOMER PROBLEM SETSAND ONLY A DEEP UNDERSTANDING OF CUSTOMER PROBLEM SETS ALLOW MANAGERS TO DEVELOP INNOVATIVE CUSTOMER SOLUTIONS THAT BREAK OUT OF STANDING CUSTOMER NEED AND PRODUCT DElNITIONS (ENCE MANAGERS MUST RECOGNIZE HOW IMPERATIVE A DEEP LINKING TO CUSTOMERS MARKETS AND PROBLEM SETS ARE )N LINKING TO CUSTOMER PROBLEM SETS THE SCOPE OF INNOVATION MUST ALSO BE REDElNED 2ATHER THAN WORKING ON DEVELOPING NEW PRODUCTS OR SERVICES OR PRODUCTSERVICE PLATFORMS COMPANIES MUST UNDERSTAND AND LINK THEIR INTERNAL CAPABILITIES TO CUSTOMER PROBLEM SETS 4HIS REQUIRES INNOVATION AT AN ORGANIZATIONAL LEVEL WITH A STRATEGIC SYSTEMATIC AND SYSTEMIC FOCUS #OMPANIES THAT IMPLEMENT SUCH AN ADAPTIVE INNOVATION MANAGEMENT MODEL WILL HAVE TO ENSURE A SUPPORTIVE INFRASTRUCTURE AND CULTURE BUT CAN LOOK FORWARD TO SIGNIlCANT RETURNS TO THEIR INNOVATION INVESTMENT
#HAPTER 4HE $.! OF /RGANIZATIONAL !GILITY 4HE PROCESS OF CODIFYING AND SCALING TACIT KNOWLEDGE INTO WELL DElNED BUSINESS PROCESSES TECHNOLOGY ENABLERS AND OTHER hHARDv ASSETS AND ARTIFACTS THAT MANY OTHERS CAN USE CONSISTENTLY EFFECTIVELY AND COST EFFECTIVELY DETERMINES WHETHER OR NOT AN ORGANIZATION CAN BE AND IS AGILE (OW SO "EING AGILE REQUIRES A CRITICAL MASS OF PEOPLE AND UNDERLYING PROCESSES SUPPORTING THOSE PEOPLE TO BE ABLE TO MOVE QUICKLY IN RESPONSE TO OR IN ANTICIPATION OF SPECIlC OPPORTUNITIES 4HE ONLY WAY TO MOBILIZE SUCH A BROAD BASE OF PEOPLE AND PROCESSES MOVING IN A DIRECTED FASHION IS THROUGH A SHARED UNDERSTANDING OF WHAT IS EXPECTED OF WHAT TO DO OF HOW TO DO IT AND OF MEASURING THE VALUE OF THOSE ACTIONS 7E OFTEN HEAR THE
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DISCUSSIONS AROUND @STANDARDS @FRAMEWORKS AND THE NEED FOR @SHARED BUSINESS ANDOR TECHNOLOGY SEMANTICS FOR EFFECTIVE ACTION ALL OF WHICH REmECT THE END RESULT OF THIS PROCESS OF CODIFYING IDEAS NASCENT VALUE PROPOSITIONS AND BEST PRACTICES INTO ORGANIZATIONAL ACTIVITIES AND MEANS THAT CAN BE SCALED !ND IT IS THIS PROCESS OF CODIlCATION THAT COMPRISES THE UNDERLYING $.! FOR ORGANIZATIONAL AGILITY
#HAPTER !GILE AND !DAPTIVE -AKING /RGANIZATIONS -ORE 2ESPONSIVE TO #USTOMERS! 8EROX #ASE 3TUDY 7HAT STARTED AS A SEARCH FOR REASONS AS TO WHY 8EROX CUSTOMER SATISFACTION DATA WAS NOT ASSURING CUSTOMER LOYALTY OR EXPLAINING DEFECTIONS FROM 8EROX HAS GONE WELL BEYOND THAT CREATING A MODEL FOR CUSTOMER RELATIONSHIPS THAT IS MAKING 8EROX BOTH MORE AGILE AND MORE ADAPTABLE IN SERVING CUSTOMERS 4HE WORK THAT LED TO THE DEVELOPMENT OF 3ENTINEL HAS PROVIDED PLAUSIBLE REASONS WHY MANY CUSTOMERS DEFECTTHE LACK OF QUICK IDENTIlCATION AND APPROPRIATE SOLUTIONS OF ALL PROBLEMS CUSTOMER END USERS MAY HAVE #ONVENTIONAL CUSTOMER SATISFACTION MEASUREMENT CANNOT ADDRESS THIS LACK IT TOOK THE DEVELOPMENT OF AN INNOVATIVE NEW SOLUTION 3ENTINEL TO DO THAT 3ENTINEL IS REALLY A TRUE SENSE AND RESPOND SYSTEMA CUSTOMER BACK ROLE AND ACCOUNTABILITY STRUCTURE FOR ACTION )TS MUCH MORE THAN A GREAT MARKETING IDEA 3ENTINEL IS A WAY FOR 8EROX AND ITS CUSTOMERS TO CO CREATE NEW VALUE !ND THATS THE REAL DElNITION OF ADAPTABILITY
#HAPTER )MPLEMENTING THE !GILE %NTERPRISE 4HE % "USINESS /PPORTUNITY -ODEL %STABLISHED ORGANIZATIONS CONTINUE TO STRUGGLE WITH HOW TO EVALUATE THE POTENTIAL OF APPLYING )NTERNET 4ECHNOLOGIES TO CREATE COMPETITIVE ADVANTAGE AND IMPLEMENT THE CONCEPT OF AN AGILE ENTERPRISE 4HE EXAMPLES AND INSIGHTS PRESENTED BY OBVIOUS )NTERNET SUCCESS STORIES SUCH AS !MAZONCOM DO NOT EASILY APPLY OR LEVERAGE THE STRENGTHS AND WEAKNESSES OF ESTABLISHED lRMS AND INDUSTRIES 4HE % "USINESS /PPORTUNITY -ODEL %/- AND ITS ASSOCIATED % "USINESS /PPORTUNITY )NDEX %/) DESCRIBED IN THIS ARTICLE PROVIDES MANAGERS WITH AN EASY TO APPLY AND COMPREHENSIVE TOOL FOR ANALYZING AN INDUSTRY AND TARGETING AREAS OF OPPORTUNITY TO IMPLEMENT THE AGILE ENTERPRISE 4HE %/- AND %/) PROVIDE MANAGERS WITH A TOOL TO PRACTICE OPEN ENDED PROCESSES OF STRATEGIC DISCOVERY NEEDED TO CREATE THE AGILE ENTERPRISE 7E SEE THROUGH THE CASE STUDIES THAT E BUSINESS CAN POTENTIALLY REDUCE BARRIERS TO ENTRY AND PROVIDE OPPORTUNITIES FOR INCREASES IN THE EFlCIENCY OF TRANSACTIONS (OWEVER OUR ANALYSIS ALSO REVEALS THAT THE COMPLEXITY OF VARIATIONS IN GOVERNMENT REGULATION AND THE LACK OF ABILITY FOR E BUSINESS SITES TO DELIVER A SENSORY EXPERIENCE TO CUSTOMERS CAN BE BARRIERS TO THE IMPLEMENTATION OF AN AGILE ENTERPRISE STRATEGY
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#HAPTER 3ECURITY AND 0RIVACY FOR THE !GILE %NTERPRISE /RGANIZATIONS THAT MAINTAIN THE mEXIBILITY TO QUICKLY ADAPT TO CHANGES IN THEIR ENVIRONMENT REQUIRE TOOLS FRAMEWORKS AND REPEATABLE PROCESS TO ALLOW THEM WORK THROUGH THE UNCERTAINTY AND APPROPRIATELY ADDRESS THE RISKS GENERATED BY THE CHANGES IN THEIR OPERATIONS OR BUSINESS ENVIRONMENT &OR EXAMPLE ORGANIZATIONS THAT ALLOW CUSTOMERS TO ACCESS AND MANAGE THEIR PERSONAL DATA THROUGH ON LINE SYSTEMS TO REDUCE THE AMOUNT OF CUSTOMER SERVICE CALLS HAVE OPENED UP THE ORGANIZATIONS )4 ENVIRONMENT TO THE )NTERNET AND THE POTENTIAL THREATS ENCOMPASSED IN USING THE )NTERNET AS A MEANS OF COMMUNICATION )N TERMS OF SECURITY AND PRIVACY FOR DATA WITHIN TODAYS ORGANIZATIONS AND THEIR ABILITY TO PROTECT THAT DATA IN LIEU OF NEW AND CHANGING METHODS TO USE THAT DATA IE ACCESSING INFORMATION ON LINE OR OUTSOURCING DATA PROCESSING THE !GILE %NTERPRISE NEEDS TO HAVE IN PLACE A SECURITY AND PRIVACY FOUNDATION 4HIS SHOULD EFlCIENTLY AND EFFECTIVELY ADDRESS THE RISKS RELATED TO ITS CURRENT ENVIRONMENT OR NEW BUSINESS INITIATIVES AND PROVIDE THE APPROPRIATE RISK MIGRATION STRATEGIES THAT WOULD ALLOW THE ORGANIZATION TO TAKE ADVANTAGE OF THE CHANGE IN THE MARKETPLACE WITHOUT ADDING ADDITIONAL RISK TO THE OVERALL ORGANIZATION
#HAPTER 3MALL -ANUFACTURERS AND THE !GILE %NTERPRISE "ECOMING AN AGILE ENTERPRISE WITH THE ABILITY TO RESPOND QUICKLY AND EFFECTIVELY TO CHANGES IN THE GLOBAL BUSINESS ENVIRONMENT IS A BUSINESS NECESSITY 4HAT MEANS ADDING THE TOOLS TECHNIQUES AND TECHNOLOGIES TO YOUR SMALL BUSINESS OPERATIONS 7HICH TOOLS WHICH TECHNIQUES AND WHICH TECHNOLOGIES DEPENDS ON YOUR CUSTOMERS AND MARKETS 'ET CLOSER TO YOUR CUSTOMERS &IND OUT WHAT THEIR REAL NEEDS ARE !DD SERVICES TO WHAT YOU OFFER -AKE YOURSELF INDISPENSABLE !SK YOURSELF h7HAT VALUE DO ) BRING TO MY CUSTOMERS )S IT IN DESIGN SERVICE BEING CLOSE TO THE MARKET OR SOMETHING ELSE v )F YOU MAKE A PRODUCT TAKE A GOOD LOOK AT THE ONES THAT REQUIRE TIGHT TOLERANCES ARE DIFlCULT TO MANUFACTURE OR HAVE CRITICAL RELIABILITY REQUIREMENTS ,OOK AT THE PROCESSES USED TO MAKE THEM !RE THEY UNIQUE PROCESSES OR DO THEY REQUIRE SPECIALIZED SKILLED LABOR THAT GIVES YOU AN ADVANTAGE (AVING ASKED YOURSELF THESE PRODUCT AND SERVICE QUESTIONS NOW ASK YOURSELF ABOUT YOUR CUSTOMERS $O YOU HAVE THE RIGHT CUSTOMERS .EXT ASK ABOUT YOUR COMPANYS OPERATIONS !RE YOU AS COST COMPETITIVE AS YOU CAN BE 5SING THE ANSWERS TO THOSE QUESTIONS THEN INVEST IN AND RESTRUCTURE YOUR BUSINESS TO BECOME AS AGILE AS POSSIBLE AND BE POSITIONED TO TAKE ADVANTAGE OF OPPORTUNITIES AS THEY BECOME AVAILABLE
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#HAPTER )4 AND THE !GILE 'OVERNMENT 4HE 2OLE OF )NFORMATION 4ECHNOLOGY IN )MPROVING THE %FlCIENCY OF 'OVERNMENT &UNCTIONS 4HE PROCESS OF SETTING UP GOVERNMENT )4 SYSTEMS AND ORGANIZATIONS TO ACHIEVE AGILITY IS AN ARDUOUS PROCESS ! LONG LIST OF CHALLENGES SUCH AS LIMITED BUDGETS LEADERSHIP TURNOVER RESTRICTIVE REGULATIONS AND RETENTION OF MANPOWER CONTINUE TO MAKE THE PROCESS A CHALLENGING ONE 4O EFFECTIVELY USE )4 TO ACHIEVE THE LONG TERM GOAL OF AGILITY GOVERNMENT ORGANIZATIONS NEED TO BE AWARE OF THESE BARRIERS AND BE WILLING TO MEET THESE CHALLENGES 4HIS CHAPTER USES 4HE 0ENNSYLVANIA 3TATE 'OVERNMENT TO ILLUSTRATE HOW GOVERNMENTS MUST RESPOND TO THE CHALLENGE OF BECOMING AN AGILE ORGANIZATION 4HE 0! 3TATE 'OVERNMENT IS MADE UP OF SEPARATE AGENCIES SERVES OVER MILLION PEOPLE AND OVERSEES A BILLION BUDGET OF STATE AND FEDERAL EXPENDITURES 4O WORK WITH MAXIMUM EFlCIENCY AND EFFECTIVENESS THE STATE HAS TO BE ABLE TO RESPOND QUICKLY TO A CHANGING ENVIRONMENT 4HE CHALLENGE IS HOW TO ACHIEVE AGILITY GIVEN THE COMPLEX AND SOMEWHAT CUMBERSOME STRUCTURE OF GOVERNMENT 6ARIOUS CHAPTERS IN THIS BOOK OFFER MULTIPLE PERSPECTIVES ON THE IMPERATIVES AND CHALLENGES OF AN !GILE %NTERPRISEFROM VERY BROAD STRATEGIC ISSUES DOWN TO IMPLEMENTATION ISSUES OF PROCESS TRANSFORMATION E BUSINESS LEVERAGE AND )4 INFRASTRUCTURE 4HE CHAPTERS ADDRESS VARIOUS PERSPECTIVES ON AGILITY FROM INDUSTRY TO GOVERNMENT FROM LARGE TO SMALL AND FROM STRATEGIC TO TACTICAL 4HERE WILL BE MANY OPPORTUNITIES FOR INNOVATION AND ENHANCEMENTS IN REALIZING A REAL TIME ENTERPRISE IN THE DECADES AHEAD OF US 7E HOPE THAT THE FOUNDATIONS OFFERED IN THIS BOOK WILL HELP READERS AND RESEARCHERS IN MAKING THOSE NEXT PRACTICES INNOVATIONS
2EFERENCES "REEN "ILL h,IVING IN $ELL 4IMEv &AST #OMPANY .OV 4HE #ONFERENCE "OARD h#%/ #HALLENGE v 3TUDY )"- h9OUR 4URN 4HE 'LOBAL #%/ 3TUDYv 0AL . AND * 2AY 0USHING THE $IGITAL &RONTIER )NSIGHTS INTO THE #HANGING ,ANDSCAPE OF E "USINESS .P !-!#/-
%-%2'%.#% /& 4(% !'),% %.4%02)3% ) "UILDING /RGANIZATIONS FOR THE 'LOBAL $IGITAL %CONOMY .)2-!, 0!, %8%#54)6% $)2%#4/2 E"53).%33 2%3%!2#( #%.4%2 0%..39,6!.)! 34!4% 5.)6%23)49 -)#(!%, ,)- #%/ '2%9 ).3)'(43
).42/$5#4)/. 7HEN 7AL -ART NOTICED A SIGNIlCANT INCREASE IN THE SALES OF 53 mAGS LAPEL PINS AND OTHER PATRIOTIC ITEMS IMMEDIATELY AFTER THE 3EPTEMBER TRAGEDY THE WORLDS LARGEST RETAILER IMMEDIATELY LOCKED UP ALL THE SUPPLIES THEY COULD lND /N THE EVENING OF THE BUYERS AT 7AL -ART HAD ALREADY ORDERED ALL OF THE AVAILABLE mAGS IN THE SUPPLY CHAIN /THER RETAILERS LIKE +MART AND 4ARGET WERE SLOW TO RESPOND AND FOR A WHILE THESE ITEMS COULD ONLY BE FOUND IN 7AL -ART STORES :ARA A 3PANISH CLOTHING RETAILER HAD BLACK CLOTHES ON THE SHELVES OF THEIR STORES IMMEDIATELY AFTER THE EVENTS (OW COULD THEY REACT SO QUICKLY 7AL -ART WAS ABLE RESPOND BECAUSE THEY HAD A hREAL TIMEv TRACKING AND ANALYSIS SYSTEM THAT HELPED THEM TO SEE THE SURGE IN DEMAND AND THEIR SUPPLY CHAIN WAS ABLE TO QUICKLY RESPOND TO THE SITUATION )N :ARAS CASE WHILE THE NORMAL LEAD TIME FOR CLOTHING TO BE MANUFACTURED WAS DAYS THEY ANTICIPATED THE NEED FOR BLACK CLOTHES AND RESPONDED QUICKLY TO GET THE BLACK DRESSES MADE AND DELIVERED TO THEIR STORE SHELVES 3O IF YOU ARE COMPETING WITH THE LIKES OF 7AL -ART OR :ARA YOU NEED TO HAVE SIMILAR ABILITIES TO ANTICIPATE OR SENSE MARKETPLACE CHANGES AND THEN RESPOND TO THOSE CHANGES WITH SPEED /THERWISE YOU ARE HISTORY
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4ODAY MORE THAN EVER CORPORATE SUCCESS DEPENDS ON THE ABILITY TO ANTICIPATE ADAPT AND ACT ON ECONOMIC TECHNOLOGICAL AND SOCIAL CHANGES OVER TIME )TS TOUGH TO SENSE AS WELL AS RESPOND TO THE CHANGES IN THE GLOBAL DIGITAL ECONOMYAND ITS GETTING HARDER ALL OF THE TIME 0REDICTABILITY LINEARITY AND hONE BEST WAYv NO LONGER CHARACTERIZE THE BUSINESS ENVIRONMENT 3CHUMPETERS GALES OF CREATIVE DESTRUCTION ARE SWEEPING FEROCIOUSLY ACROSS THE ECONOMIC ECOSYSTEM 4HIS IS EVIDENCED IN THE 'LOBAL #%/ 3TUDY CONDUCTED BY )"- "USINESS #ONSULTING 3ERVICES IN WHICH #%/S ACROSS ALL INDUSTRIES HIGHLIGHTED MARKET FORCES AS THE MOST IMPORTANT EXTERNAL FACTOR THAT WILL AFFECT THEIR ORGANIZATIONS IN THE NEXT THREE YEARS
&IGURE -ARKET &ORCES IN THE 'LOBAL $IGITAL %CONOMY
)T IS THE AGGLOMERATIONS OF MARKET FORCES THAT ARE FUELING TODAYS VOLATILITY AND VELOCITY &ACED WITH GREATER VARIETY AND CHOICES IN THE MARKETPLACE THE POWER HAS SHIFTED TOWARD CONSUMERS 4HEY ARE DEMANDING HIGHER QUALITY PRODUCTS GREATER PERSONALIZATION BETTER SERVICES FASTER DELIVERY AND BIGGER DISCOUNTS )TS NO WONDER THAT ONE #%/ IN )"-S 'LOBAL #%/ 3TUDY REMARKED h! PRODUCT THAT USED TO SCORE NINE OUT OF TEN WITH ITS CUSTOMERS NOW MERELY GETS A SIXv !T THE PRESENT TIME AND THE FORESEEABLE FUTURE THE )NTERNET REMAINS ONE OF THE MAJOR DISRUPTIVE FORCES IN THE MARKETPLACE #YBERSPACE ENABLES CONSUMERS TO FORM ONLINE COMMUNITIES WHICH CAN ADVERSELY AFFECT BRAND NAMES AND COMPANY REPUTATIONS -ORE AND MORE CONSUMERS ARE ALSO USING THE 7ORLD 7IDE 7EB TO INmUENCE THEIR PURCHASING DECISIONS 4HE GLOBAL DIGITAL SUPERSTRUCTURE HAS CAUSED THE WORLD MARKET TO BECOME MORE INTEGRATED BUT AT THE SAME TIME CONSUMER NEEDS ARE BECOMING MORE DIVERSE AND SEGMENTED CAUSING ORGANIZATIONS TO RESPOND WITH
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MARKETING SALES AND DISTRIBUTION PROGRAMS THAT ARE MORE DIVERSE AND SEGMENTED 0ROCTER AND 'AMBLE IS A GOOD CASE IN POINT 4HE &ORTUNE HOUSEHOLD PRODUCTS COMPANY HAS BEEN MANUFACTURING THEIR FAMOUS BRAND 4IDE DETERGENT SINCE 4HEIR SECOND COMMERCIALS ON NATIONAL TELEVISION CHANNELS ARE LEGENDARY AND ARE OFTEN CONSIDERED TO BE BENCHMARKS IN MASS MARKETING 4ODAY THEY HAVE FOURTEEN VERSIONS OF 4IDE SPECIALLY DESIGNED FOR FOURTEEN DIFFERENT TARGET MARKETS WHICH HAS CAUSED THEIR MARKETING CAMPAIGNS TO BE MORE CUSTOMIZED 4HEY NOW SPEND LESS ON BROADCAST MEDIA LIKE NETWORK TELEVISION AND MORE ON NARROWCAST MEDIA LIKE THE )NTERNET RADIO CHANNELS AND SPECIALIZED MAGAZINES AND CABLE TELEVISION CHANNELS %XECUTIVES ARE ALSO FACING UNRELENTING lNANCIAL PRESSURES 4HE MEDIAN RATE OF RETURN FOR 53 CONSUMER PRODUCT GOODS HAS FALLEN 3HAREHOLDERS AND ANALYSTS TOO ARE BECOMING IMPATIENT WITH MARKET VALUATION CONCERNS !CCOUNTING SCANDALS BRED MISTRUST AND CAUSED THE IMPOSITION OF STRICTER REGULATIONS EG THE 3ARBANES /XLEY !CT )N RECENT YEARS ORGANIZATIONS HAVE FACED NUMEROUS NEW REGULATORY ISSUES NAMELY CROSS BORDER E COMMERCE ONLINE TAX PRIVACY ISSUES AND HOMELAND SECURITY 4HIS IS COMPOUNDED BY THE UNPREDICTABLE SOURCES OF EXTERNAL THREATS EG THE 7ORLD 4RADE #ENTER ATTACK 3!23 THE WAR IN )RAQ -AD #OW DISEASES THE "IRD &LU %PIDEMIC THE POWER BLACKOUT IN .ORTHEASTERN 5NITED 3TATES IN AND COMPUTER VIRUSES 4HE DISRUPTIVE EFFECT OF FAST TECHNOLOGICAL INNOVATIONS AND ADOPTIONS REDElNE THE NATURE OF TODAYS COMPETITIVENESS 7ITH THE INmUX OF NEW AND INNOVATIVE COMPETITORS IN THE GLOBAL MARKETPLACE THE DYNAMICS OF INDUSTRIES ARE CHANGING 4HE )NTERNET AND ADVANCES IN COMMUNICATION TECHNOLOGIES HAVE MADE OUTSOURCING MORE ECONOMICALLY COMPELLING ESPECIALLY OFFSHORE OUTSOURCING
&IGURE &ROM 6ALUE #HAINS TO 6ALUE .ETWORKS
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WHICH IS EXPECTED TO REACH 53 BILLION IN FROM 53 BILLION IN )$# 6ERTICALLY INTEGRATED VALUE CHAINS ARE DISINTEGRATING INTO VIRTUALLY INTEGRATED VALUE NETWORKS SEE &IGURE WHERE COLLABORATION CO CREATION AND CO OPETITION BETWEEN lRMS ARE CRITICAL SUCCESS FACTORS )NDUSTRIES ARE RECONlGURING AND REDElNING AS THE THRUST OF THEIR MAIN PRODUCTS AND SERVICES UNDERGO TRANSFORMATION #OCA #OLA IS MAKING MORE MONEY SELLING BOTTLED WATER THAN #OKE '- IS MAKING MORE PROlT FROM ITS lNANCING OPERATIONS '-!# &INANCIAL 3ERVICES THAN ITS AUTOMOTIVE DIVISION OF 5NISYS REVENUE IS COMING FROM SERVICES THAN PRODUCTS /VER OF )"-S REVENUE IS COMING FROM SERVICES 4O REMAIN COMPETITIVE IN SUCH A RAPIDLY CHANGING AND COMPLEX ENVIRONMENT ORGANIZATIONS ARE TRYING TO CHANGE BUT ARE CHALLENGED WITH INmEXIBLE BUSINESS AND )NFORMATION 4ECHNOLOGY )4 INFRASTRUCTURES !T THE SAME TIME THEY FACE CULTURAL ISSUES THAT ALSO RESIST RAPID CHANGE )"- WHICH IS A TEXTBOOK SUCCESS STORY IN TRANSFORMATION TOOK SIX YEARS FROM TO TO ALIGN ITSELF WITH THE INDUSTRY 4HE INCREASING LEVEL OF UNCERTAINTY AND COMPLEXITY REQUIRES NEW ORGANIZATIONAL CONlGURATIONS AND OPERATING MODELS 4RADITIONAL FORMS OF ORGANIZATION CAN NO LONGER RESPOND EFFECTIVELY TO THE NEW MARKETPLACE DYNAMICS -ECHANISTIC ORGANIZATIONS HAVE DIFlCULTY RESPONDING TO THE CHANGING CIRCUMSTANCES "USINESSES CAN NO LONGER OPERATE WITH INmEXIBLE INFRASTRUCTURES OUTMODED BUSINESS MODELS AND lXED PRODUCTS AND SERVICES -ANUEL #ASTELLS ONE OF WORLDS BEST KNOWN SOCIAL SCIENTISTS OBSERVED THIS ERA AS THE hCRISIS OF THE TRADITIONAL CORPORATE MODEL OF ORGANIZATION BASED ON VERTICAL INTEGRATION AND HIERARCHICAL FUNCTIONAL MANAGEMENTv #ASTELLS P )N THIS ERA WE ARE WITNESSING THE RISE OF NEW ORGANIZATIONAL PRINCIPLES 7ITH TECHNOLOGICAL ADVANCES ALTERNATIVE MODELS BECOME POSSIBLE VIABLE AND FEASIBLE FOR MANAGING IN TODAYS MARKETPLACE
%-%2').' !'),)49 /RGANIZATIONS CO EVOLVE WITH THEIR ENVIRONMENTS %VERY ORGANIZATION CONTINUOUSLY REACTS TO PRICES FORECASTS SENTIMENTS TRENDS AND POLITICAL SCENARIOS 3TRATEGY CREATION IS A CONTINUOUS PROCESS AN OPEN ENDED PROCESS OF STRATEGIC DISCOVERY (AMEL )N THE COMPLEX ENVIRONMENT A BUSINESS IS ALWAYS A PROTOTYPE SUBJECT TO CONSTANT EXPERIMENTATIONS AND IT IS ALWAYS BEING CREATIVELY CONSTRUCTED AND DECONSTRUCTED OVER TIME /F COURSE THE PROTOTYPE CANNOT BE TOO VOLATILE AND INSTABLE AS IT PREVENTS PRODUCTIVE BEHAVIORS FROM EMERGING )T NEEDS TO BE POISED AT THE EDGES OF CHAOS +AUFFMAN "UILT TO !DAPTTHATS THE STRATEGIC THEME OF TODAYS ORGANIZATIONS /RGANIZATIONS NEED TO TRANSFORM FROM MAKE AND SELL TO
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SENSE AND RESPOND (AECKEL AND .OLAN "USINESSES HAVE TO BECOME AGILE TO THRIVE IN THE VOLATILE AND COMPLEX ENVIRONMENT 7E NEED THE REDElNITION AND RECONCEPTUALIZATION OF AGILITY )N THE RAPIDLY CHANGING MARKETPLACE TECHNOLOGIES SET THE PACE )NFORMATION TECHNOLOGY PARTICULARLY THE )NTERNET IS CAUSING UPHEAVAL IN MANY INDUSTRIES 4HE )NTERNET TOOK ONLY FOUR YEARS TO REACH MILLION USERS WHEREAS THE TELEPHONE TOOK OVER YEARS THE RADIO TOOK YEARS AND THE TELEVISION TOOK YEARS 4HE )NTERNET IS DISSOLVING BOUNDARIES AND ITS IMPACT IS EXPERIENCED WORLDWIDE THOUGH NOT EVENLY DISTRIBUTED YET 4HE GLOBAL DIGITAL NETWORK OFFERS A WIDE RANGE OF POSSIBILITIES FOR ENTERPRISES TO CO CREATE WITH THEIR CUSTOMERS TO COORDINATE WITH SUPPLIERS AND PARTNERS AND TO GENERATE REVENUE !S BUSINESSES PROGRESS UP THE LEARNING CURVE WE OBSERVE MORE CREATIVE AND PRODUCTIVE APPLICATIONS OF )NTERNET TECHNOLOGIES FOR REVENUE GENERATION AND COSTS REDUCTION $ELL )NC #HARLES 3CHWAB )NTEL "OEING )"- .44 $O#O-O (0 &ORD -OTOR E"AY AND MANY MORE GLOBAL CORPORATIONS ARE UTILIZING THE )NTERNET FOR MILLIONS OF DOLLARS OF TRANSACTIONS EACH DAY 'ENERAL %LECTRIC #ISCO 3YSTEMS /RACLE AND MANY MORE CLAIMED TO HAVE SAVED BILLIONS OF DOLLARS IN EXPENSES BY DIGITIZING THEIR OPERATIONS )NCUMBENTS ARE REDElNING AND REDESIGNING EXISTING BUSINESS METHODOLOGIES AND START UPS ARE CARVING AND SOLIDIFYING THEIR NICHES IN THE NEW ECONOMY &ULL STEAM AHEAD 4ODAY EXECUTIVES ARE FORCED TO RETHINK MANY KEY BUSINESS ISSUES 2ULES EXPECTATIONS PROCESSES STRUCTURES RELATIONSHIPS TACTICS AND WINNING FORMULAS ARE CHANGING 4HE )NTERNET IS RECONlGURING THE WAY ENTERPRISES COMMUNICATE REDElNING VALUE CREATION PROCESSES ENHANCING CUSTOMER VALUE DELIVERY CHANNELS STREAMLINING SUPPLY CHAINS ALTERING INDUSTRIAL STRUCTURES AND RE WRITING THE RULES OF COMPETITION )T HAS ALSO EXPOSED THE VULNERABILITIES OF MANY TRADITIONAL BUSINESS MODELS AND ASSUMPTIONS &OR EXAMPLE THE MUSIC INDUSTRY IS COUNTERING THE ONSLAUGHT OF ONLINE lLE SHARING ACTIVITIES -0 TECHNOLOGY COMPRESSES THE MUSIC lLE WITHOUT SIGNIlCANTLY DETERIORATING ITS QUALITY -0COM WAS A COMMUNITY WHERE ARTISTS AND MUSIC FANS COULD DOWNLOAD AND UPLOAD -0 lLES (OWEVER ITS INHERENT LACK OF CONSIDERATION FOR PROTECTION AGAINST THE ILLEGITIMATE DOWNLOADING OF COPYRIGHTED MUSIC lLES INSTIGATED THE @WRATH OF THE MUSIC INDUSTRY 4HE 2ECORDING )NDUSTRY !SSOCIATION OF !MERICA 2)!! SUED -0COM AND SUCCEEDED IN PROVING TO THE COURT THAT IT VIOLATED COPYRIGHTS IN !PRIL OF !TTENTIONS THEN SHIFTED TO .APSTER .APSTER TECHNOLOGY OPERATES ON A PEER TO PEER ARCHITECTURE THAT ENABLES MEMBERS TO SWAP -0 MUSIC lLES WITH GREATER EASE )N .APSTERS COMMUNITY -0 lLES ARE NOT STORED IN .APSTER OWNED SERVERS BUT IN HUNDREDS OF THOUSANDS OF INDIVIDUAL 0#S WHICH BELONG TO THE MEMBERS OF THE .APSTER COMMUNITY .APSTER ONLY PROVIDES SERVERS FOR DIRECTORIES AND SEARCH CAPABILITIES WITHIN THE COMMUNITY )N .OVEMBER OF ALONE BILLION
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DOWNLOADS OCCURRED AND THERE WERE APPROXIMATELY MILLION USERS WORLDWIDE %VEN !NDREW 'ROVE THEN #HAIRMAN OF )NTEL #ORP COMMENTED h4HE WHOLE )NTERNET COULD BE RE ARCHITECTED BY .APSTER LIKE TECHNOLOGYv 2AUL 4HE 2)!! SUED .APSTER FOR BEING AN ACCESSORY TO PIRACY )N *ULY OF THE 53 $ISTRICT #OURT IN 3AN &RANCISCO FOUND .APSTER LIABLE FOR THE EXCHANGES OF PIRATED -0 lLES WITHIN ITS COMMUNITY AND ORDERED IT TO SHUT DOWN !FTER -0COM AND .APSTER THE INDUSTRY FACED NEW BREEDS OF PEER TO PEER lLE SHARING TECHNOLOGIES SUCH AS +AZAA ,IMEWIRE I-ESH 3HAREAZA AND "IT4ORRENT (OWEVER ITS NOT ALL GLOOM AND DOOM FOR THE MUSIC INDUSTRY CONSIDERING THE WIDESPREAD POPULARITY OF !PPLES I4UNES ONLINE MUSIC STORE AND ITS I0OD MUSIC PLAYER I0OD IS ONE OF THE HOTTEST NEW PRODUCTS IN THE MARKET TODAY 3INCE THE PORTABLE MUSIC PLAYER WAS INTRODUCED IN /CTOBER !PPLE HAS CAPTURED OF THE MUSIC PLAYER MARKET BY HAVING SOLD OVER THREE MILLION UNITS )T IS ESTIMATED THAT THE I0OD WILL ACCOUNT FOR ABOUT OF !PPLES REVENUE IN I4UNES -USIC 3TORE !PPLES LEGAL MUSIC DOWNLOADING SERVICE HAS ALSO EXPERIENCED COMMERCIAL SUCCESS ,AUNCHED IN !PRIL THE ONLINE MUSIC STORE SOLD ITS MILLIONTH SONG ON *ULY )T IS THE WORLDS NUMBER ONE ONLINE MUSIC SERVICE WITH MORE THAN A MARKET SHARE OF ALL LEGAL DOWNLOADS OF SONGS AND ALBUMS 4HIS AMOUNTS TO OVER TWO PERCENT OF THE LEGALLY SOLD SONGS IN THE 53! AND WAS ACHIEVED WITHIN lFTEEN MONTHS 7HO WOULD HAVE PREDICTED THAT THIS PIONEERING LEGAL MUSIC DOWNLOADING BUSINESS WOULD BECOME A GROWING BILLION DOLLAR BUSINESS FOR !PPLE WITHIN SUCH A SHORT TIME !CCORDING TO &ORRESTER 2ESEARCH DIGITAL MUSIC DOWNLOADS ARE ESTIMATED TO WORTH MILLION BY END OF AND WILL GROW TO BILLION BY .OT SURPRISINGLY THE ONLINE MUSIC BUSINESS IS ALREADY ATTRACTING COMPETITORS 4HE RE LAUNCHED .APSTER OFFERS CENT PER SONG WITH OVER SONGS AVAILABLE ON DEMAND )N !UGUST !PPLES RIVAL IN THE MUSIC DOWNLOADING BUSINESS 2EAL.ETWORKS ANNOUNCED A FORTY NINE CENTS DOWNLOADING SERVICE AGAINST NINETY NINE CENTS CHARGED BY !PPLE FOR EACH DOWNLOADED SONG 4HIS IS A SPECIAL SALE FOR A SHORT PERIOD BUT IT WILL SURELY HEAT UP THIS mEDGLING MARKET )N 3EPTEMBER -ICROSOFT LAUNCHED ITS @PREVIEW VERSION OF -3. -USIC TO COMPETE WITH !PPLES I4UNES -ANY OTHER BIG PLAYERS LIKE 9AHOO -46 AND 6IRGIN ARE PLANNING TO ENTER THE MARKET TOO AS EXPECTED .OW LET US SEE WHAT 3TARBUCKS IS DOING )N -ARCH THEY OPENED UP THEIR lRST (EAR -USIC #OFFEEHOUSE WHERE THEY HAVE INSTALLED MUSIC LISTENING STATIONS WITH #$ BURNING CAPABILITIES 7ITH HUNDREDS OF THOUSANDS SONGS DIGITALLY STORED IN THEIR SERVERS YOU CAN CREATE YOUR OWN #$ WITH YOUR SPECIALLY SELECTED SONGS IN JUST A FEW MINUTES AS YOU SIP YOUR LATTE 4HEY PLAN TO OPEN SUCH STORES BY THE YEAR END OF AND STORES IN 7HILE THIS IS HAPPENING THE MUCH BIGGER 4OWER 2ECORDS STORES ARE FALTERING AND THEIR PARENT COMPANY lLED FOR #HAPTER BANKRUPTCY PROTECTION EARLY IN 4HIS IS A GOOD EXAMPLE OF WHAT WE MEAN BY EMERGING AGILITY ,ET THE MOST AGILE SURVIVE
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!NOTHER EXAMPLE IS %NCYCLOPEDIA "RITANNICA 4HOUGH THIS IS A MUCH USED EXAMPLE WE THINK IT IS APPROPRIATE TO REVISIT IT HERE &OR A LONG TIME IT SOLD ITS VOLUME SET FOR MORE THAN 53 AND EMPLOYED AN ARMY OF SALES AGENTS "ILL 'ATES OFFERED TO BUNDLE THE CONTENT WITH -ICROSOFT PRODUCTS BUT %NCYCLOPEDIA "RITANNICA REFUSED ,ATER -ICROSOFT DEVELOPED %NCARTA ON #$ 2/- WHICH THREW THE CENTURY OLD BUSINESS INTO A TAILSPIN SINCE %NCARTA OFFERED A MUCH CHEAPER ALTERNATIVE WITH A DAZZLING MULTIMEDIA PRESENTATION OF INFORMATION )N A HIGHLY DYNAMIC MARKETPLACE OPPORTUNITIES ARE mEETING AND BUSINESSES MUST IDENTIFY AND SEIZE OPPORTUNITIES AS THEY ARISE 4HERE ARE MANY CASES OF ORGANIZATIONS WITH GREAT INVENTIONS THAT FAILED TO PROlT FROM THEM 0ROBABLY THE BEST KNOWN EXAMPLE IS THE FAILURE OF 8EROX #ORPORATION TO CAPITALIZE ON ITS 0ALO !LTO 2ESEARCH #ENTERS 0!2# INNOVATIONS SUCH AS THE 'RAPHICAL 5SER )NTERFACE '5) AND THE COMPUTER MOUSE 8EROX 3YSTEMS $EVELOPMENT $IVISION COMMERCIALIZED '5) AS @8EROX 3TAR BUT ONLY UNITS WERE SOLD (OWEVER !PPLE WENT ON TO UTILIZE '5) AND ALSO THE MOUSE FOR ITS THEN REVOLUTIONARY -ACINTOSH AND THE REST IS HISTORY !NOTHER CASE IS $AIMLER#HRYSLERS 04 #RUISER 4HE CARMAKER COULDNT PRODUCE THE CAR FAST ENOUGH TO MEET THE MARKETS DEMAND FOR ITS AND MODEL YEARS 4HE CARMAKER SPENT MILLION DEVELOPING THE 04 #RUISER AND IT WAS A BIG HIT IN THE MARKET !LTHOUGH ITS 4OLUCA PLANT IN -EXICO COULDNT ROLL 04 #RUISERS OFF OF THE ASSEMBLY LINE FAST ENOUGH THE CARMAKER COULDNT SHIFT OVERmOW PRODUCTION TO ITS PLANT IN "ELVIDERE )LLINOIS 4HIS IS MAINLY DUE TO THE INCOMPATIBILITY BETWEEN THE TWO PRODUCTION PLANTS THE PAINT SHOP AT THE "ELVIDERE PLANT IS NOT TALL ENOUGH FOR 04 #RUISER )T IS ESTIMATED THAT $AIMLER#HRYSLER MISSED THE OPPORTUNITY TO ADD ANOTHER MILLION TO ITS PRETAX PROlT )NmEXIBILITY AS ILLUSTRATED IN THE EXAMPLES OF 8EROX AND $AIMLER#HRYSLER STRATEGICALLY IMPEDES BUSINESSES CAPABILITIES AND CAPACITIES TO COMPETE AND RESPOND TO UNEXPECTED SHIFTS IN THE INDUSTRY !GILITY IS ALSO ABOUT EXPLOITING DISRUPTIONS OR PUNCTUATED EQUILIBRIUM AND TO THRIVE IN NEW AREAS OF GROWTH "USINESSES MUST JUMP THE CURVE AND LEVERAGE ON ANY INDUSTRY SHIFTS &OR EXAMPLE E "USINESS %XCHANGE E "8 AN )"- 0REMIER "USINESS 0ARTNER STARTED OUT AS A PRINTING COMPANY SECURITY CHECKS CONSUMER PACKAGING STOCK SCRIPTS )N THE CHANGING TECHNOLOGICAL LANDSCAPE IGNITED THE COMPANYS WHOLESALE TRANSFORMATION INTO AN )4 COMPANY 4ODAY THE COMPANY PROVIDES E BILLING E PROCUREMENT PAYMENT SYSTEMS AND SERVICES TO BIG CORPORATIONS EG !N 0OST )RELAND #ABLE 7IRELESS (+4 $EUTSCHE "ANK (3"# AND (ANG 3ENG "ANK 3INGAPORE 4ELECOM AND TOGETHER WITH #ITIGROUP SUPPORTED &ED%X %6! !IR $AIRY &ARMERS AND #ARGOLUX .OKIA THE WORLDS LEADING MOBILE PHONE MAKER HAS ALSO DISPLAYED A SIMILAR SORT OF TRANSFORMATION )T WAS ONCE A &INNISH CONGLOMERATE WITH DIVERSE BUSINESSES FROM MANUFACTURING PAPER AND RUBBER BOOTS TO PRODUCING CABLES FOR TELEPHONE AND TELEGRAPH NETWORKS )N -AY .OKIAS MANAGEMENT MADE A STRATEGIC DECISION TO DIVEST ALL NON CORE BUSINESSES AND FOCUS
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ON TELECOMMUNICATIONS 4HEY BET THE HOUSE ON THE THEN NASCENT UNPROVEN DIGITAL TECHNOLOGY FOR MOBILE PHONES KNOWN AS '3- 7ITH A MARKET SHARE .OKIA IS TODAYS INDUSTRY LEADER (OWEVER ITS COMPETITORS SUCH AS -OTOROLA 3AMSUNG 3ONY %RICSSON AND 3IEMENS ARE ATTACKING .OKIA ON ALL FRONTS )N ADDITION EMERGING TECHNOLOGIES SUCH AS ' AND 7I &I ARE RESHAPING THE INDUSTRY LANDSCAPE AND CHALLENGING THE VIABILITY OF .OKIAS EXISTING BUSINESS MODEL 4O CONTINUE POWERING ITS ENGINE OF GROWTH .OKIA WILL HAVE TO CONSTANTLY LEVERAGE AND INNOVATE BOTH EMERGING AND CONVERGING TECHNOLOGIES )N THE EARLY S )"- PRACTICALLY INVENTED THE PERSONAL COMPUTER INDUSTRY )"- 0# SOON BECAME THE INDUSTRY STANDARD "UT IN THE S )"- SIMPLY COULD NOT KEEP UP WITH COMPETITORS LIKE #OMPAQ AND LATER $ELL )T lNALLY ABANDONED THE MANUFACTURE AND DISTRIBUTION OF PERSONAL COMPUTERS TO ITS BUSINESS PARTNERS )T SOLD ITS MANUFACTURING OPERATIONS INCLUDING PLANTS AND PEOPLE TO 3ANMINA #ORPORATION NOT ONLY FOR PERSONAL COMPUTERS BUT OTHER DESKTOPS AS WELL AS LOW END SERVERS /N THE OTHER HAND )"- IS DOING EXTREMELY WELL IN THE HIGH END SERVER MARKET AND HAS RETAINED THE DEVELOPMENT MANUFACTURING AND DISTRIBUTION TO ITSELF )"- HAS BEEN ABLE TO ADAPT TO THE CHANGES THAT THE NUMEROUS HIGH END SERVER MARKET HAS UNDERGONE (OWEVER IN THE LOW END SERVER MARKET AS WELL AS IN THE PERSONAL COMPUTERS MARKET THE CHANGES HAVE BEEN SO RADICAL THAT )"- HAS MOVED TO AN INNOVATIVE BUSINESS MODEL OF COLLABORATION WITH ITS BUSINESS PARTNERS IN ORDER TO MAINTAIN ITS PRESENCE AND LEAD IN THIS SECTOR )N MANY INSTANCES TECHNOLOGICAL BREAKTHROUGHS ENABLE MUCH NIMBLER COMPETITORS TO LEVERAGE THE TECHNOLOGY TO GAIN LEADERSHIP POSITIONS IN THE MARKETPLACE )NCUMBENTS HAVE NO CHOICE BUT TO ADAPT AND RESPOND TO THE CONSTANT THREATS .OKIA REPLACED -OTOROLA AS THE WORLDS BIGGEST MANUFACTURER OF MOBILE PHONES IN )N THE ENTERTAINMENT INDUSTRY 0IXAR !NIMATION 3TUDIOS IS CHALLENGING THE KING OF ANIMATION 7ALT $ISNEY 3TUDIOS )N IT PRODUCED THE WORLDS lRST FULLY COMPUTER GENERATED #' FEATURE lLM 4OY 3TORY "Y LEVERAGING ON LEADING EDGE RENDERING TECHNOLOGIES AND TECHNIQUES TO CREATE PHOTOREALISTIC ANIMATED FEATURE lLMS 0IXAR HAS PRODUCED A STREAM OF BOX OFlCE HITS THAT HAVE SO FAR GROSSED ABOUT BILLION !CROSS MANY INDUSTRIES BUSINESSES ARE JOSTLING FOR MARKET LEADERSHIP WITH GREATER SPEED AND INTENSITY %XAMPLES INCLUDE '- VS 4OYOTA 0ALM VS 0OCKET 0# 9AHOO VS 'OOGLE 0EOPLESOFT VS 3ALESFORCECOM "OEING VS !IRBUS "ARNES .OBLE VS !MAZONCOM )NTEL VS !-$ 0ROCTOR 'AMBLE VS ,/REAL 3ONY VS !PPLE 0lZER VS *OHNSON *OHNSON AND !MERICAN!IRLINES VS *ET"LUE !IRWAYS 4HE GROWING INTERESTS ON WEB SERVICES OUTSOURCING ORGANIZATIONAL CHANGE INNOVATION VALUE CHAIN DECONSTRUCTION MODULARITY LEARNING ORGANIZATION OPEN SOURCE CREATIVE DESTRUCTION COMPLEX ADAPTIVE SYSTEMS CO CREATION AND INTERNETWORKING INDICATE THE IMPORTANCE OF AGILITY AMONG BUSINESS PRACTITIONERS
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AND RESEARCHERS !GILE ENTERPRISE IS TODAYS ORGANIZING FORMULA )T IS DESIGNED TO ADAPT AND INNOVATE WITH THE KEY CHARACTERISTICS OF mEXIBILITY TO CHANGES AND SENSITIVITY TO hWHATS GOING ON OUT THERE v )T ENCAPSULATES THE MOVEMENT TOWARDS THE DEVELOPMENT OF A NEW ORGANIZATIONAL PARADIGM AND FORM FOR THE ST CENTURY ECONOMY
!'),% %.4%202)3% !GILE %NTERPRISE IS THE SURVIVAL TRAIT OF THE COMPETITIVE MARKETPLACE IN THE GLOBAL DIGITAL ECONOMY !BOUT OF THE #%/S IN THE 'LOBAL #%/ 3TUDY SAID THEY WILL TRANSFORM THEIR ORGANIZATIONS TO BECOME MORE RESPONSIVE WITHIN THE NEXT lVE YEARS 4HIS IS BECAUSE MOST OF THE #%/S BELIEVE THEIR ORGANIZATIONS ARE NOT ADAPTIVE AND AGILE ENOUGH TO CATER TO CHANGES IN THEIR CURRENT MARKETS AND AT THE SAME TIME PURSUE EMERGING OPPORTUNITIES 4HE 3TUDY ELABORATES h#%/S ALL OVER THE WORLD HAVE IDENTIlED ORGANIZATIONAL RESPONSIVENESS AGILITY AND mEXIBILITY AS NECESSARY COMPETENCIES $EVELOPING THE ABILITY OF THE ORGANIZATION TO NOT JUST SENSE BUT TO ANTICIPATE AND RESPOND TO THE CHANGING MARKET PLACE AND CUSTOMER REQUIREMENTS IS ONE OF THE GREAT CHALLENGES FOR TODAYS #%/Sv 3UCCESSFUL CORPORATIONS MUST DESIGN AN AGILE OPERATING MODEL TO THRIVE IN TODAYS ECONOMY !GILITY IN THE )NFORMATION !GE REQUIRES ORGANIZATIONS TO ADOPT A DIFFERENT PARADIGM MINDSET VISION TECHNOLOGY STRUCTURE AND CULTURE 7E TERM THE EMERGING ORGANIZATIONAL FORM AS AGILE ENTERPRISE 4HERE ARE MANY WAYS TO PERCEIVE AND CONCEPTUALLY CONSTRUCT TODAYS ORGANIZATIONS 9OU CAN lND MANY NAMES DESCRIBING EMERGING ORGANIZATIONAL FORMS IN TODAYS BUSINESS LITERATURES "Y ADOPTING A PERSPECTIVE OR VIEWPOINT WE ARE AT RISK OF IGNORING OTHER WAYS OF SEEING THE ORGANIZATION hx CONCEPTS THEORIES AND MODELS CAN NEVER REPRESENT OR EXPLAIN THE FULL RICHNESS OF REAL SOCIAL PHENOMENA WE CAN NEVERTHELESS APPRECIATE HOW APT ARCHETYPES CAN HELP US SEE AND UNDERSTAND IMPORTANT OFTEN DECISIVE ASPECTS OF REALITY %VEN IF THEIR EXPLANATORY POWER IS LIMITED THEY CAN NEVERTHELESS BE OF GREAT HELP AND MAKE IT POSSIBLE FOR US TO ANALYZE PROBLEMS MORE ACCURATELY AND TO DESIGN MORE FUNCTIONAL ORGANIZATIONSv 'ROTH P EMPHASIS ADDED %ACH CONCEPT SENSITIZES US TO A LIMITED SET OF CRITICAL ELEMENTS WHILE IGNORING OTHER POSSIBLY EQUALLY IMPORTANT ELEMENTS (OW WE REPRESENT AND CONCEPTUALIZE A BUSINESS hOFTEN FACILITATES ANALYSIS AND COMMUNICATION OF A CHANGEv 7EILL AND 6ITALE
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P )MAGES OF ORGANIZATION ARE hINTERPRETIVE CONSTRUCTS OR WAYS OF SEEINGx ALSO PROVIDE FRAMEWORKS FOR ACTIONv -ORGAN P 4HE CONCEPT OF AGILE ENTERPRISE SENSITIZES US TO THE FUNDAMENTALS OF TODAYS BUSINESS ENVIRONMENT NAMELY HIGHER VELOCITY OF CHANGEAND THE KEY TO SURVIVAL IS THE ABILITY TO ADAPT TO THE CHANGES IN REAL TIME )T ADOPTS THE OPEN SYSTEMENVIRONMENTAL MODEL WHERE ENVIRONMENTAL FORCES SIGNIlCANTLY INmUENCE THE ORGANIZATIONAL STRUCTURES STRATEGY AND SUCCESS *AFFEE )N ADDITION THE CONCEPT ACCENTUATES THE IMPERATIVENESS OF CONTINUOUS ANTICIPATION SENSITIZATION AND REACTION TO INDUSTRY DYNAMICS IN ORDER TO GAIN AND SUSTAIN ORGANIC GROWTH !T THE SAME TIME IT ALSO EMPHASIZES THE ROLE OF INNOVATION IN CARVING ENTRENCHING AND EXTENDING LEADERSHIP NICHES IN THE INDUSTRY ECOSYSTEM )T STRETCHES OUR SPECTRUM OF POSSIBILITIES AS WE STRIVE TO BUILD ENDURING ORGANIZATIONS $ISRUPTIVE FORCES SUCH AS GLOBALIZATION DIGITIZATION DEREGULATION AND CUSTOMERIZATION STIMULATE ORGANIZATIONAL MUTATION OVER TIME -ILES AND 3NOW DESCRIBE THE PROCESS OF SYNCING WITH THE BUSINESS ENVIRONMENT FOR COMPETITIVENESS AS ACHIEVING STRATEGIC lT 3UCH lT MUST OCCUR WITHIN AND WITHOUT AN ORGANIZATION -ANAGEMENT PROCESSES AND ORGANIZATIONAL STRUCTURE INTERNAL MUST BE APPROPRIATELY DESIGNED TO SUPPORT THE STRATEGY EXTERNAL -ILES AND 3NOW EXPLAIN h&IT IS A PROCESS AS WELL AS A STATEA DYNAMIC SEARCH THAT SEEKS TO ALIGN THE ORGANIZATION WITH ITS ENVIRONMENT AND TO ARRANGE RESOURCES INTERNALLY IN SUPPORT OF THAT ALIGNMENT PERFECT lT IS MOST OFTEN A CONDITION TO BE STRIVEN FOR RATHER THAN ACCOMPLISHEDv P 4HE ECONOMICAL TECHNOLOGICAL AND SOCIETAL STATE OF mUX MAKES PERFECT lT HARD TO ACHIEVE 4HINK (ERACLITUSS mUX DOCTRINE h9OU CANNOT STEP TWICE INTO THE SAME RIVER FOR FRESH WATERS ARE EVER mOWING IN UPON YOUv 4HIS IS A MANIFESTATION OF AGILITY THAT WE CALL lT OR ADAPTATION TO THE CHANGES IN A BUSINESS ENVIRONMENT 'ENERALLY SPEAKING WHEN THE CHANGES ARE INCREMENTAL THEN ADAPTATION IS AN APPROPRIATE RESPONSE .OT ONLY ADAPTING AGILE ENTERPRISES ALSO INNOVATE TO EXERT THEIR INmUENCE IN THE MARKETPLACE OR INNOVATE IN RESPONSE TO THE RADICAL CHANGES IN THE MARKETPLACE 4HIS INVOLVES THE CULTIVATION OF VIBRANT AND ROBUST INDUSTRY ECOLOGIES 7ELL KNOWN ECOLOGIES IN THE )4 INDUSTRY INCLUDE -ICROSOFTS 7INDOWS 0ALM /3 3ONYS 0LAY3TATION AND .INTENDOS 'AME"OY WHICH ARE ORCHESTRATING AND MANAGING THROUGH THEIR TECHNOLOGICAL PLATFORMS !S )"- STABILIZED ITSELF IN THE MID S IT BEGAN TO EXERT ITSELF AND AIMED TO BECOME THE STANDARD BEARER IN THE )4 INDUSTRY AGAIN )T BOLDLY PROPAGATED ITS VISION OF E "USINESS AND THEN TOOK A LEADERSHIP ROLE BY INVESTING BILLIONS OF DOLLARS IN DRIVING FORWARD THE OPEN SOURCE SOFTWARE ,ATELY )"- IS EMBRACING THE /N $EMAND VISION WHICH IS ANOTHER NAME FOR THE AGILE ENTERPRISE !GILITY CAN BE ATTAINED THROUGH A lTADAPTATION APPROACH ANDOR THROUGH AN INNOVATIVE APPROACH REFER TO &IGURE 7E CALL THIS THE CAUSE AND EFFECT OF
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&IGURE 4HE "ALANCE BETWEEN !DAPTATION AND )NNOVATION
AN AGILE ENTERPRISE 4HROUGH ITS INNOVATIVE CAPACITY THE ENTERPRISE CHANGES THE ENVIRONMENT AND BECOMES THE CAUSE OF DISRUPTION IN THE MARKETPLACE (OWEVER IT ALSO REACTS TO MARKET CHANGES AND REPRESENTS THE EFFECT OF MARKET CHANGES h"EHAVIOR IS A CONSEQUENCE OF THE CONTEXT CONFRONTING THE ORGANIZATIONv 0FEFFER AND 3LANCIK P 4HE IDEA OF CAUSE AND EFFECT DElNES THE ESSENCE OF AN AGILE ENTERPRISE A PERPETUAL CYCLE OF REACTIVE AND PREEMPTIVE BEHAVIORS IN THE MARKETPLACE NOT ONLY ABSORBING INDUSTRY FORCES BUT ALSO GENERATING AND EMITTING DISRUPTIVE FORCES IN THE INDUSTRY ECOSYSTEM (ENCE THE AGILE ENTERPRISE NEEDS TO EFFECTIVELY STRIKE A BALANCE #ONTINUOUSLY SENSING CHANGES IN MARKET FORCES AND RESPONDING WITH INCREMENTAL CHANGES IN BUSINESS MODELS 7E CALL THIS ADAPTATION OR lT !NTICIPATING RADICAL CHANGES IN MARKET FORCES AND RESPONDING WITH NEW AND BREAKTHROUGH BUSINESS MODELS 7E CALL THIS INNOVATION (OWEVER A HIGHER DEGREE OF AGILITY SHOULDNT IMPLY IMPROVEMENT GREATER COMPETITIVENESS AND THE FORMULA FOR CORPORATE LONGEVITY 7E NEED TO DISSIPATE THE TENDENCY AND FALLACY OF ASSUMING THAT HIGHER LEVEL OF AGILITY DENOTES A UTOPIAN OR END STATE !N AGILE ENTERPRISE IDIOSYNCRATICALLY EMERGES FROM THE BUSINESS LANDSCAPE )T IS AN IDEA WHOSE TIME HAS COME THATS WHY AGILE BEHAVIORS ENACTED AND SITUATED IN TODAYS MARKETPLACE DRAW ITS POTENCY 7E SHOULD THEN FOCUS ON HOW TO CULTIVATE FERTILE GROUND FOR NURTURING THE AGILE BEHAVIORS /UR QUEST IS NOT TO UNCOVER DETAILED PREDICTIONS BUT TO EXPLAIN THE FORM OF AGILE ENTERPRISES IN THE TODAYS MARKETPLACE %DITH 0ENROSE WRITES AN ORGANIZATION hIS NOT AN OBSERVABLE OBJECT PHYSICALLY SEPARABLE FROM OTHER OBJECTS AND IT IS DIFlCULT TO
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&IGURE /RGANIZING FOR !GILITY
DElNE EXCEPT WITH REFERENCE TO WHAT IT DOES OR WHAT IS DONE WITHIN ITv P !N AGILE ENTERPRISE IS ABOUT GAINING COMPETITIVENESS AND SUSTAINING GROWTH WITH THE RIGHT VISIONVALUES BREAKTHROUGH CULTURE ADAPTIVEINNOVATIVE TEAMS AND ADAPTIVE INFRASTRUCTURE REFER TO &IGURE AS WELL AS CONSTANTLY ORCHESTRATING THESE FOUR CORE COMPONENTS TO ACHIEVE COHESIVENESS AND INNOVATIVENESS 7E WILL DISCUSS THESE ELEMENTS OF AN AGILE ENTERPRISE IN THE FOLLOWING SECTION
/2'!.):).' &/2 !'),)49 4RADITIONALLY CENTRALIZED HIERARCHIES TRIUMPH AS ORGANIZING MECHANISMS FOR COORDINATING PROCESSES ALLOCATING RESOURCES AND MANAGING COMPLEXITY #ASTELLS 4ODAY WE ARE WITNESSING THE EMERGENCE OF ORGANIZATIONS WITH A NEW TYPE OF AGILITY &IGURE ILLUSTRATES THE CORE COMPONENTS OF THE AGILE ENTERPRISE %NVIRONMENTAL FORCES SIGNIlCANTLY INmUENCE THE STRATEGIC BEHAVIORS OF THE ENTERPRISE 4O THRIVE BUSINESSES NEED TO ADOPT NEW VISIONVALUES NURTURE ADAPTIVEINNOVATIVE TEAMS CULTIVATE BREAKTHROUGH CULTURE AND DEVELOP ADAPTIVE INFRASTRUCTURE )N TODAYS MARKETPLACE ALIGNING WITH INDUSTRY SHIFTS IS MADE POSSIBLE BY THE ABILITY TO CAPTURE VARIOUS MARKET SIGNALS BY USING AN ADAPTIVE )4 INFRASTRUCTURE 4HE EMERGING AGILE ENTERPRISES ARE MORE CAPABLE TO ANTICIPATE AND SENSE THE ENVIRONMENT AS WELL AS RESPOND WITH MORE INFORMED DECISIONS AND ACTIONS IN TODAYS BUSINESS LANDSCAPE 4HE PERVASIVE APPLICATION OF DIGITAL TECHNOLOGIES TO BUSINESS
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PROCESSES ENABLES ORGANIZATIONS TO ACHIEVE A NEW LEVEL OF AGILITY 4HE TECHNOLOGIES ENHANCE THE CAPABILITIES AND EXTEND THE CAPACITIES OF ORGANIZATIONS TO ACCUMULATE STORE RETRIEVE ANALYZE AND SYNTHESIZE GREATER AMOUNT OF MARKET SIGNALS DATA AND INFORMATION 4HIS EFFECTIVELY EXPANDS THE BOUNDARY OF ORGANIZATIONAL BOUNDED RATIONALITY !LSO IT FACILITATES ORGANIZATIONAL COLLECTIVE INTELLIGENCE TO mY IN FORMATION TO ACHIEVE DESIRED BUSINESS GOALS 3AWHNEY ET AL ELABORATES h)N A CONNECTED WORLD INTELLIGENCE BECOMES mUID AND MODULAR mOATING FREELY LIKE MOLECULES IN THE ETHER COALESCING INTO TEMPORARY BUNDLES WHENEVER AND WHEREVER NECESSARY TO SOLVE PROBLEMSv P !CROSS THE AGILE ENTERPRISE INTELLIGENCE IS LOOSELY COUPLED TO CREATE AND DELIVER DIFFERENTIATED VALUES TO CUSTOMERS )N ADDITION TO )4 ORGANIZATIONS NEED TO CRAFT NEW VISIONS AND CUSTOMER VALUES CULTIVATE ADAPTIVEINNOVATIVE TEAMS AND NURTURE BREAKTHROUGH CULTURES 4O MOVE AN ORGANIZATION FROM ONE STATE TO ANOTHER TOP MANAGEMENT NEEDS TO ADOPT NEW PARADIGMS AND MINDSETS FROM LINEARITY TO MULTI DIMENSIONAL VERTICAL INTEGRATION TO ON DEMAND INTEGRATION PRODUCTION TO CO CREATION AND VALUE CHAIN TO VALUE NET REFER TO 4ABLE 4HIS SHIFT IS PARTICULARLY CRUCIAL AS OUR MENTAL MODELS OF THE WORLD AROUND US DETERMINE AND GUIDE OUR ACTIONS 7ITH THE ADOPTION OF NEW MODELS EXECUTIVES CAN BEGIN TO SHAPE AND DESIGN THE ORGANIZATIONS THAT CAN THRIVE IN TODAYS BUSINESS LANDSCAPE 0RE $IGITAL !GE ,INEARITY 6ERTICAL )NTEGRATION 0RODUCTION (OMOGENEITY -ASS 0RODUCTION &OCUS ON #OSTS #OMPETITION "RICKS AND -ORTAR 0ROCESS 2EENGINEERING $IVERSIlED )N HOUSE 'LOBAL BY #HOICE 6ALUE #HAIN
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$IGITAL !GE -ULTI DIMENSIONAL /N DEMAND )NTEGRATION #O CREATION $IVERSITY -ASS #USTOMIZATION &OCUS ON 'ROWTH #O OPETITION #LICKS AND -ORTAR 0ROCESS -ODULARIZATION #ORE #OMPETENCIES /UTSOURCE 'LOBAL BY $EFAULT 6ALUE .ET
4ABLE 4HE 4RANSITION TO !GILITY IN THE 'LOBAL $IGITAL !GE
!GILE %NTERPRISE ASSUMES A COHESIVE WHOLE OF VISIONS AND VALUES ADAPTIVE INFRASTRUCTURES ADAPTIVEINNOVATIVE TEAMS AND BREAKTHROUGH CULTURES 4HE CHALLENGE OF MANAGEMENT IS TO CREATE AND SUSTAIN PROlTABILITY BY NURTURING AND HARMONIZING THE FOUR COMPONENTS 4HE LOGIC FOR AN EMERGING AGILE ENTERPRISE IS ROOTED IN ITS INTERPLAY
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6ISIONS AND 6ALUES ! VISION STATEMENT OUTLINES WHAT AN ORGANIZATION ASPIRES TO ACHIEVE IN THE MARKETPLACE AND THE NATURE OF VALUES IT INTENDS TO CREATE AND DELIVER TO ITS CUSTOMERS )T IMPLIES A GAP BETWEEN THE FUTURE STATE AND THE PRESENT STATE .ORMMAN )T PROVIDES THE FRAMEWORK IN WHICH THE LOGIC OF EXISTENCE OF THE ORGANIZATION RESIDES 4HE CREATION OF THE VISION IS THE INTELLECTUAL TASK OF THE SENIOR MANAGEMENT 4RANSFORMATIVE CHANGE NEEDS TO START FROM THE TOP RESPONSIBLE FOR GALVANIZING THE ENTIRE ORGANIZATION WITH A COMMON PURPOSE 7ELL KNOWN EXAMPLES ARE HOW ,OU 'ERSTNER AND HIS MANAGEMENT TEAM TRANSFORMED OUT OF SYNC )"- IN THE S TO BECOME TODAYS )4 SERVICES POWERHOUSE AND HOW #ARLOS 'HOSN GOT UNDER THE HOOD OF .ISSAN -OTORS #O TO OVERHAUL AND REV UP ITS COMPETITIVENESS ENGINES !T 0ROCTER 'AMBLE WE ARE WITNESSING HOW #%/ !' ,AmEY IS QUIETLY MAKING THE YEAR OLD COMPANY MORE INNOVATIVE AND RESPONSIVE TO THE MARKETPLACE 4HE RECONlGURATION OF ORGANIZATIONAL $.! REQUIRES SUCH STRONG DEDICATED AND COMMITTED LEADERSHIP )N AN AGILE ENTERPRISE THE LEADERSHIP IS CRUCIAL IN DEVELOPING A FERTILE ENVIRONMENT OR CONTEXT FOR AGILE BEHAVIORS TO EMERGE AND SUSTAIN OVER TIME ,EADERS NEED TO INSTILL A BREAKTHROUGH CULTURE PUT IN PLACE THE RIGHT TEAMS AND DEVELOP AN ADAPTIVE INFRASTRUCTURE TO SUPPORT BUSINESS ACTIVITIES 4O ACHIEVE AGILITY IN TODAYS MARKETPLACE THE WHOLE ORGANIZATION NEEDS TO COLLECTIVELY MARCH TOGETHER TO ANTICIPATE AND RESPOND TO CHANGES &UNCTIONAL TEAMS AND COMMUNITIES OF PRACTICE ACROSS THE ORGANIZATION NEED TO SHARE INFORMATION AND WORK TOGETHER TO ACHIEVE THE NEW LEVEL OF AGILITY 4HE VISION IS THE LIGHTHOUSE FOR EVERY ORGANIZATIONAL MEMBER /NCE THE VISION IS CREATED IT MUST BE COMMUNICATED WITHIN THE ORGANIZATION SO THAT THE VISION IS COMMITTED TO AND SHARED BY ALL ! CASE IN POINT IS )"-S )NTEGRATED 3UPPLY #HAIN )3# INITIATIVE )N )"- ANNOUNCED THE )3# ORGANIZATION LED BY "OB -OFFAT 4HE SUPPLY CHAIN HANDLES ROUGHLY BILLION WORTH OF PROCUREMENT EACH YEAR )"-S /N $EMAND VISION AND THE WAY THE VISION IS TRANSFORMING )"- PROVIDES THE FOUNDATION FOR THE )3# VISION h4HE VISION FOR THE )3# ORGANIZATION IS TO BE THE WORLDS lRST hON DEMANDv SUPPLY CHAIN SO THAT )"- CAN SENSE AND RESPOND TO THE NEEDS OF OUR CUSTOMERS INTERFACE WITH OUR SUPPLIERS IN THAT SAME WAY AND DRIVE THE END TO END EFlCIENCIES AND QUICK RESPONSIVENESS THAT )"- #%/ 3AM 0ALMISANO TALKS ABOUT v SAYS ,INDA #ANTWELL 6ICE 0RESIDENT "USINESS 'ROWTH )NITIATIVES )NTEGRATED 3UPPLY #HAIN "OB -OFFAT WHO RUNS THE )NTEGRATED 3UPPLY #HAIN WANTS TO MAKE SURE THAT ALL OF THE EMPLOYEES OF THEIR )3# ORGANIZATION UNDERSTAND THE STRATEGY AND THE VISION AND THAT THEYRE ALL MARCHING SYNERGISTICALLY TO GET )"- TO ACHIEVE THAT VISION (E HAS BEEN VERY AGGRESSIVE ABOUT MAKING SURE THAT THE )3# VISION IS COMMUNICATED TO ALL OF THEIR EMPLOYEES AROUND THE WORLD SO THAT THEY UNDERSTAND ITS SPIRIT AND COMMIT TO BECOMING AN hON DEMAND SUPPLY CHAINv 4O )"- AND THE
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)3# LEADERSHIP THERE IS NO END STATE )T IS A JOURNEY OF CONTINUOUSLY INNOVATING AND REINVENTING 4HEY CHARACTERIZE LEADERSHIP IN AN AGILE ENTERPRISE )N ADDITION TO VISION AN AGILE ORGANIZATION HAS TO CONSTANTLY REVISIT HOW IT WILL CREATE AND DELIVER VALUE TO ITS CUSTOMERS 4HIS REQUIRES AN ABILITY AND PASSION TO CONSTANTLY CHALLENGE EXISTING PRODUCTS AND SERVICES INHERENT ASSUMPTIONS AND THE UNDERLYING INFRASTRUCTURE WHICH INCLUDES BUSINESS PROCESSES INFORMATION TECHNOLOGY AND HUMAN RESOURCES )N THE EARLIER MENTIONED )"-S 'LOBAL #%/ 3TUDY A GREAT MAJORITY PERCENT OF THE #%/S IDENTIlED REVENUE GROWTH AS THE KEY FOCUS AREA FOR THEIR ORGANIZATIONS lNANCIAL PERFORMANCE OVER THE NEXT THREE YEARS 'ROWTH STRATEGY SHOULD BE DETERMINED BY VALUE PROPOSITIONS BUT hPRECIOUS FEW COMPANIES KNOW THEMSELVES THEIR VALUE PROPOSITIONS WELL ENOUGH TO DO IT $AY P v $AY WENT ON TO GROUP THE VALUE PROPOSITIONS INTO THREE CATEGORIES NAMELY 0RICE VALUE LEADERS LIKE $ELL OR 7AL -ART 4HEY GROW BY EXTENDING THEIR LOW COST VALUE PROPOSITIONS TO ADJACENT MARKETS 0ERFORMANCE VALUE LEADERS LIKE -EDTRONIC )NTEL OR .OKIA 4HEY GROW BY CONTINUOUS INNOVATION OF EMERGING AND CONVERGING TECHNOLOGIES 2ELATIONAL VALUE LEADERS LIKE &IDELITY )NVESTMENTS OR )"- 'LOBAL 3ERVICES 4HEY GROW BY PROVIDING AND EXTENDING INTEGRATED SOLUTIONS 3O IF YOU ARE IN THE PRICE VALUE LEADER SEGMENT AS ABOVE WITH PLAYERS LIKE $ELL OR 7AL -ART HOW DO YOU RE POSITION YOUR VALUE CREATION AND DELIVERY PROCESSES TO DIFFERENTIATE YOUR PRODUCTS AND SERVICES )F YOU DO NOT ACT FAST ENOUGH YOU MAY SOON BECOME EXTINCT EVEN BEFORE YOU REALIZE IT -ANY CHAINS LIKE + -ART HAD TO CLOSE DOWN MANY OF THEIR RETAIL SHOPS AS THEY COULD NOT COMPETE WITH 7AL -ART IN THE LOW COST MODEL 7E HAVE NOTED THAT )"- RECENTLY SOLD ITS LOW END SERVER MANUFACTURING PLANTS TO 3ANMINA #ORPORATION BECAUSE )"- IS SIMPLY UNABLE TO COMPETE WITH $ELL ON THE LOW COST VALUE PROPOSITION FOR HIGH VOLUME PRODUCTS /N THE OTHER HAND )"- WAS REPORTED TO BE THE LEADER IN THE HIGH END SERVER MARKET IN THE SECOND QUARTER OF /BVIOUSLY IN THIS SEGMENT OF THE MARKET THE "IG "LUE CONTINUES TO DELIVER DIFFERENTIATED VALUE 3IMILARLY IF YOU ARE IN THE PERFORMANCE VALUE LEADER SEGMENT LIKE )NTEL OR .OKIA OR IN THE RELATIONAL VALUE LEADER SEGMENT LIKE )"- 'LOBAL 3ERVICES YOU NEED TO REEXAMINE YOUR VALUE PROPOSITION TO IMPROVE YOUR COMPETITIVE POSITIONING 4HEREFORE RE EXAMINING AND REDElNING THE VALUE PROPOSITION AND USING THAT AS A BASIS TO DEVELOP THE VISION IS A KEY PREREQUISITE FOR SUSTAINED BUSINESS PERFORMANCE 4HE CYCLE OF CONTINUOUS INTROSPECTION AND REINVENTION WHILE MAINTAINING FOCUS ON GROWTH AND COST CONTROL IS THE MANAGEMENT CHALLENGE OF THIS AGE 4HIS IS WHAT THE AGILE ENTERPRISE IS ALL ABOUT
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"REAKTHROUGH #ULTURE #ULTURE DESCRIBES THE COLLECTIVE BEHAVIORAL TENDENCY OF AN ORGANIZATION )T CHARACTERIZES THE WAY ORGANIZATIONAL MEMBERS PERCEIVE ACT AND REACT TO MARKET AND OPERATIONAL OPPORTUNITIES AND CHALLENGES )T IS THE hTRAINING IMPROVEMENT AND RElNEMENT OF MINDv 7EBSTERS DICTIONARY AND THE WAY THE ENTIRE ORGANIZATION WORKFORCE BEHAVES &OR EXAMPLE IN THE GLOBAL DIGITAL ECONOMY PEOPLE WILL HAVE TO LEARN HOW TO WORK IN TEAMS QUITE OFTEN IN VIRTUAL TEAMS ACROSS FUNCTIONAL BOUNDARIES AND HOW TO WORK TOWARDS COMMON GOALS WITH SHARED COMMITMENTS ACROSS CULTURAL GEOGRAPHIC AND COMPANY BOUNDARIES 2OSABETH -OSS +ANTER USES THE TERM E CULTURE TO EXPLAIN THE EMERGING CULTURE IN TODAYS ORGANIZATIONS !CCORDING TO +ANTER THE 7EB IS FORCING A FUNDAMENTAL SHIFT hTOWARDS MORE COLLABORATIVE WORK RELATIONSHIPS ONES THAT RESEMBLE OPEN INCLUSIVE COMMUNITIESv P AND AWAY FROM THE BUREAUCRATIC AND MECHANISTIC ADMINISTRATIVE MODEL 4EAMS WILL BE DYNAMICALLY FORMED AND DISBANDED BASED ON THE NEEDS OF THE BUSINESS BUT WILL BE MEASURED AND REWARDED BASED ON THE ATTAINMENT OF COMMON AND AGREED UPON GOALS )T IS A BRAND NEW BALL GAME 7E CALL THIS COLLECTIVE ORGANIZATION BEHAVIOR THE "REAKTHROUGH #ULTURE )N AN AGILE ENTERPRISE BREAKTHROUGH CULTURE IS NECESSARY TO ANTICIPATE AND LEAD IN THE VOLATILE INTERDEPENDENT AND UNPREDICTABLE GLOBAL DIGITAL MARKETPLACE )T DElNES AND CHARACTERIZES AN AGILE ENTERPRISES BIAS FOR ACTION 4HIS COLLECTIVE BEHAVIORAL TENDENCY OF AN ORGANIZATION PROVIDES THE PILLAR FOR THE EMERGENCE AND SUSTENANCE OF A BIAS FOR AGILITY OVER TIME 7E HAVE USED A SET OF ATTRIBUTES TO DElNE BREAKTHROUGH CULTURE AS SHOWN IN THE TABLE BELOW
"REAKTHROUGH #ULTURE /PEN MINDED ABOUT CHANGE 3INGLE MINDED CUSTOMER FOCUS #OLLABORATIVE BOTH WITHIN AND OUTSIDE THE ENTERPRISE #OLLECTIVE AND INTENSIVE FOCUS ON GOALS AND EXECUTION 4OP DOWN MANAGEMENT BY EXAMPLE )NNOVATIVE FOR PROCESS PRODUCT AND SERVICES ,EARNING ORGANIZATION n SHARING AND CREATION OF ORGANIZATIONAL KNOWLEDGE 3ERVICE ORIENTATION A SERVICE MINDSET FOR BOTH INTERNAL AND EXTERNAL CUSTOMERS .EW METRICS n INCENTIVES FOR DESIRED BEHAVIOR 4ABLE !TTRIBUTES OF "REAKTHROUGH #ULTURE
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2ESISTANCE TO CHANGE IS THE MOST IMPORTANT OBSTACLE TO OVERCOME WHEN AN ORGANIZATION IS TRYING TO BECOME AGILE 7HEN )"- FOUNDER 4OM 7ATSON 3R STARTED A DRESS CODE WITHIN )"- WITH BLUE SUITS AND WHITE SHIRTS HE DID THAT TO CONFORM TO THE DRESS CODES OF HIS MAIN CUSTOMERS WHICH AT THAT TIME WERE BANKING INSTITUTIONS "UT AS )"-S BUSINESS GREW TO COVER OTHER INDUSTRIES )"- EMPLOYEES FORGOT TO DRESS LIKE THEIR CUSTOMERS INSTEAD THE BLUE SUITS AND WHITE SHIRTS BECAME THE )"- STANDARD /NLY AFTER THE BUSINESS DEBACLE WHEN )"- LOST CLOSE TO BILLION AND A NEW MANAGEMENT TEAM LED BY ,OU 'ERSTNER WAS INSTALLED DID )"- DRESS CODE CHANGE /NE OF THE AUTHORS OF THIS CHAPTER ATTENDED AN )"- &ACULTY 3UMMIT IN MID WHERE )"- CHAIRMAN 3AM 0ALMISANO APPEARED IN A SPORTS JACKET WHICH WOULD BE UNTHINKABLE IN THE PRE ERA "USINESS LEADERS MUST DEVELOP AN ORGANIZATIONAL CULTURE THAT IS ACCUSTOMED TO CONTINUOUS CHANGE AND HELP THEIR PEOPLE TO ADAPT TO IT WHILE RELENTLESSLY LEVERAGING THAT CHANGE TO THEIR ADVANTAGE
!DAPTIVE)NNOVATIVE 4EAM 4O STIMULATE GROWTH 0ROCTOR AND 'AMBLE POWERS UP ITS INNOVATIVE ENGINES BY LUBRICATING INTRA COMPANY COLLABORATION $IVERSE TEAMS AND BUSINESS UNITS ARE ENCOURAGED TO SHARE IDEAS AND TALENTS TO ROLL OUT PRODUCTS TO THE MARKETPLACE 3ELLERS 4HE ENTIRE CORPORATION BECOMES A NETWORKED COLLECTIVE INTELLIGENCE INTO WHICH ITS CONSTITUENTS INDIVIDUALS AND TEAMS CAN CONTINUOUSLY AND READILY TAP TO MAKE THINGS HAPPEN )N ADDITION TO INTERNAL INTELLIGENCE 0' IS ALSO TAPPING THE MARKETPLACE FOR INNOVATIVE IDEAS WITH ITS @#ONNECT AND $EVELOP INITIATIVE )T IS ALSO ONE OF THE FOUNDING MEMBERS OF YETCOM AN INTERACTIVE MARKETPLACE FOR BUYERS AND SELLERS OF TECHNOLOGIES "AIN MANAGEMENT CONSULTANTS $ARREL 2IGBY AND #HRIS :OOK DESCRIBE SUCH AN APPROACH AS @OPEN MARKET INNOVATION 4EAMS ACROSS AN AGILE ENTERPRISE CONSCIOUSLY TAP INTO THE COLLECTIVE INTELLIGENCE INSIDE THE ORGANIZATION AND IN THE MARKETPLACE FOR THE SUPPLY OF INNOVATIVE AND PROGRESSIVE IDEAS 5NDER THE MICROSCOPE EACH OF THESE TEAMS POSSESSES A DISTINCT COGNITIVE STYLE 3PECIlCALLY EACH HAS ITS OWN !DAPTIVE )NNOVATIVE ! ) PROlLE 3OME ARE MORE ADAPTIVE WHILE SOME ARE MORE INNOVATIVE $R -ICHAEL +IRTON DEVELOPED THE WIDELY USED !DAPTION )NNOVATION ! ) 4HEORY WHICH IS APPLICABLE FOR AN AGILE ENTERPRISE 4HE KEY ASSUMPTION IS THAT ALL OF US SOLVE PROBLEMS AND ARE CREATIVE +IRTON BUT EACH OF US DOES SO DIFFERENTLY FROM AN ADAPTIVE INNOVATIVE PERSPECTIVE "Y ADAPTION WE REFER TO hTHE CHARACTERISTIC BEHAVIOR OF INDIVIDUALS WHO WHEN CONFRONTED WITH A PROBLEM TURN TO CONVENTIONAL RULES PRACTICES AND PERCEPTIONS OF THE GROUP TO WHICH THEY BELONG AND DRIVE THEIR IDEAS TOWARDS THE SOLUTION OF THE PROBLEM
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FROM THESE ESTABLISHED PROCEDURESv /N THE OTHER HAND INNOVATION REFERS TO hTHE CHARACTERISTIC BEHAVIOR OF INDIVIDUALS WHO WHEN CONFRONTED WITH A PROBLEM ATTEMPT TO REORGANIZE OR RESTRUCTURE THE PROBLEM AND TO APPROACH IT IN A NEW LIGHT FREE FROM ANY OF THE CUSTOMARY PERCEPTIONS WHICH WOULD BE CONVENTIONAL STARTING POINTS FOR ITS SOLUTIONv .EITHER TYPE IS LIKELY TO BE MORE OR LESS INTELLIGENT RESOURCEFUL CREATIVE OR SUCCESSFUL !DAPTORS ARE MORE CONTROLLED PRACTICAL PRUDENT RELIABLE AND COLLABORATIVE )NNOVATORS ARE MORE RADICAL mEXIBLE INDEPENDENT RISK TAKING AND SPONTANEOUS !DAPTORS ARE MORE SENSITIVE TO THREATS FROM WITHIN THE SYSTEMS DEVISING A DOWNSIZING PLAN DURING GOOD TIMES TO RIGHT SIZE RESOURCES WHEREAS INNOVATORS TUNE IN TO ENVIRONMENTAL THREATS EG MARKET TRENDS INDUSTRY SHIFT AND EMERGING TECHNOLOGICAL DEVELOPMENT 3UCH DIVERSE DISPOSITIONS ARE PARTICULARLY IMPORTANT IN TODAYS COMPLEX AND EDGE OF CHAOS BUSINESS ENVIRONMENT TO SOLVE THE ENDLESS STREAM OF PROBLEMS AND MARKET CHALLENGES THAT ARISE )F A TEAMS SCOPE IS PRIMARILY LIMITED TO INSIDE THE COMPANY ACTIVITIES LIKE MANUFACTURING PRODUCTION SCHEDULING ETC THEN THE TEAMS PROlLE SHOULD BE MORE !DAPTIVE )F A TEAMS SCOPE IS PRIMARILY EXTERNAL FACING LIKE SALES CONSULTING ETC THEN THE TEAMS PROlLE SHOULD BE MORE )NNOVATIVE 4HE MOST SUITABLE CHANGE AGENT FOR AN !DAPTIVE TEAM WOULD BE AN )NNOVATIVE MANAGER #ONVERSELY THE MOST SUITABLE CHANGE AGENT FOR AN )NNOVATIVE TEAM WOULD BE AN !DAPTIVE MANAGER )N AN AGILE ENTERPRISE THE CRITICAL SUCCESS FACTOR IS TO DEVELOP AN APPROPRIATE MIX AND BALANCE OF !DAPTIVE AND )NNOVATIVE TEAMS TO MAXIMIZE AGILITY WITHOUT COMPROMISING EFlCIENCY
!DAPTIVE )NFRASTRUCTURE "USINESS PROCESSES AND THE SUPPORTING INFORMATION TECHNOLOGY ARE THE UNDERPINNINGS OF ANY INFRASTRUCTURE IN TERMS OF ITS CAPABILITY 4HE GLOBAL #%/S IN THE )"- STUDY MENTIONED EARLIER IN THIS CHAPTER IDENTIlED hCREATING ADAPTABLE PROCESSES THAT ALLOW REAL TIME RESPONSEv AS ONE OF THE TOP THREE ACTIONS THEY WILL TAKE RELATED TO AGILITY 4HE OTHER TWO AREAS ARE #APTURE AND UTILIZE CUSTOMER INFORMATION FOR SWIFT DECISIONS AND $EVELOP VEHICLES TO CAPTURE CUSTOMER NEEDS AND PREFERENCES !LL OF THE THREE ACTION AREAS ARE ABOUT BUSINESS PROCESS CAPABILITIES .OW HOW DO YOU DESIGN AN ADAPTABLE PROCESS THAT ALLOWS REAL TIME RESPONSE
)NCLUSION &IRST AND FOREMOST IS TO INCLUDE ALL STAKEHOLDERS INTO THE PROCESS 3O IF IT IS A CUSTOMER FACING PROCESS YOU SHOULD INCLUDE PARTICIPATION BY THE CUSTOMER
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%XAMPLES OF CUSTOMER FACING PROCESSES INCLUDE CUSTOMER ORDER ENTRY CUSTOMER ORDER FULlLLMENT INVOICING AND BILL PAYMENT ORDER STATUS ENQUIRY PRODUCT SHIPMENT AND MANY MORE /THERS HAVE TRIED QUITE SUCCESSFULLY TO HAVE CUSTOMERS PARTICIPATE IN THE NEW PRODUCT DESIGN AND DEVELOPMENT PROCESSES #OMPANIES LIKE $ELL )"- AND MANY OTHERS HAVE CREATED CUSTOM 7EB SITES FOR EACH OF THEIR KEY CUSTOMERS SO THAT THESE SPECIAL CUSTOMERS CAN SEAMLESSLY DO BUSINESS WITH THEM /THER STAKEHOLDERS LIKE SUPPLIERS OR BUSINESS PARTNERS SHOULD SIMILARLY BE INCLUDED IN THE PROCESSES THAT HAVE THEIR INVOLVEMENT 7HEN )"- SOLD OFF THE PLANTS THAT MANUFACTURED LOW END SERVERS TO 3ANMINA #ORPORATION ONE OF THE AUTHORS OF THIS CHAPTER ASKED AN )"- EXECUTIVE HOW THIS IS GOING TO WORK FROM THE CUSTOMERS VIEWPOINT (IS RESPONSE WAS THAT THE CUSTOMER IS NOT GOING TO SEE ANY DIFFERENCE BECAUSE THE PROCESSING NEEDS OF 3ANMINA #ORPORATION HAD BEEN INCORPORATED WITHIN )"-S ORDER SCHEDULING AND CUSTOMER FULlLLMENT PROCESSES
'OVERNANCE "EFORE )"- TRANSFORMED INTO A GLOBAL OPERATION EVERY COUNTRY AND BUSINESS UNIT USED TO HAVE ITS OWN SET OF KEY BUSINESS PROCESSES AND APPLICATIONS "UT AFTER THE LARGEST LOSS IN CORPORATE HISTORY IN )"- SLOWLY TRANSFORMED AND NOW HAS ONLY ONE SET OF KEY BUSINESS PROCESSES ACROSS ALL COUNTRIES AND BUSINESS UNITS 4HERE IS ONE GLOBAL PROCESS OWNER WHO IS A SENIOR BUSINESS EXECUTIVE AND IS RESPONSIBLE FOR THE PERFORMANCE OF HISHER ASSIGNED BUSINESS PROCESS ACROSS ALL GEOGRAPHIES (ESHE ALSO OWNS THE SUPPORTING BUSINESS APPLICATIONS %ACH OWNER HAS A GOAL FOR THEIR ASSIGNED PROCESSES TO ATTAIN INDUSTRY BENCHMARK IN TERMS OF AGILITY AND EFlCIENCY AND IS MEASURED AND REWARDED ACCORDINGLY &OR EXAMPLE "OB -OFFAT REFERRED TO EARLIER IN THIS CHAPTER IS THE GLOBAL OWNER OF )"-S INTEGRATED SUPPLY CHAIN PROCESS AND IS RESPONSIBLE FOR ITS PERFORMANCE ACROSS THE WORLD 4HIS SINGLE POINT OF OWNERSHIP GIVES )"- PROCESS OWNERS THE SPAN OF CONTROL NECESSARY FOR THE TASK AT HAND WHICH IS TO ACHIEVE OR EXCEED INDUSTRY BENCHMARKS IN TERMS OF AGILITY AND EFlCIENCY
4ECHNOLOGY )NFRASTRUCTURE 4ECHNOLOGY ACTS BOTH AS AN ENABLER AND A TRANSFORMER 4HE ADVENT AND ADOPTION OF THE )NTERNET AND RELATED TECHNOLOGIES IN THE S AND NOW WIRELESS AND ASSOCIATED TECHNOLOGIES HAVE ENABLED MANY NEW AND REVOLUTIONARY CHANGES IN THE WAY WE DO BUSINESS "UT FOR MANY ORGANIZATIONS DISPARATE AND HERITAGE BUSINESS APPLICATIONS HAVE PROVEN TO BE AN ENORMOUS CHALLENGE TO SURMOUNT 4HERE IS AN URGENT NEED IN MANY ORGANIZATIONS TO HARMONIZE STANDARDIZE INTEGRATE AND CONSOLIDATE DISPARATE INFORMATION TECHNOLOGY INFRASTRUCTURES -OST OFTEN IT REQUIRES ORGANIZATIONS TO MOVE TO AN ENTIRELY NEW TECHNOLOGY BASE TO MAKE IT WORK 4HEREFORE IT IS IMPORTANT TO CAREFULLY CHOOSE WHICH TECHNOLOGIES WILL MAKE THE REAL DIFFERENCE INVEST ONLY IN THOSE TECHNOLOGIES AND STAY FOCUSED
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&URTHERMORE THERE IS ALWAYS THE DEBATE ABOUT WHETHER IT IS PRUDENT TO DEVELOP THE SOLUTIONS IN HOUSE OR TO BUY IT FROM OTHERS $O YOU DEVELOP AN ENTERPRISE RESOURCE PLANNING SUITE OF APPLICATIONS BY YOURSELF OR BUY IT FROM 3!0 $O YOU DEVELOP YOUR #2- SOLUTION OR BUY IT FROM 3IEBEL OR 3!0 $O YOU DEVELOP YOUR OWN CUSTOM DATABASES OR BUY IT FROM )"- OR /RACLE 3TUDIES HAVE SHOWN THAT BUYING IT IS BETTER IN MOST CASES THAN MAKING IT /NE EXECUTIVE RECENTLY COMMENTED WHILE TALKING ABOUT PROCURING AN %20 SOLUTION FROM A VENDOR h)T IS EASIER TO SHIFT THE CORPORATE OFlCE BUILDING BY THREE FEET TO THE LEFT THAN TO DEVELOP YOUR OWN %20 SOLUTIONv 4HE OTHER ASPECT OF TECHNOLOGY AS IDENTIlED BY THE GLOBAL #%/S IN THE )"- STUDY IS TO CAPTURE AND UTILIZE ALL INFORMATION ASSOCIATED WITH CUSTOMERS TO UNDERSTAND THEIR CHANGING NEEDS AND PREFERENCES FOR SWIFT DECISIONS
0ROCESS )NNOVATION "USINESS PROCESSES ARE THE UNDERPINNING OF HOW VALUE IS CREATED AND DELIVERED -UCH HAS BEEN WRITTEN ABOUT THE DIGITIZATION OF PROCESSES AND THE VALUE DERIVED -OST LEGENDARY HAS BEEN '%S EFFORT STARTED IN BY THEIR THEN #%/ *ACK 7ELCH TO DIGITIZE hEVERY ASPECT OF THE COMPANYv )N HE WRITES IN HIS AUTOBIOGRAPHY h) DONT THINK THERES BEEN ANYTHING MORE IMPORTANT AND WIDE SPREAD IN ALL MY YEARS AT '%v '% REPORTED ENORMOUS AMOUNTS OF SAVINGS FROM THEIR PROCESS INNOVATION AND DIGITIZATION EFFORTS ! QUICK POINT TO ADD HERE IS THAT IF YOU SIMPLY DIGITIZE A PROCESS WITHOUT EXAMINING HOW VALUE IS CREATED IN TODAYS CONTEXT THEREBY TRANSFORMING THE PROCESS WITH INNOVATING WAYS YOU WILL SIMPLY BE DOING hBADv THINGS FASTER 4HEREFORE TO IMPLEMENT PROCESS INNOVATION YOU HAVE TO DECONSTRUCT THE PROCESS INTO ITS CONSTITUENT MODULES AND THEN EXAMINE EACH MODULE IN THE CONTEXT OF YOUR CURRENT BUSINESS TO SEE IF AND HOW THIS MODULE IS ADDING VALUE )F IT IS NOT ADDING VALUE IT SURELY IS ADDING TO YOUR COST AND WASTE (OWEVER BEFORE MAKING RADICAL CHANGES TO A BUSINESS PROCESS IT IS ALWAYS GOOD TO ASK h7ILL THE MARKET BUY IT v 3OMETIMES IT IS BETTER TO MAKE INCREMENTAL CHANGES 4HE EXAMPLE FROM 3CHWAB IS A CASE IN POINT )N THE MID NINETIES THEY CREATED A NEW ORGANIZATION CALLED E3CHWAB %STABLISHED 3CHWAB CUSTOMERS HAD TO BECOME NEW CUSTOMERS OF E3CHWAB TO DEAL WITH THEM ON THE 7EB )N AND AGAINST PREVAILING CONVENTIONAL WISDOM 3CHWAB DECIDED TO MERGE THE TWO OPERATIONS ALLOWING THEIR CUSTOMERS TO DEAL WITH THEM VIA THE TELEPHONE AND THE 7EB 3O EVEN THOUGH CREATING AN ONLINE SUBSIDIARY LOOKED LIKE A RADICAL CHANGE THEY QUICKLY REALIZED THAT IT WAS NOT WHAT THE MARKET WANTED AND SWIFTLY CHANGED COURSE WHICH RESULTED IN 3CHWAB BECOMING ONE OF THE LARGEST BROKERAGE BUSINESSES IN .ORTH !MERICA /N THE OTHER HAND 7EBVAN FOR EXAMPLE CAME UP WITH A RADICAL BUSINESS MODEL FOR ONLINE GROCERY SHOPPING BUT DID NOT UNDERSTAND WHAT THE MARKET WANTED AND WAS SOON EXTINCT
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#/.#,53)/. )N A MARKETPLACE CHARACTERIZED BY DISCONTINUOUS CHANGE YESTERDAYS SUCCESSES DONT CORRELATE CONVINCINGLY AND STRONGLY WITH TOMORROWS SUCCESSES 7E BELIEVE THE AGILE ENTERPRISE ENABLES US TO RETHINK THE WAY BUSINESSES CREATE AND DELIVER VALUES IN TODAYS MARKETPLACE 4HE CONCEPT SENSITIZES US TO KEY ELEMENTS ENABLES US TO ANALYZE THEM AND SUBSEQUENTLY PROVIDES US WITH INSIGHTS TO ACHIEVE OUR OBJECTIVES )T REDUCES COMPLEXITIES AND DEDUCES A REPRESENTATION FROM THE COMPLEX WORLD )T IS INSTRUCTIVE TO USE THE ENQUIRY INTO AGILE ENTERPRISE AS A PLATFORM TO ADVANCE OUR UNDERSTANDING OF ORGANIZATIONS IN THE GLOBAL DIGITAL ECONOMY /RGANIZATIONS HAVE NO CHOICE BUT TO REEXAMINE THEIR VALUE CREATION AND DELIVERY MODELS TO RECREATE THEIR VISION AND VALUE PROPOSITIONS $EVELOPING A BREAKTHROUGH CULTURE THAT CAN WITHSTAND CHANGE SHOULD SUPPORT THIS #AREFUL CONSIDERATION SHOULD BE GIVEN TO FORM TEAMS WITH MEMBERS HAVING AN APPROPRIATE MIXTURE OF INNOVATIVE AND ADAPTIVE SKILLS THAT WILL VARY FROM PROCESS TO PROCESS !S DISCUSSED EARLIER IN THIS CHAPTER A SUPPORTIVE INFRASTRUCTURE OF BUSINESS PROCESSES AND INFORMATION TECHNOLOGY SHOULD BE ADAPTIVE TO CHANGES 4HE FORTUNES OF MANY OF THE BEST KNOWN COMPANIES OF TODAY WILL RISE OR FALL DEPENDING ON HOW AGILE THEY ARE IN ANTICIPATING SENSING AND RESPONDING TO WHAT IS SHAPING UP TO BE A PERIOD OF PERPETUAL AND RAPID CHANGE 4HE AGILE ENTERPRISE IS INDEED THE ORGANIZING PARADIGM OF THE GLOBAL COMPETITIVE MARKETPLACE
2EFERENCES #ASTELLS - 4HE 2ISE OF .ETWORK 3OCIETY /XFORD 5+ "LACKWELL 0UBLSHERS $AY ' 3 h7HICH 7AY 3HOULD 9OU 'ROW v (ARVARD "USINESS 2EVIEW *ULYn!UG UNKNOWN 'ROTH , &UTURE /RGANIZATIONAL $ESIGN 4HE 3COPE FOR THE )4 "ASED %NTERPRISE ,ONDON *OHN 7ILEY 3ONS ,TD (AECKEL 3 ( AND 2 , .OLAN h-ANAGING BY 7IREv (ARVARD "USINESS 2EVIEW 3EPTn/CT n (AMEL ' h3TRATEGY AS 2EVOLUTIONv (ARVARD "USINESS 2EVIEW *ULYn!UG n +ANTER 2 - %VOLVE 3UCCEEDING IN THE $IGITAL #ULTURE OF 4OMORROW "OSTON (ARVARD "USINESS 3CHOOL 0RESS +AUFFMAN 3 !T (OME IN THE 5NIVERSE 4HE 3EARCH FOR ,AWS OF 3ELF /RGANIZATION AND #OMPLEXITY .EW 9ORK /XFORD 5NIVERSITY 0RESS +IRTON - h!DAPTATION )NNOVATION 4HEORY AND )NVENTORYv +IRTON !DAPTION )NNOVATION )NVENTORY 3EPT HTTPWWWKAICENTRECOM +IRTON - * !DAPTION )NNOVATION )N THE #ONTEXT OF #HANGE AND $IVERSITY .P 0SYCHOLOGY 0RESS -ILES 2 % AND # # 3NOW h&IT &AILURE AND THE (ALL OF &AMEv #ALIFORNIA -ANAGEMENT 2EVIEW n .ORMANN 2 2EFRAMING "USINESS7HEN THE -AP #HANGES THE ,ANDSCAPE .P *OHN 7ILEY 3ONS ,TD
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0AL . AND ! 2ANGASWAMY 4HE 0OWER OF /NE 'AINING "USINESS 6ALUE FROM 0ERSONALIZATION 4ECHNOLOGIES .P 4RAFFORD 0UBLISHING 0AL . AND * 2AY 0USHING THE $IGITAL &RONTIER )NSIGHTS INTO THE #HANGING ,ANDSCAPE OF % "USINESS .P !-!#/- 0ENROSE % 4HE 4HEORY OF THE 'ROWTH OF THE &IRM /XFORD "ASIL "LACKWELL 0FEFFER * AND ' 2 3ALANCIK h4HE $ESIGN AND -ANAGEMENT OF %XTERNALLY #ONTROLLED /RGANIZATIONv /RGANIZATION 4HEORY3ELECTED 2EADINGS %D 3 $ 0UGH TH ED .P NP n 0LANT 2 AND 3 -URRELL h4HE !GILE /RGANIZATION 4ECHNOLOGY AND )NNOVATIONv 5SING !) IN %LECTRONIC #OMMERCE 6IRTUAL /RGANIZATIONS AND +NOWLEDGE -ANAGEMENT !MERICAN !SSOCIATION OF !RTIlCIAL )NTELLIGENCE !!!) 7ORKSHOP *ULY 2AUL ! # h#AN .APSTER "EAT THE 2AP v E#OMPANY .OW $EC n 2EESE ! + h"REAKING THE 3ILO -ENTALITYv 3UPPLY $EMAND #HAIN %XECUTIVE !PRn-AY UNKNOWN 3AWHNEY - ET AL 4ECH 6ENTURE.EW 2ULES ON 6ALUE AND 0ROlT FROM 3ILICON 6ALLEY .P *OHN 7ILEY 3ONS )NC 3ELLERS 0 h0' 4EACHING !N /LD $OG .EW 4RICKSv &ORTUNE -AY n
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).42/$5#4)/. )N THE S AND S COMPANIES ON THE 3TANDARD 0OOR )NDEX REMAINED ON THE LIST ON AVERAGE FOR ABOUT SIXTY lVE YEARS 4ODAY &OSTER AND +APLAN REPORT THAT THE AVERAGE TIME ON THE 30 )NDEX IS ROUGHLY TEN YEARS P /VER THE LAST lFTY YEARS THE AVERAGE PRODUCT LIFESPAN IN PHARMACEUTICALS TOYS COSMETICS AND FOOD ITEMS HAS DECREASED BY TWO THIRDS &OR EXAMPLE PRODUCTS WITH A LIFESPAN OF TWENTY YEARS NOW HAVE AN AVERAGE USEFUL SALES LIFE OF SEVEN %VEN MORE JARRING A SIX MONTH DELAY IN PRODUCT INTRODUCTION IN THESE AREAS CAN REPRESENT GREATER THAN A REDUCTION OF LIFETIME PRODUCT REVENUE &OSTER AND +APLAN #LEARLY BUSINESS AGILITYTHE ABILITY TO SENSE CHANGE AND OPPORTUNITY IN THE MARKETPLACE RESPOND QUICKLY AND EXECUTE SUCCESSFULLYHAS BECOME A NEW STRATEGIC IMPERATIVE 3O WHAT IS AN !GILE %NTERPRISE (OW CAN IT BE DElNED (OW WOULD IT BE MEASURED (OW IS IT DIFFERENT THAN A NON AGILE ENTERPRISE (OW DOES IT DELIVER VALUE TO ITS CUSTOMERS 7E WILL CONSIDER EACH OF THESE QUESTIONS AND CONCLUDE
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BY RECOMMENDING AN APPROACH FOR AN EVOLUTIONARY TRANSFORMATION TO AN !GILE %NTERPRISE THAT WE CALL !LIGNING THE 4ACTICAL FOR 3TRATEGIC )NTENT
7HAT IS AN !GILE %NTERPRISE (OW !GILE %NTERPRISE IS DElNED DEPENDS UPON YOUR PERSPECTIVE &ROM THE PERSPECTIVE OF THE MARKET AN !GILE %NTERPRISE IS ONE THAT lNANCIALLY OUTPERFORMS COMPETITORS AND THE MARKET AS A WHOLE OVER THE LONG TERM 3UCH A METRIC PROVIDES THE ULTIMATE YARDSTICK FOR A COMPANY BUT UNFORTUNATELY DOES NOT YIELD A BLUEPRINT CONCERNING THE STRUCTURE OR OPERATIONS OF A COMPANY DESIRING TO BE AGILE .EVERTHELESS THIS MARKET VIEW OF AGILITY HIGHLIGHTS THE NOTION THAT AGILITY IS MORE THAN THE ABILITY TO CHANGE ONCE 2ATHER AGILITY IS THE SUSTAINED ABILITY TO SENSE AND RESPOND TO CHANGE AFTER CHANGE EXECUTING WELL OCCASIONALLY INmICTING CHANGE ON ONES COMPETITORS AND YIELDING MARKET LEADING RETURNS &OSTER AND +APLAN CHAPTER "USINESS STRATEGISTS OFTEN SPEAK FROM THE PERSPECTIVE OF VISION !GILE %NTERPRISES NEED TO BE ABLE TO SEE AROUND CORNERS IN ORDER TO ANTICIPATE AND LEAD AND SENSE WHATS NEXT #ERTAINLY THE ABILITY TO ANTICIPATE CHANGE IS VERY IMPORTANT BUT IN AND OF ITSELF IT IS NOT SUFlCIENT TO GUARANTEE AGILITY 6ENDORS OFTEN SPEAK FROM THE PERSPECTIVE OF COMPONENTS 4HEY SPEAK ABOUT AGILITY IN TERMS OF BIOLOGY OR MECHANICS USING PHRASES SUCH AS ADAPTIVE SELF HEALING AUTONOMIC SELF ADJUSTING OR DYNAMIC 4HESE ARE USEFUL TERMS IN DESCRIBING THE RELATIONSHIPS BETWEEN BUSINESS PROCESSES AND BETWEEN BUSINESS PROCESSES AND THE SUPPORTING )4 ENVIRONMENT *UST AS WITH THE MARKET BASED VIEW HOWEVER THIS COMPONENT BASED VIEW DOES NOT YIELD A CLEAR PRESCRIPTION ON HOW TO ORGANIZE OR OPERATE AN !GILE %NTERPRISE .OT SURPRISINGLY TECHNOLOGISTS OFTEN VIEW AGILITY FROM THE PERSPECTIVE OF AUTOMATION !GILITY IS OFTEN DElNED USING PHRASES SUCH AS VIRTUALIZATION 3/!S SERVICE ORIENTED ARCHITECTURES PROCESS MODELS AND MODEL DRIVEN ARCHITECTURES 4HESE TERMS BEGIN TO PROVIDE SOME ACTUAL PHYSICAL PUZZLE PIECES BUT STILL DO NOT PROVIDE A CLEAR EXPLANATION OF THE WHOLE PICTURE #&/S AND PURCHASING AGENTS PROVIDE YET ANOTHER PART OF THE PUZZLE LOOKING AT AGILITY FROM THE PERSPECTIVE OF CASH mOW AND CAPITAL COMMITMENT FOR ACQUISITION OF GOODS AND SERVICES 4HIS COMMUNITY REFERS TO AGILITY USING PHRASES SUCH AS PAY PER USE ON DEMAND OUT TASKING OR STRATEGIC SOURCING %ACH OF THESE lVE PERSPECTIVESMARKET BUSINESS STRATEGIST VENDOR TECHNOLOGIST AND #&/ IS VALID AND USEFUL 7HAT IS NEEDED HOWEVER IS A HOLISTIC VIEW OF BUSINESS AGILITY ONE THAT IDENTIlES THE COMMONALITIES RATHER THAN THE DIFFERENCES BETWEEN THESE PERSPECTIVES &OR AN ATHLETE AGILITY IS NOT JUST
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SPEED OR mEXIBILITY OR STRENGTH OR SUPERIOR SENSE OF DIRECTION 2ATHER AGILITY IS THE PRODUCT OF ALL OF THESE FACTORS 3O IT IS WITH BUSINESS AGILITY !GILITY DOES NOT COME FROM ANY ONE DOT ANY SINGLE COMPONENT CAPABILITY OR PERSPECTIVE !GILITY COMES FROM HOW THE DOTS ARE CONNECTED *UST AS THE TERM !GILE %NTERPRISE IMPLIES EACH OF THE PERSPECTIVES HAS MEANING WITHIN THE CONTEXT OF A SINGLE ENTERPRISE &OR AN ENTERPRISE AGILITY CAN BE DElNED AND MEASURED IN TERMS OF IMPROVING THE CYCLE TIME FOR MANAGERIAL ACTION 4HIS CYCLE TIME CAN BE BROKEN INTO THREE COMPONENTS SENSE DECIDE RESPOND ACROSS FOUR TIME PERIODS % % % %
3ENSE HOW LONG DOES IT TAKE TO SENSE A NEED OR CHANGE IN CONDITIONS $ECIDE HOW LONG DOES IT TAKE TO MAKE A DECISION 2ESPOND HOW LONG DOES IT TAKE TO MAKE A CHANGE AND RETURNING TO THE BEGINNING OF THE CYCLE 3ENSE HOW LONG DOES IT TAKE TO VALIDATE THE OUTCOME OF THE CHANGE
5NDERSTANDING ACTION CYCLE TIME LATENCIES HELPS IDENTIFY WHERE THE AGILITY BOTTLENECKS OR HOT SPOTS ARE OCCURRING AND CAN PROVIDE THE BASIS FOR DRAMATIC IMPROVEMENTS IN THE ENTERPRISES ABILITY TO CREATE DEPLOY AND RETIRE SERVICES OFFERED TO THE MARKETPLACE SEE &IGURE %FlCIENCIES AND IMPROVEMENTS CAN BE FOUND IN ALL AREAS OF THE BUSINESS SUPPLY CHAIN mEXIBILITY INVENTORY TURNS CUSTOMER MANAGEMENT AND DEMAND CHAIN PROCESSES "EING ABLE TO MEASURE CYCLE TIME LATENCIES FOR EACH COMPONENT SENSE DECIDE RESPOND INDIVIDUALLY OR
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ACROSS ALL THREE IN AN AGGREGATED FASHION WOULD YIELD SIGNIlCANT INSIGHT INTO AN ENTERPRISES AGILITY (EWLETT 0ACKARD RECENTLY INTRODUCED A METHODOLOGY OF MEASURING BUSINESS AGILITY IN DIFFERENT INDUSTRIES USING THE AGGREGATED METRICS OF TIME RANGE AND EASE HOW LONG DOES IT TAKE TO MAKE A CHANGE OVER WHAT RANGE OR SCOPE CAN THE CHANGE BE IMPLEMENTED AND HOW EASY OR DIFlCULT IS IT ULTIMATELY COST TO IMPLEMENT THE CHANGE (0 !GILITY !SSESSMENT 5SING THESE METRICS AS A COMPARISON TO INDUSTRY PEERS PROVIDES A VERY VALUABLE MARKET BASED AGILITY BENCHMARK AND PROVIDES THE BASIS FOR A GO FORWARD ACTION PLAN #ERTAINLY EACH OF THE THREE COMPONENTS SENSE DECIDE RESPOND OF MANAGERIAL CYCLE TIME IS CRITICAL TO AGILITY 1UALITY OF INFORMATION BUSINESS INTELLIGENCE AND ANALYTICS AND FEEDBACK MECHANISMS ARE CRITICAL TO SENSING 2OBUSTNESS OF GOVERNANCE STRUCTURES AND LEADERSHIP CAPABILITIES ARE CRITICAL TO DECIDING (OWEVER IT IS THE ABILITY TO RESPOND AND MAKE CHANGES QUICKLY THAT ULTIMATELY DETERMINES AGILITY 4HE DAY AFTER 3EPTEMBER TH AN EXECUTIVE COMMITTEE AT :ARA A %UROPEAN CLOTHING DESIGNER AND RETAILER MET TO DETERMINE HOW THE ATTACKS WOULD AFFECT THEIR BUSINESS 4HEY BELIEVED THAT 7ESTERN %UROPE AND .ORTH !MERICA WOULD ENTER A PERIOD OF MOURNING )MPLEMENTING CHANGE QUICKLY IN THEIR SUPPLY CHAIN :ARA WAS ABLE TO CHANGE FROM EQUESTRIAN THEMED CLOTHING TO BLACK COLORED CLOTHING WITHIN DAYS RESULTING IN DOUBLE DIGIT SALES GROWTH IN THE QUARTER #OLUMBIA 5NIVERSITY #ASE 3TUDY )N .ORTH !MERICA IN CONVERSELY A LARGE CLOTHING RETAILER STRUGGLED TO COPE WITH THE EFFECT OF 3!23 IN #HINA 3!23 GREATLY AFFECTED THEIR SUPPLY CHAIN BECAUSE #HINESE TEXTILE WORKERS WERE NOT REPORTING FOR WORK 5NFORTUNATELY THE RETAILER COULD NOT AFFECT THE SUPPLY CHAIN QUICKLY TO BRING ALTERNATE SUPPLIERS ON BOARD AND THE STOCK OF GOODS ON THE SHELVES DWINDLED IN THE SHORT TERM #OMMON TO THE lVE PERSPECTIVES AND THREE COMPONENTS OF AGILITY IS THE OBSERVATION THAT !GILE %NTERPRISES IDENTIFY VALUE FROM THEIR CUSTOMERS POINT OF VIEW AND RESPOND BY PROVIDING THAT VALUE IN A FORM THAT BEST MEETS CUSTOMERS NEEDS AND EXPECTATIONS 7E BELIEVE PROVIDING THAT VALUE AS FORMALIZED SERVICES IS THE BEST WAY TO STAY IN SYNCH WITH CUSTOMERS NEEDS AND EXPECTATIONS ,ETS EXPLORE THE ROLE SERVICES PLAY IN AN !GILE %NTERPRISE
!'),% %.4%202)3%3 $%,)6%2 6!,5% ). 4(% &/2- /& 3%26)#%3 ! FUNDAMENTAL PRECEPT OF SERVICES IS THAT THE CUSTOMER IS THE JUDGE OF THE VALUE )T IS CRITICALLY IMPORTANT TO DELIVER VALUE INTERNALLY AND EXTERNALLY AS SERVICES BECAUSE SERVICES ARE THE CUSTOMER DRIVEN GOVERNANCE MECHANISM OF AN !GILE %NTERPRISE
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7HEN THE ENTERPRISE HAS IT RIGHT THE SERVICES CREATED AND DELIVERED TO BOTH INTERNAL AND EXTERNAL CUSTOMERS WILL DELIVER THE VALUE CUSTOMERS SEEK AND THE KEY PERFORMANCE INDICATORS OF THE BUSINESS WILL BE MET 7HEN THE ENTERPRISE HAS ITS VALUE PROPOSITION WRONG INTERNAL AND EXTERNAL CUSTOMERS WILL SERVE AS THE EARLY WARNING MECHANISM THE FEEDBACK LOOP 4HUS FORMALIZED SERVICES PROVIDE A BUILT IN MECHANISM FOR ENTERPRISES TO SENSE AS IN SENSE DECIDE RESPOND CUSTOMER REACTION TO THE OFFERED VALUE PROPOSITION -OST IMPORTANTLY HOWEVER DELIVERING VALUE AS FORMALIZED SERVICES WILL FORCE THE ENTERPRISE TO STRUCTURE PROCESSES AND INFRASTRUCTURE MODULARLY AND mEXIBLY IN ORDER TO BE ABLE TO RESPOND QUICKLY AND DELIVER VALUE IN A TIMELY FASHION TO CUSTOMERS ,ETS CONSIDER THE CASE OF "UILD#O AN AMALGAM OF SEVERAL OF OUR REAL MANUFACTURING CLIENTS CREATED FOR ILLUSTRATIVE PURPOSES "UILD#O IN &IGURE IS A BUILDING SUPPLIES MANUFACTURER THAT MAKES mOORING LIGHTING AND ELECTRICAL COMPONENTS SUCH AS FUSE BOXES SWITCHES AND CONDUIT 4HIS COMPANY GREW OVER TIME PARTLY BY ACQUISITION AND IS ORGANIZED INTO THREE DIVISIONSONE FOR EACH MAIN PRODUCT LINE "UILD#O SELLS THROUGH THE DISTRIBUTION CHANNEL AS WELL AS DIRECTLY TO LARGE CORPORATE CONSTRUCTION lRMS !S WITH MANY COMPANIES )4 AUTOMATION HAS GROWN OVER TIME WITH NEW SYSTEMS BEING INSTALLED ON A PROJECT BY PROJECT BASIS )N THE CASE OF "UILD#O EACH DIVISION INSTALLED ITS OWN %20 SYSTEMS MANUFACTURING
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CONTROL SYSTEMS ETC 4HIS IS NOT UNUSUAL -ANY COMPANIES HAVE MULTIPLE SYSTEMS THAT PERFORM THE SAME OR SIMILAR FUNCTIONS .OW LETS INTRODUCE A BUILDER WHO HAS WON A CONTRACT TO BUILD A NEW OFlCE HEADQUARTERS FOR A PRESTIGIOUS CLIENT 4HE BUILDER WISHES TO PURCHASE ALL OF THESE ITEMS mOORING LIGHTING AND ELECTRICAL FROM A SINGLE SUPPLIER A SINGLE SALESMAN AND RECEIVE PORTFOLIO PRICING AND JUST IN TIME DELIVERY TO THE JOB SITE 4HE BUSINESS PROCESS mOW DESIRED BY THE CUSTOMER THE BUILDER CAN BE SEEN AT THE BOTTOM OF THE DIAGRAM IN &IGURE .OTICE THAT THE CUSTOMERS EXPECTATION IS THAT THE BUSINESS TRANSACTION BE OPTIMIZED AND SMOOTH )N FACT GETTING THE ORDER RIGHT AND DELIVERING THE MATERIALS IN THE RIGHT SEQUENCE AND JUST IN TIME ARE PROBABLY OF GREATER VALUE TO THE BUILDER THAN THE MATERIALS THEMSELVES 4HE MATERIALS THEMSELVES ARE LIKELY A COMMODITY AVAILABLE FROM MULTIPLE SUPPLIERS $ELIVERING INFORMATION ABOUT THE MATERIALS AND TRANSACTION ORDER AND DELIVERY STATUS BILLING INFORMATION ACROSS MULTIPLE CHANNELS PHONE WEB MAIL LIKELY ADDS ADDITIONAL VALUE FOR THE BUILDER &OCUSING ON ONLY THE MATERIALS THEMSELVES QUALITY PRICE ETC "UILD#O WOULD BE SERIOUSLY MISREADING PERHAPS ITS MOST IMPORTANT VALUE PROPOSITION .OW LETS LOOK AT WHAT REALLY HAPPENS INSIDE "UILD#O TO SUPPORT THIS CUSTOMER TRANSACTION IN &IGURE %ACH DIVISION HAS ITS OWN SUPPLY CHAIN ITS OWN SALES PROCESSES AND ITS OWN DISTRIBUTION AND LOGISTICS SYSTEMS AND )4 INFRASTRUCTURE SERVERS STORAGE DATABASES ETC AND PROCESSES
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%ACH SILOED BUSINESS PROCESS AND ASSOCIATED UNDERLYING )4 INFRASTRUCTURE AND PROCESSES REPRESENTS TRAPPED CASH THAT DRAINS MONEY FROM "UILD#O AND MAKES BUSINESS DECISIONS SUCH AS SUPPLY MANAGEMENT PRODUCTION PLANNING AND PORTFOLIO PRICING MORE DIFlCULT %VEN MORE TELLING IS WHAT MUST OCCUR INSIDE "UILD#O IF THE BUILDER CALLS WITH A CHANGE OF ORDER %ACH SILO AND ITS SUPPORTING PROCESSES AND SYSTEMS MAY BE AFFECTED #HANGES WILL TAKE TIME TO COORDINATE AND WILL LIKELY BE EXPENSIVE TO ACCOMMODATE "UILD#OS BUSINESS PROCESSES AND ITS SUPPORT AUTOMATION INFRASTRUCTURE ARE SO SILOED IT IS VERY DIFlCULT TO mEX TO ADAPT AND TO MOVE QUICKLY #LEARLY "UILD#OS PROCESSES AND INFRASTRUCTURE NEED TO BE ALIGNED AND SYNCHRONIZED WITH THE EXPECTATIONS OF ITS CUSTOMERS AND MARKETPLACE !N EXCELLENT EXAMPLE OF IMPROVING MARKET POSITION BY INCREASING THE SERVICES BASED VALUE PROPOSITION OF THEIR MARKETPLACE OFFERING IS THE (YUNDAI -OTOR #OMPANY 4HROUGH THE S (YUNDAI IN THE 53 HAD A REPUTATION FOR POOR QUALITY AND WAS SUFFERING FROM WEAK SALES "Y INCREASING THE WARRANTY PERIOD TO TEN YEARS AND MILES (YUNDAI SIGNIlCANTLY INCREASED THE VALUE OF THEIR DELIVERABLES AND INCREASED SALES BY IN "LOOMBERG .EWS 3ERVICE &ROM A PRODUCT PERSPECTIVE (YUNDAI WAS JUST SELLING CARS AGAINST DOZENS OF OTHER VENDORS "Y ADDING SERVICES BASED DELIVERABLES TEN YEAR WARRANTY GUARANTEEING FREE REPAIRS (YUNDAI WAS ABLE TO DIFFERENTIATE ITS VALUE PROPOSITION IN THE MARKET %SSENTIALLY (YUNDAI BEGAN TO OFFER AN IMPROVED SERVICENAMELY ACCESS TO TRANSPORTATION RESOURCES GUARANTEED TO WORK AT A PRICE BELOW COMPETITORS !S WE HAVE SEEN BEING AN !GILE %NTERPRISE MEANS OUTPERFORMING INDUSTRY PEERS AND THE MARKET OVER THE LONG TERM "EING ABLE TO SENSE DECIDE AND RESPOND TO CHANGING MARKET AND BUSINESS TRENDS AND CONDITIONS IS WHAT DOES THIS #LEARLY THE BEST WAY TO DO THIS IS TO MAINTAIN CONSTANT ALIGNMENT WITH CUSTOMERS AND THE MARKETPLACE 4HE CONCEPT OF A CUSTOMER lRST CUSTOMER IN VERSUS A CORPORATE OUT PERSPECTIVE HAS BEEN WELL DOCUMENTED IN THE BUSINESS LITERATURE 7HAT IS NOT GENERALLY UNDERSTOOD HOWEVER IS THAT ARCHITECTING CREATING AND DELIVERING VALUE AS A SET OF FORMALIZED SERVICES IS THE BEST WAY TO BECOME AND REMAIN AGILE !GILE %NTERPRISES DELIVER FORMALIZED SERVICES INSIDE THE ENTERPRISE AS WELL AS EXTERNALLY TO CUSTOMERS SUPPLIERS AND PARTNERS )DENTIFYING THE STRATEGIC SET OF FORMALIZED SERVICES THAT CUSTOMERS WANT BEGINS WITH SOLID RELATIONSHIPS
3ERVICES 2EDElNE THE 2ELATIONSHIP "ETWEEN "USINESS AND )4 h%VERY BUSINESS DECISION TRIGGERS AN )4 EVENT v NOTED THE LATE "OB .APIER (0 #)/ IN h)F YOU GET THE INFRASTRUCTURE RIGHT EVERYTHING IS POSSIBLEv 4HE CONVERSE IS UNFORTUNATELY ALSO TRUE 7ITHOUT mEXIBILITY AND MODULARITY IN THE
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)4 INFRASTRUCTURE AND ENVIRONMENT TO AUTOMATE AND SUPPORT THE TO BE CHANGED BUSINESS PROCESSES MANY DESIRED BUSINESS DECISIONS ARE TOO COSTLY TOO SLOW OR DOWNRIGHT IMPOSSIBLE TO EXECUTE #LEARLY THE ALIGNMENT AND RELATIONSHIP BETWEEN BUSINESS AND )4 PLAYS A KEY ROLE IN THE QUESTION OF AGILITY .EARLY EVERY #)/ SURVEY OVER THE PAST DECADE HAS LISTED BUSINESSn)4 ALIGNMENT AS A STRATEGIC IMPERATIVE "UT WHAT IS ALIGNMENT (OW IS IT MEASURED (OW DO YOU KNOW WHEN A BUSINESS AND ITS CUSTOMERS AND BUSINESS AND )4 lRST BECOME NOT ALIGNED (OW OFTEN MUST ALIGNMENT BE CHECKED !LL ARE GOOD QUESTIONS #LEARLY WE NEED A MODEL AND A LANGUAGE TO DESCRIBE ALIGNMENT N 6ENKATRAMAN (ENDERSON AND /LDACH PUBLISHED A STRATEGIC ALIGNMENT MODEL FOR ALIGNING BUSINESS AND )4 STRATEGIES &IGURE 6ENKATRAMAN SUGGESTS THAT THERE ARE TWO REASONS WHY VALUE FROM )4 INVESTMENTS IS DIFlCULT TO REALIZE &IRST IS THE LACK OF ALIGNMENT BETWEEN THE BUSINESS AND )4 STRATEGIES 3ECOND IS THE LACK OF A DYNAMIC ADMINISTRATIVE PROCESS TO CONTINUALLY CHECK WHETHER OR NOT ALIGNMENT WAS STILL PRESENT 6ENKATRAMAN &ORMALIZED SERVICES BY THEIR VERY NATURE SOLVE BOTH PROBLEMS 4HIS IS BECAUSE DELIVERING VALUE AS FORMALIZED SERVICES FUNDAMENTALLY ALTERS THE NATURE OF RELATIONSHIPS BUSINESS TO )4 RELATIONSHIPS AS WELL AS BUSINESS TO CUSTOMER RELATIONSHIPS 7E CAN SLIGHTLY ALTER 6ENKATRAMANS MODEL BY USING FORMALIZED SERVICES AS THE INTERFACE BETWEEN BUSINESS AND )4 STRATEGIES AND BETWEEN CUSTOMERS AND COMPANIES 7ITH THIS MODIlCATION )4 NOW DELIVERS FORMALIZED SERVICES TO THE BUSINESS AND THE BUSINESS DELIVERS SERVICES TO ITS CUSTOMERS AS WELL AS ITS SUPPLIERS AND PARTNERS SEE &IGURE "Y LOOKING AT THE LIFECYCLE OF A FORMALIZED SERVICE IN &IGURE WE CAN DECOMPOSE THE STRATEGIC ALIGNMENT MODEL A BIT FURTHER 7E CAN BEGIN TO SEE THE RELATIONSHIPS BETWEEN % % % %
"USINESS STRATEGY AND BUSINESS INFRASTRUCTURE AND PROCESSES "USINESS INFRASTRUCTURE AND PROCESSES AND )4 STRATEGY )4 STRATEGY AND )4 INFRASTRUCTURE AND PROCESSES )4 INFRASTRUCTURE AND PROCESSES AND THE BUSINESS
IN TERMS OF HOW FORMALIZED SERVICES ARE DElNED DESIGNED DEVELOPED AND DELIVERED 5SING FORMALIZED SERVICES AS THE COMMON LANGUAGE SPOKEN BOTH BY THE BUSINESS AND BY )4 IS THE KEY TO CONTINUAL BUSINESS )4 ALIGNMENT OR SYNCHRONIZATION
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4(% !2#()4%#452% /& !'),)49 3%26)#%3 !2% 4(% "5),$).' ",/#+3 /& !. !'),% %.4%202)3% (0 HAS DEVELOPED THE $ARWIN !RCHITECTURE WHICH IS A SET OF MODELS PRINCIPLES AND DESIGN RULES THAT ARE USED TO CONSTRUCT AN !GILE %NTERPRISE OR IN (0 TERMS AN !DAPTIVE %NTERPRISE !S CAN BE SEEN IN &IGURE SERVICES PLAY A KEY ROLE IN THE $ARWIN MODEL 4HERE ARE A NUMBER OF KEY FEATURES AND CONCEPTS IN $ARWIN WORTH NOTING &IRST BUSINESS VALUE IS CREATED WHEN VALUE IS DELIVERED TO A CUSTOMER 7HILE RESOURCES MAY BE INVESTED IN MANAGEMENT INFRASTRUCTURE APPLICATIONS ETC THROUGHOUT THE ENTERPRISE THE ONLY MEASURE THAT ULTIMATELY MATTERS IS THAT OF THE CUSTOMERS !LL INVESTMENTS AND ALL DECISIONSARCHITECTURAL AND OTHERWISEMUST BE GROUNDED IN THE GUIDING PRINCIPLE THAT CUSTOMERS ARE THE CONSUMERS OF THE BUSINESS SERVICES CREATED BY THE ENTERPRISE AND HENCE ARE THE JUDGE OF THE VALUE 3ECOND IS THE REALIZATION THAT $ARWIN IS NOT A TECHNICAL ARCHITECTURE )T DOES NOT PRESCRIBE THE USE OF PARTICULAR TECHNOLOGIES MIDDLEWARE OR APPLICATIONS SUCH AS .%4 *%% 5NIX 7INDOWS 3!0 7EB3PHERE /RACLE OR 31, 3ERVER 2ATHER (0S $ARWIN !RCHITECTURE DESCRIBES THE CAPABILITIES RELATIONSHIPS AND PRINCIPLES SIMPLIlCATION STANDARDIZATION MODULARITY AND INTEGRATION REQUIRED TO BUILD
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AND MAINTAIN AGILITY $ARWIN GUIDES KEY DECISIONS PREVENTING ORGANIZATIONS FROM BEING LOCKED INTO OR HELD UP BY HIDDEN PROPRIETARY CONTROL POINTS $ARWIN FOCUSES ON THE AGILITY RELATIONSHIPS BETWEEN COMPONENTSHOW THE COMPONENTS AND ELEMENTS OF THE ENTERPRISE NEED TO INTER RELATE WITH ONE ANOTHER IN ORDER TO MAINTAIN THE ABILITY TO CHANGE QUICKLY 4HIRD YOU WILL NOTICE THAT FORMALIZED SERVICES PLAY AN ESSENTIAL ROLE IN THE $ARWIN ARCHITECTURE 4HERE ARE THREE PRIMARY LAYERS OF SERVICES BUSINESS SERVICES APPLICATION SERVICES AND INFRASTRUCTURE SERVICES 4HESE LAYERS ARE ORGANIZED AS HORIZONTAL SETS OF FUNCTIONS THAT ARE DELIVERED TO THE NEXT LAYER ABOVE AS A SET OF FORMALIZED SERVICES %ACH LAYER IS % % %
3ELF CONTAINED 0ERFORMS DElNED FUNCTIONS $ELIVERS ITS VALUE AS A SET OF SERVICES THROUGH DElNED INTERFACES AND PROTOCOLS TO THE NEXT LAYER ABOVE
&OR TECHNICAL READERS THESE ARE ALSO THE KEY CHARACTERISTICS OF THE /3) SEVEN LAYER TELECOMM STACK &OURTH THE $ARWIN MODEL EMPHASIZES THAT THE REAL FUNCTION OF )4 IS TO AUTOMATE BUSINESS PROCESSES NOT JUST TO RUN HARDWARE /VER THE PAST TWENTY YEARS
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)4 INFRASTRUCTURES MIGRATED FROM MONOLITHIC MAINFRAMES TO OFF THE SHELF SOFTWARE RUNNING ON DISTRIBUTED SYSTEMS 4HIS SHIFT BROUGHT AUTONOMY AND RESPONSIBILITY FOR PLANNING TO THE ,INES OF "USINESS ,/"S AND IN MANY ENTERPRISES THE )4 ORGANIZATION BECAME INCREASINGLY RELEGATED TO A TECHNOLOGY OPERATIONS AND SUPPORT ROLE 4HIS TREND IS REVERSED FOR AN !GILE %NTERPRISE &OR AN ENTERPRISE TO BE AGILE PLANNING FOR AND WITHIN EACH ,/" MUST BE DONE WITHIN THE LARGER CONTEXT OF THE GOALS STANDARDS RESOURCES AND METHODOLOGIES OF THE ENTERPRISE &IFTH AGILITY COMES FROM BEING ABLE TO COMPOSE AND RECOMPOSE SERVICES QUICKLY &OR THIS TO BE TRUE THE SERVICES MUST BE BUILT FROM MODULAR COMPONENTS THAT CAN BE COMBINED AND RECOMBINED ON AN AS NEEDED BASIS )T IS THIS CAPABILITY THAT IS REFERRED TO IN THE )4 PRESS AS SERVICE ORIENTED ARCHITECTURE 3IXTH UPPER LAYER SERVICES THE BUSINESS SERVICES IN THE $ARWIN MODEL ARE COMPOSED OF LOWER LEVEL SERVICES APPLICATION AND INFRASTRUCTURE SERVICES IN THE $ARWIN MODEL )N THIS WAY EACH END BUSINESS SERVICE DELIVERED TO AN EXTERNAL CUSTOMER OR SUPPLIER OR PARTNER IS BUILT BY COMBINING LOWER LEVEL SERVICES IN BUILDING BLOCK FASHION ,ASTLY SERVICES DELIVERED TO EXTERNAL CUSTOMERS ARE COMPOSED OF MULTIPLE LOWER LEVEL SERVICES THAT ARE DELIVERED TO INTERNAL CUSTOMERS 4HIS MEANS THAT !GILE %NTERPRISES ARE COMPOSED OF MANY SERVICE PROVIDER TO CUSTOMER RELATIONSHIPS 2ELATIONSHIPS ARE CRITICALLY IMPORTANT IN AN !GILE %NTERPRISE )N FACT IT IS THE QUALITY OF THE RELATIONSHIPS BETWEEN )4 AND THE BUSINESS AND BETWEEN THE ENTERPRISE AND ITS CUSTOMERS THAT DETERMINE WHAT SERVICES CUSTOMERS WILL PURCHASE FROM THE ENTERPRISE 7HILE A FURTHER DETAILED DECOMPOSITION OF THE $ARWIN MODEL IS BEYOND THE SCOPE OF THIS DISCUSSION IT IS IMPORTANT TO FORMALLY DElNE THE TERM SERVICE
7HATS A 3ERVICE 4HE lRST REACTION WE RECEIVE WHEN THESE CONCEPTS ARE PRESENTED TO A CLIENT IS h!BSOLUTELY 4HAT IS WHY WE CONSIDER OURSELVES A PROVIDER OF SERVICESv )T BECOMES QUICKLY EVIDENT HOWEVER THAT WE MUST BACK UP AND DElNE WHAT WE MEAN BY SERVICES 3ERVICE IS A WIDELY USED TERM IN OUR LANGUAGE 7E ARE USED TO HEARING THE TERM SO OFTEN WE RARELY THINK CAREFULLY ABOUT IT 7E HEAR IT IN THE MEDIA AND INDUSTRY PRESS OFTEN h7E ARE A SERVICE ORIENTED CULTURE v OR h7E ARE SHIFTING TO A SERVICES BASED ECONOMY v ETC )N FACT THE TERM SERVICE HAS MULTIPLE MEANINGS IN OUR LANGUAGE AS ILLUSTRATED IN THE FOLLOWING SENTENCES % %
7E GOT GREAT SERVICE AT THE RESTAURANT SERVICE ATTENTIVENESS TO NEEDS 7E RECEIVED LOVELY PLACE SETTINGS SERVICE FOR EIGHT SERVICE SILVERWARE
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% % % %
) GET MY CAR SERVICED AT THE CAR DEALER SERVICE MAINTAINED (0 IS OUR MANAGED SERVICE PROVIDER SERVICE OUTSOURCING )N ) WAS DRAFTED INTO THE MILITARY SERVICE SERVICE !RMED &ORCES ) USE &ED%XS OVERNIGHT DELIVERY SERVICE
4HE LAST SENTENCE THE &ED%X EXAMPLE CAPTURES THE MEANING OF SERVICE REQUIRED BY !GILE %NTERPRISES 6ALUE DELIVERED IN THE FORM OF SERVICES IS MUCH MORE MODULAR AND mEXIBLE THAN VALUE DELIVERED IN THE FORM OF PRODUCTS &OR EXAMPLE &ED%X CAN VARY DELIVERY GUARANTEES SO AS TO CREATE MULTIPLE DIFFERENTIATED VALUE PROPOSITIONS FOR ITS CUSTOMERS 7E CAN SEE THIS IN THE FOUR REQUIRED CHARACTERISTICS OF A FORMALIZED SERVICE !LL FORMALIZED SERVICES NO MATTER WHAT THEY ARE HAVE THESE FOUR REQUIRED CHARACTERISTICS IN COMMON % % % %
$ElNED DELIVERABLES CAN HAVE PRODUCT AND PROCESS COMPONENTS -EASURED AND REPORTED QUALITY $ElNED PRICE 6ALUE IS JUDGED BY THE CUSTOMER
5PON REmECTION YOU CAN SEE THAT THE lRST SECOND AND THIRD CHARACTERISTICS ARE TUNABLE TO HELP MEET VARYING CUSTOMER AND MARKET CONDITIONS %
$ElNED DELIVERABLES #USTOMER VALUE IS MUCH EASIER TO INCREASE OR DECREASE IF THE DELIVERABLES INCLUDE BOTH PRODUCT BASED AND SERVICES BASED VALUE 4HIS IS TRUE EVEN IF THERE IS A SIGNIlCANT OR EVEN MAJORITY PERCENTAGE OF PRODUCT BASED VALUE AS PART OF THE OVERALL SET OF DELIVERABLES 2ECALL HOW (YUNDAI IN AN EARLIER EXAMPLE DRAMATICALLY INCREASED THEIR VALUE PROPOSITION TO THE MARKET BY IMPROVING THE SERVICES CONTENT OF THEIR CARS !NOTHER EXAMPLE IS 'ENERAL -OTORS WHO IS INCREASING THE VALUE PROPOSITION OF THEIR VEHICLES WITH THEIR SET OF /N3TAR4- SERVICES
%
-EASURED AND REPORTED QUALITY "OTH THE QUALITY AND QUANTITY OF INFORMATION REPORTED TO CUSTOMERS CAN BE TUNED AS WAY TO INCREASE VALUE AND COMPETITIVE POSITION )N THE CASE OF (YUNDAI IMPROVED WARRANTIES NOT ONLY SERVED AS A SALES INCENTIVE AND A WAY TO IMPROVE CUSTOMER RELATIONSHIPS BUT ALSO
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PROVIDED A CLOSED LOOP COMMUNICATION CHANNEL BACK TO ENGINEERING SO THAT PRODUCT AND INTERNAL PROCESS IMPROVEMENTS COULD BE MADE %
$ElNED PRICE 0RODUCT BASED COSTS ARE DIFlCULT TO DECREASE 4HE CONTENT AND PRICE OF ASSOCIATED SERVICES BASED DELIVERABLES HOWEVER ARE EASIER TO NEGOTIATE AND ADJUST WITH BOTH CUSTOMERS AND SUPPLIERS
)T IS THE FOURTH AND LAST CHARACTERISTIC OF A SERVICE CUSTOMERS ARE THE JUDGE OF THE VALUE HOWEVER THAT ULTIMATELY DIFFERENTIATES CORPORATION OUT FROM CUSTOMER IN ORGANIZATIONS AND PROCESSES FROM SERVICES
0ROCESSES VERSUS 3ERVICES 4HE TABLE IN &IGURE HIGHLIGHTS THE DIFFERENCES BETWEEN PROCESSES AND SERVICES 4HESE DIFFERENCES ARE SIGNIlCANT BECAUSE !GILE %NTERPRISES MUST ALWAYS PLACE PRIORITY ON SERVICESIE CUSTOMER FACING VALUE CUSTOMERS CAN BE EITHER INTERNAL OR EXTERNAL TO THE ORGANIZATION &OCUSING ONLY ON INTERNAL PROCESSES LEAVES ORGANIZATIONS MUCH TOO VULNERABLE TO IGNORING CUSTOMER AND MARKET NEEDS IN
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&IGURE
FAVOR OF PROCESS ADHERENCE /F COURSE PROCESSES ARE COMPONENTS OF SERVICES BUT IT IS THE FORMALIZED CUSTOMER INTERFACE THAT DIFFERENTIATES THE TWO %XAMINING THE CHART IT BECOMES CLEAR THAT THE BIGGEST DIFFERENCE IS THAT SERVICES HAVE A FORMALIZED CUSTOMER INTERFACE WHEREAS PROCESSES OR FUNCTIONS HAVE AN INFORMAL CUSTOMER INTERFACE )T IS THE FORMALITY OF THIS INTERFACETHE VALUE DELIVERY BOUNDARYTHAT MAKES SERVICES CRUCIAL TO !GILE %NTERPRISES 4HESE IDEAS CAN BE EASILY SEEN WHEN THINKING ABOUT AN !4- MACHINE 4HE SERVICE TO THE EXTERNAL CUSTOMER THE CONSUMER IS THE CASH WITHDRAWAL SERVICE 4HIS SERVICE IS COMPOSED OF MULTIPLE FUNCTIONS OR PROCESSES SUCH AS ACCOUNT LOOKUP IDENTIlCATION VERIlCATION AND BALANCE VALIDATION 4HESE FUNCTIONS OR PROCESSES TYPICALLY RESIDE WITHIN AN APPLICATION CREATED FOR THE PURPOSE OF SUPPORTING THE CASH WITHDRAWAL SERVICE OF THE !4- MACHINE 4HESE PROCESSES ARE SHOWN ON THE LEFT SIDE OF &IGURE /N THE RIGHT SIDE OF &IGURE YOU CAN SEE THE SAME FUNCTIONALITY BEING PROVIDED IN THE FORM OF MODULAR LOOSELY COUPLED FORMALLY DElNED SERVICES 0ROVIDING VALUE IN THE FORM OF SERVICES MEANS THAT THERE ARE NOW MULTIPLE CUSTOMERSINTERNAL AND EXTERNAL &OR EXAMPLE THE !4- MANAGER IS THE CUSTOMER OF THE CHECKING SAVINGS ACCOUNTS MANAGER "ECAUSE THERE ARE MULTIPLE CUSTOMER PROVIDER RELATIONSHIPS THERE IS CLEAR ACCOUNTABILITY THROUGHOUT THE ENTIRE VALUE CHAIN .EEDS AND
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OPPORTUNITIES WILL BE MONITORED MORE CLOSELY AND UNDERSTOOD MORE QUICKLY 4HIS MODULARIZATION ALSO ALLOWS CHANGES TO BE MADE MUCH MORE EASILY AND QUICKLY TO EACH INDIVIDUAL SERVICE WHILE PROTECTING THE INTEGRITY OF THE FUNCTIONALITY OF THE OTHER SERVICES ,ETS EXTEND OUR !4- EXAMPLE BY SUPPOSING THAT THE BANK WISHES TO PARTNER WITH A CELLULAR PHONE SERVICE PROVIDER TO EXTEND THEIR BANKING SERVICES ACROSS A WIDER BUSINESS ECOSYSTEM 3UPPOSE THAT THE CELLULAR COMPANY WISHES TO OFFER THEIR CUSTOMERS THE ABILITY TO PURCHASE ITEMS USING THEIR CELL PHONE INSTEAD OF A CREDIT CARD A CELLULAR DEBIT CARD SERVICE 4HIS IS ALREADY HAPPENING IN *APAN )F THE CASH WITHDRAWAL SERVICE OFFERED AT THE !4- MACHINE HAS BEEN DESIGNED AND HARD CODED WITH STANDALONE INFRASTRUCTURE AND SOFTWARE APPLICATION IE IN A VERTICAL SILO THEN THE CODE WILL HAVE TO BE DUPLICATED AND MODIlED AND RUN ON ITS OWN SEPARATE SILOED INFRASTRUCTURE 4HE ABILITY TO EXECUTE THIS CHANGE THEN WILL BE SLOWED AND WILL BE MORE EXPENSIVE )F HOWEVER THE SERVICE HAS BEEN CREATED OUT OF SMALLER STAND ALONE MODULAR SERVICES AS IDENTIlED ABOVE SUCH AS IDENTIlCATION VERIlCATION ETC THEN IT WOULD BE RELATIVELY EASY AND INEXPENSIVE TO BUILD AND OFFER THE NEW CELLULAR DEBIT CARD SERVICE BY LAYERING WIRELESS ACCESS AND SECURITY SERVICES ON TOP OF THE LOWER LEVEL SERVICES SUPPORTING THE CASH WITHDRAWAL SERVICE ALREADY BEING OFFERED VIA THE !4- MACHINE .OW AS SEEN IN &IGURE THE CELL PHONE SIMPLY BECOMES AN ALTERNATE ACCESS DEVICE FOR THE CASH WITHDRAWAL SERVICE
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&OR AN EXCELLENT DISCUSSION OF SERVICE PLATFORMS USED FOR MULTI CHANNEL DELIVERY OF SERVICES PLEASE SEE 3ERVICES "LUEPRINT 2OADMAP FOR %XECUTION BY 2AVI +ALAKOTA AND -ARCIA 2OBINSON !S CAN BE SEEN FROM THIS EXAMPLE NOW FORMALIZED SERVICES ARE BEING DELIVERED TO BOTH INTERNAL AND EXTERNAL CUSTOMERS &OR THE SAKE OF COMPLETENESS LETS MAP THE SOLUTION ARCHITECTURE OF THE CELLULAR DEBIT CARD SERVICE BACK TO (0S $ARWIN !RCHITECTURE )N &IGURE THE INDIVIDUAL SERVICES OF THE CELLULAR DEBIT CARD SOLUTION ARE COLOR CODED TO DEMONSTRATE THE LINKAGE BACK TO THE GENERALIZED $ARWIN !RCHITECTURE 4HE !4- EXAMPLE ILLUSTRATES HOW VARIOUS SERVICES ARE BUILT BOTTOM UP IN $ARWIN !RCHITECTURE (IGHER LEVEL BUSINESS SERVICES ARE COMPOSED OF APPLICATION SERVICES !PPLICATION SERVICES ARE COMPOSED OF LOWER LEVEL INFRASTRUCTURE SERVICES )N THIS WAY LOWER AND MID LEVEL INFRASTRUCTURE AND APPLICATION SERVICES CAN BE COMBINED AND RE COMBINED TO QUICKLY PRODUCE MULTIPLE BUSINESS SERVICES THAT MEET BUSINESS NEEDS AND BRING NEW VALUE TO CUSTOMERS 4HE !4- EXAMPLE ALSO SHOWED THAT THERE ARE DIFFERENT CUSTOMERS OF THE SERVICES AT THE DIFFERENT $ARWIN LEVELS ,ETS REVISIT OUR DElNITION OF FORMALIZED SERVICES AND DElNE A SERVICES MATURITY MODEL IN TERMS OF THE VALUE BEING DELIVERED AND THE CUSTOMERS CONSUMING THAT VALUE
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"UILDING AN )4 3ERVICE -ATURITY -ODEL 4HE ABILITY TO EXTEND AND LINK BUSINESS PROCESSES IN A MODULAR FASHION ACROSS THE BOUNDARIES OF THE ENTERPRISE IS A HALLMARK OF AGILITY MATURITY 5SING THIS SERVICE MATURITY MODEL WE COULD SAY THAT WITH REGARD TO THE CELLULAR DEBIT CARD AND !4- SERVICES THE BANK WAS AGILE ADAPTIVE LEVEL IF IT COULD MODULARLY LINK THE NEW WIRELESS ACCESS AND SECURITY SERVICES TO THE PRE EXISTING LOWER LEVEL SERVICES SUCH AS ACCOUNT LOOK UP )$ VERIlCATION ETC AND THUS OFFER THE NEW CELLULAR DEBIT CARD SERVICE QUICKLY WITHOUT HAVING TO REPLICATE ANY FUNCTIONALITY !LTERNATELY IF THE BANK HAD TO CREATE ADDITIONAL INSTANCES OF THE LOWER LEVEL FUNCTIONS USING ADDITIONAL COPIES OF THE APPLICATIONS AND RUN THE NEW CELLULAR DEBIT CARD SERVICE ON ITS OWN )4 INFRASTRUCTURE THEN THE BANK COULD HARDLY BE CONSIDERED AGILE OR ADAPTIVE COSTS WOULD RISE AND ANY FUTURE CHANGES TO THE LOWER LEVEL SERVICES WOULD HAVE TO BE MADE MULTIPLE TIMES IN MULTIPLE PLACES &UTURE CHANGES WOULD BE SLOWED AND BE MORE EXPENSIVE TO IMPLEMENT )N THIS CIRCUMSTANCE THE SERVICE MATURITY WOULD BE LEVEL ONE OR TWO DEPENDING ON THE LEVEL OF EFlCIENCY AND QUALITY OF SERVICE THE )4 ORGANIZATION WAS DELIVERING TO THE BUSINESS SEE &IGURE
&IGURE
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4HERE IS ANOTHER MAJOR BUSINESS BENElT IN DELIVERING EACH OF THE FUNCTIONS IN THE SOLUTION STACK AS FORMALIZED SERVICES RATHER THAN JUST AS INTERNAL PROCESSES .AMELY IT WOULD NOW BE POSSIBLE FOR THE BANK TO UNDERSTAND THE UNIT TRANSACTION COST OF EACH SERVICE IN THE SOLUTION STACK )T WOULD BE VERY EASY THEN FOR THE BANK TO COMPARE THE COSTS AND BENElTS OF DELIVERING THE CASH WITHDRAWAL SERVICE OR ACCOUNT DEBITING SERVICE VIA !4- CELLULAR DEBIT CARD TELLER OR SOME OTHER ALTERNATE METHODEVEN ON AN INDIVIDUAL CUSTOMER BASIS 5NDERSTANDING COMPONENT SERVICES COST MODULARITY AND INSIGHT INTO CUSTOMER AND MARKET BEHAVIOR ARE ALL CONTRIBUTING FACTORS OF BUSINESS AGILITY
!2#()4%#452!, #(!.'% $ELIVERING VALUE AS A SET OF SERVICES AT EACH LAYER OF THE $ARWIN MODEL REQUIRES A GREAT DEAL OF CHANGE ACROSS ALL ELEMENTS OF THE ENTERPRISE ORGANIZATION 4ODAY IN MOST COMPANIES BUSINESS PROCESSES ARE AUTOMATED BY APPLICATIONS THAT HAVE BEEN BUILT IN VERTICAL SILOS DEPARTMENT BY DEPARTMENT AND ,/" BY ,/" #HANGING FROM THESE SILOED BUSINESS PROCESS AND )4 ENVIRONMENTS ARCHITECTED VERTICALLY TO A HORIZONTAL ARCHITECTURE DELIVERING SERVICES REQUIRES SIGNIlCANT CHANGE SEE &IGURE
&IGURE
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#LEARLY BUSINESS AND TECHNICAL ARCHITECTURES MUST CHANGE &UNCTIONALITY MUST BE ORGANIZED HORIZONTALLY SO THAT IT CAN BE EASILY CONNECTED ACROSS INTERNAL SILOS AND ACROSS THE VALUE NETWORK )N OTHER WORDS VERTICAL BUSINESS PROCESSES AND )4 SILOS MUST BE TRANSFORMED INTO A HORIZONTAL ENTERPRISE ARCHITECTURE COMPOSED OF MODULAR COMPONENTS THAT CAN BE QUICKLY COMBINED AND RECOMBINED TO OFFER NEW FUNCTIONS AND SERVICES !T THE CENTER OF ALL OF THIS CHANGE WE BELIEVE IS THE RELATIONSHIP BETWEEN BUSINESS AND )4 !T ITS BEST )4 SHOULD BE VIEWED AS NOTHING LESS THAN THE AUTOMATION OF BUSINESS PROCESSES "UT IN MANY ENTERPRISES )4 IS VIEWED AS NOTHING BUT A COST CENTER BORING AND OFTEN ANNOYING PLUMBING THAT IS BEST KEPT OUT OF SIGHT AND OUT OF MIND #LEARLY THE )4 FUNCTION IN MANY COMPANIES HAS A LONG WAY TO GO ,ETS EXAMINE EXPLICITLY THE ,/" )4 RELATIONSHIP
,/" )4 2ELATIONSHIP ! FUNDAMENTAL PROPERTY OF SERVICES IS THAT THEY ARE DElNED TOP DOWN BUT BUILT BOTTOM UP 2EFERRING BACK TO THE $ARWIN !RCHITECTURE MODEL FOR A MOMENT WE REALIZE THAT BUSINESS SERVICES WOULD BE DElNED IN TERMS OF CUSTOMER AND BUSINESS NEEDS FROM THE TOP DOWN !S WE SAW WITH THE EARLIER !4- EXAMPLE HOWEVER SERVICES ARE BUILT BOTTOM UP 4HAT IS BEFORE A CELLULAR DEBIT CARD SERVICE COULD BE OFFERED THE LOWER LEVEL SERVICES MUST ALREADY BE IN PLACE BALANCE VALIDATION ACCOUNT LOOK UP ETC 4HIS TOP DOWN BOTTOM UP DYNAMIC OFTEN LEADS TO GAPS % % %
#REDIBILITY GAPS BETWEEN WHAT THE BUSINESS NEEDS AND WHAT THE BUSINESS PERCEIVES )4 CAN DELIVER ,ANGUAGE GAPS BETWEEN THE LANGUAGES OF BUSINESS AND TECHNOLOGY !LIGNMENT GAPS BETWEEN WHAT THE BUSINESS NEEDS AND WHAT )4 THINKS ITS JOB IS
7E HAVE ALREADY POINTED OUT THAT FORMALIZED SERVICES CAN ADDRESS THE LANGUAGE AND ALIGNMENT GAPS 4HIS LEAVES HOWEVER A CREDIBILITY GAP THAT MUST BE UNDERSTOOD AND MUST BE CLOSED #LOSING THE CREDIBILITY GAP REQUIRES TWO THINGS % %
5NDERSTANDING THE CUSTOMERS ,/"S PERCEPTIONS )MPROVING THOSE PERCEPTIONS BY DELIVERING AN INCREASING AMOUNT OF VALUE TO THE BUSINESS
4O UNDERSTAND ,/" PERCEPTIONS OF )4 WE NEED A SCALE AGAINST WHICH TO IDENTIFY WHAT TYPES OF SERVICES ARE BEING DELIVERED TO WHOM WITHIN THE ,INES OF "USINESS
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4HIS IS ONE OF THE FUNCTIONS OF THE SERVICE MATURITY MODEL !S THE BUSINESS VALUE OF THE DELIVERABLES RISES BUSINESS RELATIONSHIPS ARE ESTABLISHED AND MAINTAINED HIGHER AND HIGHER WITHIN THE ,/" AND CORPORATE EXECUTIVE MANAGEMENT RANKS .OW THAT WE HAVE A SCALE WE NEED A MODEL THAT CAN ADEQUATELY CHARACTERIZE RELATIONSHIPS BETWEEN THE ,/"S AND )4
4HE "USINESS 2ELATIONSHIP -ODEL 2EMEMBERING THAT THE TRUE JOB OF )4 IS BUSINESS PROCESS AUTOMATION AND THE TRUE GOAL OF )4 IS TO ENABLE VALUE CREATION FOR THE BUSINESS IT IS IMPERATIVE TO BE ABLE TO MEASURE ,/" TRUST AND CONlDENCE IN )4 (OWEVER TRUST AND CONlDENCE ARE SUBJECTIVE NOT OBJECTIVE MEASURES AND THEREFORE ARE DIFlCULT TO MEASURE .EVERTHELESS ,/" TRUST AND CONlDENCE IN )4 IS ESSENTIAL TO ENABLE )4S CAPABILITY TO SUPPORT STRATEGIC CRITICAL BUSINESS IMPERATIVES AND PRODUCE MAXIMUM VALUE FOR THE BUSINESS )N SHORT HOW )4 IS PERCEIVED DETERMINES WHETHER )4 IS VALUED BY THE BUSINESS OR BRUSHED ASIDE AND LEFT TO ITS OWN DEVICES IN THE BASEMENT COMPUTER ROOM )4 ORGANIZATIONS THAT WISH TO INCREASE THE TRUST AND CONlDENCE OF THE BUSINESS MUST lRST ASSESS THEIR POSITION ON A BUSINESS RELATIONSHIP MODEL AND TAKE SPECIlC ACTION STEPS TO IMPROVE THE BUSINESS PERCEPTION 4O ASSESS THEIR POSITION THE )4 ORGANIZATION MUST EVALUATE THEIR PROCESSES AND SKILLS 4HE )4 LEADERSHIP MUST ENSURE THAT THESE PROCESSES AND SKILLS ARE SUPPORTING THE NEEDS OF THE BUSINESS )N OTHER WORDS BUSINESS AND )4 STRATEGIES MUST BE ALIGNED !N EFFECTIVE AND EFlCIENT EVALUATION WILL CLEARLY IDENTIFY THE FOCUS OF THE )4 FUNCTION )S )4 OPERATING AS A BUSINESS ORIENTED FUNCTION OR JUST AS A TECHNOLOGY ORIENTED FUNCTION /R IS IT SOMETHING IN BETWEEN 4HE )4 ORGANIZATION HAS THE OPPORTUNITY TO PROVIDE BUSINESS SERVICES AND ADD VALUE THROUGH BUSINESS AND CUSTOMER KNOWLEDGE "UT ALL TOO OFTEN )4 HAS FAILED TO SEIZE THE OPPORTUNITY AND CAPITALIZE ON ITS KNOWLEDGE OF THE BUSINESS 4HE RESULT IS THE LOSS OF THE TRUST AND CONlDENCE OF THE BUSINESS UNITS AND THE CREATION OF )4 SILOS BASED WITHIN THE BUSINESS UNITS 'AINING THE TRUST AND CONlDENCE OF THE ,/" CUSTOMERS REQUIRES )4 TO DEVELOP A RELATIONSHIP STRATEGY )N ORDER TO DEVELOP A RELATIONSHIP STRATEGY THE lRST STEP IS TO UNDERSTAND THE STARTING POINT 9OU HAVE TO START FROM WHERE YOU ARE NOT WHERE YOU WOULD LIKE TO BE 4HERE ARE SEVEN QUESTIONS TO BE ASKED IN ORDER TO DETERMINE THE CURRENT DEGREE OF TRUST AND CONlDENCE THE ,/"S HAVE IN )4 4HE QUESTIONS ASKED IN THIS SPECIlC ORDER ARE $OES THE BUSINESS BELIEVE THAT )4 IS A STRATEGIC ASSET AND A MAJOR BUSINESS RESOURCE )S SERVICE TO END USERS A TOP )4 PRIORITY
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!RE BUSINESS USERS AND ,/" MANAGERS COMMITTED TO AND INVOLVED IN )4 PROJECTS $OES THE HEAD OF )4 HAVE A HIGH STATUS IN THE ORGANIZATION )S THE )4 STRATEGY ALIGNED WITH THE BUSINESS STRATEGY !RE EXISTING )4 SYSTEMS STRATEGIC AND INTEGRATED $OES THE BUSINESS PERCEIVE THE )4 FUNCTION TO BE BUSINESS RATHER THAN TECHNOLOGY ORIENTED &IRST )4 PERSONNEL ANSWER THESE QUESTIONS ABOUT THEMSELVES )F THE ANSWER IS A STRONG AND UNEQUIVOCAL YES TO ALL OF THE ABOVE QUESTIONS THERE MAY BE A GOOD BUSINESS )4 RELATIONSHIP AND THE )4 ENVIRONMENT MAY BE FUNCTIONING WELL AND IS UNDER CONTROL )N SHORT IF )4S PERCEPTIONS ARE ON TARGET THEN )4 AND THE ,/"S ARE SPEAKING THE SAME LANGUAGE AND ARE WORKING TOGETHER WELL TO CREATE VALUE FOR THE ENTERPRISE )F ONE OR MORE OF THE ANSWERS IS NO THEN A LESS THAN DESIRED RELATIONSHIP EXISTS BETWEEN )4 AND ITS CUSTOMERS 4HE NEXT STEP IS TO DISCOVER IF )4S CUSTOMERS ,/" MANAGERS WOULD ALSO ANSWER A STRONG AND UNEQUIVOCAL YES TO THE SAME QUESTIONS )T IS THE CUSTOMER PERCEPTION OF )4 THAT IS REALITY NOT )4S OWN ASSESSMENT 2EMEMBER THE FOURTH CHARACTERISTIC OF A SERVICE IS THAT CUSTOMERS ARE THE JUDGE OF THE VALUE NOT THE SERVICE PROVIDERS 5NLESS )4 DETERMINES ITS CUSTOMERS VIEWS )4 DOES NOT HAVE THE INFORMATION NEEDED TO IMPROVE THE VALUE BEING DELIVERED OR NOT TO THE ,/" CUSTOMERS &AILURE TO UNDERSTAND THIS IS AT THE ROOT OF MANY )4 PROBLEMS !S )4 BEGINS THE JOURNEY TOWARD A CUSTOMER ORIENTED SERVICE ORGANIZATION THE CHANGES REQUIRED OF )4 SKILLS COULD BE ENORMOUS 3KILLS THAT NEED TO BE lNELY TUNED MIGHT INCLUDE % % %
"USINESS SKILLS IN ORDER TO BE ABLE TO UNDERSTAND AND ANTICIPATE THE NEEDS OF THE CUSTOMER 3OFT SKILLS SUCH AS PERSONAL COMMUNICATIONS CUSTOMER RELATIONSHIPS AND ACCOUNT MANAGEMENT STRATEGIC SKILLS TO LOOK FOR ADDED VALUE VS JUST LOOKING FOR )4 COST SAVINGS
7E USE A BUSINESS RELATIONSHIP MODEL "2- TO DEVELOP THE RELATIONSHIP STRATEGY AND TO IDENTIFY THE NEEDED SKILLS TO ENABLE A BETTER ALIGNMENT AND RELATIONSHIP OF )4 WITH THE BUSINESSES IT SERVES "2- CONlRMS THE TYPE OF RELATIONSHIP THAT EXISTS BETWEEN )4 AND ITS CUSTOMERS AS WELL AS RECOMMENDING HOW THE RELATIONSHIP CAN BE IMPROVED THUS BRINGING )4 TO THE HEART OF THE ORGANIZATION 4HE "2- MODEL SUGGESTS SPECIlC STRATEGIES AND TACTICS FOR )4 ORGANIZATIONS TO PURSUE 4HESE STRATEGIES AND TACTICS ARE ALIGNED WITH THE )4 ORGANIZATIONS POSITION
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ON THE MODEL AND HELP GUIDE THE )4 ORGANIZATION TOWARD SPECIlC ACTIONS TO HELP TRANSFORM THE )4 FUNCTION INTO AN ASSET THAT IS PERCEIVED AS STRATEGIC IS VALUABLE TO THE FUTURE OF THE BUSINESS AND IS IN A POSITION OF BUSINESS LEADERSHIP 4RADITIONALLY )4 STRATEGY HAS BEEN DEVISED IN ISOLATION AND THEN IMPOSED UPON THE BUSINESS UNITS "Y DElNING THE )4 STRATEGY IN TERMS OF FORMALIZED SERVICES BEING DELIVERED AT VARIOUS LEVELS WITHIN THE ENTERPRISE TO INTERNAL AND EXTERNAL CUSTOMERS IT BECOMES HARD TO TELL WHERE THE BUSINESS STRATEGY ENDS AND THE )4 STRATEGY BEGINS 4HEY MELD INTO ONE UNIlED CUSTOMER FOCUSED STRATEGY )MPROVING THE RELATIONSHIP BETWEEN BUSINESS AND )4 FOLLOWS THIS SEQUENCE % % % %
-AKE COMMITMENTS TO SERVICE AND SUPPORT THE CUSTOMER "UILD UP UNDERSTANDING OF THE CUSTOMER 7ORK TOGETHER AND DEVELOP MUTUAL TRUST "UILD THE STRATEGY TOGETHER
/UR EVIDENCE SUGGESTS THAT YOU HAVE TO BUILD THE RELATIONSHIPS BEFORE YOU CAN BUILD THE STRATEGY TOGETHER 4HE "2- MODEL CONSISTS OF MAJOR COMMUNITIES OR CATEGORIES %ACH OF THESE COMMUNITIES CHARACTERIZES THE QUALITY OF THE ,/" )4 RELATIONSHIP AT THAT LEVEL OF RELATIONSHIP MATURITY 4HE FOUR COMMUNITIES ARE
&IGURE
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4ECHNO #ENTRIC 4RANSITION TO 3ERVICE #ENTRIC "USINESS #ENTRIC #USTOMER #ENTRIC
!S THE )4 ORGANIZATION MOVES FROM ONE COMMUNITY TO ANOTHER THE MATURITY LEVEL CHANGES FROM COST CENTER TO STABLE TRUSTED SUPPORTER TO RESPECTED PEER TO STRATEGIC PARTNER AND TO ADAPTIVE STRATEGIC PARTNER 4HIS PROGRESSION IS REPRESENTED IN &IGURE (IGH LEVEL RECOMMENDATIONS FOR ACTION ARE MADE IN SEVEN STEPS %ACH STEP IDENTIlES THE TARGET OF THE ACTION AND THE FOCUS OF THE ACTION TO BE TAKEN
4ECHNO #ENTRIC 4HE )4 STRATEGY IN THE lRST COMMUNITY IS TO GET THE )4 ENVIRONMENT BACK UNDER CONTROL )4 ORGANIZATIONS IN THIS COMMUNITY HAVE A VERY TECHNICAL ORIENTATION AND ARE GENERALLY UNAWARE OF THE BUSINESS ISSUES BEING FACED BY ,/" AND CORPORATE EXECUTIVES &OR THIS COMMUNITY SERVICE IS INTERPRETED TO MEAN TECHNICAL lX AND EVERY PROBLEM IS ASSUMED TO BE SOLVABLE WITH TECHNOLOGY &OR 4ECHNO #ENTRIC )4 ORGANIZATIONS THERE IS ONLY ONE REAL COURSE OF ACTION SWITCH RESOURCES TO END USER SUPPORT IN A MAJOR WAY #LEARLY THE ALIGNMENT OF THE BUSINESS TO )4 IS IMPORTANT AND NEEDS TO BE ADDRESSED BUT FOCUSING RESOURCES ON PROVIDING HIGH QUALITY SUPPORT TO THE END USERS IS THE FASTEST WAY TO CHANGE CUSTOMER PERCEPTIONS ABOUT THE )4 DEPARTMENT 7ITHOUT THIS CHANGE OF BEHAVIORS A 4ECHNO #ENTRIC )4 ORGANIZATION WILL BE RELEGATED TO THE POSITION OF A SUSTAINED COST CENTER AND LIKELY WILL BE IDENTIlED AS A PRIME CANDIDATE FOR OUTSOURCING )F OUTSOURCING IS NOT A STRATEGIC INTENTION 4ECHNO #ENTRIC SHOPS MUST GAIN CONTROL OF THE CURRENT SITUATION AND PROCEED TO GET MUCH CLOSER TO THE BUSINESS
4RANSITION TO 3ERVICE #ENTRIC 4HE )4 STRATEGY IN THE SECOND COMMUNITY IS TO GET CLOSE TO THE BUSINESS 4HE FOCUS OF THE )4 ORGANIZATION IS ON INFRASTRUCTURE RATHER THAN ON INDIVIDUAL TECHNICAL PIECE PARTS &OR THIS COMMUNITY THE UNDERSTANDING OF SERVICE IS MOVING BEYOND JUST TECHNICAL lX AND IS BEGINNING TO BE UNDERSTOOD AS QUALITY OF SERVICE UPTIME AND RESPONSE TIME !N ORGANIZATION IN TRANSITION HAS MADE SIGNIlCANT PROGRESS IN INTRODUCING CUSTOMER SERVICE AND BUSINESS UNDERSTANDING INTO THE )4 FUNCTION BY FOCUSING ON IMPROVING THE QUALITY OF SERVICE TO THE ORGANIZATION 3TILL IT WILL TAKE TIME TO CHANGE END USER PERCEPTIONS AND PROGRESS WILL BE PATCHY 4HE DEVELOPMENT OF THE NECESSARY BUSINESS SERVICE AND INTERPERSONAL SKILLS WILL PROVE DIFlCULT 4HE FOCUS WILL CHANGE NOW FROM JUST DOING THE RIGHT THING TO DOING THINGS IN A MUCH BETTER WAY /NCE THE )4 DEPARTMENT IS BEGINNING TO BE SEEN AS PART OF
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THE SOLUTION INSTEAD OF THE PROBLEM IT WILL BE POSSIBLE TO START OPENING THE KIND OF DIALOGUE THAT IS NEEDED TO CREATE MORE AMBITIOUS INITIATIVES IN STRATEGY AND SYSTEMS
"USINESS #ENTRIC 4HE )4 STRATEGY FOR THE THIRD COMMUNITY IS TO GET INTO SERVICES ! "USINESS #ENTRIC COMMUNITY HAS BEEN MIGRATING FROM A TECHNICAL SERVICE FUNCTION INTO A PRO ACTIVE MANAGEMENT FUNCTION &OR THIS COMMUNITY THE TERM SERVICE IS UNDERSTOOD AS FORMALIZED DELIVERABLES FOR CUSTOMERS INSIDE THE ENTERPRISE AND EVENTUALLY FOR CUSTOMERS IN THE EXTENDED ENTERPRISEPARTNERS AND SUPPLIERS 4HE FOCUS OF THE )4 ORGANIZATION SHIFTS FROM QUALITY OF SERVICE TO CUSTOMER SATISFACTION 4HE CHANGE MANAGEMENT SKILLS THAT HAVE BEEN DEVELOPED IN REFOCUSING THE )4 FUNCTION ARE RECOGNIZED THROUGHOUT THE ORGANIZATION 4HE )4 FUNCTION IS PLAYING AN INCREASINGLY ACTIVE ROLE IN IMPLEMENTING CHANGE ACROSS THE BUSINESS AS FORMALIZED SERVICES ARE BEGINNING TO BE DElNED AND DELIVERED THROUGH THE INFRASTRUCTURE AND APPLICATION SERVICES LEVELS OF THE $ARWIN !RCHITECTURE 4HE OBJECTIVE IS TO PLAY A KEY ROLE IN DRIVING THIS CHANGE WHILE KEEPING CUSTOMER SERVICE AT ITS HIGHEST LEVELS )4 SHOULD NOW START TO LEVERAGE THE EXPERIENCE GAINED FROM THE EARLIER STAGES TO GET RIGHT INTO THE CORE OF THE BUSINESS 'IVEN THE PIVOTAL IMPORTANCE OF THE ENTIRE SUPPLY CHAIN IN DELIVERING THE REQUIRED QUALITY OF SERVICE TO INTERNAL CUSTOMERS LEADING EDGE PROCUREMENT AND SUPPLIER MANAGEMENT SKILLS NEED TO BE DEVELOPED "USINESS #ENTRIC COMMUNITIES WILL HAVE TO APPLY NEW TECHNOLOGIES TO REACH BEYOND THE INTERNAL SYSTEMS INTO THE ENTIRE VALUE NETWORK 4HESE ARE MAJOR OPPORTUNITIES BUT )4 MUST EXHIBIT BUSINESS KNOWLEDGE AND CREDIBILITY BEFORE THEY CAN BE PERCEIVED AS LEADERS !LTHOUGH A GREAT DEAL OF PROGRESS HAS BEEN MADE THERE ARE STILL A NUMBER OF DIFlCULT CULTURAL AND OPERATIONAL CHANGES THAT HAVE TO BE MADE IN ORDER TO CREATE A WORLD CLASS SERVICE ORGANIZATION 4HE FOCUS NOW SHOULD BE MUCH MORE FORWARD LOOKING #ONSIDERATION SHOULD BE GIVEN TO SUCH ISSUES AS ACCOUNT MANAGEMENT WITHIN THE BUSINESS THE QUALITY OF THE RELATIONSHIPS AND WHETHER OR NOT THE CUSTOMER HAS AN ENJOYABLE EXPERIENCE 4HE )4 STRATEGY SHOULD START TO DISAPPEAR AS A SEPARATE ENTITY IT IS WHATEVER IS REQUIRED TO SUPPORT THE BUSINESS STRATEGY .OW IS THE TIME TO ENSURE THAT )4 IS AN INTEGRAL PART OF THE BUSINESS STRATEGY )4 MUST BEGIN PARTICIPATING IN BUSINESS DISCUSSIONS WITH SENIOR ,/" AND CORPORATE BUSINESS MANAGEMENT
#USTOMER #ENTRIC 4HE )4 STRATEGY FOR THE FOURTH COMMUNITY IS TO GET INTO LEADERSHIP 4HE FOCUS OF THE )4 ORGANIZATION IS NOW ON WORKING IN FULL PARTNERSHIP WITH ,/" AND CORPORATE EXECUTIVES TO CREATE NEW VALUE AND BUSINESS OPPORTUNITIES FOR THE ENTERPRISE &OR THIS
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COMMUNITY SERVICE IS NOW UNDERSTOOD AS A SET OF DELIVERABLES NOT ONLY FOR INTERNAL CUSTOMERS BUT FOR EXTERNAL CUSTOMERS AS WELL ACROSS THE ENTIRE VALUE NETWORK 4HE SHIFT OF MOST 7ESTERN INDUSTRIAL ECONOMIES FROM A MANUFACTURING TO A SERVICES BASE HAS MADE CUSTOMER SERVICES THE KEY DIFFERENTIATOR FOR MANY IF NOT MOST BUSINESSES )N THIS SITUATION EXPERIENCE AND IN DEPTH UNDERSTANDING OF SERVICE CONCEPTS AND THE ABILITY TO DELIVER SERVICES ACROSS THE ENTIRE VALUE NETWORK IS AN EXTREMELY VALUABLE SET OF SKILLS AND DRIVES SIGNIlCANT VALUE CREATION FOR THE ENTERPRISE ,OOKING BACK TOWARDS 4ECHNO #ENTRIC THE INTERNAL )4 FUNCTION HAS TRANSFORMED ITSELF FROM AN INWARD LOOKING TECHNO CENTRIC GUARDIAN OF TECHNOLOGY INTO A BUSINESS CENTRIC WORLD CLASS PROVIDER OF INTERNAL AND EXTERNAL SERVICES
&2/- 7(!4 !.$ &/2 7(/-x4/ (/7 ,ETS REVIEW WHERE WE ARE 7E BEGAN BY EXAMINING lVE DIFFERENT PERSPECTIVES ON AGILITY n THE PERSPECTIVES OF THE MARKET THE BUSINESS STRATEGIST THE VENDOR THE TECHNOLOGIST AND THE #&/ 4HESE lVE PERSPECTIVES COME TOGETHER WITHIN EACH ENTERPRISE 7E HAVE IDENTIlED THE IMPORTANCE OF THE CUSTOMER IN MAINTAINING AGILITY AND THAT !GILE %NTERPRISES DELIVER VALUE TO THEIR CUSTOMERS AS FORMALIZED SERVICES 7E HAVE SHOWN HOW FORMALIZED SERVICES DELIVERED TO BOTH INTERNAL AND EXTERNAL CUSTOMERS SERVE AS THE LANGUAGE OF AN !GILE %NTERPRISE 4HE FOUR LIFECYCLE PHASES OF A SERVICE DElNE DESIGN DEVELOP DELIVER PROVIDE A DElNED VOCABULARY AND STRUCTURE FOR ALIGNMENT AND CONTINUAL SYNCHRONIZATION BETWEEN THE BUSINESS AND )4 5SING THE $ARWIN !RCHITECTURE WE SHOWED HOW SERVICES BECOME THE BUILDING BLOCKS OF AN !GILE %NTERPRISE n EXAMINING HOW BUSINESS SERVICES ARE COMPOSED OF APPLICATION SERVICES THAT ARE COMPOSED OF INFRASTRUCTURE SERVICES 7E DElNED A SERVICE MATURITY MODEL THAT IDENTIlES THE NATURE OF THE SERVICES DELIVERABLES AS AN ENTERPRISE MATURES ITS SERVICE DELIVERY CAPABILITY 7E ALSO FOCUSED ON THE CUSTOMERS OF THE SERVICES $ElNING MULTIPLE SERVICES UP THE $ARWIN !RCHITECTURE STACK AND ACROSS THE VALUE NETWORK MEANS THAT IN AN !GILE %NTERPRISE THERE ARE MANY FORMALIZED CUSTOMER TO SERVICE PROVIDER RELATIONSHIPS 7E SHARED THE "USINESS 2ELATIONSHIP -ODEL THAT SERVES AS A DIAGNOSTIC TOOL TO DETERMINE THE QUALITY OF THE RELATIONSHIP BETWEEN CUSTOMERS AND SERVICE SUPPLIERS BETWEEN BUSINESS AND )4 AS WELL AS BETWEEN BUSINESS AND ITS EXTERNAL CUSTOMERS SUPPLIERS AND PARTNERS ,ASTLY WE DESCRIBED THE FOUR "2- COMMUNITIES 4ECHNO #ENTRIC 4RANSITION TO 3ERVICE #ENTRIC "USINESS #ENTRIC AND #USTOMER #ENTRIC AND A SEVEN STEP
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ACTION PLAN THAT PROVIDE THE BASIS FOR A GO FORWARD ACTION PLAN FOR )4 TO IMPROVE ITS RELATIONSHIPS WITH ITS CUSTOMERS 4HIS SEVEN STEP ACTION PLAN STRONGLY IMPLIES THAT TRANSFORMATION TO AN !GILE %NTERPRISE IS NOT AN EVENT BUT A JOURNEY -ULTIPLE CHANGES ACROSS PEOPLE PROCESS AND TECHNOLOGY ARE REQUIRED 4HESE CHANGES MUST BE SYNCHRONIZED SO THAT THE BUSINESS CAN MEET ITS DAY TO DAY OBLIGATIONS WHILE AT THE SAME TIME TRANSFORMING ITS BUSINESS AND )4 PROCESSES INFRASTRUCTURE AND ORGANIZATION TO BE ABLE TO mEX AND ADAPT QUICKLY 4HE lNAL SECTION OF THE CHAPTER WILL IDENTIFY THE MAJOR AREAS OF CHANGE THAT MUST BE SYNCHRONIZED IN ORDER TO TRANSFORM INTO AN !GILE %NTERPRISE AS WELL AS AN APPROACH FOR TRANSFORMING SILOS TO SERVICES
-!.!'%-%.4 /& #(!.'% 4RANSFORMING FROM SILOED BUSINESS PROCESSES APPLICATIONS AND INFRASTRUCTURE TO AN !GILE %NTERPRISE HAS BEEN DESCRIBED AS RUNNING A MARATHON WHILE HAVING A HEART LUNG TRANSPLANT 6ERTICAL PROCESS AND INFRASTRUCTURE SILOS MUST BE EVOLVED TO HORIZONTAL LAYERS OF SERVICES WHILE KEEPING THE BUSINESS RUNNING AND GROWING #HANGE IS REQUIRED IN MULTIPLE DISCIPLINES ACROSS THE ENTERPRISE )F THE CHANGE IS NOT MANAGED HARDLY ANYTHING WOULD BE AS DAUNTING EXCEPT SUFFERING THE MARKET CONSEQUENCES OF NOT IMPROVING THE ENTERPRISES AGILITY AND EFFECTIVENESS ,ETS RE EXAMINE THE ARCHITECTURAL TRANSFORMATION DIAGRAM IN &IGURE AND MAJOR AREAS WHERE CHANGE NEEDS TO OCCUR
,/" )4 2ELATIONSHIP 7E HAVE EXAMINED IN SOME DETAIL THE REQUIREMENT FOR RELATIONSHIPS TO CHANGE !S NOTED EARLIER FORMALIZED SERVICES ARE DElNED TOP DOWN BUT ARE BUILT BOTTOM UP 4HIS MEANS SIMPLY THAT ,/" TRUST AND CONlDENCE IN )4 MUST BE EARNED )4 MUST IMPROVE QUALITY OF SERVICE AND FORMALIZE THE DELIVERY OF INFRASTRUCTURE SERVICES TO THE BUSINESS &ORTUNATELY THERE ARE BEST PRACTICES STANDARDS SUCH AS THE )4 )NFRASTRUCTURE ,IBRARY )4), THAT IDENTIFY AND DOCUMENT )4 OPERATIONAL PROCESSES 2EFERRING AGAIN TO THE $ARWIN -ODEL )4 MUST BUILD ,/" TRUST AND CONlDENCE AT THE LOWER LEVELS OF THE $ARWIN STACK BY PROVIDING RELIABLE AND CREDIBLE INFRASTRUCTURE AND APPLICATION SERVICES BEFORE )4 WILL TRULY BE A VALUED PARTNER AT THE EXECUTIVE BUSINESS TABLE INVITED TO DISCUSS BUSINESS NEEDS AND BUSINESS SERVICES
)4 /PERATIONAL 0ROCESSES !N EXCELLENT REPRESENTATION AND DELINEATION OF THE )4), PROCESSES CAN BE FOUND IN (0S )4 3ERVICE -ANAGEMENT )43- MODEL (0S )43- MODEL EXTENDS
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&IGURE
THE )4), STANDARDS BY SPECIFYING THE SEVENTEEN PROCESSES AND THE INTERACTIONS BETWEEN THEM REQUIRED TO DELIVER VALUE AS A FORMALIZED SERVICE 4HE (0 )43- MODEL IS DIVIDED INTO QUADRANTS WITH EACH QUADRANT IDENTIFYING THE PROCESSES THAT NEED TO BE PERFORMED WITHIN THE FOUR LIFECYCLE PHASES OF A SERVICE 4HESE FOUR LIFECYCLE PHASES CAN BE SEEN ON THE OUTER RING OF THE DIAGRAM IN &IGURE DElNE THE BUSINESS NEED BUSINESS TO )4 ALIGNMENT DESIGN THE SERVICE AND HOW TO MANAGE AND MEASURE THE DELIVERABLES DEVELOP AND DEPLOY THE SERVICE AND OPERATE THE SERVICE 4HESE WERE SUGGESTED EARLIER IN THE STRATEGIC BUSINESS TO )4 ALIGNMENT MODEL IN &IGURE AS THE BASIS FOR THE COMMON LANGUAGE BETWEEN BUSINESS AND )4 7HEN BUILDING A NEW SERVICE FROM SCRATCH THE PROCESSES ARE EXECUTED IN SERVICE CREATION ORDER INDICATED BY THE YELLOW NUMBERS IN THE DIAGRAM 7HEN SEEKING TO TRANSFORM TO AN !GILE %NTERPRISE HOWEVER ,/" CREDIBILITY AND CONlDENCE IN )4 ARE BUILT BY RELIABLY EXECUTING THE PROCESSES IN SERVICE TRANSFORMATION ORDER INDICATED BY THE NUMBERS IN DARK CIRCLES IN lGURE 4HIS SERVICE TRANSFORMATION ORDER LOGICALLY MAPS TO THE GUIDANCE AND PRESCRIPTIONS GIVEN IN THE "2- MODEL WE SAW EARLIER AND DEMONSTRATES THE DEPENDENCY BETWEEN CREDIBLE AND RELIABLE EXECUTION OF )4 OPERATIONAL PROCESSES AND THE LEVEL OF TRUST AND CONlDENCE ,/"S HAVE IN )4
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&IGURE
)4 'OVERNANCE )4 'OVERNANCE HAS TO DO WITH DECISION MAKING WHO IS AUTHORIZED TO MAKE DECISIONS OVER WHAT SCOPE OR DOMAIN AND HOW WILL THE DECISIONS BE ENFORCED !S ENTERPRISES TRANSFORM FROM SILOS TO SERVICES WHICH IS TOWARDS AN !GILE %NTERPRISE GOVERNANCE SHIFTS FROM A DECENTRALIZED TO A FEDERATED MODEL $ECISIONS CONCERNING BUSINESS PROCESSES APPLICATIONS AND INFRASTRUCTURE THAT ONCE WERE THE EXCLUSIVE DOMAIN OF INDIVIDUAL DEPARTMENTS OR DIVISIONS NOW BECOME PART OF A LARGER ENTERPRISE DECISION MAKING PROCESS 0ROCESSES MUST BE EXTENDED AND LINKED ACROSS SILOS AUTOMATED COMPONENTS RE USED STANDARDS LEVERAGED AND ARCHITECTURES DOCUMENTED AND SIMPLIlED !S WAS THE CASE FOR RELATIONSHIP AND )4 OPERATIONAL PROCESS GOVERNANCE FOR AN !GILE %NTERPRISE MATURES THROUGH MULTIPLE PHASESEXTENDING THE DOMAIN OF DECISION MAKING 4HESE PHASES COULD BE LABELED ,/" CORPORATE CENTRALIZED FEDERATED AND lNALLY BUSINESS ECOSYSTEM !S THE DOMAIN OF )4 GOVERNANCE EXTENDS FROM SINGLE SILOS ACROSS THE ENTERPRISE ENTERPRISE ARCHITECTUREHOW ALL THE PIECES lT TOGETHERBECOMES OF KEY IMPORTANCE
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%NTERPRISE !RCHITECTURE ,IKE THE WORD SERVICE THE TERM ARCHITECTURE HAS MANY USES AND CONTEXTS %ARLIER WE DESCRIBED (0S $ARWIN !RCHITECTURE AS A WAY OF DESCRIBING THE RELATIONSHIPS BETWEEN SERVICE ELEMENTS 4ECHNOLOGISTS OFTEN SPEAK OF VENDOR ARCHITECTURES SUCH AS 7INDOWS OR 5NIX /THER TYPES OF ARCHITECTURES INCLUDE APPLICATION ARCHITECTURE INFORMATION ARCHITECTURE INFRASTRUCTURE ARCHITECTURE ETC -)4S #ENTER FOR )NFORMATION 3YSTEMS 2ESEARCH #)32 HAS CAPTURED THE MEANING THAT IS NEEDED BY AN !GILE %NTERPRISE #)32 DElNES %NTERPRISE !RCHITECTURE AS hTHE ORGANIZING LOGIC FOR DATA APPLICATION AND INFRASTRUCTURE CAPTURED IN A SET OF POLICIES AND TECHNICAL CHOICES TO ACHIEVE THE DESIRED TECHNICAL AND BUSINESS STANDARDIZATION AND INTEGRATIONv 2OSS 4HE FOLLOWING CHART &IGURE ILLUSTRATES THE ROLE OF ENTERPRISE ARCHITECTURE AS COMPARED TO OTHER TYPES ,AVERDURE !S SEEN IN THE $ARWIN MODEL ENTERPRISE ARCHITECTURE IS ABOUT CONNECTING THE DOTS IE LINKING THE BUSINESS VIEW BUSINESS SERVICES TO THE FUNCTIONAL VIEW APPLICATION SERVICES TO THE TECHNOLOGY VIEW INFRASTRUCTURE SERVICES TO AN OPERATIONAL VIEW )4 BUSINESS MANAGEMENT -ANY COMPANIES HAVE HAD A POOR EXPERIENCE WITH ENTERPRISE ARCHITECTURE 4OO MANY ENTERPRISE ARCHITECTURE EFFORTS HAVE ENDED UP AS THICK BINDERS COLLECTING DUST ON SOMEONES OFlCE SHELF 7E BELIEVE THE RIGHT APPROACH IS TO BUILD AN ENTERPRISE ARCHITECTURE ONE SOLUTION AT A TIME 4HIS REQUIRES AN ON GOING DISCUSSION AND ALIGNMENT BETWEEN THE BUSINESS AND )4 TO DOCUMENT BUSINESS OBJECTIVES AND GUIDING PRINCIPLES TO GUIDE DECISION MAKING (ENCE ONCE AGAIN WE SEE THE IMPORTANCE OF RELATIONSHIP !S ENTERPRISES PROGRESS TOWARD AGILITY THEIR IMPLEMENTATION OF ENTERPRISE ARCHITECTURE MATURES AND ADDRESSES A WIDER AND MORE COMPREHENSIVE SCOPE 4HIS SCOPE IS REmECTED IN HOW THE PHYSICAL COMPUTING INFRASTRUCTURE IS DEPLOYED AS WELL AS THE PRIMARY STRATEGY OF )4
)NFRASTRUCTURE 3TRATEGY )NFRASTRUCTURE STRATEGY REFERS TO HOW THE PHYSICAL COMPUTING INFRASTRUCTURE IS BUILT AND DEPLOYED THROUGHOUT THE ENTERPRISE /UR RESEARCH HAS SHOWN THAT THE COMPUTING INFRASTRUCTURE IS JUST A PHYSICAL MANIFESTATION OF HOW SILOED THE ORGANIZATION AND ITS PROCESSES ARE $ATACENTER INFRASTRUCTURE IS ALMOST ALWAYS DEPLOYED IN A STYLE DISTRIBUTED COLLOCATED CENTRALIZED FEDERATED REmECTIVE OF THE QUALITY OF THE ,/" )4 RELATIONSHIP )4 GOVERNANCE AND )4 OPERATIONAL PROCESS MATURITY
/RGANIZATION !LMOST ALL LARGE )4 ORGANIZATIONS HAVE INFORMATION OFlCER OR RELATIONSHIP MANAGER POSITIONS 4HESE PERSONNEL SERVE AS THE INTERFACE BETWEEN THE ,/"S AND THE )4
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.OTE (0S $ARWIN !RCHITECTURE DESCRIBES THE RELATIONSHIPS BETWEEN THE ELEMENTS &IGURE
ORGANIZATION /NE OF THEIR PRIMARY FUNCTIONS IS TO SERVE AS A TRANSLATOR BETWEEN THE LANGUAGES OF BUSINESS AND )4 !DDITIONALLY THEY SERVE IN AN INTERNAL UNOFlCIAL MARKETING ROLE n ADVERTISING )4S CAPABILITIES AND SUCCESSES TO THE ,/"S 4HE SHIFT TO FORMALIZED SERVICES CHANGES BOTH OF THESE FUNCTIONS )N AN !GILE %NTERPRISE THE SERVICES THEMSELVES BECOME THE COMMON LANGUAGE .O TRANSLATION IS REQUIRED !DDITIONALLY BECAUSE SERVICES BY DElNITION HAVE MEASURED AND REPORTED QUALITY MANY OF THE RELATIONSHIP AND MARKETING TASKS BECOME AUTOMATIC !S ORGANIZATIONS MATURE AND BECOME MORE AGILE MORE ROLES CHANGE )4 ROLES CHANGE FROM MANAGING HARDWARE AND PROBLEMS TO MANAGING SERVICES 3ERVICE -ANAGER ROLES ARE CREATED AT EACH OF THE $ARWIN SERVICE LAYERS )N SHORT )4 EMPLOYEES BECOME MUCH MORE INTIMATE AND ENGAGED WITH THE BUSINESS ISSUES /VER TIME WE BELIEVE THE FORMAL BOUNDARY BETWEEN )4 AND BUSINESS OPERATIONS WILL ERODE 4HIS IS ALREADY HAPPENING IN SEVERAL LEADING COMPANIES )N THE MID S /WENS #ORNING COMBINED )4 WITH LOGISTICS SUPPLY CHAIN MATERIAL MANAGEMENT AND A NUMBER OF OTHER FUNCTIONS INTO THE 3YSTEMS 4HINKING )NFORMATION 'ROUP !PRIL !FTER ITS MERGER WITH #OMPAQ (0 COMBINED ITS GLOBAL OPERATIONS AND )4 DEPARTMENTS INTO A NEW GROUP KNOWN AS '/ )4 (0 NEWS RELEASE
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0EOPLE .OT ONLY WILL ROLES CHANGE BUT THE SKILLS REQUIRED BY )4 PERSONNEL WILL ALSO NEED TO CHANGE 3OFT SKILLS SUCH AS COMMUNICATION LISTENING CUSTOMER RESPONSIVENESS AS WELL AS BUSINESS MANAGEMENT SKILLS WILL BECOME REQUIREMENTS EVEN FOR TECHNICAL STAFF .O LONGER WILL )4 PERSONNEL BE ABLE TO BE OBLIVIOUS TO THE BUSINESS 0ROCESS CAPABILITIES OF THE )4 STAFF ARE ALSO A KEY AREA OF SKILL DEVELOPMENT !S AN ORGANIZATION PROGRESSES TOWARD AGILITY PROCESS MATURITY IMPROVES FROM AD HOC TO REPEATABLE TO BEST PRACTICES TO QUANTITATIVE MANAGEMENT TO CONTINUOUS IMPROVEMENT 4HESE IMPROVEMENTS IN PROCESS SKILLS DIRECTLY CORRELATE TO RELATIONSHIP MATURITY AS SEEN IN THE "2- MODEL AS WELL AS TO )4 OPERATIONAL PROCESS MATURITY SEEN IN THE )4 3ERVICE -ANAGEMENT MODEL
0ORTFOLIO -ANAGEMENT 4HERE ARE THREE POSSIBLE METHODS FOR TRANSFORMING TO AN !GILE %NTERPRISE CREATE NEW SERVICES "IG "ANG TRANSFORMATION OR EVOLUTIONARY TRANSFORMATION %ACH HAS ITS CHALLENGES #REATING NEW BUSINESS SERVICES FROM MODULAR LOWER LEVEL APPLICATION SERVICES AND INFRASTRUCTURE SERVICES IS DIFlCULT IF THE LOWER LEVEL FUNCTIONS HAVE NOT YET BEEN FORMALIZED AS SERVICES /FTEN FUNCTIONALITY AT THE LOWER LEVELS IS TRAPPED OR LAND LOCKED IN ONE OR MULTIPLE VERTICAL SILOS "IG "ANG TRANSFORMATION IS THE SECOND METHOD 3IMPLY REPLACING ALL VERTICAL BUSINESS PROCESSAPPLICATIONINFRASTRUCTURE SILOS WITH MODULAR HORIZONTAL SERVICES IS SIMPLY NOT PRACTICAL OR AFFORDABLE FOR MOST ENTERPRISES 4HE THIRD METHOD EVOLUTIONARY TRANSFORMATION SEEKS TO CAPITALIZE ON THE CHANGE EVENTS NATURALLY OCCURRING WITHIN THE BUSINESS PROCESSES APPLICATIONS AND COMPUTING INFRASTRUCTURE OF THE ENTERPRISE 4HE GOAL IS TO ORIENT THE CHANGES ACCORDING TO THE MODELS PRINCIPLES AND DESIGN RULES OF AN !GILE %NTERPRISE INSTEAD OF JUST REPLACING ELEMENTS WITHIN THE SAME VERTICAL SILOS AND ARCHITECTURE 4HESE NATURAL EVENTS HAVE MULTIPLE FORMS % % %
.EW OR IMPROVED CUSTOMER DELIVERABLES REQUIRING THE IMPLEMENTATION OF NEW OR MODIlED BUSINESS PROCESSES 5P REVS OF EXISTING APPLICATIONS ,EASE RENEWAL OR UPGRADES OF HARDWARE
)N ORDER TO USE THIS THIRD METHOD THE ORGANIZATION MUST INCLUDE THE CONSIDERATION OF ENTERPRISE ARCHITECTURE WITHIN ITS PORTFOLIO MANAGEMENT PROCESS 4HIS REPRESENTS AN EXTENSION TO THE USUAL PORTFOLIO MANAGEMENT PRACTICE OF PRIORITIZING PROJECTS ON THE BASIS OF BUSINESS VALUE RESOURCE REQUIREMENTS AND TIME .OW ANOTHER
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DIMENSION IS ADDED FOR CONSIDERATION !GILE %NTERPRISE ARCHITECTURAL REQUIREMENTS AND OPPORTUNITIES FOR EACH PROJECT 'AINING COOPERATION BETWEEN BUSINESS UNITS AND THE ENTERPRISE CAN OFTEN BE A CHALLENGE )T IS EASY TO SEE THE IMPORTANCE OF 2ELATIONSHIP AND )4 'OVERNANCE IN ADDING THIS ARCHITECTURAL CONSIDERATION TO THE PORTFOLIO MANAGEMENT PROCESS 4HE ABILITY TO CATALOG AND MANAGE THE ARCHITECTURAL IMPLICATIONS AND OPPORTUNITIES OF MULTIPLE PROJECTS IS LIKE THE OTHER DISCIPLINES A CAPABILITY THAT MATURES OVER TIME 0ORTFOLIO MANAGEMENT MATURITY RANGES FROM hNO INVENTORY OF PROJECTSv TO PORTFOLIO ANALYSIS BEING USED TO GUIDE )4 DECISIONS MATCH BUSINESS STRATEGY AND ALIGN WITH THE OVERALL ARCHITECTURAL VISION 4HE VISIBILITY OF PROJECTS TRANSPARENCY OF PROJECT INFORMATION EXECUTIVE DASHBOARDS RISK MANAGEMENT AND PROJECT AND PROGRAM MANAGEMENT EXPERTISE ARE ALL CAPABILITIES THAT MUST MATURE AS AN ORGANIZATION TRANSFORMS FROM SILOS TO SERVICES
!DAPTIVE %NTERPRISE -ATURITY -ODEL -ANAGING CHANGE ACROSS THE ABOVE DISCIPLINES IS ESSENTIAL WHEN SEEKING TO TRANSFORM INTO AN !GILE %NTERPRISE 7E HAVE ANALYZED THE CHANGES REQUIRED ACROSS THESE DISCIPLINES AND ORGANIZED THE CHANGES INTO A UNIlED MATURITY MODEL CALLED THE !DAPTIVE %NTERPRISE -ATURITY -ODEL !%-- 4HIS MODEL ALIGNED AND SYNCHRONIZED WITH THE )4 3ERVICE -ATURITY -ODEL DISCUSSED EARLIER CHARTS THE MATURITY OF EACH OF THE ABOVE DISCIPLINES ACROSS lVE MATURITY LEVELS 4HE MODEL EXPOSES THE LOGICAL LINKAGES AND DEPENDENCIES BETWEEN THESE DISCIPLINES 4HINK OF THE !%-- MODEL AS A PRISM THAT SEPARATES WHITE LIGHT INTO ITS CONSTITUENT MULTI COLORED WAVELENGTHS !S THE ENTERPRISE TAKES ON EACH NEW PROJECT OR CHANGE THE SUCCESS REQUIREMENTS FOR EACH OF THE EIGHT MANAGEMENT DISCIPLINES ARE IDENTIlED AND COMPARED TO THE ENTERPRISES CURRENT MATURITY IN THAT DISCIPLINE )N THIS WAY CHANGE CAN BE UNDERSTOOD AND MANAGED CAREFULLY AND THOUGHTFULLY 5NDERSTANDING THESE LINKAGES AND DEPENDENCIES WE BELIEVE IS A KEY ENABLER IN UNDERSTANDING HOW TO MANAGE CHANGE REDUCE RISK AND MINIMIZE COST AND TIME IN SEEKING TO BECOME AN !GILE %NTERPRISE 4HE !%-- MODEL PLAYS A PIVOTAL ROLE IN OUR RECOMMENDED APPROACH TO !GILE %NTERPRISE TRANSFORMATION
!,)'.).' 4(% 4!#4)#!, &/2 342!4%')# ).4%.4 /NE OF THE GREAT CONCERNS THAT # LEVEL EXECUTIVES HAVE IS PROTECTING INVESTMENTS 4HE QUESTION ALWAYS SURFACES h$O WE HAVE TO RIP AND REPLACE IN ORDER TO BUILD AN !GILE %NTERPRISE v 7E BELIEVE THE ANSWER IS h./v
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&IGURE
4RANSFORMATION TO AN !GILE %NTERPRISE IS AN EVOLUTIONARY NOT A RIP AND REPLACE PROCESS )T IS A PROCESS WE BELIEVE OF ALIGNING TACTICAL IMPROVEMENTS FOR STRATEGIC INTENT 7E WANT TO TAKE ADVANTAGE OF THE NORMALLY OCCURRING CHANGES SUCH AS SYSTEM UPGRADES TECH REFRESHES APPLICATION ENHANCEMENTS AND BUSINESS PROCESS IMPROVEMENTSBUT ORGANIZE THESE CHANGES AROUND A STRATEGIC !GILE %NTERPRISE GOAL AND PROGRAM PLAN ,ETS TAKE A LOOK AT THE PROCESS OF CREATING A CUSTOMIZED !GILE %NTERPRISE ROADMAP 4HE SEVEN STEP PROCESS SEEN IN &IGURE FOLLOWS $ARWIN 3TEP 4HE $ARWIN STEP IS AN EDUCATION AND ALIGNMENT STEP )T IS AN OPPORTUNITY TO HAVE A FACILITATED DISCUSSION BETWEEN ,/" AND )4 CONCERNING ,/" PERCEPTIONS OF )4 AND ,/" NEEDS CHALLENGES AND BUSINESS METRICS 4HESE DISCUSSIONS HELP US DETERMINE THE OVERALL AGILITY MATURITY OF THE CLIENT 4HE $ARWIN STEP ALSO PROVIDES AN OPPORTUNITY TO INTRODUCE TO BOTH )4 AND THE ,/" THE CONCEPTS CONCERNING THE VERTICAL TO HORIZONTAL
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TRANSFORMATION AND THE ARCHITECTURE OF AGILITY 4HIS IS THE PURPOSE OF THE $ARWIN !RCHITECTURE )T IS IMPORTANT TO DEVELOP A COMMON VISION CONCERNING THE CHARACTERISTICS OF THE DESIRED END STATE !LIGNMENT 3TEP .EXT WE TAKE A LOOK AT THE lVE MAIN INPUTS TO THE PROCESS MAKING AN INVENTORY OF THE BUSINESS GOALS THE CURRENT AND IN PLAN BUSINESS APPLICATION AND )4 INFRASTRUCTURE PROJECTS 7E ALSO IDENTIFY THE AGILITY HOT SPOTS AND ,/" PAIN POINTS 4HE AGILITY HOT SPOTS ARE THOSE BUSINESS PROCESSES THAT ARE NOT WELL SYNCHRONIZED WITH )4 4AKEN TOGETHER THESE INPUTS PAINT A GOOD PICTURE OF CURRENT ISSUES AND PLANS COMPETITIVE POSITION AS WELL AS CRITICAL SUCCESS FACTORS &ILTERING 7E THEN SEND ALL THIS INFORMATION THROUGH A lLTERING MECHANISM THAT WE HAVE DEVELOPED CALLED THE !DAPTIVE %NTERPRISE -ATURITY -ODEL 4HE !%-- MODEL SEPARATES OUT THE CHANGES THAT EACH PROJECT INITIATIVE GOAL HOT SPOT ETC WILL REQUIRE IN EACH OF THE MANAGEMENT OF CHANGE DISCIPLINES IN ORDER FOR EACH PROJECT AND INITIATIVE TO BE SUCCESSFUL AND EACH GOAL TO BE MET n WHILE AT THE SAME TIME IDENTIFYING WHAT MUST BE DONE TO HELP THE CLIENT PROGRESS TOWARD THEIR !GILE %NTERPRISE GOAL 0ORTFOLIO -APPING 7E THEN MAP ALL THE VARIOUS PROJECTS AND INITIATIVES TO THEIR DEPENDENCIES IN EACH OF THE DISCIPLINES AND TECHNICAL ARCHITECTURAL AREAS SO THAT WE CAN CLEARLY IDENTIFY PATTERNS COMMONALITIES AND DEPENDENCIES
4HE MAPPINGS THEN BECOME INPUT TO A PORTFOLIO MANAGEMENT PROCESS WITHIN AN !DAPTIVE %NTERPRISE 0ROGRAM /FlCE THAT ALLOWS OUR CLIENTS TO BEST LEVERAGE INVESTMENTS ACROSS MULTIPLE PROJECTS AND INITIATIVES "ECAUSE WE ARE LEVERAGING THE WORK ACROSS THE MANAGEMENT OF CHANGE DISCIPLINES CLIENTS ARE ABLE TO MAKE PROGRESS FASTER AT LOWER COST WITH A MUCH GREATER RETURN ON )4 INVESTMENT
2OADMAP 4HE OUTPUT OF THE PORTFOLIO MANAGEMENT PROCESS IS A CUSTOMIZED !DAPTIVE %NTERPRISE 2OADMAP 4HIS 2OADMAP IS MEANT TO BE A LIVING DOCUMENT THAT IS UPDATED QUARTER BY QUARTER AS PROJECTS ARE COMPLETED AND NEW PROJECTS ARE ADDED
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%NTERPRISE !RCHITECTURE /FlCE .EXT THE 2OADMAP BECOMES INPUT INTO AN %NTERPRISE !RCHITECTURE 0ROGRAM SO THAT DETAILED ARCHITECTURAL BLUEPRINTS ARE DEVELOPED FOR EACH INDIVIDUAL PROJECT AND INITIATIVE BASED ON THE ARCHITECTURAL STANDARDS IN PLACE AND UNDER DEVELOPMENT BY THE CUSTOMER AT EACH LEVEL OF THE $ARWIN !RCHITECTURE "LUEPRINTS &INALLY THE PROJECT BLUEPRINTS ARE TAKEN TO IMPLEMENTATION UNDER THE MANAGEMENT AND GUIDANCE OF THE !DAPTIVE %NTERPRISE 0ROGRAM /FlCE #HANGES AND IMPROVEMENTS ARE MADE AND THE CYCLE REPEATS ITSELF THEN ON A REGULAR BASIS
35--!29 !GILE %NTERPRISES DELIVER THEIR VALUE TO INTERNAL AND EXTERNAL CUSTOMERS AS FORMALIZED SERVICES &ORMALIZED SERVICES BY THEIR VERY NATURE CAN SERVE AS THE COMMON LANGUAGE BETWEEN AN ENTERPRISE AND ITS CUSTOMERS AND BETWEEN THE ,/"S AND )4 "Y UTILIZING A HORIZONTAL ARCHITECTURAL MODEL SUCH AS $ARWIN FORMALIZED SERVICES CAN SERVE AS THE BUILDING BLOCKS OF AN !GILE %NTERPRISE ! SERVICE MATURITY MODEL THAT IDENTIlES WHAT SERVICES ARE DELIVERED TO INTERNAL AND EXTERNAL CUSTOMERS CAN SERVE AS THE FRAMEWORK FOR JUDGING PROGRESS ALONG THE !GILE %NTERPRISE JOURNEY 4HIS SERVICE MATURITY MODEL CAN BE EXTENDED ACROSS MULTIPLE MANAGEMENT OF CHANGE DISCIPLINES TO GUIDE PROGRESS REDUCE RISK AND MAXIMIZE RETURN ON INVESTMENTS 4HE TACTICAL CHANGES EXPERIENCED BY EVERY ENTERPRISE ON A REGULAR BASIS CAN BE LEVERAGED TOWARDS THE STRATEGIC INTENT OF TRANSFORMING INTO AN !GILE %NTERPRISE
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7HEN THE 53 (UMAN 'ENOME 0ROJECT COMPLETED ITS MISSION IN BY IDENTIFYING ALL OF THE APPROXIMATE GENES IN HUMAN $.! THEY SAY WE ENTERED THE @BIOLOGY CENTURY 9ET (ARVARDS 0RESIDENT ,AWRENCE 3UMMERS COMPLAINS REPEATEDLY THAT MANY OF ITS OWN STUDENTS GRADUATE WITHOUT KNOWING hTHE DIFFERENCE BETWEEN A GENE AND A CHROMOSOMEv &OR MOST OF THE REST OF US THE TELEVISION SHOW #3) -IAMI IS ABOUT AS CLOSE AS WE GET TO UNDERSTANDING $.! 9OUR BODY IS MADE UP OF ABOUT TRILLION CELLS 9OU HAVE CHROMOSOMES #HROMOSOMES ARE MADE OF $.! %ACH CHROMOSOME HAS MANY GENES !LTOGETHER HUMAN $.! HAS ABOUT GENES ! GENOME IS ALL OF THE $.! IN AN ORGANISM INCLUDING ITS GENES 'ENES CARRY INFORMATION FOR MAKING ALL OF THE PROTEINS REQUIRED BY ALL ORGANISMS 4HESE PROTEINS DETERMINE AMONG OTHER THINGS HOW THE ORGANISM LOOKS HOW WELL ITS BODY METABOLIZES FOOD OR lGHTS INFECTION AND SOMETIMES EVEN HOW IT BEHAVES $.! HAS FOUR DIFFERENT CHEMICAL BUILDING BLOCKS 4HESE ARE CALLED BASES )N THE HUMAN GENOME ABOUT THREE BILLION BASES ARE ARRANGED ALONG THE CHROMOSOMES IN A PARTICULAR ORDER FOR EACH UNIQUE INDIVIDUAL 4HE ORDER OF THESE BASES UNDERLIES ALL OF LIFEgS DIVERSITY DICTATING WHETHER AN ORGANISM IS HUMAN OR ANOTHER SPECIES SUCH AS YEAST RICE OR FRUIT mY ALL OF WHICH
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HAVE THEIR OWN GENOMES 6IRTUALLY EVERY CELL IN YOUR BODY CARRIES ALL OF YOUR $.! 4O GET AN IDEA OF THE SIZE OF THE HUMAN GENOME PRESENT IN EACH OF OUR CELLS IT WOULD TAKE THE EQUIVALENT OF VOLUMESTHE SIZE OF A -ANHATTAN TELEPHONE BOOK AT PAGES EACH TO HOLD IT ALL .OW YOU KNOW MORE THAN THE AVERAGE (ARVARD GRADUATE "ECAUSE ALL ORGANISMS ARE RELATED THROUGH SIMILARITIES IN $.! SEQUENCES INSIGHTS GAINED FROM NONHUMAN GENOMES OFTEN LEAD TO NEW KNOWLEDGE IN HUMAN GENOMES !BOUT THE (UMAN 'ENOME 0ROJECT AND VICE VERSA )N MUCH THE SAME WAY ALL GOVERNMENTS ARE RELATED THROUGH SIMILARITIES IN THEIR @$.! SEQUENCES REPRESENTING IF YOU WILL THE GOVERNMENT SPECIES 4HINK OF EACH AGENCY AS A CHROMOSOME 4HE TYPICAL GOVERNMENT HAS ABOUT @CHROMOSOMES %ACH OF THESE AGENCIES OR @CHROMOSOMES HAS MULTIPLE GENES WITH BASIC CHEMICAL BUILDING BLOCKS OF PEOPLE PROCESSES AND TECHNOLOGIES ORGANIZED IN A PARTICULAR ORDER THAT UNIQUELY DETERMINES HOW THEY ARE ORGANIZED AND HOW WELL THEY OPERATE !LTOGETHER ALL OF THE $.! INCLUDING THE GENES MAKES UP THE GOVERNMENT GENOME 'IVEN THE COMMONALITIES OF THE GOVERNMENT hSPECIESv WOULDNT IT BE NICE TO MAP THE GOVERNMENT GENOME TO UNCOVER WHAT MAKES ONE SUBSPECIES THRIVE AND ANOTHER END UP ON THE ENDANGERED LIST 3OME PROMISING NEW THINKING IS MOVING IN THAT DIRECTION
4(% '/6%2.-%.4 '%./-% 3INCE THE S BUSINESS PROCESS REENGINEERING HAS GENERALLY FOCUSED ON ONE PROCESS AT A TIME WITHIN ONE INTERNAL ORGANIZATIONAL UNIT -UCH HAS CHANGED SINCE THEN AND THIS SIMPLISTIC METHOD IS NO LONGER ADEQUATE -ANY PRIVATE SECTOR COMPANIES HAVE ALREADY SQUEEZED OUT ALMOST ALL OF THE COST AND TIME THEYRE GOING TO lND USING BUSINESS PROCESS REENGINEERING )"-S #%/ 3AM 0ALMISANO DESCRIBES THE NEW ERA WE ARE ENTERING AS hTHE ON DEMAND WORLDv (E SAID h%NTERPRISES BEST EQUIPPED TO COMPETE IN THAT WORLD ARE hON DEMAND ENTERPRISESv WHOSE BUSINESS PROCESSESINTEGRATED END TO END ACROSS THE ENTERPRISE AND WITH KEY PARTNERS SUPPLIERS AND CUSTOMERSCAN RESPOND WITH mEXIBILITY AND SPEED TO ANY CUSTOMER DEMAND OPPORTUNITY OR EXTERNAL THREATv 7HAT MAKES THE ON DEMAND WORLD DIFFERENT IS THE FACT THAT THERES NOT ONLY THE OPPORTUNITY TO GET BETTER BUT ALSO AN OPPORTUNITY TO CREATE A MAJOR STEP FUNCTION IMPROVEMENTTO BREAKTHROUGH BARRIERS ONCE THOUGHT INSURMOUNTABLE 'IVEN THIS NEW ENVIRONMENT THE TRADITIONAL PROCESS VIEW IS FAR TOO LINEAR AND MACRO 4ODAY THE HIGHEST GOVERNMENT TRANSFORMATION PRIORITIES ARE TYPICALLY HORIZONTAL CROSS BOUNDARY CROSS GOVERNMENT CROSS JURISDICTIONAL AND PUBLIC
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PRIVATE INTEGRATION 4HESE CROSS BOUNDARY PROCESSES STRADDLE ORGANIZATIONS WITHIN THE GOVERNMENT ENTERPRISE AND EXTEND BEYOND THE ENTERPRISE TO OTHER GOVERNMENTS OR TO THE PRIVATE SECTOR 4HE CROSS BOUNDARY TREND MANDATES A MORE SOPHISTICATED UNDERSTANDING AND MANIPULATION OF THE FUNDAMENTAL BUILDING BLOCKS OF A GOVERNMENTTHEIR UNDERLYING $.! *UST AS YOUR OWN GENES DICTATE WHETHER YOU ARE TALL OR SHORT WHETHER YOU HAVE THICK HAIR OR ARE BALD OR WHETHER YOU HAVE A PROPENSITY TO DISEASE SO DOES THE GENETIC CODE FOR EACH GOVERNMENT 'OVERNMENTS NEED TO START PERCEIVING THEMSELVES IN TERMS OF THEIR GENETIC MAKEUPGROUPS OF PEOPLE PROCESSES AND TECHNOLOGIESAND THE SPECIlC TRAITS OF INDIVIDUAL GOVERNMENT UNITS INSTEAD OF A COLLECTION OF AUTONOMOUS AGENCIES 3CIENTISTS NOW ROUTINELY TRANSFER $.! FROM ONE ORGANISM TO ANOTHER CREATING RECOMBINANT $.! 4HATS WHAT NEEDS TO BE DONE IN ORDER TO ACHIEVE CAPABILITIES TO FACILITATE CROSS BOUNDARY INTEGRATION &OR EXAMPLE ONCE YOU IDENTIFY GENETIC MARKERS OF SUCCESSSUCH AS AN INNOVATIVE CULTURE OR USE OF OPEN SOURCE TECHNOLOGIESAND TRANSFER THEM TO OTHER UNITS YOU BEGIN TO CREATE GOVERNMENT ORGANIZATIONS RESISTANT TO THE DISEASES OF INERTIA INEFFECTIVENESS AND POOR PERFORMANCE ! GENETIC OR MODULAR VIEW OF GOVERNMENT IS DIFFERENT FROM A PROCESS VIEW ! PROCESS IS BASICALLY A SET OF SEQUENTIAL BUSINESS ACTIVITIES STEP STEP x STEP N THAT CREATE SOME BUSINESS VALUE 0ROCESS REENGINEERING ANALYZES A SPECIlC PROCESS IN TERMS OF WHERE STEPS MIGHT BE IMPROVED AUTOMATED OR ELIMINATED TO REDUCE COST TIME OR TO IMPROVE PERFORMANCE ! MORE MODULAR OR GENETIC VIEW IS ESSENTIAL TO BECOMING ON DEMANDWHERE COMPONENTS CAN BE SWAPPED IN AND OUT SWITCHED AROUND AND RECOMBINED AT WILL ! GROUP OF RESOURCES PEOPLE TECHNOLOGY AND PROCESSES ITSELF CAN BE VIEWED AS ONE @STEP IN A CROSS BOUNDARY PROCESS ! SIMPLE EXAMPLE IS THE hPROCESS PAYMENTv 'ENERALLY THATS ONE TO SEVERAL STEPS IN A PROCESS REDESIGN PROJECT )NSTEAD THINK OF hPROCESS PAYMENTv AS A GROUP OF COMPETENCIES MADE UP OF PEOPLE AND TECHNOLOGIES THAT PROCESS A PAYMENT 3UDDENLY YOU HAVE A COMPETENCY THAT CAN BE hREUSEDv MANY TIMES AS PARTS OF OTHER COMPLETELY UNRELATED MULTIPLE PROCESSES THAT ALSO INVOLVE PAYMENTSSO LONG AS THE TECHNOLOGIES ARE COMPATIBLE 4HATS AN ON DEMAND ENTERPRISE THAT ALLOWS RESOURCES TO BE ORGANIZED DIFFERENTLY TO ELIMINATE DUPLICATION OR ENSURE THEY ARE ALIGNED IN THE MOST EFFECTIVE WAY 4HE RESULT IS mEXIBILITY AND OPTIMIZATION REGARDLESS OF THE SOURCE OF THE RESOURCE "Y VIEWING THE ENTERPRISE AS A COLLECTION OF COMPONENTS OR GENES YOU CAN IDENTIFY AND PRIORITIZE TRANSFORMATION INITIATIVES DETERMINE WHERE TO INVEST MORE RESOURCES OR WHERE YOU CAN FREE UP RESOURCES BY OPTING FOR AN OUTSOURCED SOLUTION THAT IS INTEGRATED BOTH IN THE PROCESS AND WITH TECHNOLOGIES 7HEN AN ENTERPRISE IS BROKEN DOWN INTO COMPONENTS TYPICALLY n THE RESULT CAN BE ENLIGHTENING 9OU MAY lND n DUPLICATIONS OF THE SAME COMPONENT "Y VIEWING EACH
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COMPONENT AS A STANDALONE SERVICE YOU BEGIN TO SEE NEW POSSIBILITIESOUTSOURCE IT USE IT AS A WEB SERVICE MAKE IT A UTILITY AND DEVELOP IT AS A SHARED SERVICE ACROSS THE ENTERPRISE
/. $%-!.$ ).&/2-!4)/. 4%#(./,/'9 ).&2!3425#452%3 'ROWING UP ONE OF MY CHILDRENS FAVORITE TOYS WAS ,EGOS 4HEY COME PACKAGED IN A BOX WITH A PICTURE OF A SHIP BRIDGE OR SOME OTHER STRUCTURE ON THE FRONT (OWEVER IT DIDNT TAKE THEM LONG TO DISCOVER THAT BECAUSE THE PIECES WERE INTERCHANGEABLE THEY COULD BUILD ANYTHING THEY IMAGINEDNOT JUST WHAT WAS ON THE BOX /UR BIGGEST PROBLEM IS THAT WE DONT HAVE THE LUXURY OF KNOWING WHAT WILL HAPPEN IN THE FUTURE OR HOW WE WILL NEED TO USE RESOURCES AT A MOMENTS NOTICE 4HE TRIGGER MIGHT BE NEW LEGISLATION OR A TERRORIST EVENT 7E DONT KNOW WHETHER WELL NEED TO BUILD A BRIDGE OR A SHIP OR SOMETHING ELSE BETWEEN OR AMONG DIFFERENT ENTITIES )F ONE ENTITY HAS ,EGOS AND THE OTHER HAS WOODEN BLOCKS IT AINT GONNA HAPPEN AT LEAST ANYTIME FAST &OR THIS NEW BUSINESS MODEL TO WORK REQUIRES A MODULAR )4 INFRASTRUCTURE -ANY ELEMENTS OF CROSS BOUNDARY PROCESSES ARE STILL ENMESHED IN ORGANIZATIONAL SILOS WITH THEIR OWN )4 APPLICATIONS AND INFRASTRUCTURES 4HESE )4 INFRASTRUCTURES WERE BUILT TO SUPPORT THE AUTOMATION OF INDIVIDUAL STANDALONE PROCESSES WITHIN AN ORGANIZATIONAL UNITNOT ACROSS ORGANIZATIONAL UNITS 4O CREATE AN INTEGRATED HORIZONTAL OR CROSS GOVERNMENT PROCESS YOU NEED TO THINK ABOUT YOUR )4 AGENDA IN NEW WAYS 4HIS REQUIRES A HIGHLY MODULAR ENVIRONMENT WHERE APPLICATION AND INFRASTRUCTURE CAN BE EASILY DElNED AND MANIPULATED 4HE USE OF OPEN STANDARDS MAKES IT POSSIBLE TO INTEGRATE PROCESSES THAT WERENT ORIGINALLY DESIGNED TO WORK TOGETHER /PEN STANDARDS MEAN THAT SYSTEMS NETWORKING PROGRAMMING DATA STORAGE COMMUNICATIONS CONFORM TO A RECOGNIZED SET OF INDUSTRY STANDARDS RATHER THAN SINGLE VENDOR PROPRIETARY @STANDARDS "Y GOVERNMENTS ADOPTING OPEN STANDARDS THEMSELVES AND MANDATING THAT ANY OF THEIR PARTNERS OR SUPPLIERS ALSO CONFORM TO THESE INDUSTRY STANDARDS GOVERNMENTS MAXIMIZE THE ABILITY TO CONNECT ANY TO ANY AS NEEDED ON DEMAND 7ITH OPEN STANDARDS YOU DONT HAVE TO RE CREATE APPLICATIONS EVERY TIME SOME PIECE OF HARDWARE OR SOFTWARE CHANGES !DVANCES IN )4 NOW SUPPORT A MODULAR )4 INFRASTRUCTURE BUILT TO CORRESPOND WITH NEW MODULAR BUSINESS DESIGNS .EW )4 CAPABILITIES INCLUDE TOOLS TO INTEGRATE EXISTING ASSETS AND OPEN STANDARDS THAT SUPPORT LOOSELY COUPLED SERVICES ACROSS BOUNDARIES AND ALLOW INTEGRATION WITH OUTSOURCED COMPONENTS 4HE OVERALL )4 SIMPLIlCATION RESULTS IN A CONSOLIDATED
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LOGICAL VIEW OF RESOURCES 4HIS INTEGRATION INCLUDES LEGACY SYSTEMS WITHIN GOVERNMENT AND EVENTUALLY EXTENDS TO SYSTEMS DEPLOYED BY CUSTOMERS PARTNERS AND SUPPLIERS WHO ARE PART OF THE OVERALL VALUE CHAIN !S AN EXAMPLE AN INTEGRATED INFRASTRUCTURE ALLOWS MULTIPLE ORGANIZATIONS RESPONDING TO AN EMERGENCY TO COLLABORATE AND SHARE CRITICAL INFORMATION IN REAL TIME TO MORE EFFECTIVELY DEAL WITH THE CRISIS 4HE GOVERNMENT GENOME IS AN EXCELLENT STRUCTURE TO UNDERSTAND INFORMATION mOWS AMONG COMPONENTS 4HE ENTERPRISE ARCHITECTURE DElNES THE STANDARDS GOVERNING HOW INFORMATION IS MANAGED AND EXCHANGED 4HE )4 CAPABILITY INCLUDES COMPUTING PLATFORMS OPERATING SYSTEMS SOFTWARE DATA AND NETWORKS REQUIRED TO SUPPORT THE COMPONENTS IN THE OVERALL BUSINESS MODEL 4HE ENTERPRISE ARCHITECTURE PROVIDES THE FRAMEWORK FOR SELECTING SPECIlC PRODUCTS AND BUILDING A CAPABILITY THAT CAN ADAPT TO CHANGING REQUIREMENTS OVER TIME )4 IS THE LIFELINE TO ENABLE INTEGRATED BUSINESS ACTIVITIES TO WORK BY SEAMLESSLY CONNECTING GOVERNMENT DEPARTMENTS PARTNERS AND SUPPLIERS )N THE FUTURE GOVERNMENTS WILL WANT TO TAKE ADVANTAGE OF THE CAPABILITIES OF VIRTUALIZED SERVICES THAT ARE BECOMING AVAILABLE 7ITH WORKSTATION UTILIZATION OFTEN LESS THAN PERCENT AND SERVER UTILIZATION ONLY MODERATELY HIGHER ENTERPRISES HAVE A CONSIDERABLE AMOUNT OF AVAILABLE COMPUTING POWER TO USE TO MEET PEAK WORKLOAD REQUIREMENTS 4HE VIRTUALIZATION OF RESOURCES IN AN ON DEMAND OPERATING ENVIRONMENT ENABLES GOVERNMENTS TO REDUCE OVERALL CAPACITY REQUIREMENTS AND SHARE AVAILABLE COMPUTING CAPABILITY ACROSS THE ENTERPRISE AND EVENTUALLY ACROSS OTHER ENTERPRISES -UCH LIKE THE NEW DYNAMIC STABILITY CAPABILITY OF SOME 356S THAT CAN APPLY BRAKES TO EACH WHEEL INDEPENDENTLY IN THE EVENT OF AN IMPENDING ROLL OVER THE RIGHT )4 FOUNDATION CAN BE AUTONOMICIE ABLE TO SELF CONlGURE SELF MONITOR SELF DIAGNOSE AND SELF HEAL PROBLEMS WITHOUT HUMAN INTERVENTION !S NETWORKS BECOME MORE COMPLEX A SINGLE FAILURE CAN OFTEN CASCADE INTO A COMPLETE MELTDOWN OF THE COMPUTING INFRASTRUCTURE !UTONOMIC CAPABILITIES DRAMATICALLY IMPROVE RESILIENCE OF THE INFRASTRUCTURE AND REDUCE DISRUPTIONS TO THE OPERATING ENVIRONMENT 4HE CUMULATIVE RESULT OF THESE TECHNOLOGY INFRASTRUCTURE CHANGES IS A REAL OPPORTUNITY TO LEAPFROG INCREMENTAL CHANGETO INTEGRATE DISPARATE STANDALONE OPERATIONS INTERNALLY AND EXTERNALLYAND OPTIMIZE THEM AS AN INTEGRATED WHOLE SO THEY WORK BETTER TOGETHER AND DELIVER ADDITIONAL VALUE
#ASE 3TUDY /N $EMAND !RIZONA !RIZONA IS A GREAT EXAMPLE OF A STATE THAT HAS MOVED INTO THE ON DEMAND WORLD 4HE !RIZONA -OTOR 6EHICLE $IVISION -6$ HAS WORKED WITH )"-
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FOR ALMOST A DECADE TO DELIVER MORE EFlCIENT CONVENIENT SERVICES THROUGH ELECTRONIC TRANSACTIONS )N !RIZONAS CITIZENS BEGAN TO SEE THE BENElTS OF THIS PARTNERSHIP WITH BASIC ONLINE CAPABILITIES KIOSKS IN SELECT -6$ OFlCES AND INTERACTIVE VOICE RESPONSE )62 FOR BASIC TRANSACTIONS SUCH AS VEHICLE REGISTRATION RENEWAL 3ERVICE!RIZONA WON NUMEROUS AWARDS AND BECAME AN EARLY MODEL FOR OTHER GOVERNMENTS TO APPROACH ONLINE SERVICE DELIVERY (OWEVER IN NEW LEGISLATION REQUIRED THE ISSUANCE OF TEMPORARY TAGS TO BE REmECTED IMMEDIATELY IN THE STATES BACKEND SYSTEMS 4HIS MEANT TIGHTER INTERACTIONS WITH EXTERNAL BUSINESSES THAT FACILITATE ROUTINE CITIZEN TRANSACTIONS ON BEHALF OF THE DIVISION 5NDER PARTICULAR SCRUTINY WAS THE ISSUANCE OF TEMPORARY LICENSE TAGS TO CITIZENS BY CAR DEALERSHIPS (OWEVER A LACK OF INTEGRATION BETWEEN DEALERSHIPS AND THE STATE MEANT THAT THE PROCESSING OF TEMPORARY TAGS WAS DELAYED WHICH SPELLED POTENTIAL TROUBLE FOR !RIZONA LAW ENFORCEMENT .OT ONLY DID -6$ FACE THIS COMPLIANCE ISSUE IT ALSO WANTED TO ENSURE THAT IT WAS DELIVERING CONVENIENT RESPONSIVE SERVICES TO CITIZENS mEET OPERATORS LOAN PROVIDERS CAR DEALERSHIPS AND OTHERS 4O DO SO THE DIVISION NEEDED A mEXIBLE STANDARDIZED METHOD OF HANDLING TRANSACTIONS WITH THIRD PARTIES ONE THAT WOULD SIMPLIFY ONGOING INTEGRATION EFFORTS AND KEEP CAPITAL INVESTMENTS TO A MINIMUM )N -6$ WORKED WITH )"- TO SIMPLIFY ITS BACK END BUSINESS PROCESSES AND CREATE A mEXIBLE INTEGRATION PLATFORM THAT MAKES IT EASIER FOR THIRD PARTIES TO COMMUNICATE WITH THE STATE -6$ HAS USED THE PLATFORM TO CREATE REAL TIME DATA mOW WITH CAR DEALERSHIPS COMPLYING WITH NEW REGULATIONS AND ELIMINATING THE LAG TIME BEFORE THE STATE IS ABLE TO IDENTIFY THE OWNER OF TEMPORARY TAGS /THER CAPABILITIES INCLUDE LICENSE RENEWALS AT DEALERSHIPS MOTOR CARRIER PERMITS AND PERMANENT mEET RENEWAL 4HE SOLUTION HAS EVEN BEEN USED TO INTEGRATE OTHER GOVERNMENT DEPARTMENTS AS EXEMPLIlED BY ONLINE VOTER REGISTRATION CAPABILITIES THE lRST SUCH SERVICE IN THE 53 AND AT NO COST TO THE USER 4HE GOVERNMENT TO BUSINESS PROJECT IS PART OF A LARGER ONGOING EFFORT TO USE TECHNOLOGY TO DELIVER MORE RESPONSIVE SERVICES TO CITIZENS )T IS THE LATEST ADDITION TO !RIZONAS 7EB PORTAL INFRASTRUCTURE 3ERVICE!RIZONA 0ROCESS REDESIGN LED TO A NUMBER OF IMPROVEMENTS FOR EXAMPLE THE REDESIGN LED TO A REDUCTION IN THE NEED FOR PAPER SIGNATURES AND THE ASSOCIATED OVERHEAD COSTS $IGITIZED CITIZEN SIGNATURES AND PHOTOS ARE NOW PART OF THE SERVICE AND THIS HAS ENABLED BROADER APPLICABILITY TO APPLICATIONS SUCH AS ONLINE VOTER REGISTRATION 5TILIZING A PORTAL APPROACH GIVES THE STATE A SYSTEM WIDE STANDARD USER INTERFACE WITH THE CAPABILITY FOR OTHER STATE FUNCTIONS TO JOIN IN 4HE ACTUAL DEVELOPMENT AND OPERATION OF THE )4 INFRASTRUCTURE IS ENTIRELY VIRTUALIZED -6$ IS NOT CHARGED FOR THE DEVELOPMENT OF THE APPLICATIONS NOR IS IT CHARGED FOR THE ACQUISITION OR OPERATION OF THE INFRASTRUCTURE )NSTEAD CHARGES ARE TRANSACTION BASED 4HE CONSUMER OR BUSINESS USER PAYS
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THE SAME AMOUNT THAT WOULD BE PAID IN PERSON )62 OR 53 0OSTAL 3ERVICE SERVICES AND THE STATE DETERMINES WHO SHOULD PAY FOR EACH TRANSACTION THE USER OR THE DIVISION AND ESTABLISHES THE OPTIMAL TRANSACTION FEE #ONSUMERS AND BUSINESSES CAN NOW UTILIZE SERVICES ON A BASIS WITHOUT THE STATE NEEDING TO COMMIT UPFRONT FUNDING FOR INFRASTRUCTURE APPLICATION DEVELOPMENT OR OPERATION OF ANY APPLICATION &OR THE USER THERE IS NOW AN ALTERNATIVE TO STANDING IN LINE DURING BUSINESS HOURS OR USING THE 53 0OSTAL 3ERVICE 4HIS SERVICE IS ALSO AVAILABLE THROUGH THE !RIZONA 3TATE 0ORTAL 7EB SITE WHICH HAS AN EASILY NAVIGATED USER INTERFACE DEVELOPED WITH REPRESENTATION FROM !RIZONA #OMMERCE 4OURISM THE 'OVERNORS OFlCE 3TATE ,IBRARY AND AN OUTSIDE AD AGENCY THAT PRESENTS A STANDARD LOOK AND FEEL TO !RIZONAS CITIZENS AND BUSINESSES
5.$%234!.$).' 7(%2% 7%6% "%%. !.$ 7(%2% 7%2% '/).' /N DEMAND IS ALREADY EVERYWHERE BUT MANY PEOPLE DO NOT RECOGNIZE IT YET #ONSIDER THE CAPABILITY OF h/N 3TARv TO CALL YOUR VEHICLE AND DISPATCH POLICE IF THE SYSTEM DETECTS AN AIR BAG DEPLOYMENT 4HATS END TO END INTEGRATION AMONG DIFFERENT ENTITIES LEVERAGING AND EXPLOITING TODAYS TECHNOLOGIES 'OVERNMENT SERVICES ARE ALMOST ALWAYS DELIVERED USING A COMBINATION OF GOVERNMENT LABOR PLUS MATERIALS OR OTHER SERVICES PURCHASED FROM EXTERNAL SUPPLIERS !N AGILE GOVERNMENT USES THESE EXTERNAL SUPPLIERS AS SEAMLESSLY AS ITS OWN RESOURCES TO DELIVER BETTER SERVICE RESPOND QUICKLY TO CHANGING ENVIRONMENTS AND SIGNIlCANTLY INCREASE PRODUCTIVITY AND EFFECTIVENESS &ORTUNATELY A CONVERGENCE OF FORCES IS ENABLING THE @PERFECT STORM IN WHICH NEW BUSINESS MODELS AND NEW TECHNOLOGIES INTERSECT TO UNLEASH NEW CROSS BOUNDARY CAPABILITIES /NE OF THOSE BUSINESS MODELS TAKES A COMPONENT VIEW OF THE ORGANIZATION OR ITS $.! MAKEUP 'OVERNMENTS WITH FORESIGHT ARE LEADING THE WAY AND EMBRACING THE CONCEPT OF AN ON DEMAND GOVERNMENT 4HOSE WHO SUCCESSFULLY INTEGRATE WITHIN THE ENTERPRISE AND ACROSS EXTERNAL BOUNDARIES WILL BE ABLE TO RESPOND WITH THE KIND OF SPEED NECESSARY TO DYNAMICALLY MEET UNENDING AND GROWING DEMANDS UPON GOVERNMENT 4HE GOOD NEWS IS THAT AN ON DEMAND STRATEGY BUILDS UPON ALL THE HARD WORK THAT HAS GONE INTO E GOVERNMENT OVER THE PAST DECADE )N FACT THE PAST THIRTY YEARS OF MANAGEMENT THEORY IN PRACTICE-ANAGEMENT BY /BJECTIVES 4OTAL 1UALITY -ANAGEMENT 0ROCESS 2EENGINEERING AND #HANGE -ANAGEMENT ALL CONTRIBUTE TO THIS SPRINGBOARD TO THE FUTURE 'OOD PRINCIPLES OF CREATING A
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COMPELLING VISION CREATING AN ENVIRONMENT FOR CULTURE CHANGE AND DOCUMENTING THE BUSINESS CASE CONTINUE TO ASSUME IMPORTANT TRANSFORMATION ROLES 4HE JOURNEY TOWARD ON DEMAND GOVERNMENT IS VISUALIZED IN &IGURE AS FOUR WAVES
7AVE /NE /NLINE 'OVERNMENT 'OVERNMENTS CREATING THEIR PRESENCE ON THE 7EB CHARACTERIZED THE lRST WAVE )TS HARD TO IMAGINE A GOVERNMENT NOW WITHOUT A 7EB SITE THAT OFFERS A WEALTH OF INFORMATION TO CITIZENS AND BUSINESSES )NFORMATION ON THESE EARLY 7EB SITES GENERALLY MIRRORED THE WAY GOVERNMENT WAS ORGANIZED 0RETTY SOON HOWEVER AGENCY 7EB SITES PROLIFERATED OUT OF CONTROL INTO A JUMBLE OF CONFUSION FOR THE AVERAGE CITIZEN NOT FAMILIAR WITH THE INTRICACIES OF HOW THE GOVERNMENT WAS ORGANIZED 4HE )NTERNET CHANGED TECHNOLOGY CHANGED ADMINISTRATIONS CHANGED AND CITIZEN EXPECTATIONS CHANGED )T BECAME UNACCEPTABLE TO TAKE A CITIZEN THROUGH INFORMATION ABOUT HOW TO PROCESS A GOVERNMENT TRANSACTION ONLY TO BE TOLD AT THE END TO PRINT AND MAIL A FORM OR VISIT A GOVERNMENT OFlCE TO COMPLETE THE TRANSACTION
7AVE 4WO )NTERACTIVE 'OVERNMENT &AIRLY QUICKLY IT BECAME OBVIOUS THAT THE GOVERNMENTS ELECTRONIC @FACE NEEDED TO BE ORGANIZED FROM THE USERS PERSPECTIVES AND NEEDED TO BE INTERACTIVE TO THE
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CONCLUSION OF A TRANSACTION )N THE SECOND WAVE PORTALS WERE READILY ADOPTED FROM A FUNCTIONAL POINT OF VIEW hHOW DO )x v VERSUS AN ORGANIZATIONAL VIEW !ND THE lRST ELECTRONIC TRANSACTIONS WERE LAUNCHED WHERE CITIZENS OR BUSINESSES COULD lNISH A TASK ONLINE INSTEAD OF JUST RESEARCHING INFORMATION
7AVE 4HREE )NTEGRATED 'OVERNMENT ! NEW LEVEL OF SOPHISTICATION EMERGED WHERE THE COMMONALITIES AND COMPLEXITIES OF OPERATIONS WITHIN GOVERNMENT WERE RECOGNIZED )NTERNAL INTEGRATION IS THE HALLMARK OF THE THIRD WAVE )NTEGRATION GENERALLY OCCURRED IN CLUSTERS OF DEPARTMENTS SUCH AS SOCIAL SERVICES AGENCIES OR TAX ADMINISTRATION WITH COMMON NEEDS OR THE SAME CUSTOMER SET )N RESPONSE CROSS AGENCY PROCESSES WERE REDESIGNED IN SOCIAL SERVICES OR TAX ADMINISTRATION SUPPORTED BY TECHNOLOGY /R PROJECTS MAY INCLUDE INTEGRATION OF INTERNAL SUPPORT FUNCTIONS SUCH AS lNANCE HUMAN RESOURCES PROCUREMENT OR INFORMATION TECHNOLOGY THAT TOUCH ALL DEPARTMENTS 'OVERNMENTS HERE BEGIN TO BREAK OUT OF THE CONlNES OF hONE AGENCY ONE PROCESSv INTO INTEGRATION AT AN ENTERPRISE LEVEL
7AVE &OUR /N $EMAND 'OVERNMENT AND 3IX 3TEPS TO 'ET 4HERE 4HE ON DEMAND GOVERNMENT ENTERPRISE OF THE FOURTH WAVE IS UNLIKE THE lRST THREE WAVES IN SIGNIlCANT WAYS (ERE THE FOCUS SHIFTS FROM INTERNAL TO EXTERNAL !N ON DEMAND GOVERNMENT IS ONE WHOSE BUSINESS PROCESSES ARE INTEGRATED END TO END NOT ONLY ACROSS THE ENTERPRISE BUT ALSO OUTSIDE THE ENTERPRISE WITH KEY PARTNERS SUPPLIERS AND CUSTOMERS 4HAT ONLY HAPPENS WITH OPEN STANDARDS 4HE RESULT IS CAPABILITY FOR UNPRECEDENTED mEXIBLE AND FAST RESPONSE TO CHANGING CUSTOMER DEMANDS OPPORTUNITIES OR THREATS )T PRESENTS NOT JUST THE OPPORTUNITY TO GET BETTER BUT ALSO THE OPPORTUNITY FOR MAJOR STEP FUNCTION IMPROVEMENT 'ETTING TO THE FOURTH WAVE ADDRESSES THE PRESSING ISSUES OF TODAY BUT ALSO ENABLES GOVERNMENTS TO ADDRESS MAJOR LONG TERM GOALS LIKE ECONOMIC GROWTH CONTROLLING HEALTHCARE COSTS MEETING THE NEEDS OF DISADVANTAGED AND AGING POPULATIONS AND INCREASING THE SKILLS AND EDUCATION LEVEL OF ALL CITIZENS 'OVERNMENT PLAYS A MAJOR ROLE AS A CATALYST IN ALL OF THESE AREAS % 3TEP /NE #REATE THE 6ISION h7HERE THERE IS NO VISION THE PEOPLE PERISHv0ROVERBS 6ISION ACTS AS A GUIDING LIGHT TO CAPTURE THE HEARTS AND MINDSHARE OF THE PEOPLE WITHIN AND OUTSIDE AN ORGANIZATION WHOSE SUPPORT IS NEEDED TO ACCOMPLISH CHANGE ! COMPELLING VISION SHOULD FOCUS ON VALUE CREATED FOR THE MOST IMPORTANT CUSTOMER 4HE CUSTOMER SET WILL VARY FROM INDIVIDUAL CITIZENS BUSINESS CONSTITUENTS OTHER GOVERNMENTS EMPLOYEES PARTNERS OR EVEN SUPPLIERS 7ITH
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CUSTOMERS AT THE CORE ATTENTION WILL SHIFT AWAY FROM AN INTERNAL VIEW OF THE GOVERNMENT 4HIS ENCOURAGES IMAGINATION IN lNDING INNOVATIVE WAYS OF DOING BUSINESS RATHER THAN LIMITING FOCUS TO CURRENT CHALLENGES AND INCREMENTAL APPROACHES 'OVERNMENT VISIONS NEED TO EMBRACE THE POWER OF END TO END INTEGRATION OF AN EXTENDED ENTERPRISE FROM EXTERNAL ENTITIES SUCH AS CITIZENS AND BUSINESS CONSTITUENTS THROUGH THE HEART OF INTERNAL OPERATIONS AND EXTEND ALL THE WAY OUT TO EXTERNAL SUPPLIERS 4HIS RE CONCEPTUALIZATION IS THE ADMISSION TICKET TO AN ON DEMAND WORLD s 3TEP 4WO 2ESHAPE /RGANIZATIONAL #ULTURE 4HE DECLARATION OF A NEW VISION MEANS CHANGE IS COMING #HANGE MEANS PEOPLE MUST LEAVE THEIR COMFORT ZONES DISPLACEMENT LEADS TO UNCERTAINTY UNCERTAINTY LEADS TO SPECULATION SPECULATION LEADS TO FEAR AND FEAR LEADS TO RESISTANCE 4O AVOID THIS DOWNWARD SPIRAL THE ROLE OF EXECUTIVE LEADERSHIP TAKES ON EVEN MORE IMPORTANCE TO CONTINUALLY COMMUNICATE AND REINFORCE THE VISION 7EB PORTALS ARE EFFECTIVE COMMUNICATION TOOLS 2ECOGNIZE AND CELEBRATE SUCCESSESPEOPLE AND PROJECTS (ELP PEOPLE TO TRANSFORM THEMSELVES THROUGH TRAINING NEW SKILL DEVELOPMENT #ULTURAL ISSUES WITHIN TRANSFORMATION PROJECTS NEED TO BE IDENTIlED AND UNDERSTOOD IN
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A COLLABORATIVE ENVIRONMENT 0ARTICULARLY CRUCIAL IS EFFECTIVE GOVERNANCE WHERE REPRESENTATIVES FROM ALL STAKEHOLDER GROUPS INCLUDING EXTERNAL GROUPS ACTIVELY PARTICIPATE AND CONTINUALLY SOLICIT FEEDBACK FROM THEIR CONSTITUENCIES #ULTURE CHANGE OCCURS WHEN PEOPLE SEE THAT NEW ROLES WILL BE MORE FULlLLING AND UNDERSTAND HOW THEY CAN DEVELOP THE SKILLS TO DELIVER INCREASED VALUE s 3TEP 4HREE $OCUMENT THE "USINESS -ODEL %ARLY PROCESS REENGINEERING FOCUSED ON IMPROVING EXISTING PROCESSES /N DEMAND TRANSFORMATIONS ENCOMPASS THE CREATION OF NEW PROCESSES THAT SPAN MULTIPLE BUSINESS ACTIVITIES AND CROSS BOUNDARIES 4AKE A BROAD VIEW OF THE CUSTOMER AND USE CUSTOMERS AS ALLIES IN THE CHANGE EFFORT %XPLORE THE POSSIBILITY OF DUPLICATIVE PROCESSES AND COMBINE THEM FOR EFlCIENCIES &ULLY INVESTIGATE THE PROCESSES THAT LINK PARTNERS AND FOCUS ON COMMON CUSTOMER OBJECTIVES !SSESS AND PRIORITIZE THE MOST CRITICAL PROJECTSTHOSE CORE TO THE DELIVERY OF THE NEW VALUE PROPOSITION %STABLISH A MANAGEABLE SCOPE #HOOSE PROJECTS WISELY CONSIDERING STRATEGIC IMPLICATIONS lNANCIAL IMPACT AND THE VALUE TOWARD ACHIEVING THE VISION TO CREATE THE BUSINESS CASE &REQUENTLY GOOD CANDIDATE PROJECTS ARE THOSE THAT FACILITATE SHARED SERVICES ACROSS AN ORGANIZATION SUCH AS )4 lNANCE OR PROCUREMENT #HOOSE THOSE WITH RELATIVELY LOW UPFRONT INVESTMENT AND ORGANIZATION RISK AND YET HAVE THE POTENTIAL TO YIELD TANGIBLE RESULTS -AKE SURE YOU CHOOSE A BALANCED MIX OF PROCESS TECHNOLOGY AND CULTURE CHANGE PROJECTS SEE 3TEP &IVE s 3TEP &OUR $ESIGN THE 4ECHNOLOGY )NFRASTRUCTURE "UILD AN EFFECTIVE ENTERPRISE ARCHITECTURE TO ENSURE THAT )4 CAPABILITIES INFORMATION APPLICATION TECHNOLOGY AND SECURITY ARCHITECTURES WILL BE SEAMLESS FOR PROCESSES THAT CROSS BOUNDARIES &ACILITATE COLLABORATION AND DATA SHARING WHERE APPROPRIATE 4HE ABILITY TO CAPTURE ANALYSE AND SHARE INFORMATION ACROSS THE ENTERPRISE ALLOWS THE ORGANIZATION TO PROACTIVELY IDENTIFY EVER CHANGING RISKS REQUIREMENTS AND OPPORTUNITIES AND THE FRAMEWORK TO RESPOND WITH UNPRECEDENTED SPEED AND EFlCIENCY .EW TECHNOLOGIES AND OPERATIONAL MODELS HAVE EMERGED THAT FOR THE lRST TIME IN DECADES CREATE OPPORTUNITY TO DELIVER RADICAL CHANGE AND IMPROVEMENT ACROSS THE )4 INFRASTRUCTURE #OMBINED WITH OPEN STANDARDS THESE TECHNOLOGIES OFFER POWERFUL TRANSFORMATIVE CAPABILITIES 5TILITY BASED COMPUTING GRID COMPUTING AND MOBILE WIRELESS TECHNOLOGIES ARE JUST A FEW 5LTIMATELY OPEN INFRASTRUCTURES SHOULD BE EXTENDED TO SUPPLIERS AND CUSTOMERS )4 OPTIMIZATION WILL ALMOST ALWAYS CUT COSTS AND ENABLE GOVERNMENTS TO TAKE ADVANTAGE OF EMERGING TECHNOLOGIES THAT ENABLE CUSTOMERS TO SHARE
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UNUSED CAPACITY AND IMPLEMENT SELF HEALING CAPABILITIES TO FURTHER REDUCE SUPPORT COSTS AND REDUCE OUTAGES !CROSS PUBLIC SECTOR ORGANIZATIONS THERE IS A WEALTH OF RESOURCES AND KNOW HOW THAT IS EITHER DUPLICATED OR LOST WITHIN DEPARTMENTAL SILOS 4HE KEY IS TO MANAGE RESOURCES HOLISTICALLY AND TRANSPARENTLY EITHER INTERNALLY OR EXTERNALLY THROUGH OUTSOURCING AND SHARED SERVICE RELATIONSHIPS ,OOK FOR WAYS TO FUND STARTING WITH RETURNS INHERENT IN )4 OPTIMIZATION s 3TEP &IVE "UILD A 4RANSFORMATION 2OADMAP ! TRANSFORMATION ROADMAP IS THE COLLECTION OF INDIVIDUAL PROJECTS PROCESS TECHNOLOGY CULTURE SELECTED TO ACHIEVE THE VISION -ANY GOVERNMENTS CONSULTANTS AND TECHNOLOGY COMPANIES ALIKE MAKE THE MISTAKE OF FOCUSING ON A PROCESS REDESIGN AN )4 REDESIGN OR A CULTURE REDESIGN INDEPENDENTLY OF EACH OTHER )"-S APPROACH INTEGRATES PROCESS TECHNOLOGY AND CULTURE CHANGE PROJECTS BECAUSE TIGHT COORDINATION AMONG THEM IS ESSENTIAL !NY CHANGE TO PROCESS WILL AFFECT THE CULTURE !NY CHANGE TO TECHNOLOGY WILL AFFECT PROCESS AND CULTURE AND SO ON )T IS HELPFUL TO ACTUALIZE THE ROADMAP AS A DOCUMENT IN ORDER TO CHART THE STEPS OF EACH PROJECT 3EE &IGURE BELOW 4HE INDIVIDUAL PROJECTS MOVE THE ORGANIZATION IN A STAIR STEP PROGRESSION BALANCING ATTENTION FUNDING AND EXECUTION AMONG PROCESS CULTURE AND TECHNOLOGY %ACH PROJECT MAY HAVE ITS OWN STEERING COMMITTEE BUT IT ACTS IN CONCERT WITH THE OVERALL TRANSFORMATION GOVERNING BODY #ENTRAL FUNDING OF PROJECTS INCREASES ORGANIZATIONAL WILLINGNESS TO COLLABORATE ON NEW PROJECTS 2ETAIN PART OF THE SAVINGS FROM COMPLETED PROJECTS TO ENCOURAGE AND REINVEST IN NEW PROJECTS % 3TEP 3IX /PERATE AND !DAPT /VER 4IME )MPLEMENT PERFORMANCE METRICS THAT DElNE DESIRED OUTCOMES AND MEASURE PROGRESS AGAINST EXPECTED RESULTS 0ERIODIC PUBLICATION OF RESULTS COMMUNICATES PROGRESS AND REINFORCES COMMITMENT -EASUREMENTS DETERMINE WHETHER INITIATIVES ARE WORKING CALL ATTENTION TO ADJUSTMENTS THAT MAY BE NEEDED DEMONSTRATE RESULTS AND JUSTIFY FUTURE INVESTMENTS 4HE PROBABILITY EXISTS THAT CRITICAL CUSTOMER NEEDS OR SOME PART OF THE ENVIRONMENT WILL CHANGE SIGNIlCANTLY BEFORE THE TRANSFORMATION IS COMPLETE 3O ALLOW A PROCESS FOR THE MODEL TO ADAPT OVER TIME 3TAY ABREAST OF THE RAPID PACE OF TECHNOLOGICAL CHANGE 3OMETHING THAT YOU MIGHT NOT HAVE BEEN ABLE TO TACKLE AT THE BEGINNING MAY SUDDENLY BECOME POSSIBLE /R TECHNOLOGY MAY CHANGE SO DRAMATICALLY THAT OTHER MANAGEMENT ALTERNATIVES ARE INDICATEDCONSOLIDATION OR COMMERCIAL MANAGEMENT #ONTINUE GOOD GOVERNANCE AND CHANGE MANAGEMENT PRACTICES
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&IGURE
"EGUN FORMALLY IN THE 53 (UMAN 'ENOME 0ROJECT WAS ORIGINALLY A lFTEEN YEAR EFFORT COORDINATED BY THE 53 $EPARTMENT OF %NERGY AND THE .ATIONAL )NSTITUTES OF (EALTH (OWEVER RAPID TECHNOLOGICAL ADVANCES ACCELERATED THE COMPLETION DATE BY TWO YEARS AND CONCLUDED EARLY IN !SIDE FROM IDENTIFYING ALL GENES IN HUMAN $.! ANOTHER IMPORTANT FEATURE OF THE PROJECT WAS THE FEDERAL GOVERNMENTgS LONG STANDING DEDICATION TO THE TRANSFER OF TECHNOLOGY TO THE PRIVATE SECTOR "Y LICENSING TECHNOLOGIES TO PRIVATE COMPANIES AND AWARDING GRANTS FOR INNOVATIVE RESEARCH THE PROJECT CATALYZED THE MULTIBILLION DOLLAR 53 BIOTECHNOLOGY INDUSTRY THAT CONTINUES TO FOSTER THE DEVELOPMENT OF NEW MEDICAL APPLICATIONS 2ESEARCH AND DEVELOPMENT IS JUST ONE ILLUSTRATION OF THE MANY ROLES OF GOVERNMENT !N ON DEMAND GOVERNMENT IS ONE THAT CAN FUNDAMENTALLY IMPROVE ITS PERFORMANCE IN ANY OF ITS MANY ROLES 7E ARE IN THE MIDST OF AN INDUSTRY CHANGING PHENOMENON .OT EVERY GOVERNMENT WILL TAKE THE SAME PATH TO GET THERE 2EGARDLESS OF HOW YOU START THE IMPORTANT THING IS TO START
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).42/$5#4)/. 4HIS CHAPTER LOOKS AT THE KEY ROLE INNOVATION MUST PLAY WITHIN AN ENTERPRISE FACED WITH UNCERTAINTY IN A RAPIDLY CHANGING GLOBAL ENVIRONMENT 4O SET THE SCENE WE BRIEmY DISCUSS THE MACRO ECONOMIC TRENDS THAT MAKE INNOVATION MANDATORY NOT A LUXURY 4HESE TRENDS LEAD TO FUNDAMENTAL CHANGES IN THE NATURE OF INNOVATION FROM A PURELY PRODUCT OR SERVICE FOCUS TO CONTINUOUS AND HOLISTIC CREATIVITY IN ALL ASPECTS OF BUSINESS 4O SUCCEED THE ENTERPRISE BECOMES AN hINNOVATION ENGINEv 4HIS DEMANDS NEW MANAGEMENT SKILLSSKILLS THAT MOST OF YOU WILL NOT HAVE LEARNED AS EVEN NOW THEY ARE JUST APPEARING IN EDUCATION CURRICULA 9OU WILL GAIN INSIGHT INTO THESE hNEWv INNOVATION FORMS THROUGH SOME SHORT CASES THAT WILL ILLUSTRATE THE SEVEN MAJOR NEW ATTRIBUTES THAT SUCCESSFUL hINNOVATION ENGINESv EXHIBIT 7E ALSO DISCUSS HOW AS MANAGERS YOU CAN LEAD YOUR CORPORATE CULTURE TO SUPPORT CONTINUOUS AND AGILE INNOVATION &INALLY YOU WILL LEARN HOW INNOVATIONS IN INNOVATION MANAGEMENT ITSELF CAN BE USED TO MINE THE KNOW HOW EXPERIENCE AND CREATIVE CAPACITY OF YOUR ORGANIZATION IN REAL TIME WHILE UNDERPINNING A SUPPORTIVE CULTURE
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"!#+'2/5.$ 4HROUGHOUT HISTORY THERE HAVE BEEN PERIODS OF DRAMATIC SOCIETAL CHANGES DRIVEN BY MAJOR TECHNOLOGICAL INNOVATIONS 9OU CERTAINLY LEARNED AT SCHOOL OF THE AGRICULTURAL REVOLUTION WITH THE INTRODUCTION OF FARM TOOLS AND CROP MANAGEMENT TECHNIQUES THAT FUNDAMENTALLY CHANGED THE ECONOMICS SOCIAL STRUCTURE AND WEALTH CREATION OF WHOLE REGIONS ! FEW HUNDRED YEARS LATER INNOVATIONS IN MACHINES TRANSPORTATION AND METALLURGY CREATED THE INDUSTRIAL REVOLUTION WITH ENORMOUS IMPACT ON WHOLE NATIONS WORKERS WHICH AGAIN TRIGGERED A TREMENDOUS CREATION OF WEALTH 4HEN CAME THE COMPUTER HOWEVER THIS TIME THE POTENTIAL IMPACT WAS DIFFERENT FOR SEVERAL REASONS 4HE UNDERPINNING TECHNOLOGY OF COMPUTERS AS SUCCINCTLY CAPTURED BY -OORES ,AW ADVANCED SO RAPIDLY THAT INDIVIDUALS COMPANIES GOVERNMENTS AND NATIONS HAVE BEEN UNABLE TO ADAPT TO THE CHANGES THRUST UPON THEM BY EACH NEW GENERATION OF COMPUTING POWER 4HEREFORE TO UNDERSTAND THE INFORMATION TECHNOLOGY REVOLUTION IT IS APPROPRIATE TO BREAK DOWN THE CHANGES OF THE LAST THIRTY YEARS OR SO INTO SUBTLY DISCRETE DISRUPTIONS 7HEN THE COMPUTER lRST ENTERED THE BUSINESS WORLD IN THE FORM OF MAINFRAMES WITH PROGRAMS AND DATA STORED ON CARDS ENTERPRISES IMPLEMENTED APPLICATIONS THAT DIRECTLY SUBSTITUTED FOR REPETITIVE HUMAN TASKS SUCH AS PAYROLL MANAGEMENT BILLING ETC 4HE COMPUTER WAS PRINCIPALLY A PRODUCTIVITY TOOL %VEN WHEN THE DESK TOP AND LATER LAP TOP MODELS APPEARED THEY WERE USED PRIMARILY FOR SPEEDING UP EXISTING TASKS SUCH AS SALES FORECASTING DOCUMENT AND PRESENTATION PREPARATION ETC )T WASNT UNTIL THE LAST DECADE WHEN COMPUTERS AND OTHER DIGITAL DEVICES BECAME CONNECTED OR NETWORKED AND AUTOMATED SEARCH TECHNIQUES WERE DEVELOPED THAT A CATACLYSMIC SHIFT OCCURRED FROM AN EMPHASIS ON PRODUCTIVITY TO THAT OF GLOBAL KNOWLEDGE SHARING 7E ARE ONLY JUST BEGINNING TO UNDERSTAND THE IMPLICATIONS AND EFFECTS OF THIS CONNECTIVITY ,ETS PUT SOME NUMBERS AROUND IT !LTHOUGH IT IS NOTORIOUSLY DIFlCULT TO ACCURATELY SIZE THE )NTERNET ANY ESTIMATE PROVIDES STAGGERING STATISTICS !CCORDING TO RESEARCH FROM .IELSEN.ET2ATINGS IN &EBRUARY CONSERVATIVELY OVER MILLION PEOPLE WORLDWIDE HAD )NTERNET ACCESS %XTRAPOLATING DATA FROM .5! AT THE TIME OF THIS WRITING WE CAN EXPECT THIS NUMBER TO HAVE GROWN TO OVER MILLION !T THE SAME TIME THE INFORMATION AVAILABLE TO THESE )NTERNET USERS IS EXPLODING WITH OVER SEVEN MILLION NEW 7EB PAGES BEING ADDED DAILY TO THE SEVERAL BILLION THAT ALREADY EXIST MANY PAGES LINKING TO OTHER ARCHIVED DATA SOURCES #YERVEILLANCE /THER ESTIMATES QUOTE lFTY MILLION INDEPENDENT 7EB SITES EXISTING AT THE END OF :AKON GROWING AT A COMPOUND RATE OF PER YEAR /#,# 'OOGLE CLAIMS TO REGULARLY SCAN BILLION 7EB PAGES THIS MAY ONLY BE OF THE TOTAL OF SO CALLED hHIDDEN PAGESv THAT EXIST
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!S YOU WILL SEE FROM THE NEXT SECTION THIS DRAMATIC EXPANSION OF KNOWLEDGE ACCESS IS ACCOMPANIED BY A COLLAPSE OF BARRIERS THAT hCONVENIENTLYv PROTECTED COMPANIES FROM lERCE COMPETITION IN THE PAST WHILE PROVIDING NEWLY AGILE CORPORATIONS ACCESS TO CAPITAL LABOR SKILLS KNOW HOW lXED ASSETS AND INTELLECTUAL PROPERTY ALMOST ANYWHERE )N A WORLD WHERE THERE ARE NO HIDING PLACES AND EVERYONE HAS ACCESS TO THE SAME RESOURCES ON EQUAL TERMS INNOVATION IS THE ONLY WAY THAT PROlTABLE HIGH MARGIN GROWTH CAN BE SUSTAINEDNOT INNOVATION IN PRODUCTS BUT INNOVATION IN ALL ASPECTS OF A BUSINESS HOLISTICALLY CONTINUOUSLY AND mEXIBLY PRACTICED ACROSS DEPARTMENTAL NATIONAL AND CORPORATE BORDERS 3O FUNDAMENTAL ARE THESE CHANGES WE BOLDLY DECRY A NEW ERA h4HE )NNOVATION %RAv 4HE FOLLOWING DIAGRAM SHOWS THE WAVES OF DISRUPTIONS IMPACTING BUSINESSES AS INFORMATION TECHNOLOGIES REMOVE KNOWLEDGE BARRIERS
&IGURE !CCELERATING 7AVES OF 4ECHNOLOGY $RIVEN 3OCIAL $ISRUPTIONS
4(% #/,,!03% /& 02/4%#4)6% "!22)%23 !CCESS TO +NOWLEDGE !S YOU SAW IN THE INTRODUCTION WE ARE RAPIDLY MOVING TO A WORLD IN WHICH ESSENTIALLY ALL KNOWLEDGE CAN BE ACCESSED BY EVERYONE AT MINIMAL COST .5! )MPORTANTLY KNOWLEDGE IS NO LONGER CONlNED TO LOCAL COMMUNITIES
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AND NETWORKS )T IS JUST AS EASY TO lND AN EXPERT AT A 5NIVERSITY IN -ELBOURNE !USTRALIA AS -ELBOURNE &LORIDA OR A CORPORATE PARTNER IN #AMBRIDGE -ASS AS #AMBRIDGE 5+ 4O REMAIN COMPETITIVE TODAY IT IS NO LONGER SUFlCIENT TO RELY ON LOCAL KNOW HOW INDEED IT IS VITAL TO ACCESS THE BEST IDEAS TECHNOLOGIES RESEARCH RESOURCES EXPERTS WHEREVER THEY ARE 4HE VALUE OF GEOGRAPHICAL CENTERED CLUSTERS PROPOUNDED FOR EXAMPLE BY -ICHAEL 0ORTER AS AN IMPORTANT VEHICLE FOR FUTURE ECONOMIC SUCCESS IS BEING DEVALUED BY LOCAL KNOW HOW ENCLAVES BECOMING LESS RELEVANT AS THE INTERNET SPREADS ITS TENTACLES $EPENDENCE ON LOCAL KNOWLEDGE AND SUPPORT IS NO LONGER SUFlCIENT INDEED MAY EVEN BE DANGEROUS BY CREATING AN INWARD LOOKING FALSE SENSE OF SECURITY 5NFORTUNATELY TOO MANY ECONOMIC DEVELOPMENT PROGRAMS BOTH AT REGIONAL AND NATIONAL LEVELS ARE MANAGED THROUGH POLITICAL JURISDICTIONS AND THEREFORE ARE SUB OPTIMALLY A ZERO SUM EXERCISE /FTEN THEY JUST MOVE JOBS AND WEALTH FROM ONE AREA TO ANOTHER )N CONTRAST THE NEW NETWORKED WORLD CAN SUPPORT A BIOTECH COMPANY HEADQUARTERED IN 3EATTLE WITH BASIC RESEARCH UNDERTAKEN AT 5NIVERSITIES IN 3AN $IEGO %DINBURGH AND !UCKLAND SCALE UP OF PRODUCTION IN 3INGAPORE AND CLINICAL TRIALS IN THE NEWEST MEMBERS OF THE %UROPEAN 5NION )TS ADVISORY BOARD WILL BE UNDOUBTEDLY INTERNATIONAL IN MAKE UP ! MANAGEMENT CHALLENGEYES BUT BY ASSEMBLING APPROPRIATE RESOURCES TO COMPETE QUICKLY AND EFlCIENTLY A MORE CERTAIN SUCCESS 4HESE KNOWLEDGE CENTERED STRUCTURES ARE VARIOUSLY REFERRED TO AS hVIRTUAL KNOWLEDGE NETWORKSv OR hVIRTUAL CLUSTERSv 4HEY ARE mUID AND MAY FORM AND DISSOLVE IN SHORT SHRIFT WHEN NO LONGER VALUABLE WHEREAS GEOGRAPHICAL BASED CLUSTERS MAY TAKE YEARS TO EVOLVE WITH THE DANGER OF THEN BEING OUTMODED AND REDUNDANT
4RADE BARRIERS #ONCURRENTLY HISTORICAL TRADE BARRIERS FOR GOODS AND SERVICES ARE RAPIDLY BEING DISMANTLED OPENING UP ALL MARKETS TO GLOBAL SUPPLIERS &IGURE WAS COMPILED FROM 74/ DATA SHOWS THE RAPID ACCELERATION OF TRADE AGREEMENT IMPLEMENTATION "ARRIERS TO COMPETITION FROM IMPORTEXPORT CONTROLS THAT COMPANIES COULD HIDE BEHIND IN THE PAST ARE DISSOLVING 4HERE MAY BE OCCASIONAL SHORT TERM RESTRICTIONS APPLIED FOR POLITICAL REASONS BUT THE OVERALL TREND IS CLEAR
!CCESS TO #APITAL 3IMULTANEOUSLY WITH THE ELIMINATION OF TRADE BARRIERS FOR GOODS AND SERVICES RESTRICTIONS ON CURRENCY TRADING HAVE ALSO BEEN ALMOST ENTIRELY REMOVED .OW DAILY CROSS BORDER TRADING IN CURRENCY DWARFS THE VALUE OF IMPORTS AND EXPORTS
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&IGURE 'ROWTH IN .UMBER OF 4RADE !GREEMENTS 3OURCE 74/
!LTHOUGH MOST CURRENCY TRADING IS ON A SHORT TERM BASIS THE LACK OF RESTRICTIONS IN THE MAJORITY OF ECONOMIES TO INWARD OR OUTWARD FOREIGN INVESTMENT MEANS THAT FUNDS MAY NOW SEEK OPPORTUNITIES ON A GLOBAL BASIS AND lRMS MUST COMPETE INTERNATIONALLY FOR BOTH DEBT AND EQUITY lNANCE &ULLY IN MUTUAL FUNDS MANAGED IN THE 53 AND A MAINSTAY OF 53 PERSONALLY MANAGED PENSIONS ARE NOW INVESTED OVERSEAS 4HE 7ALL 3TREET *OURNAL PREDICTED THAT WOULD BE A RECORD YEAR FOR 53 INVESTORS TO PLACE THEIR INVESTMENT BETS OVERSEAS WITH ". SLATED TO mOW INTO FOREIGN CORPORATIONS +ARMIN &IGURE THREE SHOWS THE GROWTH IN VALUE OF INTERNATIONAL HOLDINGS IN SECURITIES 'EOGRAPHICAL LOCATION NO LONGER PROVIDES ANY SIGNIlCANT ADVANTAGE FOR ACCESS TO MAJOR SOURCES OF CAPITAL /F COURSE THERE ARE STILL LOCAL ECONOMIC DEVELOPMENT GRANTS BUT AS THEY HAVE PROLIFERATED THEY ARE NO LONGER A REAL DIFFERENTIATING FACTOR 6ENTURE #APITAL REMAINS ONE SOURCE OF FUNDING THAT PREFERS PROXIMITY BUT OVERALL 6# FUNDS ARE A VERY SMALL PART OF TOTAL GROWTH CAPITAL %VEN VENTURE CAPITAL IS TRENDING INTERNATIONAL !S REPORTED RECENTLY &ANNIN AND $EUTSCHMAN LEADING h3ANDHILL 2OADv 6# lRMS ARE LOOKING TO TARGET A SIGNIlCANT PART OF NEW FUNDS FOR INVESTMENT IN EARLY STAGE COMPANIES IN !SIA HOPING TO BRING THEIR START UP MANAGEMENT SKILLS INTO MARKETS WHERE 53 STYLE VENTURE CAPITAL IS LITTLE KNOWN #LEARLY THEY ARE NOT lNDING SUFlCIENTLY ATTRACTIVE OPPORTUNITIES NEARBY !S AN INDICATOR OF HOW INTERNATIONALISM HAS mOURISHED IN LIQUID ASSET DEPLOYMENT &IGURE SHOWS THE GROWTH IN THE DAILY RATIO OF INTERNATIONAL CURRENCY mOWS AS A MULTIPLE OF INTERNATIONAL TRADE 4ODAY MORE THAN ONE HUNDRED TIMES AS
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&IGURE )NTERNATIONAL 3ECURITIES /WNERSHIP
MUCH CURRENCY mOWS ACROSS BORDERS EVERY DAY THAN THE VALUE OF GOODS AND SERVICES 3IEGEL
4ECHNOLOGICAL /BSOLESCENCE 7E OFTEN HEAR THAT PRODUCT LIFECYCLES ARE DECLINING HOWEVER IT IS NOTORIOUSLY DIFlCULT TO lND HARD DATA SUPPORTING THIS FACT #LEARLY IT IS MUCH MORE LIKELY TO BE TRUE IN FAST MOVING CONSUMER PRODUCTS SUCH AS FOOD AND DETERGENTS AND IN PRODUCTS IN WHICH THE UNDERPINNING TECHNOLOGY IS DRIVEN BY -OORES LAW OR IS IMPACTED BY MAJOR TECHNOLOGICAL SHIFTS !CCORDING TO AN INTERNAL STUDY IN THE MID NINETIES BY (EWLETT 0ACKARD (OHMANN THE AVERAGE PERIOD THAT THEIR PRODUCTS REMAINED MAJOR CONTRIBUTORS TO SALES HAS FALLEN FROM FOUR YEARS IN TO WELL BELOW TWO YEARS IN -ORE RECENT STUDIES )"- INTERNAL STUDY AND )NDUSTRY 7EEK *ANUARY MEASURE PRODUCT DEVELOPMENT TIMES 4HESE HAVE REDUCED FROM AN AVERAGE OF DAYS THREE YEARS AGO TO DAYS NOW )N THE PORTABLE COMMUNICATOR BUSINESS SECTOR POPULATED BY SUCH COMPANIES AS
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&IGURE )NTERNATIONAL #URRENCIES &LOWS AS A -ULTIPLE OF 4RADE
-OTOROLA .OKIA "LACKBERRY ETC MARKET LIFE CYCLES ARE NOW LESS THAN PRODUCT DEVELOPMENT CYCLES CHALLENGING EVEN THE MOST EFlCIENT ENGINEERING DEPARTMENTS 4O MEET THESE CHALLENGES COMPANIES ARE DEVELOPING NEW METHODS TO REDUCE THEIR PRODUCT DEVELOPMENT TIMES BY EMPLOYING ACTIVITIES SPREAD AROUND THE WORLD 4HE -UNICH BASED LEAD TEAM HANDS OVER TO 0EKING AT THE END OF THE DAY WHOSE TEAM IN TURN AT SUNSET HANDS OVER TO $ENVER )N MANY CASES THESE TEAMS MAY NOT BE ON THE STAFF OF THE LEAD COMPANY BUT MAY BE JOINT DEVELOPMENT PARTNERS THAT ARE ASSEMBLED QUICKLY TO MEET AN URGENT DEADLINE -ANAGING SUCH COMPLEX PROJECTS ACROSS CORPORATE NATIONAL AND CULTURAL BOUNDARIES REQUIRES NEW SKILLS THAT ENSURE THAT hGETTING IT RIGHT lRST TIMEv CAN BE ACHIEVED 4HERE IS NO ROOM FOR ERROR !N INDICATOR OF THIS PHENOMENON IS THE EMERGENCE OF THE DOZENS OF SOFTWARE PROVIDERS THAT PROVIDE THE SUPPORT SYSTEMS FOR BOTH RAPID PRODUCT DEVELOPMENT AND PRODUCT LIFE CYCLE OPTIMIZATION /F COURSE IN SLOWER MOVING SECTORS SUCH AS MACHINE TOOLS AND LOCOMOTIVES THE EVIDENCE FOR RAPIDLY DECLINING PRODUCT LIFE CYCLES IS NOT SO OBVIOUS (OWEVER EVEN HERE THE IMPACT OF LOW COST ELECTRONIC COMPUTING POWER AND THE UBIQUITY OF THE INTERNET ARE ACCELERATING THE UPGRADES THAT CUSTOMERS EXPECT TO PROVIDE THEM MORE THAN JUST A PRODUCT THEY ANTICIPATE NOTHING LESS THAN A TOTAL SOLUTION TO THEIR REQUIREMENTS THROUGHOUT THEIR OWNERSHIP 4HESE ADDITIONAL SERVICE COMPONENTS MAY COVER NOT ONLY lNANCING AND OPERATOR TRAINING BUT REMOTE CONDITION MONITORING FOR ONLINE SUPPORT AND MAINTENANCE PERFORMANCE GUARANTEES WITH lNANCIAL PENALTIES AND EVEN TAKING BACK THE PRODUCT FOR RECYCLING AT THE END
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OF ITS LIFE CYCLE %ACH OF THESE SERVICE COMPONENTS DEMANDS IMPLEMENTATION OF NEW TECHNOLOGIES WITHIN EVEN THE MOST TRADITIONAL OF ENGINEERING SECTORS 4HE ACCELERATION OF PRODUCT LIFECYCLES CHANGES THE WAY THAT YOU MUST MANAGE INTELLECTUAL PROPERTY )N THE PAST THE n YEARS OF PROTECTION AFFORDED BY A PATENT WAS OFTEN VALUABLE OVER ITS FULL LIFE "UT WHEN TECHNOLOGY EVOLVES RAPIDLY TWENTY YEARS OF PROTECTION LOSES ITS VALUE 2ESEARCH BY THE AUTHORS 3USMAN 7ARREN AND 4URRELL SHOWS THAT COMPANIES ARE RE EVALUATING THE WAYS THAT THEY PROTECT THEIR INTELLECTUAL PROPERTY AND ARE CAREFULLY SELECTING WHICH AREAS TO SEEK LONG TERM PATENT COVERAGE USUALLY ON FUNDAMENTAL INVENTIONS AND FOREGOING PATENTS FOR TRADE SECRETS ELSEWHERE 0ATENT LAW REQUIRES INVENTORS TO hTEACHv WHAT THEY HAVE DONE AND THIS INEVITABLY EXPOSES CONCEPTS AND KNOW HOW THAT MAY BE BETTER KEPT SECRET RATHER THAN GIVING COMPETITORS A JUMP START TO CATCH UP !N AGILE COMPANY HAS MOVED ON BY THE TIME PATENTS ARE ISSUED AND THE PATENTS MAY BE OF MORE VALUE TO COMPETITORS THAN TO THE OWNER )N THE NEW INNOVATION MODEL CHURNING OUT PATENTS IS REPLACED BY INCLUDING THE PROTECTION OF INTELLECTUAL PROPERTY WITHIN THE OVERALL BUSINESS STRATEGY RATHER THAN A WAY OF PROTECTING AN INVENTION !ND WHEN PATENTS ARE lLED THEY ARE WRITTEN TO PROTECT BOTH THE hHARDv INVENTION AND THE UNIQUE BUSINESS MODEL SURROUNDING IT )N SOME SECTORS OF COURSE PATENTS WILL CONTINUE TO BE THE PRINCIPAL METHOD TO RETAIN PROTECTION FROM COMPETITION &OR EXAMPLE THE LONG AND EXPENSIVE DEVELOPMENT CYCLES AND REGULATORY HURDLES GOVERNING PHARMACEUTICAL PRODUCTS ENCOURAGE THE USE OF PATENT PROTECTION %VEN HERE HOWEVER CAREFUL SELECTION OF WHAT TO PATENT AND WHEN IN ORDER TO RETAIN MAXIMUM ADVANTAGE AFTER PERHAPS A YEAR DEVELOPMENT CYCLE IS A CHALLENGING TASK
3UMMARY 3O WE MUST NOW ENVISION A WORLD IN WHICH ACCESS TO KNOWLEDGE AND EXPERTISE LABOR AND CAPITAL IS TRULY GLOBAL AND TRANSPARENTLY ACCESSIBLE AND WHERE TECHNOLOGY RELENTLESSLY ADVANCES "REAKTHROUGHS ARE NO LONGER CONlNED TO JUST A FEW CENTERS OF EXCELLENCE SUCH AS "ELL ,ABS OR -)4 THE NEXT BREAKTHROUGH CAN JUST AS EASILY OCCUR IN "ANGALORE "EIJING OR "RISBANE AS IN "OSTON "RISTOL OR "ASEL 3HORTER PRODUCT LIFE CYCLES AND RAPID TECHNOLOGICAL OBSOLESCENCE MAKES PATENTS LOSE THEIR POWER IN MONOPOLY PRESERVATION )N ADDITION MANAGERS CAN NO LONGER RELY ON THE TRADITIONAL PROTECTIONS OF TRADE AND MONETARY RESTRICTIONS LOCAL LABOR PRE EMINENCE AND COSY KNOWLEDGE CLUSTERS TO PROVIDE COMPETITIVE ADVANTAGES 4HE ONLY WAY THAT SUSTAINABLE ADVANTAGES CAN BE EARNED IS THROUGH CONTINUOUS INNOVATIONNOT ONLY INNOVATION IN PRODUCT DEVELOPMENT BUT IN ALL ASPECTS OF ENTERPRISE ACTIVITYAND AT AN EVER INCREASING RATE
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/F COURSE THERE HAS ALWAYS BEEN INNOVATION IN CORPORATIONS )NDEED "AUMOL ARGUES THAT THE UNPRECEDENTED WEALTH GENERATED IN THE MAJOR ECONOMIES IN THE TWENTIETH CENTURY WOULD NOT HAVE BEEN POSSIBLE WITHOUT INNOVATION (OWEVER UNTIL RELATIVELY RECENTLY MANY lRMS COULD SURVIVE AND PROSPER WITHOUT INNOVATINGTHEY COMPETED IN A PROTECTED ENVIRONMENT .OW INNOVATION IS NO LONGER A LUXURY IT IS A NECESSITY
.%7 -/$%,3 /& )../6!4)/. )T IS NOT SURPRISING THEREFORE THAT OUR TRADITIONAL MANAGEMENT STRUCTURES AND METHODS ARE SORELY STRETCHED TO PERFORM IN THIS TURMOIL 4HIS SECTION IS INTENDED TO PROVIDE MANAGERS WITH INSIGHT AND METHODS FOR IMPROVING THEIR INNOVATION AGILITY 7E DISCUSS IN MORE DETAIL WHAT WE MEAN BY CONTINUOUS AND HOLISTIC INNOVATION WITH EXAMPLES 4HE WORK IN THIS SECTION IS LARGELY BASED ON RECENT STUDIES UNDERTAKEN WITH ONE OF OUR COLLEAGUES 'ERALD 3USMAN "EFORE DISCUSSING THE NEW MODELS OF INNOVATION WE NEED A DElNITION TO FOCUS OUR THINKING /FTEN INNOVATION IS STILL INTERPRETED AS hNEW PRODUCT DEVELOPMENT v AND WE lRST NEED TO DISAVOW THIS VIEW
$ElNITION OF )NNOVATION 4HERE ARE MANY DElNITIONS OF INNOVATION IN THE ACADEMIC AND BUSINESS PRESS &OR THE PURPOSE OF THIS CHAPTER WE CHOOSE THE FOLLOWING h3UCCESSFUL INNOVATION IS THE USE OF NEW TECHNOLOGICAL KNOWLEDGE ANDOR NEW MARKET KNOWLEDGE EMPLOYED WITHIN A BUSINESS MODEL THAT CAN DELIVER A NEW PRODUCT OR SERVICE TO CUSTOMERS WHO WILL PURCHASE AT A PRICE THAT WILL PROVIDE PROlTS v 4HIS DElNITION IS BUILT ON THE GENERALLY ACCEPTED WORK OF !FUAH )N ORDER TO FOCUS THE DISCUSSION AND TO EMPHASIZE THE NEW INNOVATION WE HAVE ADDED THE FOLLOWING h3UCCESSFULxv IN ORDER TO EMPHASIZE THAT WE ARE NOT INTERESTED IN INNOVATION THAT FAILS TO DELIVER AND MAINTAIN VALUE FOR THE INNOVATING ENTERPRISE hxEMPLOYED WITHIN A BUSINESS MODELxv IN ORDER TO STRESS THAT INNOVATION IN A BUSINESS MODEL IS AS IMPORTANT PERHAPS MORE SO THAN PURELY PRODUCT OR PROCESS
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TECHNOLOGY 4HIS NEW EMPHASIS ON BUSINESS MODELS IS EMERGING AS A KEY POINT IN OUR RESEARCH AS WELL AS THE RESEARCH OF OTHERS )T ARISES FROM MAJOR CHANGES IN THE BUSINESS ENVIRONMENT SUCH AS SHORTENED PRODUCT LIFE CYCLES INFORMATION INTENSITY AND TRANSFER AND GLOBALIZATION OF MARKETS AND RESOURCES 4HESE FACTORS CHALLENGE THE ABILITY OF AN INNOVATOR TO RETAIN THE VALUE DERIVED FROM THEIR INNOVATIONS )T REQUIRES AN ENTERPRISE TO BECOME AN INTEGRATED INNOVATION ENGINE hxTHAT WILL PURCHASE AT A PRICE THAT WILL PROVIDE PROlTSv IN ORDER TO STRESS THAT SUCCESS REQUIRES THE INNOVATOR TO BE ABLE TO EXTRACT BENElT FROM THE VALUE THAT THEY CREATE !FUAHS DElNITION INCLUDES INNOVATIONS THAT CUSTOMERS MAY WANT BUT WILL NOT PAY ENOUGH FOR OR INNOVATIONS WHERE THE VALUE CREATED BY THE INNOVATOR MIGRATES TO ANOTHER ENTERPRISE THAT MAY EVEN BE OFFSHORE AND THEREFORE DOES NOT NECESSARILY INCREASE THE ECONOMIC WEALTH OF THE INNOVATING ENTERPRISE )N FACT WE SUGGEST YOU USE GROSS MARGINS IN YOUR BUSINESS AS THE KEY METRIC FOR DETERMINING WHETHER YOUR ORGANIZATION IS CONTINUING TO INNOVATE EFFECTIVELY )F CUSTOMERS WONT ALLOW YOU TO RETAIN A HIGH GROSS MARGIN YOUR PRODUCTS OR SERVICES ARE BEING COMMODITIZED AND IPSO FACTO YOU ARE NOT INNOVATING SUFlCIENTLY
(OLISTIC )NNOVATION !TTRIBUTES !S THE TRADITIONAL BARRIERS TO COMPETITION ARISING FROM PATENTS TRADE RESTRICTIONS AND PREFERRED ACCESS TO CAPITAL AND LABOR SKILLS DISAPPEAR CORPORATIONS MUST SEEK OTHER WAYS TO SUSTAIN LEADERSHIP POSITIONS 2ECENT RESEARCH WITHIN THE 3MEAL #OLLEGE AT 0ENNSYLVANIA 3TATE 5NIVERSITY 3USMAN ET AL PARTIALLY FUNDED BY THE 53 $EPARTMENT OF #OMMERCE IDENTIlED COMMON ATTRIBUTES SHOWN BY COMPANIES THAT CONTINUE YEAR AFTER YEAR TO CREATE HIGHLY PROlTABLE GROWTH !LTHOUGH NOT EVERY COMPANY RESEARCHED SHOWED EACH ATTRIBUTE CERTAINLY NOT TO THE SAME LEVEL THE DATA PROVIDED A HIGHLY CONSISTENT PICTURE OF WHAT INNOVATION MEANS IN OUR RAPIDLY CHANGING WORLD 7E BREAK DOWN THESE ATTRIBUTES INTO SEVEN KEY AREAS SHOWN IN THIS DIAGRAM IMMERSED IN A h3UPPORTIVE #ORPORATE #ULTUREv 7E WILL DISCUSS EACH BRIEmY AND PROVIDE ILLUSTRATIONS /F COURSE EVERY COMPANY MUST lND ITS OWN UNIQUE SOLUTION BUT YOU WILL SEE PATTERNS THAT WILL HELP YOU EXPLORE NEW AREAS OF INNOVATION IN YOUR OWN ORGANIZATIONS -OST IMPORTANTLY THESE NEW INNOVATORS VIEW CREATIVITY AS A DAILY ENTERPRISE WIDE BEHAVIOR LED FROM THE TOP )T IS NOT HOUSED IN 2$ OR MARKETING OR SEEN AS SOMETHING THAT YOU DO WHEN CHALLENGED )T IS A HOLISTIC PROCESS THAT PERMEATES THE WHOLE ORGANIZATION DAY IN AND DAY OUT TO CREATE A SMOOTH RUNNING hINNOVATION ENGINEv 4HIS DOES NOT MEAN THAT CHAOS REIGNS 4HE RULES ARE CLEAR EVERYONE KNOWS WHAT TO DO AND WHAT THE TARGETS ARE n THE RESULTS SHOW
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&IGURE 4HE 3EVEN (OLISTIC !TTRIBUTES 3HOWN BY AN !GILE )NNOVATOR
%XTERNALIZED !GILE INNOVATORS ARE CONTINUALLY SCOURING THE WORLD FOR NEW IDEAS TECHNOLOGIES PARTNERS ETC 4HEY UNDERSTAND THAT THEY CANNOT DO EVERYTHING FOR THEMSELVES THEY EMBRACE OUTSIDE IDEAS AND THEY EXCEL IN PARTNERSHIP RELATIONSHIPS 4HEY ENCOURAGE EVERYONE IN THE ENTERPRISE TO BE INQUISITIVE )F YOU HAVE INSTALLED SOFTWARE TO MONITOR YOUR STAFF S hWASTEFUL INTERNET SURlNGv DISABLE IT -INI CASE 0"2 IS A PUBLIC !USTRALIAN COMPANY WITH -- REVENUE IN MAINLY IN BRAKE CALIPERS FOR THE AUTOMOTIVE SECTOR THE MAJORITY SOLD TO 53 /%-S )T IS A WORLD LEADER IN ALUMINUM CASTING 0"2 ACTIVELY SEEKS COMPLEMENTARY PARTNERS FOR ACCELERATING PRODUCT DEVELOPMENT 4O THIS END IT HAS DEVELOPED METHODS TO RAPIDLY ASSEMBLE PARTNERS COOPERATE EFFECTIVELY AND SHARE BENElTS 0"2S *OINT $EVELOPMENT !GREEMENTS *$!S ARE CLEAR AND SIMPLE TO UNDERSTAND 4HEY DO NOT ATTEMPT TO DElNE lNAL OUTCOMES INITIALLY BUT ALLOW GRACIOUS MIGRATION TOWARDS SUPPLY AGREEMENTS OR EVEN FULLY OPERATIONAL JOINTLY OWNED COMPANIES 4HE DIFlCULT ISSUE OF )0 OWNERSHIP IS DEALT WITH UP FRONT !NY )0 THAT IS GENERATED IN THE PARTNERSHIP IS JOINTLY OWNED AND CANNOT BE WITHDRAWN BY ANY PARTNER EVEN IF THEY DO NOT CONTINUED
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-INI CASE 0"2 CONTINUED
PROCEED TO A CONTRACTUAL STATUS BEYOND DEVELOPMENT 0"2 UNDERSTANDS THAT SETTING UP THESE PARTNERSHIPS IS KEY TO FUTURE SUCCESS BY REDUCING PRODUCT DEVELOPMENT TIMES RETAINING FOCUS ON CORE COMPETENCIES AND MAKING EFlCIENT USE OF RESOURCES )N ADDITION 0"2 HAS TECHNICAL SPECIALISTS THAT SPEND ONE DAY A WEEK LOOKING AT EXTERNAL TECHNOLOGIES AND DEVELOPMENTS 0"2 WORKS WITH 5NIVERSITIES AS SOURCES OF NEW TECHNOLOGY AND BENCHMARKS ITS OWN MANUFACTURING PROCESSES AGAINST THE BEST SEARCHING FOR BEST PRACTICES AND EXCELLENCE
#USTOMER #LOSENESS !GILE ENTERPRISES WORK CLOSELY WITH THEIR CUSTOMERS REALIZING THAT THE NEXT PRODUCT OR SERVICE IDEA MAY COME FROM THEM "UT MORE IMPORTANTLY THEY CREATE SYMBIOTIC LINKAGES WITH THEIR CUSTOMERS THAT PROVIDE VALUE TO BOTH PARTIES AND SUBTLY ESTABLISH BARRIERS TO FOLLOWSHIP FROM COMPETITORS -INI CASE 'ENERAL &ASTENERS MANUFACTURES BOLTS AND OTHER METAL FASTENERS FOR THE AUTOMOTIVE INDUSTRY IN WHICH THERE IS AN OVERSUPPLY 'ENERAL &ASTENERS USES AN INNOVATIVE BUSINESS MODEL TO DE COMMODITIZE THEIR BUSINESS 4HEY UNDERTAKE THE ENGINEERING DESIGN FOR NEW CAR PLATFORMS TAKING RESPONSIBILITY FOR HOW THE CAR WILL BE RELIABLY ASSEMBLED 4HIS REQUIRES SPECIAL HARD TO COME BY SKILLS 4HEY THEN CONTRACT TO SUPPLY THE /%- WITH JUST IN TIME COMPONENTS DIRECTLY TO THE PRODUCTION LINES WITH QUALITY INSPECTION AND GUARANTEES 4HEY PURCHASE FASTENERS EITHER INTERNALLY OR FROM OTHER SUPPLIERS AND MANAGE AN INTEGRATED SUPPLY CHAIN FROM DESIGN TO lNAL ASSEMBLY 4HIS REQUIRES '&S COMPUTER ARCHITECTURE TO SEAMLESSLY INTEGRATE WITH /%- PLANTS EXCHANGING DATA IN REAL TIME 4HEY ARE hLOCKED INv TO THEIR CUSTOMERS BOTH IN DESIGN AND OPERATIONS MAKING IT DIFlCULT FOR COMPETITORS TO DISPLACE THEM 4HEY PROVIDE BOTH PRODUCTS AND SERVICES
3ERVICER !S WE SAW 'ENERAL &ASTENERS PROVIDE BOTH PRODUCTS AND SERVICES 4HEY SOLVE PROBLEMS FOR THEIR CUSTOMER AND HENCE CREATE GREATER VALUE FOR BOTH PARTIES !GILE INNOVATORS BLUR THE BARRIER BETWEEN PRODUCT AND SERVICE THEY SEE THEMSELVES AS SOLUTION PROVIDERS AND PARTNERS WITH THEIR CUSTOMERS $ELLS CUSTOMERS GET A PRODUCT CONlGURED AND MANUFACTURED JUST FOR THEMIT CAN BE DIFFERENT FROM ANY OTHER COMPUTER THAT $ELL HAS EVER MADE 4HEY PERMIT A CUSTOMER TO hSELF
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SERVE AND SELF DESIGNv ONLINE PROVIDING A TOTALLY CUSTOMIZED PRODUCT COUPLED WITH MINIMAL SELLING COSTS 4HIS hINSTANT JUST FOR MEv ONLINE EXPERIENCE IS MIGRATING FROM CONSUMER TO BUSINESS MARKETS AND MUST BE TAKEN INTO ACCOUNT AS NEW BUSINESS MODELS ARE EXPLORED !GILE MANUFACTURING ENTERPRISES ARE RECONlGURING THEIR BUSINESSES TO PROVIDE TOTAL SERVICE SOLUTIONS FROM lRST CONTACT TO DELIVERY OF PRODUCT AND SUPPORTING SERVICES -INI CASE 'REIF 0ACKAGING A SUPPLIER OF METAL DRUMS FOR SHIPPING BULK CHEMICALS MANY OF WHICH ARE TOXIC REALIZED THAT THEY HAD NO REAL COMPETITIVE POSITION AND MARGINS WERE THIN ,ISTENING CAREFULLY TO THEIR CUSTOMERS THEY SAW THERE WERE UNMET NEEDS AND NEW SOURCES OF VALUE TO BE ACCESSED 4HEY CONVERTED THEIR BUSINESS MODEL TO BEING A hTRIP LEASINGv COMPANY FOR SPECIALTY CHEMICALSTHE &ED%X® OF PROBLEM CHEMICALS .OW THEY SOLVE THE TOTAL TRIP PROBLEM FOR THEIR CUSTOMERSDRUM SUPPLY CLEANING REFURBISHING REGULATORY COMPLIANCE TRANSPORTATION AND TRACKING 4HEY BUILT A NEW WEB APPLICATION !LTHOUGH THEY SUB CONTRACT OUT MOST SUPPORT FUNCTIONS THEY CAPTURE THE VALUE IN THE SUPPLY CHAIN AND BUILD LONG LASTING CLIENT RELATIONSHIPS -OREOVER THEY BUY SUPPORT SERVICES IN VOLUME AND THEIR DATABASE OF TRIP COSTING ENABLES THE COMPANY TO ACCURATELY QUOTE ON hTRIPSv AND TO PROVIDE CUSTOMIZED AND TRACEABLE SERVICE 4HIS SHIFT HAS SIGNIlCANTLY IMPROVED THEIR MARGINS AND CASH mOW WHICH THEY CAN DIRECT TO FURTHER INNOVATIONS
)NCLUSIVE )4 4RADITIONALLY A lRMS )4 FUNCTION REMAINS OUTSIDE THE hINNOVATION LOOPv )T OPERATES AS A SERVICE TO SUPPORT BUSINESS MODELS THAT ARE DESIGNED WITHOUT INCLUDING INPUT FROM )4 MANAGERS (OLISTIC INNOVATORS INCLUDE )4 AS A CORE COMPONENT OF THEIR INNOVATION PROCESS ON A CONTINUAL BASIS )4 IS USED TO PROVIDE GREATER VALUE TO CUSTOMERS TIGHTER hLOCK INv TO BOTH VENDORS AND CUSTOMERS AND MOST IMPORTANT TO ACCUMULATE INTELLECTUAL ASSETS IN THE FORM OF MINABLE DATA THAT OVER TIME IS PROHIBITIVELY EXPENSIVE FOR A COMPETITOR TO ACQUIRE AND APPLY 4HIS DATA ACCUMULATION IS MUCH MORE THAN THAT FOUND IN hCUSTOMER RELATIONSHIP MANAGEMENTv SYSTEMS WHICH HAVE MIGRATED TOWARDS EFlCIENCY TOOLS RATHER THAN STRATEGIC WEAPONS -INI CASE $") BASED IN 0ENNSYLVANIA PROVIDES hVEGETATION MANAGEMENTv FOR BUSINESSES INCLUDING #LASS ) RAILROADS WHICH ARE REGULATED BY THE &EDERAL 'OVERNMENT ON THE AMOUNT OF VEGETATION THAT MAY GROW ON RIGHTS OF WAY CONTINUED
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-INI CASE $") CONTINUED
$") HAS A DOMINANT POSITION IN THIS SECTOR BY lRST DESIGNING AND BUILDING THEIR OWN VEGETATION TREATMENT ROADRAIL VEHICLES 4HESE CAN RAPIDLY MOUNT THE TRACK AND DETECT THE LOCATION AND TYPE OF VEGETATION ALONG THE LINE MIX OPTIMIZED HERBICIDES IN REAL TIME AND SPOT SPRAY USING ROBOT ARMS 4HE AMOUNT OF CHEMICAL USED IS MINIMIZED "Y MAPPING THE EXACT LOCATION OF EVERY PLANT USING '03 TECHNOLOGY THE COMPANY ENSURES THAT ITS NEXT SERVICE RUN CAN BE ACCOMPLISHED IN MINIMUM TIME WITH HIGHLY EFlCIENT UTILIZATION OF CHEMICALS AND EQUIPMENT 4HE PROPRIETARY DATA THAT THE COMPANY COLLECTS ON ITS CLIENTS UNIQUE SITUATIONS ARE A MAJOR COMPETITIVE ADVANTAGE MAKING IT EXCEEDINGLY DIFlCULT FOR A COMPETITOR TO BID ACCURATELY ON A CONTRACT AND TO COMPETE IN SERVICE $") HAS NO PATENTS BUT PROTECTS ITS KNOW HOW AND DATA THROUGH TRADE SECRETS AND WORKS WITH UNIVERSITIES TO AUGMENT ITS SCIENCE AND TECHNOLOGY
)NCLUSIVE )0 4HE PROTECTION OF AN ENTERPRISES INTELLECTUAL PROPERTY IS OFTEN CONSIDERED AS ESTABLISHING AND SUPPORTING A PATENT PORTFOLIO WHERE INVENTIONS ARE HANDED OVER TO PATENT ATTORNEYS ONCE THE DECISION TO SEEK PROTECTION HAS BEEN MADE 0ATENTS ARE WRITTEN TO PROTECT THE TECHNICAL INVENTION RATHER THAN THE BUSINESS MODEL IN WHICH THE TECHNOLOGY IS EMBEDDED !GILE INNOVATORS HAVE A CLEAR UNDERSTANDING OF HOW )0 IS INCORPORATED WITHIN THE COMPANY !RE THERE PROJECTS WHERE INFORMATION SHOULD BE ON A hNEED TO KNOWv BASIS $OES EVERYONE UNDERSTAND HOW TRADE SECRETS ARE PROTECTED !RE PROCESSES PATENTED (OW IS )0 SHARED WITH PARTNERS !SKING THESE QUESTIONS WITHIN COMPANIES LIKE 7, 'ORE THE MATERIALS SPECIALIST AND ,UTRON THE LIGHTING CONTROL COMPANY n BOTH COMPANIES KNOWN FOR THEIR CONTINUAL ABILITY TO INNOVATE AND WHOSE SUCCESS IS BUILT ENTIRELY ON THIS n GARNERS CONSISTENT ANSWERS FROM EVERYONE )S THIS TRUE IN YOUR COMPANY )F NOT YOU DO NOT HAVE AN INCLUSIVE )0 STRATEGY
)NNOVATION -ETRICS (OW DO YOU KNOW WHETHER YOUR COMPANY IS CONTINUOUSLY INNOVATING WITHOUT SYSTEMS IN PLACE TO MEASURE IT - LONG RECOGNIZED AS HAVING THE ABILITY TO CONTINUALLY DEVELOP AND LAUNCH NEW PRODUCTS COUNTS HOW MUCH REVENUE IS DERIVED FROM PRODUCTS THAT WERE NOT IN THE MARKET TWO YEARS PREVIOUSLY 4HERE IS A DANGER OF COURSE IN COUNTING PRODUCTS THAT ARE NOT TRULY INNOVATIVE PERHAPS HAVING A SLIGHT MODIlCATION ONLY AT THE REQUEST OF A CUSTOMER ! BETTER SOLUTION IS TO ACTUALLY MEASURE THE GROSS MARGIN THAT PRODUCTS GENERATE
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-INI #ASE 2ESTEK DEVELOPS SELLS AND SUPPORTS WORLDWIDE HIGHLY SPECIALIZED COMPONENTS FOR GAS CHROMATOGRAPHY 4HE COMPANY EMBEDS WITHIN ITS MANAGEMENT INFORMATION SYSTEMS SPECIlC METRICS FOR INNOVATION MONITORING 4OTAL GROSS PROlT OVER THE LIFETIME OF A PRODUCT DIVIDED BY THE 2$ INVESTMENT THAT WENT INTO THE PRODUCT IS TARGETED TO BE lVE 4HIS TARGET HELPS THE COMPANY EVALUATE THE PAY BACK PERIOD OF THEIR INVESTMENTS )N ADDITION THEY MEASURE THE GROSS MARGINS ON EACH PRODUCT 0RODUCTS ARE ONLY DEEMED TO BE hNEWv IF THE GROSS MARGIN EXCEEDS BY EIGHT PERCENT OR MORE THE MEAN FOR ALL PRODUCTS 4HIS AVOIDS ANY COMPLACENCY THAT MIGHT ARISE BY CONFUSING NEW 3+5S WHICH OFTEN OCCUR FROM TRUE NEW PRODUCTS BASED ON INNOVATION 4HE COMPANY HAS A SPECIlC TARGET FOR THESE NEW INNOVATIVE PRODUCTS BOTH IN NUMBER AND REVENUES 2ESTEK HAS A RECORD OF PROlTABLE GROWTH YEAR ON YEAR FROM ITS STREAM OF NEW PRODUCTS )T HAS A SYSTEM FOR SEEKING NEW TECHNOLOGIES WORLDWIDE AND OFTEN PARTNERS WITH 5NIVERSITIES 5SE AND DISSEMINATION OF SUCH INNOVATION METRIC SYSTEMS THROUGHOUT AN ENTERPRISE COMMUNICATE THE IMPORTANCE OF CONTINUOUS CREATIVITY TO EVERYONE IN THE ORGANIZATION AND THEREBY UNDERPINS A SUPPORTIVE CULTURE
&OCUS 2APIDLY CHANGING TECHNOLOGY MARKETS AND COMPETITION DEMAND THAT ANY ENTERPRISE MUST EXCEL IN WHAT IT CHOOSES TO DO AND THIS IMPLIES THAT IT DOES NOT UNDERTAKE ACTIVITIES BETTER DONE BY A PARTNER OR A COMPETITOR !GILE CORPORATIONS FOCUS THEY DO NOT WASTE RESOURCES ON DIVERSIlCATION INTO BUSINESSES WHERE THEY HAVE LITTLE TO OFFER -INI #ASE 4APROGGE IS THE WORLDWIDE MARKET LEADER IN DESIGNING BUILDING AND COMMISSIONING COOLING WATER SYSTEMS FOR POWER STATIONS SEAWATER DESALINATION PLANTS REFRIGERATION AND INDUSTRIAL PLANTS )T HAS OVER OF THE WORLD MARKET )T IS A TECHNICALLY RICH COMPANY WITH SEVERAL HUNDRED PATENTS AND SIGNIlCANT TRADE SECRETS IN THE MANUFACTURE AND SELECTION OF THE DISPOSABLE SPONGE BALLS THAT ARE USED TO CLEAN WATER SYSTEMS -ANY INSTALLATIONS ARE CONNECTED DIRECTLY TO THE )NTERNET SO THAT PERFORMANCE ANYWHERE IN THE WORLD CAN BE MONITORED AT THE CORPORATE HEADQUARTERS IN 'ERMANY AND PREVENTIVE MAINTENANCE INSTRUCTIONS PROVIDED TO CUSTOMERS BEFORE ANY CRITICAL PROBLEMS ARISE 4HIS PROVIDES A HIGHLY VALUABLE SERVICE WHILE REDUCING THE NEED FOR EXPENSIVE lELD EXPERTS 4HE COMPANYS 7EB CONTINUED
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-INI CASE 4APROGGE CONTINUED
SITE WWWTAPROGGEDEEN IMMEDIATELY CONVEYS A KNOWLEDGE OF INDUSTRIAL WATER SYSTEMS THAT IS DAUNTING TO WOULD BE COMPETITORS WHILE PROVIDING CONlDENCE TO CUSTOMERS 4APROGGE HAS A PASSION FOR WHAT IT DOES A DRIVE TO DOMINATE ITS CHOSEN NICHE AND AN UNWAVERING FOCUS 4HIS FOCUS COMMANDS AN UNASSAILABLE POSITION AGAINST COMPETITORS !LTHOUGH MUCH OF ITS 2$ IS DONE IN HOUSE FROM TIME TO TIME 4APROGGE ACCESSES NEW TECHNOLOGIES FROM PARTNERS AND 5NIVERSITIES
3UMMARY )N TALKING WITH ALL THE COMPANIES MENTIONED IN THIS SECTION WE CAME AWAY FEELING THAT THEY HAD SOMETHING SPECIAL )NNOVATION WAS SOMETHING THAT THEY DO ALL OF THE TIME EVERYDAY )T IS NOT A PART OF THEIR LIFE IN MANY WAYS IT IS THEIR LIFE 7E CALL THIS hHOLISTIC INNOVATIONv )T DEMANDS A UNIQUE CORPORATE CULTURE TO BE SUCCESSFUL 6ERY FEW COMPANIES EXHIBIT AN ALL EMBRACING YET CONTROLLED INNOVATION SUPPORTING CULTURE 7E THEREFORE NOW TURN TO THIS THORNY SUBJECT TO PROVIDE YOU WITH SOME GUIDELINES ON HOW YOU CAN BEGIN TO REINFORCE YOUR ENTERPRISE CULTURE TO PROMOTE CONTINUAL AGILE INNOVATION
#/20/2!4% #5,452% )N OUR MOST RECENT RESEARCH INTERVIEWS AND FROM REVIEWING PAST WORK IN THE lELD WE RECOGNIZE THAT SUCCESSFUL CREATIVE COMPANIES HAVE DEVELOPED AND NURTURED A CULTURE THAT EXPLICITLY AND MORE IMPORTANTLY IMPLICITLY SUPPORTS hHOLISTICv INNOVATION #OMPANIES WITH SEEMINGLY IDENTICAL lNANCIAL ASSETS PRODUCTS BRAND RECOGNITION ETC MAY PERFORM ENTIRELY DIFFERENTLY /NE IS HIGHLY SUCCESSFUL WHILE THE OTHER GRADUALLY DECLINES 4HE FORMER IS JUDGED AS INNOVATIVE THE OTHER DULL OR UNABLE TO GET ITS INNOVATIVE IDEAS EXECUTED SMOOTHLY 7HY IS THIS 4HERE HAS BEEN MUCH RESEARCH IN THIS AREA AND MANY BUSINESS BOOKS WRITTEN ABOUT THE lELD /N ONE POINT AT LEAST THERE SEEMS TO BE CONSENSUS )NNOVATION REQUIRES LEADERSHIP SUPPORT FROM THE VERY TOP OF THE ENTERPRISE 5NFORTUNATELY INNOVATION MANAGEMENT IS NOT ADDRESSED IN MOST OF OUR BUSINESS SCHOOLS AND THEREFORE UNLESS A MANAGER HAS A NATURAL ACUITY FOR LEADING AN INNOVATION DRIVEN ORGANIZATION THE ORGANIZATION WILL USUALLY mOUNDER /NE AIM OF OUR WORK HAS BEEN TO DEVELOP A SET OF READILY UNDERSTANDABLE AND ACTIONABLE ATTRIBUTES THAT OCCUR IN NEARLY EVERY SUCCESSFUL INNOVATIVE COMPANY -ANAGERS CAN ADAPT THEIR MANAGEMENT STYLES COMMUNICATION SKILLS INCENTIVE STRUCTURES ETC TO
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&IGURE 4HE 4EN &ACTORS FOR AN )NNOVATION 3UPPORTIVE #ULTURE
STRENGTHEN THE CULTURE FOR CREATIVITY 7E HAVE NARROWED THESE ATTRIBUTES DOWN TO TEN FACTORS )DEALLY THESE FACTORS ARE MUTUALLY ORTHOGONAL IE EACH DOES NOT DEPEND ON ANY OTHER 4HIS IS DIFlCULT TO ACHIEVE BUT BY ATTEMPTING THIS CONSTRUCT IT IS EASIER FOR MANAGERS TO IDENTIFY AREAS WHERE IMPROVEMENT MIGHT BE REQUIRED WITHOUT TOO MUCH CONCERN THAT CHANGES IN ONE AREA WILL CREATE OTHER PROBLEMS 4HE FOLLOWING TABLE PROVIDES DElNITIONS TOGETHER WITH ILLUSTRATIVE STATEMENTS THAT MIGHT BE CASUALLY OVERHEARD WITHIN AN ENTERPRISE 7E SUGGEST THAT YOU REVIEW THESE FACTORS AND ASK YOURSELF WHETHER YOUR ORGANIZATION EXHIBITS THESE ATTRIBUTES 7HAT WOULD YOU HEAR IF YOU COULD BE A mY ON THE WALL IN YOUR OFlCES AND PRODUCTION FACILITIES )F YOU CANNOT IMAGINE HEARING THESE STATEMENTS START MODIFYING YOUR BEHAVIOR AND COMMUNICATIONS TO MOVE THE ORGANIZATION TOWARDS A CULTURE WHERE SUCH FACTORS WOULD BECOME MORE EVIDENT 4ABLE #ULTURAL !TTRIBUTES OF 3UCCESSFUL )NNOVATIVE %NTERPRISES !TTRIBUTE (ONESTY
$ElNITION 4HE DEGREE TO WHICH EACH EMPLOYEE HAS TOTAL CONlDENCE IN THE INTEGRITY ABILITY AND GOOD CHARACTER OF OTHER EMPLOYEES AND THE ORGANIZATION REGARDLESS OF THEIR ROLE
%XAMPLE 3TATEMENTS h) TRUST THE PEOPLE ) WORK WITH ) lND IT EASY TO BE OPEN AND HONEST WITH PEOPLE FROM OTHER DEPARTMENTSv
4(% !'),% %.4%202)3%
!TTRIBUTE
$ElNITION
%XAMPLE 3TATEMENTS
4HE DEGREE TO WHICH THE INTERESTS AND ACTIONS OF EACH EMPLOYEE SUPPORT THE CLEARLY STATED AND COMMUNICATED KEY GOALS OF THE ORGANIZATION
h7E HAVE CLEAR AIMS AND OBJECTIVES WHICH EVERYONE UNDERSTANDS 7E BUILD CONSENSUS AROUND KEY OBJECTIVES 7E RECOGNIZE AND REWARD LOYALTYv
4HE DEGREE TO WHICH THE ORGANIZATION EMPLOYEES AND MANAGERS TAKE RISK
h) AM ENCOURAGED TO EXPERIMENT WE TAKE CALCULATED RISKS 7E ENCOURAGE TRIAL AND ERRORv
4HE DEGREE TO WHICH TEAM PERFORMANCE IS EMPHASIZED OVER INDIVIDUAL PERFORMANCE
h7E PROMOTE TEAMWORK )T IS THE CENTER OF EVERYTHING THAT WE DO 4HERE ARE USUALLY PEOPLE FROM OTHER DEPARTMENTS IN MY TEAM 7E HAVE BOTH PROBLEM SOLVERS AND @OUT OF THE BOX THINKERS IN OUR TEAMSv
4HE DEGREE TO WHICH EACH EMPLOYEE FEELS EMPOWERED BY MANAGERS AND THE ORGANIZATION
h!S A MANAGER ) AM EXPECTED TO DELEGATE 7E HAVE A @NO BLAME CULTURE 7E ALLOW STAFF TO MAKE DECISIONSv
&REEDOM
4HE DEGREE TO WHICH SELF INITIATED AND UNOFlCIAL ACTIVITIES ARE TOLERATED AND APPROVED THROUGHOUT THE ORGANIZATION
h) AM ALLOWED TO DO MY OWN THING 7E ENCOURAGE PEOPLE TO TAKE INITIATIVES 7E RECOGNIZE THE INDIVIDUALv
3UPPORT
4HE DEGREE TO WHICH NEW IDEAS ARE ENCOURAGED FROM ALL SOURCES AND RESPONDED TO PROMPTLY AND APPROPRIATELY
h7E ENCOURAGE FRESH IDEAS AND NEW APPROACHES 7E REWARD INNOVATIVE INDIVIDUALS 7E REWARD INNOVATIVE TEAMSv
%NGAGE MENT
4HE DEGREE TO WHICH ALL LEVELS OF THE ORGANIZATION ARE ENGAGED WITH THE CUSTOMER AND THE OPERATIONS OF THE ORGANIZATION
h-ANAGEMENT UNDERSTANDS THE OPERATIONS OF THE COMPANY ) CAN SHARE PROBLEMS WITH MY MANAGERS ) KNOW WHY MY JOB IS IMPORTANTv
3TIMULI
4HE DEGREE TO WHICH IT IS UNDERSTOOD THAT UNRELATED KNOWLEDGE CAN IMPACT PRODUCT SERVICE AND OPERATIONS IMPROVEMENTS
h) AM ENCOURAGED TO SEARCH EXTERNALLY FOR INFORMATION ) OBTAIN DATA FROM MANY DIFFERENT SOURCES 7E LISTEN TO SUGGESTIONS FROM SUPPLIERS 7E USE CONSULTANTS IN FOCUSED ROLLSv
4HE DEGREE TO WHICH THERE IS BOTH PLANNED AND RANDOM INTERACTION BETWEEN FUNCTIONS AND DIVISIONS AT ALL LEVELS OF THE ORGANIZATION
h) AM KEPT IN THE PICTURE ON HOW WE ARE PERFORMING 7E HAVE EXCELLENT FORMAL CHANNELS OF COMMUNICATIONS 7E USE BEST PRACTICE KNOWLEDGE TRANSFER BETWEEN DEPARTMENTS 7E ACTIVELY MANAGE OUR INTELLECTUAL ASSETSv
!LIGNMENT
2ISK
4EAMS
%MPOWER MENT
#OMMUNI CATION
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)../6!4)/. -!.!'%-%.4 4HE )NNOVATION 0IPELINE !S WE HAVE SEEN AN AGILE ENTERPRISE MUST FOSTER A SUPPORTIVE CULTURE FOR INNOVATION AND INVEST IN APPROPRIATE SUPPORT PROCESSES AND TECHNOLOGIES )NNOVATIVE CONCEPTS CAN COME FROM ANYWHERE IN THE ORGANIZATION AND FREQUENTLY FROM CUSTOMERS SUPPLIERS AND OTHER THIRD PARTY INDIVIDUALS OR ORGANIZATIONS ,EADING lRMS ADOPT HOLISTIC CORPORATE WIDE METHODS TO HARNESS THESE DIVERSE INPUTS ACROSS THE )NNOVATION 0IPELINE 4HE 0IPELINE SUPPORTS ALL RELATED INNOVATION ACTIVITIES NOT JUST PRODUCT DEVELOPMENT 4HE )NNOVATION 0IPELINE WORKS EQUALLY WELL FOR NEW TECHNOLOGY IMPLEMENTATION (2 INITIATIVES IMPROVEMENTS TO MANUFACTURING PROCESSES OR THE GENERATION OF NEW BUSINESS MODELS 342!4%')# #/.4%84
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&IGURE 4HE )NNOVATION 0IPELINE
3TRATEGIC #ONTEXT ENCOMPASSES THE BUSINESS GOALS THE CURRENT AND FUTURE STATE OF THE lRM MANAGEMENT COMMITMENT AND DESIRE TO GROW THE MARKET DYNAMICS THE COMPETITIVE REGULATORY AND ECONOMIC ENVIRONMENTS 4HE CONTEXT IS DETERMINED BY THE OVERALL CORPORATE STRATEGY OR THE STRATEGY AT BUSINESS UNIT LEVEL 3TRATEGY DRIVES THE CRITERIA FOR MAKING DECISIONS AND THE DECISION MAKING PROCESS ITSELF 3TRATEGIC #ONTEXT CREATES THE BOUNDARIES OF THE INNOVATION PROCESS PARTICULARLY IN TERMS OF NEEDS AND GOALS &RAMING ESTABLISHES THE AREAS OF STRATEGIC FOCUS FOR INNOVATION AND THE FRAMING OF SPECIlC CORPORATE CHALLENGES THAT NEED TO BE ADDRESSED TO ACHIEVE CORPORATE GOALS %XAMPLES INCLUDE THE IDENTIlCATION OF NEW MARKET OPPORTUNITIES OR TECHNOLOGY PLATFORMS
4(% !'),% %.4%202)3%
4HE )DEA -ANAGEMENT PROCESS DElNES THE GENERATION COLLECTION DEVELOPMENT EVALUATION AND SELECTION OF BUSINESS IDEAS 4YPICAL METHODS INCLUDE BRAINSTORMING CREATIVITY TECHNIQUES FOCUS GROUPS AND ONLINE IDEA CAPTURE AND MANAGEMENT SYSTEMS 4HE )DEA -ANAGEMENT PROCESS CAN TAKE PLACE THROUGH THE WORK OF INDIVIDUALS OR THROUGH GROUPS WORKING TOGETHER 4HE PROCESS MAY BE HIGHLY FORMALIZED OR AD HOC AND UNSTRUCTURED &ROM THIS STAGE IDEAS ARE DEVELOPED INTO CONCEPTS AND THE TOP CONCEPTS ARE MOVED INTO THE #ONCEPT -ANAGEMENT PHASE COVERING THE DEVELOPMENT AND ANALYSIS OF CONCEPTS AND BUSINESS OPPORTUNITIES #ONCEPTS ARE CONSIDERED AS PRE PROJECTS WHERE A DECISION HAS NOT YET BEEN TAKEN TO PROCEED WITH A PROJECT AND ALLOCATE SUBSTANTIAL RESOURCES !T THIS STAGE THERE ARE OFTEN COMPETING CONCEPTS OR PROJECTS THAT COULD FULlLL THE SAME BUSINESS OBJECTIVES 4HE OUTPUT OF #ONCEPT -ANAGEMENT IS A RELATIVELY SMALL SELECTION OF CONCEPTS THAT HAVE BECOME APPROVED PROJECTS THROUGH BUSINESS CASE APPROVAL AND A LARGER NUMBER OF CONCEPTS THAT HAVE BEEN HELD BACK DE PRIORITIZED OR SHELVED 0ROJECTS THAT RECEIVE AUTHORIZATION AND THE NECESSARY COMMITMENT OF RESOURCES MOVE INTO 0ROJECT -ANAGEMENT PHASE IN WHICH ENTERPRISES APPLY THE TRADITIONAL SKILLS OF PROJECT AND RESOURCE MANAGEMENT 5LTIMATELY THE TOP PROJECTS REACH THE ,AUNCH PHASE WHEREBY THE PROJECTS ARE RELEASED TO THE MARKET OR IN THE CASE OF INTERNAL PROCESS IMPROVEMENTS DEPLOYED TO STAFF 4HIS PHASE RELIES ON ESTABLISHED TECHNIQUES TO EXECUTE LAUNCH PLANS DRAWING ON OPERATIONAL EXPERIENCE AND RESOURCES )N SOME CASES THE COMPANY CAN DERIVE MAXIMUM VALUE FROM AN INNOVATION BY APPLYING DELIBERATE METHODS TO %XPAND THE OFFERING )N THIS PHASE THE COMPANY TAKES THE KNOWLEDGE AND IMPROVEMENTS GAINED FROM THE INITIAL LAUNCH AND INCORPORATES THEM INTO NEW PRODUCT LINES OR INTERNAL PROCESSES 4HIS MAY INVOLVE DEVELOPING NEW MARKETS ADAPTING MARKET MESSAGES MODIFYING PRICING CHANNELS OF DISTRIBUTION OR THE FORMULATION OF THE CORE PRODUCT 3UCCESSFUL EXECUTION OF THIS PHASE CREATES ENDURING PRODUCT LINES OR PROCESS IMPROVEMENTS THAT MAINTAIN AND INCREASE THE PROlTABILITY OF THE ACTIVITY 4HE 0IPELINE OPERATES IN A CONTEXT OF )NNOVATION &OUNDATIONS THAT UNDERPINS ALL INNOVATION ACTIVITIES INCLUDING ORGANIZATIONAL CULTURAL AND PROCESS BASED ATTRIBUTES THAT CONTRIBUTE TO SHORT TERM AND LONG TERM SUCCESS 3OME ARE FOCUSED ON SPECIlC AREAS OF THE BUSINESS WHEREAS OTHERS ARE FUNCTIONS OR ACTIVITIES THAT ARE COMMON TO MANY BUSINESS ACTIVITIES &OUNDATIONS INCLUDE EXECUTIVE SUPPORT QUALITY LEADERSHIP OF INNOVATION ACTIVITIES THE EXISTENCE OF PROCESSES AND SYSTEMS AND THE ORGANIZATIONAL ATTITUDES AND BEHAVIORS THAT SUPPORT INNOVATION /RGANIZATIONS MANAGE THEIR INNOVATION ACTIVITIES AND THEIR RELATIONSHIP TO STRATEGIC OBJECTIVES THROUGH AN )NNOVATION 0ORTFOLIO A ROADMAP OF POTENTIAL ACTIVITIES AND PROJECTS ALREADY UNDERWAY 4HE 0ORTFOLIO HELPS MANAGE THE OVERALL
)../6!4)/. -!.!'%-%.4 ). !. !'),% %.4%202)3%
INNOVATION PROCESS IN A BROAD ORGANIZATIONAL CONTEXT ALLOWING ORGANIZATIONS PRIORITIZE THE ALLOCATION OF RESOURCES AND MANAGE RISK ACROSS ALL ASPECTS OF THE BUSINESS 2ESEARCH CONDUCTED BY THE $OBLIN 'ROUP HAS DEMONSTRATED THE BENElTS OF INNOVATING ACROSS THE ENTIRE VALUE CHAIN OF AN ORGANIZATION NOT JUST IN A SINGLE AREA SUCH AS 2$ OR NEW PRODUCT DEVELOPMENT AND THE 0ORTFOLIO -ANAGEMENT APPROACH PROVIDES THE FRAMEWORK AND A TOOLSET TO ENSURE THE METHODS ARE PROPERLY APPLIED
)NNOVATION -ANAGEMENT 4ECHNOLOGY )-4 'IVEN THE IMPORTANCE OF HAVING A MANAGED PROCESS TECHNOLOGY CAN BRING MANY BENElTS TO INNOVATION INITIATIVES 4ECHNOLOGY ALLOWS THE PROCESS TO SCALE ALLOWS COMPANIES TO REPLICATE BEST PRACTICES AND PROVIDES A CHANNEL FOR POTENTIALLY ALL EMPLOYEESAND PEOPLE OUTSIDE THE lRM WITH DIVERSE DISCIPLINES AND EXPERIENCES TO PROVIDE INPUT TO THIS VITAL CORPORATE ACTIVITY THEREBY MAXIMIZING THE USE OF THE ENTERPRISES INTELLECTUAL ASSETS /THER BENElTS INCLUDE PROVIDING STRUCTURE REPEATABILITY AND DISCIPLINE TO A PROCESS THAT IS OFTEN VIEWED AS MYSTERIOUS )-4 ENCOMPASSES THE TOOLS THAT SUPPORT THE INNOVATION PROCESS THROUGHOUT THE 0IPELINE COVERING EVERYTHING FROM ONLINE VIRTUAL NETWORKING TO PROJECT MANAGEMENT SOFTWARE FOR NEW PRODUCT DEVELOPMENT 4HE MAIN CLASSES OF SOFTWARE THAT SUPPORT THE PIPELINE ARE 7EB BASED )DEA -ANAGEMENT USED AT THE FRONT END OF THE PROCESS UP TO THE 0ROJECT STAGE AND 3TAGE 'ATE OR 0RODUCT ,IFECYCLE -ANAGEMENT 0,- SOFTWARE COVERING THE 0ROJECT 0HASE AND BEYOND
7EB BASED )DEA -ANAGEMENT 4HIS IS A HOLISTIC TOOL SET THAT ALLOWS COMPANIES TO TAP INTO THE WEALTH OF IDEAS AND KNOWLEDGE ACROSS THE ENTERPRISE AND BEYOND )DEA -ANAGEMENT IS NECESSARILY PEOPLE CENTRIC AND CARE IS NEEDED IN THE DESIGN AND IMPLEMENTATION OF A CORPORATE WIDE PROGRAM 4HERE ARE TWO MAIN TYPES OF )DEA -ANAGEMENT PROGRAMS ONGOING AND EVENT DRIVEN 4HE ONGOING APPROACH AKIN TO THE OLD FASHIONED SUGGESTION BOX IS DESIGNED TO COLLECT A BROAD RANGE OF IDEAS IN A CENTRAL PLACE AND THE ADMINISTRATOR OF THE SYSTEM IS RESPONSIBLE FOR A TRIAGE PROCESS OF SENDING THE IDEAS TO APPROPRIATE MANAGERS FOR REVIEW AND SUBSEQUENT IMPLEMENTATION 4HE EVENT DRIVEN APPROACH IS MORE DIRECTED BY BUSINESS STRATEGY AND OBJECTIVES WITH NARROWLY FOCUSED IDEA COLLECTION AND TIME BOUNDED COLLECTION AND IDEA EVALUATION
4(% !'),% %.4%202)3%
!LTHOUGH BOTH METHODS CAN BE SUCCESSFUL THE EVENT DRIVEN APPROACH YIELDS TO FOLD MORE HIGH QUALITY HIGH IMPACT IDEAS THAN THE ALWAYS OPEN APPROACH )MAGINATIK 2ESEARCH 4HE METHOD UNDERPINS A SUPPORTIVE INNOVATION CULTURE AND PROVIDES THE ALL IMPORTANT PROCESS CHANNEL THAT ALLOWS THE COMPANY TO DERIVE VALUE FROM THE PROCESS )N BOTH TYPES OF )DEA -ANAGEMENT THE PROCESS INVOLVES IDEA COLLECTION SOME FORM OF COLLABORATIVE INSIGHT AND IDEA DEVELOPMENT USUALLY THROUGH A NETWORK OF PEERS AND lNALLY IDEA EVALUATION AND SELECTION BY MANAGEMENT OR A SPECIlC PROJECT TEAM 4HE TECHNIQUE CAN BE APPLIED TO MANY BUSINESS CHALLENGES ACROSS THE ENTERPRISE SUCH AS NEW PRODUCT DEVELOPMENT PRODUCT COMMERCIALIZATION PROCESS IMPROVEMENTS AND COST REDUCTION AND NEW BUSINESS MODEL CREATION
-INI #ASE "-3 )N "RISTOL -YERS 3QUIBB FACED THE IMPENDING LOSS OF THE CORE PATENTS ON 'LUCOPHAGE ITS BLOCKBUSTER DIABETES DRUG 4HE COMPANY HAD ALREADY DEVELOPED NEW FORMULATIONS THAT WOULD PROVIDE SIGNIlCANT CUSTOMER BENElTS 4HE CHALLENGE WAS TO MAKE DOCTORS AND PATIENTS AWARE OF THE PRODUCTS AND TO ENCOURAGE PEOPLE TO SWITCH TO THE NEW VARIANTS )N THE PAST THE COMPANY HAD RELIED ON INTERNAL SMALL GROUP BRAINSTORMING OR ON THE ADVICE OF THEIR MARKETING AGENCIES BUT FOR THIS PROJECT THEY DECIDED TO RUN AN )DEA -ANAGEMENT @EVENT TO GATHER IDEAS AND INSIGHTS FROM SALES AND MARKETING EMPLOYEES WORLDWIDE 4HE PROCESS OF IDEA GATHERING AND EVALUATION WAS MANAGED WITH AN ONLINE )DEA -ANAGEMENT SYSTEM )MAGINATIK 4HE SYSTEM GATHERED OVER IDEAS AND THE PROJECT TEAM LED BY THE 'LUCOPHAGE 0RODUCT -ANAGER SELECTED TOP CONCEPTS FOR IMPLEMENTATION "Y EARLY THE SUCCESSFULLY IMPLEMENTED EMPLOYEE IDEAS HAD ADDED -- TO THE FORECAST LAUNCH REVENUE OF THE NEW PRODUCTS )NFORMATION7EEK
)NNOVATION -ANAGEMENT 4ECHNOLOGY ! #ATALYST FOR #HANGE 7E SAW EARLIER THAT A SUPPORTIVE CULTURE IS REQUIRED FOR AN ENTERPRISE TO RESPOND TO A CHALLENGE OR OPPORTUNITY WITH AGILITY #ORPORATE LEADERS MUST REPEATEDLY SEND OUT SIGNALS TO THE ORGANIZATION TO UNDERPIN THE NECESSARY CULTURAL ATTRIBUTES )-4 BY CLEARLY INCORPORATING A FAIR RECOGNITION AND REWARD SYSTEM CAN BE EFFECTIVE IN THIS REGARD &OR EXAMPLE ONE OF THE KEYS TO A SUCCESSFUL )NNOVATION -ANAGEMENT PROGRAM IS REWARD AND MOTIVATION FOR ALL PARTICIPANTS 4HE ISSUE IS HOW TO MOTIVATE PEOPLE TO TAKE TIME OUT OF THEIR NORMAL WORK TO THINK ABOUT AND DEVELOP POTENTIAL
)../6!4)/. -!.!'%-%.4 ). !. !'),% %.4%202)3%
SOLUTIONS FOR BUSINESS PROBLEMS THAT MAY SIT OUTSIDE THEIR DOMAIN OF EXPERTISE 2ESEARCH HAS SHOWN THAT THE BEST METHODS OF INCENTIVE FOCUS ON INTANGIBLE REWARDS SUCH AS MANAGEMENT ACKNOWLEDGEMENT AND PEER LEVEL PRAISE +OHN 2EWARDS MUST BE DISASSOCIATED FROM THE VALUE OF AN IDEA )DEAS CAN TAKE YEARS AND COST MILLIONS OF DOLLARS TO IMPLEMENT AND IT IS NOT FAIR TO OVER REWARD THE ORIGINAL IDEATOR 0ROGRAMS THAT HIGHLIGHT lNANCIAL REWARDS TEND TO ENCOURAGE NEGATIVE BEHAVIORS THAT CAN DESTROY A SUPPORTIVE CULTURE 7HILE IT IS POSSIBLE TO DESIGN A PROGRAM TO AVOID MOST OF THE lNANCIAL PROBLEMS THESE METHODS ARE EXPENSIVE AND YIELD LITTLE REWARD
-INI #ASE !MERICAN !IRLINES &OR YEARS !MERICAN !IRLINES RAN )DEAS )N !CTION A COMPANY WIDE INITIATIVE TO COLLECT AND REWARD COST SAVING IDEAS 4HE PROGRAM GENERATED OVER -- IN NET BENElTS OVER THE LIFE OF THE PROGRAM %VEN SO THE PROGRAM WAS NOT DEEMED OVERWHELMINGLY SUCCESSFUL %MPLOYEES COULD EARN THOUSANDS OF DOLLARS WORTH OF BONUSES FOR THEIR CONTRIBUTIONS BUT THE FOCUS ON lNANCIAL REWARDS MEANT THAT THE PROGRAM REQUIRED AUDITORS COST ACCOUNTANTS AND MANY LAYERS OF PROGRAM MANAGEMENT !T ITS HIGH POINT THE PROGRAM EMPLOYED ALMOST PEOPLE !FTER 3EPTEMBER THE PROGRAM WAS DISBANDED AND REPLACED WITH A NEW PROGRAM )DEAS )N &LIGHT 4HIS PROGRAM OFFERED NO lNANCIAL REWARDS FOR IDEAS &ORTUNATELY THE NEW PROGRAM PROVED EVEN MORE SUCCESSFUL THAN THE PREVIOUS PROGRAM YIELDING DOUBLE THE ANNUAL BENElTS IN THE lRST YEAR !PPARENTLY EMPLOYEES WERE MOTIVATED MORE BY SAVING THE COMPANY THAN MAKING THEMSELVES A FEW DOLLARS "ASEX #ONFERENCE
)-4 ALSO SUPPORTS ANOTHER KEY CULTURAL ATTRIBUTETEAMWORKAS THE BEST IDEAS USUALLY COMBINE INSIGHTS AND KNOWLEDGE FROM SEVERAL AREAS /NLINE SOFTWARE TOOLS SUPPORT CROSS FUNCTIONAL COLLABORATION COMBINING IDEAS BOTH FROM INNOVATORS AND FROM DOERS THAT CAN BE IN DIFFERENT DEPARTMENTS AND DISPERSED AROUND THE WORLD 4HE PEOPLE CENTRIC NATURE OF THE INNOVATION PROCESS MEANS THAT SOFTWARE NEEDS TO BE CAREFULLY DESIGNED TO MANAGE UNDERLYING PSYCHOLOGICAL BEHAVIORS &OR EXAMPLE SOME INDIVIDUALS PREFER CRITIQUING OTHER PEOPLES IDEAS RATHER THAN GENERATING THEIR OWN IDEAS 4HIS INPUT MAY BE VALUABLE BUT THE SOFTWARE AND PROCESS NEED TO ADAPT TO THE WAY PEOPLE REALLY WORK )-4 ALSO ENABLES METRICS )T IS A TRUISM TO SAY THAT YOU GET WHAT YOU MEASURE AND THIS IS JUST AS IMPORTANT FOR INNOVATION INITIATIVES AS FOR ANY OTHER CORPORATE FUNCTION 4HERE ARE SEVERAL METHODS OF MEASURING THE SUCCESS OF AN INNOVATION
4(% !'),% %.4%202)3%
INITIATIVE FROM ASSESSING THE RESULTS FROM SPECIlC IDEAS GENERATED THROUGH THE PROCESS TO COMPARING THE EFlCIENCY OF THE PROCESS COMPARED WITH ALTERNATIVE METHODS -OST TOP COMPANIES HAVE ADOPTED COMPOSITE METRICS TO ASSESS THEIR INNOVATION PERFORMANCE 3IMPLISTIC MEASURES SUCH AS PATENT SUBMISSIONS OR REVENUE FROM NEW PRODUCTS TEND TO BE ONE DIMENSIONAL AND NEGATE THE BENElT OF THE HOLISTIC INNOVATION APPROACH
#/.#,53)/. 4HIS CHAPTER HAS ARGUED THAT INNOVATION FOR EVERY ENTERPRISE IS NOT A LUXURY BUT A NECESSITY !S PROTECTIVE BARRIERS DISAPPEAR KNOWLEDGE BECOMES FREELY ACCESSIBLE AND CHANGES IN BUSINESS ENVIRONMENTS ACCELERATE THE NATURE OF INNOVATION IS SUBTLY SHIFTING !N AGILE ENTERPRISE MUST CREATE A CULTURE THAT SUPPORTS HOLISTIC INNOVATION IN WHICH ALL FUNCTIONS CONTINUOUSLY INTERACT TO PRODUCE NEW BUSINESS CONlGURATIONS AND RELATIONSHIPS "USINESS MODEL INNOVATION IS TAKING OVER FROM THE UNI DIMENSIONAL PRODUCT OR SERVICE FOCUS OF THE PAST 9OU AS LEADERS MUST EMBRACE ENTERPRISE WIDE INNOVATION 9OU MUST APPLY NEW TOOLS TO MANAGE THIS COMPLEX PROCESS AND SHOW BY EXAMPLE THE IMPORTANCE OF CULTURAL VALUES REQUIRED FOR REAL TIME HOLISTIC INNOVATION )N THIS WAY YOU WILL BUILD A CORPORATION THAT CAN INNOVATIVELY HARNESS ALL OF ITS RESOURCES TO RESPOND IN REAL TIME TO UNEXPECTED THREATS AND OPPORTUNITIES
2EFERENCES !FUAH !LAN )NNOVATION -ANAGEMENT 3TRATEGIES )MPLEMENTATION AND 0ROlTS .P /XFORD 5NIVERSITY 0RESS "ASEX #ONFERENCE !MERICAN !IRLINES PRESENTATION .EW 9ORK /CT "AUMOL 7ILLIAM * 4HE &REE -ARKET )NNOVATION -ACHINE .P 0RINCETON 5NIVERSITY 0RESS #YERVEILLANCE #YERVEILLANCE /NLINE 2ISK -ONITORING AND -ANAGEMENT *ULY HTTP WWWCYVEILLANCECOM $EUTSCHMAN !LAN /FFSHORING #REATIVITY &AST #OMPANY $EC n $OBLIN 'ROUP )NNOVATION ,ANDSCAPES HTTPWWWDOBLINCOM &ANNIN 2 h)S 3ANDHILL 2OAD lNALLY READY TO INVEST IN !SIAN $EALSv !SIAN 6# *OURNAL &EB (OHMANN (ANS 'UNTER 'ENERAL -ANAGER (0 'ERMANY 0RESENTER AT -C+INSEY #ONFERENCE ON 4ECHNOLOGY -ANAGEMENT -UNICH 3EPT )MAGINATIK )DEA #ENTRAL HTTPWWWIMAGINATIKCOM )MAGINATIK 2ESEARCH %VENT "ASED )DEA -ANAGEMENT 2. 3EPT +ARMIN # h53 )NVESTORS 0LACE 2ECORD "ETS ON -ARKETS IN %UROPE AND !SIAv 7ALL 3TREET *OURNAL %ASTERN %DITION !UG P !
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+OHN ! 0UNISHED BY 2EWARDS (OUGHTON -IFmIN +ONTZER 4ONY ! 4IMELY .OTION 7ORTH #ONSIDERING )DEA MANAGEMENT MAY HELP VALIDATE KNOWLEDGE MANAGEMENT )NFORMATION7EEK -AR .5! h.UA )NTERNET (OW -ANY /NLINEv .5! )NTERNET 3URVEYS 3EPT HTTPWWWNUAIE SURVEYSHOW?MANY?ONLINEINDEXHTML !UTHORS NOTE %XCEPT FOR UNDERDEVELOPED NATIONS WHERE THE SO CALLED DIGITAL DIVIDE IS FURTHER EXACERBATING WEALTH IMBALANCE !T THE END OF PERSONAL INTERNET ACCESS BROKE DOWN AS FOLLOWS ALL NUMBERS IN MILLIONS %UROPE !SIA0ACIlC . !MERICA ,ATIN !MERICA !FRICA -IDDLE %AST SOURCE .5! )NTERNATIONAL /#,# h7EB #HARACTERIZATIONv /NLINE #OMPUTER ,IBRARY #ENTER 4HE 7EB #HARACTERIZATION 0ROJECT !PR HTTPWCPOCLCORG 0ORTER -ICHAEL % h#LUSTERS AND THE .EW %CONOMICS OF #OMPETITIONv (ARVARD "USINESS 2EVIEW n 3IEGEL - h#ONTROL OF )NTERNATIONAL #APITAL ! 3URVEY OF 0OLICY /PTIONSv 'LOBAL 0OLICY &ORUM .OV HTTPWWWGLOBALPOLICYORGSOCECONGLOTAXBIBLIOSILVERHTM 3USMAN 'ERALD !NTHONY # 7ARREN AND -ARK 4URRELL h)NNOVATION -ODELS IN THE ST #ENTURYv 0ROJECT :AKON 2OBERT (OBBES (OBBES )NTERNET 4IMELINE 6ERS *AN HTTPWWWZAKONORG ROBERTINTERNETTIMELINE
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).42/$5#4)/. #HANGE )T COMES IN ALL SHAPES AND SIZES AND SINCE THE TURN OF THE CENTURY BEST PRACTICE ORGANIZATIONS HAVE BEEN ADAPTING TO IT WITHOUT PAUSING FOR BREATH 4HE CAPACITY TO HANDLE CHANGE AND TO MANAGE ITS EFFECTS INTERNALLY AND EXTERNALLY IS WHAT SEPARATES THE ADAPTIVE ENTERPRISES FROM THE INmEXIBLE ONES THE MARKET LEADERS FROM THE MARKET LOSERS 7HAT ARE THE CHANGES THAT ARE PREOCCUPYING COMPANIES WORLDWIDE 'LOBALIZATION STANDARDIZATION AND OUTSOURCING TO NAME BUT A FEW )N THIS CHAPTER WE DISCUSS OFFSHORE OUTSOURCING ONE MECHANISM THAT AGILE COMPANIES CAN USE TO HELP THEM ADAPT TO ECONOMIC SHOCKS AND CHANGES AND STILL COME OUT ON TOP /UTSOURCING BUSINESS PROCESSES OR INFORMATION TECHNOLOGY TO LOWER COST DESTINATIONS THE WORLD OVER IS A TREND THAT HAS GATHERED GREAT MOMENTUM IN RECENT YEARS #USTOMERS WHO WANT MORE OF EVERYTHING FOR LESS MONEY ARE THE DRIVING FORCE BEHIND THE TREND )F THEY VALUE COST THEY WANT IT LOWER )F THEY VALUE SPEED THEY WANT IT FASTER )F THEY VALUE CONVENIENCE NOTHING LESS THAN WILL DO 7ITH CORPORATE BUDGETS PARED DOWN FROM THE HIGHS OF THE S COMPANIES ARE EAGER TO PLEASE CUSTOMERS BUT HAVE FEWER RESOURCES CAPITAL LABOR AND TECHNOLOGY AT THEIR DISPOSAL -ANAGERS HAVE TO DO MORE WITH LESS %NABLED BY THE )NTERNET AN INCREASINGLY INTERLINKED GLOBAL ECONOMY AND REDUCED INTERNATIONAL TRADE BARRIERS OFFSHORE OUTSOURCING IS ONE OF THE NUMEROUS AGILE METHODOLOGIES THAT COMPANIES HAVE EMBRACED IN ORDER TO CONFORM TO THAT MANDATE
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4HIS CHAPTER DElNES OFFSHORE OUTSOURCING THE BUSINESS PROCESSES THAT ORGANIZATIONS ARE SENDING OFFSHORE AND THE BUSINESS MODELS BOTH lRST GENERATION AND SECOND GENERATION THAT THEY ARE USING TO BECOME MORE AGILE2OBINSON AND +ALAKOTA
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"USINESS PROCESS OUTSOURCINGCALL CENTERS lNANCE AND ACCOUNTING HUMAN RESOURCES AND TRANSACTION PROCESSINGHAS FOLLOWED A DIFFERENT PATTERN )N THE S THERE WAS A TREMENDOUS MOVEMENT IN CORPORATIONS TO CONSOLIDATE VARIOUS FRAGMENTED DIVISIONAL ACTIVITIES AND CREATE SHARED SERVICES CENTERS 33#S !N 33# IS ESSENTIALLY A DO IT YOURSELF INSOURCING MODEL IN WHICH A LARGE lRM SETS UP ITS OWN DEDICATED SERVICE OPERATION TO HANDLE TASKS SUCH AS CUSTOMER CARE OR TRANSACTION PROCESSING 3OME OF THESE 33#S BEGAN TO MIGRATE OFFSHORE 4HE COMPANIES THAT PIONEERED THE OFFSHORE 33# MODEL SUCH AS '% AND !MERICAN %XPRESS UNDERSTOOD THAT THEY COULD REALIZE MORE VALUE IF THEY BASED THESE CENTERS IN LOW COST COUNTRIES 4HE ACTIONS OF THESE EARLY INNOVATORS HAVE LED TO A STEADY RISE IN THE NUMBER OF LARGE CORPORATIONS ESTABLISHING BACK OFlCE PROCESSING CENTERS IN COUNTRIES LIKE )NDIA THE 0HILIPPINES 3OUTH !FRICA AND 2USSIA 4HE EMERGING TREND OF OFFSHORING BUSINESS PROCESSES OR WHITE COLLAR WORK REPRESENTS A FUNDAMENTAL STRUCTURAL ADJUSTMENT NOT A SHORT TERM BUSINESS CYCLE PHENOMENON 4HE EXPERIENCE OF MANUFACTURING ILLUSTRATES THAT WHEN IT IS POSSIBLE TO DO THINGS CHEAPER ELSEWHERE IN THE WORLD THE WORK WILL MIGRATE THERE &OR INSTANCE TOUGH TO BEAT LABOR AND OVERHEAD COSTS HAVE MADE #HINA A TOP CHOICE FOR ALMOST ALL TYPES OF MANUFACTURING 7ITH THE RELENTLESS PURSUIT OF THE LOWEST GLOBAL COSTS OFFSHORING IS BECOMING INSTITUTIONALIZED AT MANY COMPANIES
%XAMPLES OF /FFSHORE /UTSOURCING 4HE PRACTICE OF OFFSHORE OUTSOURCING IS SLOWLY BUT SURELY BECOMING AN ENTRENCHED PART OF MODERN MANAGEMENT )N FACT IT WOULD BE HARD TO lND A SENIOR MANAGEMENT TEAM IN ANY LARGE CORPORATION THAT HAS NOT THOUGHT ABOUT INVESTIGATING OR PROTOTYPING AN OFFSHORE PROJECT TO SEE WHETHER IT IS RIGHT FOR THEM )N THIS SUBSECTION WE DESCRIBE A VARIETY OF OFFSHORING ENDEAVORS !LL HIGHLIGHT THE BASIC TENET THAT BUSINESS mOWS TO THE AREAS WITH THE LOWEST COST
"ACK /FlCE /FFSHORE /UTSOURCING AT (3"# (OLDINGS (3"# (OLDINGS ONE OF THE WORLDS LARGEST BANKS HAS OVER OFlCES IN COUNTRIES ACROSS THE GLOBE (3"# IS UNDER INCREASING PRESSURE FROM #ITIGROUP TO REMAIN COMPETITIVE ON COST 4HE CORPORATION ALREADY RUNS A NUMBER OF GLOBAL PROCESSING HUBS IN )NDIA AND -ALAYSIA 2ECENTLY IT ANNOUNCED PLANS TO MIGRATE CERTAIN BUSINESS TASKSMAINLY PROCESSING WORK AND CALL CENTER INQUIRIES TO )NDIA -ALAYSIA AND #HINA !CCOMPANYING THE MIGRATION OF THESE TASKS IS THE RELOCATION OF JOBS ONE OF THE LARGEST OVERSEAS TRANSFERS OF "RITISH JOBS (3"#S DECISION MIRRORS SIMILAR OFFSHORE OUTSOURCING MOVES BY OTHER "RITISH COMPANIES SUCH AS "RITISH 4ELECOM !VIVA AND 0RUDENTIAL
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)N THE WORLD OF lNANCIAL SERVICES OFFSHORE OUTSOURCING WAS ONCE REGARDED AS A SHORT TERM SOLUTION FOR PROBLEMS SUCH AS SHARP OR UNEXPECTED RISES IN DEMAND OR SHORTAGES IN PROGRAMMERS 4ODAY lNANCIAL SERVICES COMPANIES RANGING FROM RETAIL AND INVESTMENT BANKING LIFE AUTO AND MORTGAGE INSURANCE BUSINESSES TO CREDIT CARD PROCESSORS AND BROKERAGE COMPANIES VIEW OFFSHORE OUTSOURCING AS A KEY ELEMENT OF THEIR OVERALL CORPORATE STRATEGIES
#USTOMER 3ERVICE /FFSHORE /UTSOURCING AT !MAZONCOM !MAZONCOM COMMENCED OPERATIONS ON THE 7EB IN *ULY 3INCE THEN THE ONLINE RETAILER HAS ACCUMULATED APPROXIMATELY MILLION CUSTOMERS ACROSS A VARIETY OF SITES !S !MAZONCOM CONTINUES TO ATTRACT NEW CUSTOMERS FROM ALL OVER THE WORLD IT HAS BECOME IMPORTANT TO HAVE TRAINED SUPPORT STAFF READY TO RESPOND TO THE MANY CUSTOMER QUESTIONS AND INQUIRIES NO MATTER WHAT TIME OF DAY OR NIGHT 4O REPLY TO CUSTOMER E MAILS FASTER !MAZONCOM SELECTED $AKSH IN *UNE TO PROVIDE E MAIL CUSTOMER SERVICE FROM )NDIA !MAZONCOM EXPECTS $AKSH TO RESPOND TO OF E MAILS RECEIVED IN HOURS AND WITHIN HOURS 3EVERAL HUNDRED $AKSH PROFESSIONALS WORK EXCLUSIVELY FOR THE RETAILING GIANT !MAZONCOM ALSO BOUGHT A EQUITY STAKE IN THE COMPANY 4HE RATIONALE FOR THIS E MAIL OFFSHORING DECISION !MAZONCOM PAYS A FULL TIME CUSTOMER SERVICE REP BASED IN THE 5NITED 3TATES AN AVERAGE OF PER MONTH WHEREAS AN EQUIVALENT REP IN )NDIA COSTS n PER MONTH !LTHOUGH COMPANIES CITE MULTIPLE REASONS IN THEIR DECISIONS TO OFFSHORE COST REMAINS A MAJOR DRIVER )N !PRIL )"- ANNOUNCED THAT IT WOULD ACQUIRE $AKSH AND ABSORB ITS EMPLOYEES INTO THE )"- "USINESS #ONSULTING 3ERVICES GROUP 4HIS MOVE WILL HELP )"- BOLSTER ITS CONTACT CENTER OUTSOURCING CAPABILITIES AND PROVIDE A STRONGER FOOTHOLD IN )NDIA
)4 /FFSHORE /UTSOURCING AT #ADENCE $ESIGN 3YSTEMS !S THE WORLDS LARGEST PROVIDER OF ELECTRONIC DESIGN AUTOMATION PRODUCTS #ADENCE $ESIGN 3YSTEMS HELPS COMPANIES BRING THEIR IDEAS FOR ELECTRONIC PRODUCTS TO LIFE )T DOES DESIGN WORK FOR BUSINESSES THAT MANUFACTURE ITEMS SUCH AS SEMICONDUCTORS COMPUTER SYSTEMS TELECOMMUNICATIONS AND NETWORKING EQUIPMENT AS WELL AS MOBILE AND WIRELESS DEVICES 7ITH MOST OF ITS CUSTOMER BASE ADVERSELY AFFECTED BY AN ECONOMIC DOWNTURN #ADENCE HAD TO WORK MUCH HARDER TO SELL ITS PRODUCTS 4O REDUCE )4 COSTS #ADENCE OUTSOURCED SOME OF ITS APPLICATION DEVELOPMENT TO !ZTEC 3OFTWARE 7HEN THE PROJECT BEGAN !ZTEC SENT TEN SOFTWARE ENGINEERS TO #ADENCES #ALIFORNIA LOCATION TO SUPPORT ITS DESIGN TEAM 4HE TWO GROUPS WORKED TO PINPOINT WHAT
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WOULD MAKE THE PROJECT A SUCCESS AND TO GET COMFORTABLE WITH EACH OTHERS WORK STYLES !ZTEC HAD TO UNDERSTAND #ADENCES PROCESSES INFRASTRUCTURE AND REPORTING BEFORE IT COULD MOVE ANY WORK TO HEADQUARTERS IN )NDIA %VENTUALLY !ZTEC BEGAN MOVING THE WORK TO "ANGALORE PIECE BY PIECE AND THE GROUP DEDICATED TO THE PROJECT INCREASED TO PEOPLE #URRENTLY TWO !ZTEC STAFFERS REMAIN IN #ALIFORNIA AND WORK OFFSHORE FROM )NDIA &ACED WITH ECONOMIC GYRATIONS AND AN URGENT NEED TO ENHANCE COMPETITIVENESS MORE ADAPTIVE ENTERPRISES ARE CHOOSING THE PATH #ADENCE CHOSETO OFFSHORE &OR GROWTH ORIENTED COMPANIES LIKE #ADENCE OFFSHORE OUTSOURCING ALSO OFFERS INSTANT CAPACITY AND lNANCIAL mEXIBILITY AS THE BUSINESS EXPANDS AND CONTRACTS
&INANCE AND !CCOUNTING /FFSHORE /UTSOURCING AT 'ENERAL -OTORS 'ENERAL -OTORS '- HAS OUTSOURCED SEVERAL lNANCE AND ACCOUNTING &! PROCESSES FROM ITS .ORTH !MERICAN AND %UROPEAN OPERATIONS )N !FlLIATED #OMPUTER 3ERVICES !#3 SIGNED A TEN YEAR OUTSOURCING CONTRACT WITH '- AGREEING TO TAKE OVER AND EXECUTE THE AUTOMAKERS ACCOUNTS PAYABLE !0 ACCOUNTS RECEIVABLE !2 PAYROLL TRAVEL AND EXPENSE AND CASH MANAGEMENT PROCESSES '-S GOAL ACHIEVE CONSIDERABLE COST REDUCTIONS AND IMPROVE QUALITY AND CONTROL 4HE COMPANY IS LEVERAGING !#3S CAPABILITY TO PERFORM TRANSACTIONAL ACTIVITIES !#3 PROVIDES ITS SERVICES FROM CENTERS IN !RIZONA *AMAICA AND 3PAIN '- MONITORS THE QUALITY OF !#3S WORK WITH THE AID OF NUMEROUS CONTROLS SERVICE LEVEL AGREEMENTS DESK PROCEDURES INTERNAL AND EXTERNAL AUDITS ONSITE QUALITY ASSURANCE TEAMS SEGREGATION OF DUTIES DELEGATION OF AUTHORITY AND PROCESS RISK VALIDATIONS '- WAS NOT THE lRST TO BLAZE THIS PATH AND IT WILL NOT BE THE LAST /THER LEADING ORGANIZATIONS SUCH AS "RITISH !IRWAYS AND &ORD HAVE SEIZED THE &! OUTSOURCING OPPORTUNITY AS A METHOD FOR SAVING MONEY SUBSTANTIALLY IMPROVING SERVICE LEVELS AND REDEPLOYING RESOURCES TO INITIATIVES THAT GENERATE PROlTABLE GROWTH &ACED WITH HIGH INTERNAL &! COSTS MORE AND MORE COMPANIES ARE LOOKING AT OFFSHORING AS A WAY TO FREE UP STAFF TO FOCUS ON STRATEGIC ASPECTS OF OPERATIONS
4(% /&&3(/2% /543/52#).' 02/#%33 ,!.$3#!0% !S THE (3"# !MAZONCOM #ADENCE AND '- EXAMPLES SHOW THE PROCESSES THAT COMPANIES CAN SELECT FOR OFFSHORE OUTSOURCING ARE AS DIVERSE AS THE BUSINESS WORLD ITSELF 4HE OFFSHORE BUSINESS PROCESS LANDSCAPE IS COMPLEX AND VARIED BUT THE BUSINESS PROCESSES THAT COMPANIES ARE SENDING OFFSHORE DO FALL INTO lVE MAIN
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CATEGORIES 4HEY INCLUDE INFORMATION TECHNOLOGY CUSTOMER CARE lNANCE AND ACCOUNTING HUMAN RESOURCES AND TRANSACTION PROCESSING SEE &IGURE !LTHOUGH COMPANIES DO OUTSOURCE MANUFACTURING AND SUPPLY CHAIN MANAGEMENT IN THIS CHAPTER WE HAVE CHOSEN TO FOCUS ON THE lVE MOST WIDELY OUTSOURCED CATEGORIES OF BUSINESS PROCESSES
&IGURE /FFSHORE 0ROCESS ,ANDSCAPE
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s !PPLICATION DEVELOPMENT WHICH SPANS DESIGNING DEVELOPING AND INSTALLING SOFTWARE FOR A VARIETY OF )4 SYSTEMS !PPLICATIONS RANGE FROM SINGLE PLATFORM SINGLE SITE SYSTEMS TO MULTIPLATFORM MULTI SITE SYSTEMS ! PROJECT MAY INVOLVE THE DEVELOPMENT OF NEW APPLICATIONS OR NEW FUNCTIONS FOR EXISTING SOFTWARE APPLICATIONS %ACH DEVELOPMENT PROJECT TYPICALLY INVOLVES ALL ASPECTS OF THE SOFTWARE DEVELOPMENT PROCESS INCLUDING DElNITION PROTOTYPING DESIGN PILOTS PROGRAMMING TESTING INSTALLATION AND MAINTENANCE s !PPLICATION MAINTENANCE WHICH IS USUALLY FOR LARGE SOFTWARE SYSTEMS THAT NEED MODIlCATIONS ENHANCEMENTS AND PRODUCT SUPPORT )T INCLUDES MIGRATING TO NEW TECHNOLOGIES WHILE EXTENDING THE USEFUL LIFE OF EXISTING SYSTEMS 0ROJECTS MAY INVOLVE RE ENGINEERING SOFTWARE TO MIGRATE APPLICATIONS FROM MAINFRAME TO CLIENTSERVER ARCHITECTURES OR PORT EXISTING OPERATING SYSTEMS TO 5NIX OR ,INUX &OR COMPANIES WITH EXTENSIVE PROPRIETARY SOFTWARE APPLICATIONS IMPLEMENTING SUCH TECHNOLOGIES MAY REQUIRE REWRITING AND TESTING MILLIONS OF LINES OF SOFTWARE CODE s !PPLICATION TESTING WHICH FOCUSES ON CRITICAL ASPECTS SUCH AS QUALITY ASSURANCE BUILDING AUTOMATED TEST SUITES PERFORMANCE METRICS CAPACITY PLANNING FOR PEAK BUSINESS DEMANDS VALIDATION TESTING TEST AUTOMATION EXECUTION DEFECT TRACKING AND REPORTING s 3UPPORT SERVICES FOR CONSTANTLY CHANGING APPLICATIONS AND TECHNOLOGY THAT SPAN HELP DESKS SCHEDULED MAINTENANCE SECURITY ISSUES REMOTE DIAGNOSTICS AND DOCUMENTATION DEVELOPMENT s )MPLEMENTATION SERVICES WHICH ARE END TO END APPLICATION HOSTING SERVICES THAT ALLOW CUSTOMERS TO TRANSFER THE RESPONSIBILITY OF MAINTAINING ENHANCING AND MANAGING CUSTOM AND PACKAGED APPLICATIONS TO THE VENDOR 4HEY ALSO INCLUDE PRODUCT LIFECYCLE MANAGEMENT PROTOTYPE DEVELOPMENT TECHNOLOGY EVALUATION PROOF OF CONCEPT APPLICATION HOSTING AND TRAINING s .EW PRODUCT ENGINEERING SERVICES WHICH ENCOMPASS 7EB 3ERVICES DESIGN PRODUCT AND PROCESS ANALYSIS AND SIMULATIONS AND RANGE FROM BASIC CHANGES TO COMPLEX DESIGNS )N ADDITION THEY MAY INVOLVE CUSTOMIZING THE LATEST OBJECT ORIENTED DESIGN MODELING AND ENGINEERING SOFTWARE TO SPECIlC USER REQUIREMENTS 'OOGLE THE INNOVATIVE SEARCH TECHNOLOGY COMPANY THAT CONNECTS MILLIONS OF )NTERNET USERS EVERY DAY WITH THE INFORMATION THEY SEEK IS HEADING OFFSHORE 'OOGLE PLANS TO OPEN ITS lRST OFFSHORE ENGINEERING 2$ CENTER IN "ANGALORE )NDIA 3OME COMPANIES NOT AS ADVENTUROUS AS 'OOGLE MAY BE RELUCTANT TO
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OUTSOURCE THE DEVELOPMENT SUPPORT IMPLEMENTATION OR MAINTENANCE OF )4 ESPECIALLY MISSION CRITICAL )4 APPLICATIONS AND SYSTEMS 4HEY MAY BE MORE WILLING TO CONSIDER SENDING SOME ASPECT OF THEIR CUSTOMER CARE OPERATION OFFSHORE
#USTOMER #ARE 0ROCESSES 7KHFXVWRPHURI WRGD\LVYHU\GLIIHUHQWIURPWKHFXVWRPHURI \HVWHUGD\:LWK HDFK SDVVLQJ GD\ FXVWRPHUV JDLQ PRUH NQRZOHGJH DQG FRQVHTXHQWO\ PRUH GHPDQGVIRUFRPSDQLHV 7KH,QWHUQHWFUHDWHGDQHZFXVWRPHUZKRLVDUPHGZLWKPRUHLQWHOOLJHQFH DERXWSULFHVDQGJUHDWHUVHUYLFHH[SHFWDWLRQVDQGLVGULYLQJFRPSDQLHVWRIRFXV HIIRUWVDQGPRQH\RQFXVWRPHUFDUH:LWKLQWKHSURFHVVFDWHJRU\RI FXVWRPHU FDUHWKHUHDUHPDQ\VXEFDWHJRULHVULSHIRURIIVKRULQJ s 3UPPORT INCLUDES RESPONDING TO THE CUSTOMERS INITIAL INQUIRY PRODUCT QUESTION REQUEST FOR A STATUS UPDATE INVOICE QUERY OR ORDER CONlRMATION -OST OF THESE ISSUES ARE HANDLED THROUGH CONTACT CENTERS VIA VOICE BASED PHONE SUPPORT E MAIL OR LIVE CHAT s -ARKETING PROVIDES COMPREHENSIVE MARKETING FUNCTIONALITY SUCH AS DIRECT MAIL MARKETING CAMPAIGNS TELEMARKETING TELESALES LEAD QUALIlCATION LEAD TRACKING AND CUSTOMER SURVEYS s 3ALES SUPPORTS CROSS SELLING AND UP SELLING OPPORTUNITIES INBOUND AND OUTBOUND SALES ACQUISITION PROGRAMS CAMPAIGN MANAGEMENT AND RETENTION PROGRAMS s 4ECHNICAL SUPPORT ASSISTS CUSTOMERS WITH RESOLVING PRODUCT OR SERVICE PROBLEMS s #USTOMER ANALYTICS PROVIDES CONTENT AND APPLICATIONS TO MEASURE PREDICT PLAN AND OPTIMIZE CUSTOMER RELATIONSHIPS 4ECHNICAL SUPPORT AND HELP DESK ARE OFTEN THE lRST CUSTOMER CARE PROCESSES TO GO OFFSHORE (OWEVER THIS IS NOT AS EASY AS IT APPEARS )N $ECEMBER ,EHMAN STOPPED USING 7IPRO 3PECTRAMIND FOR ITS INTERNAL )4 HELP DESK ,EHMAN WASNT SATISlED WITH THE LEVEL OF SERVICE IT RECEIVED AND BROUGHT THE HELP DESK FUNCTION BACK IN HOUSE /FFSHORING TECHNICAL SUPPORT WHILE ATTRACTIVE CAN BE FRAUGHT WITH PITFALLS IF NOT PLANNED CAREFULLY %XPERIENCES LIKE ,EHMANS MIGHT PERSUADE SOME COMPANIES TO KEEP CUSTOMER CARE IN HOUSE AND OPT FOR OFFSHORING lNANCE AND ACCOUNTING PROCESSES INSTEAD
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&INANCE AND !CCOUNTING 0ROCESSES &ROM ACCOUNTING TO TRAVEL MANAGEMENT lRMS NEED TO ANALYZE VOLUMINOUS DATA SETS TO UNDERSTAND REPORT AND GENERATE VALUE 7ITHIN THIS PROCESS CATEGORY MANY SUBCATEGORIES CAN POTENTIALLY BE OFFSHORED s 4RANSACTION PROCESSING ENABLES ENTERPRISES AND THEIR BUSINESS NETWORKS TO HANDLE CUSTOMER AND SUPPLY CHAIN RELATED lNANCIAL PROCESSES !CCOUNTS PAYABLE ACCOUNTS RECEIVABLE CREDIT MANAGEMENT BILL PRESENTMENT AND PAYMENT IN HOUSE ACCOUNT MANAGEMENT CASH AND LIQUIDITY MANAGEMENT AND DISPUTE MANAGEMENT ARE TYPICAL TRANSACTION PROCESSING SUBPROCESSES s 'ENERAL ACCOUNTING RECORDS QUANTITIES AND VALUES FROM lNANCIALLY RELEVANT TRANSACTIONS AND MAINTAINS A CONSISTENT RECONCILED AND AUDITABLE SET OF BOOKS FOR STATUTORY REPORTING MANAGEMENT SUPPORT AND USE AS A SOURCE FOR ANALYTIC APPLICATIONS 3UBPROCESSES INCLUDE GENERAL LEDGERS BOOKKEEPING AND PROJECT ACCOUNTING s &INANCIAL MANAGEMENT ENCOMPASSES lNANCIAL STATEMENTS REVENUE AND COST ACCOUNTING AND PRODUCT AND SERVICE COSTING s &INANCIAL REPORTING SUPPORTS GREATER TRANSPARENCY IN lNANCIAL REPORTING PERFORMANCE MONITORING INTEGRATED STRATEGIC PLANNING BUSINESS CONSOLIDATION AND EFFECTIVE STAKEHOLDER COMMUNICATION 4YPICAL SUBPROCESSES INCLUDE lNANCIAL REPORTING SALES TAX lLING SHAREHOLDER SERVICES AND BUDGETING AND FORECASTING s 4AX RELATED PROCESSING IS DEPENDENT ON THE GENERAL LEDGER WHICH IS A COLLECTION OF ALL BALANCE SHEETS INCOME AND EXPENSE ACCOUNTS 'ENERAL LEDGER REPORTS LOCAL AND FEDERAL TAX RETURNS 7 FORMS AND UNEMPLOYMENT TAX RETURNS ARE THE SUBPROCESSES HOUSED UNDER TAX PROCESSING 0ROCTER 'AMBLE WAS AN EARLY ADOPTER OF OFFSHORE TAX PROCESSING 4HE CORPORATION HAS APPROXIMATELY EMPLOYEES IN THE 0HILIPPINES WHO HELP PREPARE 0'S TAX RETURNS AROUND THE WORLD !LL OF THE PROCESSING CAN BE DONE IN THE 0HILIPPINES WITH JUST THE lNAL RETURN SUBMITTED LOCALLY TO THE VARIOUS TAX AUTHORITIES /FFSHORE lNANCE AND ACCOUNTING STRATEGIES HAVE HELPED MANY COMPANIES LIKE 0' SHARPEN THEIR FOCUS ON CORE CAPABILITIES HOWEVER THERES ALWAYS OFFSHORE HUMAN RESOURCES TO CONSIDER IF ORGANIZATIONS ARENT EAGER TO SEND OUT lNANCE AND ACCOUNTING WORK
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(UMAN 2ESOURCES 0ROCESSES +XPDQ5HVRXUFHV +5 LVDFRPSOH[EXVLQHVVIXQFWLRQWKDWFRYHUVDUDQJHRI SURFHVVHVIURPUHFUXLWPHQWDQGUHWLUHPHQWWREDVLFWUDQVDFWLRQVDQGZRUNIRUFH GHYHORSPHQW 7KH LQLWLDO WDUJHWV IRU +5 RIIVKRUH RXWVRXUFLQJ DUH WKH +5 GHSDUWPHQWV RI WKH*OREDOFRPSDQLHV$FFRUGLQJWR)RUWXQH·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s #OMPENSATION SERVICES INVOLVE MANAGING DEFERRED COMPENSATION STOCK OPTIONS AND LONG TERM PERFORMANCE ANALYZING PAYROLL DATA KEEPING TRACK OF ATTENDANCE RECORDING AND PAYING PAYROLL TAXES AND ISSUING PAYMENTS TO EMPLOYEES s "ENElTS MANAGEMENT SPANS A BROAD RANGE OF SERVICES THAT INCLUDE MANAGING HEALTH MEDICAL K PENSION AND LIFE INSURANCE PLANS OVERSEEING ELIGIBILITY AND VACATION SCHEDULES TRACKING LEAVE MAINTAINING RETIREMENT EARNING HISTORIES AND SUPERVISING THE ENROLLMENT AND TERMINATION OF BENElTS s %MPLOYEE RELATIONS IS BASED ON COMPANIES EFFORTS TO PROMOTE AND MAINTAIN EFFECTIVE RELATIONSHIPS WITH ALL EMPLOYEES 4HIS INCLUDES CAPABILITIES THAT ENABLE EMPLOYEES THROUGH A VARIETY OF CHANNELS HELP DESK 7EB PORTAL AND VOICE TO CONDUCT DAY TO DAY TRANSACTIONS 3PECIlC TASKS INCLUDE EMPLOYEE DEVELOPMENT EMPLOYEE RECORD MANAGEMENT EMPLOYEE COMMUNICATION LABOR MANAGEMENT LOCAL COMPLIANCE ISSUES TRAINING NEEDS IDENTIlCATION TRAINING ADMINISTRATION AND SPECIALIZED TRAINING REQUIREMENTS s 7ORKFORCE MANAGEMENT COVERS THE CREATION OF STRATEGIES THAT HELP TO EFFECTIVELY DEPLOY AND MEASURE HUMAN CAPITAL )T ALSO INCLUDES DEVELOPING CANDIDATE POOLS ASSESSING AND SELECTING CANDIDATES AND MANAGING RECRUITING &OR LARGE MULTINATIONALS RECRUITING AND WORKFORCE PLANNING INVOLVES ESTABLISHING AND ADMINISTERING EXPATRIATE AND DOMESTIC RELOCATION
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POLICIES AND PROGRAMS ADDRESSING AND MANAGING THE SPECIAL NEEDS OF THE EXPATRIATE EMPLOYEES AND HANDLING THE REPATRIATION OF EMPLOYEES #ISCO 3YSTEMS THE WORLDWIDE LEADER IN NETWORKING OFFSHORED PAYROLL PROCESSING AND EMPLOYEE QUERY RESOLUTION ISSUES TO #ROSSDOMAIN 3OLUTIONS #ROSSDOMAIN SPECIALISTS HANDLE PAYROLL REIMBURSEMENT PROCESSING QUERIES AND REMITTANCES &OR THOSE COMPANIES THAT DONT ENVISION THEMSELVES FOLLOWING #ISCOS LEAD IN OFFSHORING (2 PROCESSES ONE LAST CATEGORY EXISTS TRANSACTION PROCESSING
4RANSACTION 0ROCESSING 7HILE BACK OFlCE TRANSACTION PROCESSING MAY BE BORING THE ACCURACY AND TIMELINESS OF THE INFORMATION IT DELIVERS ARE THE LEGS UPON WHICH TODAYS COMPANIES STAND !S THE OFFSHORE MARKET MATURES BACK OFlCE SERVICES ARE BECOMING MORE SPECIALIZED AND VERTICAL SPECIlC &OR INSTANCE IN THE MORTGAGE INDUSTRY COMPANIES ARE OUTSOURCING LOAN PROCESSING )N HEALTHCARE COMPANIES ARE OUTSOURCING MEDICAL TRANSCRIPTION AND MEDICAL RECORD ADMINISTRATION )N INSURANCE COMPANIES ARE OUTSOURCING CLAIMS PROCESSING AND POLICY ADMINISTRATION )N THE WORLD OF OFFSHORE TRANSACTION PROCESSING !MERICAN %XPRESS IS CONSIDERED A BEST PRACTICE "Y MOVING ITS TRANSACTION PROCESSING OFFSHORE THE COMPANY HAS CREATED TREMENDOUS EFlCIENCIES IN ITS INTERNAL BACK OFlCE SERVICES !MERICAN %XPRESSS OFFSHORE PRESENCE ALSO GIVES IT THE ABILITY TO MANAGE MEMBERSHIP GROWTH AND STILL KEEP OPERATING COSTS IN CHECK !T THIS POINT COMPANIES MAY HAVE TENTATIVELY IDENTIlED THE PROCESS THAT THEY WISH TO SEND OFFSHORE 4HEIR NEXT STEP IS TO DETERMINE HOW TO EXECUTE THEIR OFFSHORE PROJECT BY SELECTING THE BUSINESS MODEL THAT ENABLES THEM TO BE MORE AGILE
%XECUTING /FFSHORE /UTSOURCING ! GREAT NUMBER OF DIVERSE ORGANIZATIONS ARE OFFSHORING BUSINESS PROCESSES 4O BETTER UNDERSTAND THE DIFFERENT BUSINESS MODELS IT IS IMPORTANT TO FAMILIARIZE YOURSELF WITH THE TWO DIMENSIONS OF EVERY BUSINESS MODEL /WNERSHIP OR RELATIONSHIP STRUCTURE SUBSIDIARY JOINT VENTURE OR EXTERNAL VENDOR AND 'EOGRAPHIC LOCATION OF THE WORK ONSITE OFFSITE ONSHORE OR OFFSHORE
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)N THE NEXT SECTION WE EXPLORE THE VARIOUS BUSINESS MODELS THAT EMERGE FROM THE DIFFERENT COMBINATIONS OF RELATIONSHIP STRUCTURE AND GEOGRAPHIC LOCATION
/WNERSHIP 3TRUCTURE %XTERNAL 6ENDOR *OINT 6ENTURES OR 3UBSIDIARY ! CRUCIAL ISSUE IN ENSURING FUTURE OFFSHORING SUCCESS INVOLVES SELECTING THE MOST APPROPRIATE OWNERSHIP MODEL 4HERE ARE THREE DIFFERENT GENERAL RELATIONSHIP STRUCTURES FOR OUTSOURCING ENGAGEMENTS 0URE CONTRACT OFFSHORE OUTSOURCING BUY OR THIRD PARTY *OINT VENTURES PARTNERSHIP AGREEMENT &ULLY OWNED CAPTIVE SUBSIDIARY BUILD IT OR INSOURCE #LEARLY THERE IS A WIDE SPECTRUM OF OWNERSHIP STRUCTURES AVAILABLE WITH PARTICULAR ADVANTAGES AND DISADVANTAGES FOR EACH ,ETS LOOK AT THEM IN MORE DETAIL
0URE #ONTRACT /FFSHORE /UTSOURCING 0URE CONTRACT OFFSHORE OUTSOURCING IS THE PHRASE USED TO DESCRIBE A COMPANY THAT RELINQUISHES CONTROL OF A FUNCTION TO AN EXTERNAL SERVICE PROVIDER IN A FOREIGN COUNTRY 4HE EXTERNAL SERVICE PROVIDER TAKES OVER THE FUNCTION AND DOES MUCH OF THE WORK OFFSHORE USING CHEAPER LABOR #ONTRACT OUTSOURCING CAN LEAD TO THREE DIFFERENT MODELS 6HOHFWLYHRXWVRXUFLQJLQZKLFKÀUPVRQO\VHQGRXWDVPDOOVXEVHWRI WKHLUEXVLQHVVSURFHVVDFWLYLWLHV7KH'HOWD$LU/LQHV:LSUR6SHFWUDPLQG UHODWLRQVKLS SURYLGHV D JRRG H[DPSOH RI SXUH FRQWUDFW RIIVKRUH RXWVRXUFLQJ'HOWDHOHFWHGWRRIIVKRUHVHOHFWFDOOFHQWHUVHUYLFHVWR:LSUR 6SHFWUDPLQG 7UDQVLWLRQDO RXWVRXUFLQJ LQ ZKLFK ÀUPV WHPSRUDULO\ KDQG RYHU D IXQFWLRQWRDWKLUGSDUW\YHQGRUDQGEULQJLWEDFNLQKRXVHODWHU*(DQG 6DW\DP&RPSXWHUVKDGDWUDQVLWLRQDORXWVRXUFLQJUHODWLRQVKLS 7RWDO RXWVRXUFLQJ LQ ZKLFK H[WHUQDO YHQGRUV WDNH RYHU WKH EXVLQHVV SURFHVVDQGGRZKDWHYHUWKHRUJDQL]DWLRQZDVGRLQJDW²OHVV 7KH %HOO6RXWK$FFHQWXUH RXWVRXUFLQJ DJUHHPHQW H[HPSOLÀHV WKLV ODVW PRGHO%HOO6RXWKRXWVRXUFHG,7ZRUNWRDIDFLOLW\UXQE\$FFHQWXUHLQ ,QGLD 0URE CONTRACT OFFSHORE OUTSOURCING IS A MAKE VERSUS BUY DECISION )TS CHIEF ADVANTAGES ARE LIMITED OPERATIONAL RISK THE POTENTIAL FOR COST SAVINGS AND THE
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RAPID SPEED AT WHICH IT CAN BE EXECUTED 4YPICALLY IT IS FASTER TO IMPLEMENT AN OUTSOURCED PROJECT THAN IT IS TO IMPLEMENT A JOINT VENTURE OR CAPTIVE CENTER
*OINT 6ENTURE ! JOINT VENTURE *6 IS THE PRODUCT OF TWO OR MORE COMPANIES POOLING THEIR COMBINED RESOURCES TO CREATE A NEW ENTITY TO PERFORM A BUSINESS PROJECT TOGETHER FOR A SET PERIOD *6S ATTEMPT TO CREATE COMMON GOALS THROUGH JOINT EQUITY OWNERSHIP 7HAT IS UNIQUE ABOUT *6S IS THEIR INDEPENDENCE 4HEY HAVE THEIR OWN MANAGEMENT AND THE ORGANIZATIONAL FREEDOM TO DEVELOP A CULTURE AND PRACTICES DIFFERENT FROM EITHER PARENT &ROM A BENElT PERSPECTIVE *6S ARE ATTRACTIVE SINCE THEY CAN SAVE BOTH PARENTS MONEY BECAUSE EXPENSES RESOURCES AND WORKLOAD ARE SHARED '% AND 3ATYAM #OMPUTERS FORMED A JOINT VENTURE IN $ECEMBER 4HE '%3ATYAM #OMPANY PROVIDED A '% INDUSTRIAL SYSTEMS AFlLIATE WITH ENGINEERING DESIGN SOFTWARE DEVELOPMENT AND SYSTEM MAINTENANCE SERVICES )N 3ATYAM SOLD ITS INTEREST IN THE *6 AFTER '% EXERCISED ITS OPTION TO PURCHASE 3ATYAMS INTEREST FOR MILLION
#APTIVE /FFSHORE 3UBSIDIARY )N THE PAST COMPANIES PURSUED THE OFFSHORE PATH VIA JOINT VENTURES !S BUSINESS EVOLVED COMPANIES EVENTUALLY DISCOVERED THAT IT WAS BETTER TO BUILD THEIR OWN SUBSIDIARIES &IRMS BEGAN TO ESTABLISH CAPTIVE OFFSHORE SUBSIDIARIES OR FOREIGN SUBSIDIARIES THAT COMPLETED ALL THE "0/ WORK THEMSELVES #OMPANIES THAT SELECT THIS OWNERSHIP MODEL TEND TO CITE REASONS OF MORE CONTROL AND mEXIBILITY AND LOWER PRICES ON A LONG TERM BASIS #ULTURAL ISSUES ARE ALSO A FACTOR )N SOME INSTANCES lRMS MAY WISH TO MAINTAIN CONTROL OF THE OUTPUT BY USING A MODEL THAT IS MORE ALIGNED WITH THEIR INTERNAL CULTURE 3OME OF THE COMPANIES THAT HAVE CAPTIVE SUBSIDIARIES IN )NDIA INCLUDE (3"# (YDERABAD !MERICAN %XPRESS .EW $ELHI "RITISH !IRWAYS -UMBAI #ITIBANK #HENNAI AND $ELL "ANGALORE
,OCATION OF 7ORK /NSITE /FFSITE OR /FFSHORE *HRJUDSKLFORFDWLRQSOD\VDNH\UROHLQVWUXFWXULQJRXWVRXUFLQJEXVLQHVVPRGHOV 2XWVRXUFLQJ FDQ HLWKHU EH GRQH RQVLWH RQ WKH SUHPLVHV RIIVLWH RXWVLGH WKH SUHPLVHVEXWLQWKHVDPHFRXQWU\ RURIIVKRUH RXWVLGHWKHSUHPLVHVDQGRXWVLGH WKHFRXQWU\ *OREDOFRPSDQLHVVXFKDV(OHFWURQLF'DWD6\VWHPV ('6 WHQGWREOHQGDOO WKUHHORFDWLRQPRGHOV,Q0DUFK('6ÀUHGLWV&(25LFKDUG+%URZQ
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DIWHU GLVDVWURXV WKLUGTXDUWHU UHVXOWV 8SRQ KLV DUULYDO WKH QHZ &(2 0LFKDHO -RUGDQLPPHGLDWHO\EHJDQWRWDNHVWHSVWRPDNH('6PRUHFRPSHWLWLYHDJDLQVW WKHORZFRVWRXWVRXUFLQJFRPSHWLWLRQ %$3 WHICH MAKES THE BULK OF ITS REVENUES BY RUNNING THE BACK OFlCE OPERATIONS OF BIG CORPORATIONS WAS LOSING GROUND TO LOWER COST OUTSOURCING lRMS SUCH AS 7IPRO AND )NFOSYS 4O IMPROVE ITS COMPETITIVENESS %$3 MOVED QUICKLY TO LOWER ITS COST STRUCTURE )T INCREASED ITS HEAD COUNT IN )NDIA !RGENTINA -ALAYSIA (UNGARY AND -EXICO THE COUNTRIES IN WHICH IT EXPECTS TO HAVE MORE THAN OF ITS WORKFORCE OF EMPLOYEES BY YEAR END %$3 IS ALSO HARD AT WORK CREATING A GLOBAL DELIVERY MODEL THAT INCREASES CUSTOMER CHOICE %$3S "EST 3HORE INITIATIVE BLENDS THE ONSHORE NEARSHORE AND OFFSHORE MODELS MATCHING CLIENTS TO DIFFERENT DEVELOPMENT OR SOLUTION CENTERS ACCORDING TO THEIR PARTICULAR REQUIREMENTS INDUSTRY TECHNOLOGY OR LOCATION %$3 PREDICTS IT WILL EMPLOY INDIVIDUALS IN ITS GLOBAL "EST 3HORE SOLUTION CENTERS
/NSITE /UTSOURCING 4HIS LOCATION MODEL MANDATES THAT ALL PROCESSES STARTING WITH INFORMATION GATHERING AND ENDING WITH IMPLEMENTATION BE CARRIED OUT AT THE CLIENTS PREMISES 4HE THIRD PARTY PROVIDER UTILIZES ITS OWN WORKFORCE TO SERVICE CLIENTS ON THEIR PREMISES 4HIS MODEL ENSURES CLIENTS GREATER PROJECT CONTROL )T IS ALSO SUITABLE FOR THOSE PROJECTS THAT ARE MISSION CRITICAL LOCATION SENSITIVE AND REQUIRE CONSTANT ATTENTION
/FFSITE /UTSOURCING 4HIS LOCATION MODEL HINGES ON THE SERVICE PROVIDER HAVING AN OFlCE ONSHORE 4HE PROJECT OR WORK MAY BE DONE OFFSITE BUT ITS STILL IN THE SAME COUNTRY AS THE CLIENT .OT ONLY IS THE OFFSITE CENTER CLOSE TO THE CLIENT IT MAY BE USED TO PROVIDE SUPPORT TO AN ONSITE TEAM 4HUS THE EXPERTS AT THE OFFSITE CENTER WORK IN TANDEM WITH THE CORRESPONDING ONSITE TEAM TO ENSURE TIMELY QUALITY SERVICE
.EARSHORE OR /FFSHORE /UTSOURCING 4HIS LOCATION MODEL DICTATES THAT THE PROJECT RELATED ACTIVITY IS DONE AT THE VENDORS PREMISES NEARSHORE OR OFFSHORE &OR 53 BASED COMPANIES NEARSHORE IS COUNTRIES SUCH AS #ANADA -EXICO OR #OSTA 2ICA WHILE OFFSHORE IS COUNTRIES SUCH AS )NDIA #HINA OR THE 0HILIPPINES 4HIS MODEL IS BEST IN INSTANCES WHEN THE PROJECT PLAN IS WELL DElNED AND THE OFFSHORE TEAM HAS A CLEAR UNDERSTANDING OF CLIENT REQUIREMENTS 4HE HIGH LEVEL OF RISK ASSOCIATED WITH THIS MODEL BECOMES AN ISSUE FOR SOME CLIENTS /NE RISK ASSOCIATED WITH THIS MODEL IS THE COMMUNICATION GAP BETWEEN THE VENDOR AND CLIENT WHICH MAY RESULT IN THE CLIENTS REQUIREMENTS NOT BEING CAPTURED ACCURATELY 3OME ANALYSTS ARE OF THE OPINION THAT A OFFSHORE MODEL IS NOT WORKABLE
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4HE BOTTOM LINE .UMEROUS OWNERSHIP AND LOCATION OPTIONS ARE AVAILABLE %XECUTIVES CAN USE SUPPLEMENTAL STAFF TEMPORARY WORKFORCES CONSULTANTS OR CONTRACTORS 4HEY CAN OUTSOURCE HIRE EXTERNAL CONTRACTORS TO DO ALL OR SOME OF THE WORK 4HEY CAN POOL RESOURCES THROUGH STRATEGIC ALLIANCES AND SHARE IN THE RESULTS /R THEY CAN MEET THEIR NEEDS BY CREATING ENTIRELY NEW ENTITIES THROUGH JOINT VENTURES WITH ONE OR MORE PARTNERS 4O UNDERSTAND WHICH BUSINESS MODEL IE COMBINATIONS OF OWNERSHIP AND LOCATION MODELS IS RIGHT FOR YOU IT IS USEFUL TO UNDERSTAND THE NUANCES OF WHATS BEING IMPLEMENTED BY VARIOUS COMPANIES
&IRST 'ENERATION "USINESS -ODELS 4HE MANY COMBINATIONS OF LOCATION AND OWNERSHIP STRUCTURES GIVE RISE TO SEVERAL DISTINCT BUSINESS MODELS SEE &IGURE )N EACH MODEL THE RELATIONSHIP BETWEEN THE CLIENT AND PROVIDER IS STRUCTURED UNIQUELY
&IGURE &IRST 'ENERATION /FFSHORE "USINESS -ODELS
)NTERNAL $ELIVERY $EPARTMENT "ASED -ODEL 4HIS IS A DELIVERY MODEL WITH WHICH EVERY MANAGER IS FAMILIAR )N THIS MODEL AN INTERNAL DEPARTMENT PROVIDES SERVICESlNANCE AND ACCOUNTING HUMAN RESOURCES OR )4 SUPPORTTO OTHER BUSINESS UNITS AND IMPLEMENTS NEW SERVICES THROUGH INTERNAL PROJECTS 4HE INTERNAL DEPARTMENT AND BUSINESS UNIT INVOLVED MANAGE THE
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RELATIONSHIP DIRECTLY )NTERNAL DELIVERY IS THE MOST mEXIBLE MODEL BECAUSE THE UNIT MANAGER MAY CHANGE THE RULES AND THE PROCESSES AS MUCH AND AS OFTEN AS NEEDED .EVERTHELESS IT IS ALSO THE MOST LIMITED SOURCING MODEL WITH REGARD TO SCALE DIMENSION OF OPERATIONS AND KNOWLEDGE EXPERIENCE INNOVATION AND AVAILABLE ADDITIONAL RESOURCES
/FFSITE /NSHORE 3HARED 3ERVICES 4HE SHARED SERVICES APPROACH ELIMINATES THE DUPLICATE PROCESSES ACTIVITIES AND STAFF THAT INDIVIDUAL BUSINESS UNITS HAVE AND BRINGS THEM TOGETHER TO ACHIEVE CRITICAL MASS 0AYING FOR EACH BUSINESS UNIT TO MANAGE ITS OWN lNANCE AND ACCOUNTING HUMAN RESOURCES OR INFORMATION TECHNOLOGY SUPPORT IS COSTLY 4HESE COST CENTER FUNCTIONS WHILE NECESSARY ARE NOT STRATEGIC )T MAKES MORE SENSE TO CONSOLIDATE THESE NON STRATEGIC PROCESSES AND GENERATE ECONOMIES OF SCALE #OMPANIES EXECUTE THE SHARED SERVICES MODEL BY BUNDLING SELECTED SUPPORTING PROCESSES AND ACTIVITIES INTO A SEPARATE DIVISION OR ORGANIZATION 4HIS ENTITY TREATS THESE PROCESSES AS ITS CORE BUSINESS AND IS MEASURED BY ITS OWN UNIQUE PROlT AND LOSS 0, "UNDLING SERVICES INTO AN INDEPENDENT ORGANIZATION MEANS THAT SOME OR ALL OF THE EMPLOYEES WHO SUPPORT THEM ALSO HAVE TO MOVE TO THE NEW ENTITY
/FFSHORE #APTIVE 3HARED 3ERVICES 4AKING THE SHARED SERVICES AND HOUSING THEM OFFSHORE LEADS US TO THE CAPTIVE SHARED SERVICES DELIVERY MODEL 4HE PRODUCT OF THIS DO IT YOURSELF OFFSHORE MODEL IS A CENTER SET IN A FOREIGN COUNTRY THAT IS DEDICATED TO SERVING THE DIFFERENT BUSINESS UNITS OR SALES GENERAL AND ADMINISTRATIVE 3'! FUNCTIONS OF A LARGE COMPANY 4HIS MODEL IS VERY COMMON IN MULTINATIONAL lRMS THAT WISH TO CONTROL THEIR "0/ OPERATIONS QUALITY AND INTELLECTUAL PROPERTY !MERICAN %XPRESS WAS AMONG THE lRST TO ESTABLISH A BACK OFlCE CAPTIVE SHARED SERVICES CENTER IN )NDIA IN /THER COMPANIES THAT HAVE FOLLOWED SUIT INCLUDE "RITISH !IRWAYS IN AND '%#)3 IN 3INCE A GROWING NUMBER OF 'LOBAL &ORTUNE lRMS INCLUDING !/, #ITIGROUP $ELL (EWLETT 0ACKARD (3"# AND *0 -ORGAN #HASE HAVE ESTABLISHED CAPTIVE OPERATIONS
#OSOURCING #OSOURCING IS THE TERM THAT DESCRIBES COMPANIES THAT EXECUTE A SHARED SERVICES CENTER WITH AN EXTERNAL VENDOR #OSOURCING A FANCIER TERM FOR JOINT VENTURE IS A COLLABORATIVE RELATIONSHIP BASED ON SHARED OBJECTIVES THAT REmECT THE APPROPRIATE BALANCE BETWEEN CONTROL AND mEXIBILITY #OSOURCING IS A VIABLE MODEL FOR ORGANIZATIONS UNCOMFORTABLE WITH OUTSOURCING A COMPLETE BUSINESS PROCESS OUTSOURCING SOME PARTS TO A JOINT VENTURE WITH A VENDOR MAY OFFER A TEMPORARY OR lNAL SOLUTION
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4HE COSOURCING MODEL AIMS TO COMBINE THE STRENGTH OF THE VENDOR AND THE CLIENT 4HAT WAS THE INTENT OF !44 AND !CCENTURE WHO ANNOUNCED A lVE YEAR MILLION COSOURCING ARRANGEMENT DESIGNED TO TRANSFORM !44S RESIDENTIAL CREDIT AND ACCOUNTS RECEIVABLE MANAGEMENT FUNCTIONS AND PROVIDE NEW CAPABILITIES AND EFlCIENCIES )N PARTICULAR THE AGREEMENT IS DESIGNED TO HELP !44 EXPAND ITS SERVICE PORTFOLIO INCREASE MARKETING mEXIBILITY IMPROVE UNCOLLECTED RECEIVABLES ENHANCE OPERATIONAL EFlCIENCY AND REDUCE COSTS /N ITS SIDE !CCENTURE WILL MANAGE THE INTEGRATION OF PLANNING INITIATIVE EXECUTION AND COLLECTIONS PROCESSES ACROSS MULTIPLE ORGANIZATIONS WITHIN !44 #ONSUMER !PPROXIMATELY !44 EMPLOYEES WHOSE WORK IS WITHIN THE SCOPE OF THE AGREEMENT WILL TRANSITION TO !CCENTURE )N ADDITION APPROXIMATELY OTHER !44 EMPLOYEES WILL BE PART OF THE COSOURCED OPERATION AND REMAIN ON THE !44 PAYROLL 4HE COSOURCING AGREEMENT HAS BEEN STRUCTURED SO THAT !44 WILL RETAIN CONTROL OF BUSINESS PLANNING CREDIT POLICY AND CUSTOMER INTERACTION !CCENTURE WILL LEAD THE TRANSFORMATION PROGRAM AND BE RESPONSIBLE FOR THE CREDIT RISK MANAGEMENT AND COLLECTIONS FUNCTIONS )N ADDITION !CCENTURE WILL BUILD AND DEPLOY CAPABILITIES TO ENABLE !44 TO SUPPORT ITS GROWTH OBJECTIVES WHILE MITIGATING RISK AND REDUCING UNCOLLECTIBLES #OSOURCING IS AN OPTION WHEN lRMS DONT HAVE THE SKILLS OR THE MONEY TO SET UP A SHARED SERVICES CENTER ON THEIR OWN OR SIMPLY DONT HAVE THE MANAGEMENT BANDWIDTH GIVEN THE MAGNITUDE OF THE OTHER TASKS ON THEIR PLATES 4HE ADVANTAGE FOR COMPANIES THAT COSOURCE IS THAT THEY DONT HAVE TO PAY FOR EVERYTHING UPFRONT 4HE ADVANTAGE FOR VENDORS IS THAT THEY GAIN A GUARANTEED REVENUE STREAM
/FFSHORE $EVELOPMENT #ENTERS )N THE SOFTWARE INDUSTRY JOINT VENTURES WITH OFFSHORE VENDORS ARE COMMON SO COMMON THAT THE INDUSTRY DEVELOPED A TERM FOR THEM OFFSHORE DEVELOPMENT CENTERS /$#S !N /$# IS A DEDICATED CUSTOMIZED AND SECURE DEVELOPMENT CENTER ESTABLISHED BY A VENDOR FOR A CUSTOMER WHO NEEDS TO OUTSOURCE SUBSTANTIAL SOFTWARE DEVELOPMENT MAINTENANCE OR ENGINEERING WORK 4HIS MODEL GIVES THE CUSTOMER MORE CONTROL BUT REQUIRES MUCH MORE MANAGEMENT ATTENTION )N THE MID S '% BEGAN A BUSINESS WIDE INITIATIVE TO ESTABLISH DEDICATED SOFTWARE AND ENGINEERING DEVELOPMENT CENTERS WITH SEVERAL )NDIAN VENDORS SUCH AS 4ATA #ONSULTANCY 3ERVICES 3ATYAM AND 0ATNI %ACH VENDOR ESTABLISHED FACILITIES DEDICATED TO '% WITH SEPARATE ENTRANCES SECURITY AND lREWALLS IN CITIES SUCH AS -UMBAI "ANGALORE (YDERABAD $ELHI AND #HENNAI 4HESE GLOBAL DEVELOPMENT CENTERS ARE EXTENSIONS OF '%S INDIVIDUAL BUSINESS )4 OR ENGINEERING TEAMS AND ULTIMATELY REPORT TO THE #)/ OR ENGINEERING LEADER 4HE #)/ REVIEWS CURRENT SUPPLIERS SELECTS NEW ONES AND NEGOTIATES CONTRACTS
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4HESE CENTERS HAVE PROVED HIGHLY SUCCESSFUL GROWING FROM JUST OVER SOFTWARE DESIGNERS IN TO IN )N '% ESTABLISHED TWO WHOLLY OWNED SOFTWARE DEVELOPMENT CENTERS AS OPPOSED TO THE JOINTLY OWNED CENTERS WE JUST DESCRIBED TO DEVELOP KEY IN HOUSE EXPERTISE FOR MORE HIGHLY VALUED AND PROPRIETARY SOFTWARE )NCREASINGLY MANY 53 TECHNOLOGY COMPANIES ARE CONSIDERING STARTING OWNED SUBSIDIARIES IN COUNTRIES LIKE )NDIA INSTEAD OF WORKING WITH AN OFFSHORE )4 SERVICES VENDOR 4HE MAIN REASONS BEING 4HE COST SAVINGS ASSOCIATED WITH AN OFFSHORE SUBSIDIARY CAN BE AS HIGH AS WHEN COMPARED TO A VENDOR PARTNERSHIP $IRECT CONTROL ON HIRING AND RETENTION OF OFFSHORE RESOURCES 4HE ABILITY TO RETAIN INTELLECTUAL PROPERTY WITHIN THE COMPANY
3TAFF !UGMENTATION #ONTRACTING OR 4EMPORARY 3ERVICES 4HE OLDEST ONSITE OUTSOURCING MODEL IS STAFF AUGMENTATION CONTRACTING OR TEMPORARY SERVICES )N THIS MODEL CORPORATIONS LEVERAGE SUPPLEMENTAL STAFF TO CONTAIN COSTS AND HANDLE OVERmOW WORK 3TAFF AUGMENTATION REDUCES THE COSTS ASSOCIATED WITH HIRING BENElTS AND TERMINATION AS WELL AS THE EXPENSE OF RECRUITING TRAINING AND RETAINING PERSONNEL )N HOUSE RESOURCES CAN BE REDEPLOYED ON REVENUE GENERATING AND STRATEGIC ACTIVITIES 4HE STAFF AUGMENTATION MODEL CAN ALSO UTILIZE OFFSHORE RESOURCES !CTUALLY MANY OFFSHORE VENDORS lRST STARTED AS BODY SHOPS THAT PROVIDED STAFF AUGMENTATION 4HESE VENDORS THRIVED IN THE LATE S WHEN IT WAS EXTREMELY DIFlCULT TO lND QUALIlED EMPLOYEES
0URE )4 OR "USINESS 0ROCESS /UTSOURCING 0URE OUTSOURCING IS THE MOST CLASSIC OF THE lRST GENERATION OFFSHORE OUTSOURCING BUSINESS MODELS )N THIS MODEL COMPANIES DELEGATE ONE OR MORE BUSINESS PROCESSES TO AN EXTERNAL PROVIDER THAT OWNS ADMINISTERS AND MANAGES THE PROCESSES BASED ON PREDElNED AND MEASURABLE SERVICE LEVEL METRICS 0URE OUTSOURCING IS BASED ON A MULTIYEAR lVE TO TEN YEAR CONTRACT WITH A SINGLE VENDOR FOR ALL THE IN SCOPE SERVICES )T COMES IN TWO FORMS INFORMATION TECHNOLOGY OUTSOURCING )4/ AND BUSINESS PROCESS OUTSOURCING "0/ )N THIS MODEL VENDORS USUALLY HANDLE A LARGE PART OF THE CUSTOMERS )4 OR PROCESS NEEDS 4HE TWO REASONS MOST COMMONLY GIVEN BY COMPANIES THAT SELECT THIS MODEL ARE LACK OF STAFF WITH APPROPRIATE SKILLS AND NOT ENOUGH TIME TO DO THE JOB RIGHT 4HE )4/ MODEL REALLY BEGAN IN WHEN %ASTMAN +ODAK OUTSOURCED ITS CORPORATE )4 INFRASTRUCTURE DATA CENTERS AND ALL ITS NETWORKS AND DESKTOP SYSTEMS TO )"- 4HE TEN YEAR DEAL WAS ESTIMATED TO BE WORTH MILLION 3INFH
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THEN SEVERAL COMPANIES SUCH AS $U0ONT '- 5NITED 4ECHNOLOGIES AND 8EROX HAVE OUTSOURCED MOST OF THEIR )4 INFRASTRUCTURE 4HE ADVANTAGES OF THIS MODEL ARE A LOWER COST OF PROCUREMENT REDUCED MANAGEMENT OVERHEAD AND SERVICE PROVIDER FAMILIARITY WITH CLIENT NEEDS 4HE DISADVANTAGES ARE THE CAPTIVE OR EVEN EXCLUSIVE RELATIONSHIP AND THE TENDENCY OF SERVICE PROVIDER INVESTMENTS TO SET THE PACE FOR INNOVATION
&IRST 'ENERATION /FFSHORE /UTSOURCING )N THIS MODEL FOREIGN COMPANIES COME TO THE 5NITED 3TATES OR %UROPE TO SELL PROJECTS 4HESE PROJECTS ARE THEN EXECUTED COMPLETELY OFFSHORE WITH LOCAL LOW COST LABOR 4HIS MODEL WAS lRST SEEN IN CONTRACT MANUFACTURING AND THEN SPREAD TO )4 )N THE )4 SECTOR THE TASKS INCLUDED 9+ REMEDIATION EURO CONVERSION SOFTWARE DEVELOPMENT AND APPLICATION MAINTENANCE 4HE lRST GENERATION OF OFFSHORE OUTSOURCING WAS ATTRACTIVE FOR #)/S IN THE lNANCIAL SERVICES HIGH TECH AND RETAIL INDUSTRIES WHO DID NOT WANT TO HIRE IN HOUSE STAFF OR EXPENSIVE CONSULTANTS TO DO SIMPLE TASKS )N ADDITION THE 53 UNEMPLOYMENT RATE DURING THE S WAS VERY LOW WHICH MADE IT HARD TO RECRUIT EMPLOYEES !S A RESULT MANY ORGANIZATIONS TURNED TO OFFSHORE OUTSOURCING VENDORS TO TAKE CARE OF THEIR STAFlNG PROBLEMS 4HIS FACILITATED BETTER UTILIZATION OF IN HOUSE PERSONNEL )T ALSO HELPED THEM TO RAPIDLY TURN PROJECTS ON OR OFF BASED ON BUSINESS DEMAND 4HE lRST GENERATION OF OFFSHORE OUTSOURCING DID HAVE SOME LIMITATIONS )TS MODUS OPERANDI WAS TO THROW LOW COST TALENT AT A VARIETY OF PROBLEMS WHICH WORKS WELL FOR DElNED COMMODITY TASKS THAT DO NOT REQUIRE MUCH COMMUNICATION HOWEVER IN A BUSINESS PROCESS ENVIRONMENT CUSTOMER CARE OR TRANSACTION PROCESSING THAT REQUIRES ONGOING INTERACTION THE CLASSIC HAND OFF MODEL IS NOT A GOOD MATCH -UCH MORE INTEGRATION BETWEEN THE lRM AND THE OFFSHORE VENDOR IS NECESSARY
3ECOND 'ENERATION -ODELS !S CUSTOMER NEEDS EVOLVE SECOND GENERATION BUSINESS MODELS ARE EMERGING 4HEY TEND TO BE MORE SOPHISTICATED AND TO SPAN MULTIPLE MODELS OF THE lRST GENERATION 4HESE COMBINATION MODELS INCLUDE s 'LOBAL DELIVERY OR BLENDED OUTSOURCING MODELS PRACTICED BY LARGE GLOBAL VENDORS s (YBRID DELIVERY MODEL PRACTICED BY MIDSIZE AND LARGE OFFSHORE VENDORS s 'LOBAL SHARED SERVICES CENTER PRACTICED BY LARGE MULTINATIONALS
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s "UILD OPERATE TRANSFER "/4 MODEL PRACTICED BY RISK AVERSE CORPORATIONS s /FFSHORE MULTISOURCING MODEL PRACTICED BY EXPERIENCED CONGLOMERATES
'LOBAL $ELIVERY -ODEL ! GLOBAL DELIVERY MODEL ALSO CALLED BLENDED OUTSOURCING IS ONE IN WHICH A COMPANY OUTSOURCES TO A MULTINATIONAL SERVICE PROVIDER SUCH AS !CCENTURE 5NISYS %$3 OR )"- THAT OFFERS A MIX OF ONSITE OFFSITE ONSHORE AND OFFSHORE RESOURCES 4HE GLOBAL DELIVERY MODEL ALLOWS VENDORS TO DISTRIBUTE AND MANAGE ENGAGEMENTS ACROSS MULTIPLE GLOBAL LOCATIONS 4HE ADVANTAGE OF THIS MODEL IS THAT THE COMPANY INITIATING THE OUTSOURCING RECEIVES A LOWER RATE WITHOUT THE RISK )F FASTER TIME TO MARKET IS A PRIMARY DELIVERY OBJECTIVE THE GLOBAL DELIVERY MODEL CAN ACCOMMODATE THIS REQUIREMENT BY DIVVYING UP WORK EFFORTS ACROSS ONSHORE NEARSHORE AND OFFSHORE DEVELOPMENT FACILITIES ,ARGE CORPORATIONS THAT HIRE GLOBAL OUTSOURCERS SUCH AS 3YKES 3)4%, #ONVERGYS 7IPRO OR )NFOSYS OFTEN PREFER THIS DISTRIBUTED APPROACH 4HE DISTRIBUTION OF OUTSOURCING ACTIVITIES MAY VARY ACCORDING TO THE DEMANDS OF THE PROJECT 6ENDORS HAVE A VARIETY OF MARKETING NAMES FOR THE GLOBAL DELIVERY MODEL BEST SHORE ANY SHORE RIGHT SHORE AND MULTI SHORE 7HATEVER IT IS CALLED ITS OBJECTIVE IS THE SAME TO DISTRIBUTE AND MANAGE ENGAGEMENTS AND RESOURCES ACROSS MULTIPLE LOCATIONS THEREBY ALLOWING THE SERVICE PROVIDER TO BETTER RESPOND TO CLIENT REQUIREMENTS )F DISASTER STRIKES ANY OF THE VENDORS LOCATIONS IT CAN SHIFT WORK TO OTHER LOCATIONS SO THAT THERE IS NO INTERRUPTION IN BUSINESS PROCESSES 4HE BIGGEST ADVANTAGE OF THE GLOBAL DELIVERY MODEL IS THAT IT SAVES THE CLIENT FROM INVESTING IN A HUGE TEAM OF EMPLOYEES FOR MULTI LOCATION PROJECTS )T ADAPTS TO THE CLIENTS CHANGING REQUIREMENTS AND IF THERE IS A SUDDEN NEED FOR MORE RESOURCES THE SERVICE PROVIDER CAN SUPPLY THEM AT ONCE TO THE CLIENT AND LATER RELOCATE THEM TO OTHER MORE CONVENIENT LOCATIONS 4HE GLOBAL DELIVERY MODEL IS THE PREFERRED MODEL OF CHOICE FOR LARGE CONSULTING COMPANIES 4HEIR CLOSE CUSTOMER RELATIONSHIPS AND DOMAIN KNOWLEDGE HAVE MADE THEM FORMIDABLE COMPETITORS 4HEY CAN QUICKLY ENTER MARKETS SUCH AS THE 0HILIPPINES AND TAKE ADVANTAGE OF THE LOW COST LABOR 4HEIR CAPABILITIES AND CUSTOMER BASES PERMIT THEM TO SCALE UP THEIR OFFSHORE OPERATIONS RAPIDLY
(YBRID $ELIVERY -ODEL /NSITE AND /FFSHORE (YBRID OUTSOURCING COMBINES ONSITE AND OFFSHORE SERVICES TO DELIVER RESULTS AT REDUCED COST 4HE HYBRID OUTSOURCING MODEL ALSO KNOWN AS THE DUAL SHORE MODEL IS BECOMING THE BUSINESS MODEL FOR MIDSIZED SERVICE PROVIDERS HEADQUARTERED OFFSHORE IN COUNTRIES SUCH AS )NDIA
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(OW DOES THIS WORK #ONSIDER THE CASE OF A SOFTWARE DEVELOPMENT PROJECT 4HE LOCAL ONSITE TEAM MANAGES THE PROJECTS PROGRAM MANAGEMENT OFlCE 0-/ AND HANDLES THE CLIENT FACING COMPONENTS OF THE PROJECT SUCH AS REQUIREMENTS GATHERING AND USER INTERFACE DEVELOPMENT 4HE ONSITE OPERATION MAY CONTROL A DElNED PORTION OF THE PROJECT THAT REQUIRES INTERACTION WITH THE BUSINESS SUBJECT MATTER EXPERTS AND SOFTWARE ARCHITECTS ONSITE 4HE OFFSHORE FACILITIES TAKE CARE OF THE CODING TESTING AND BUG lXING SO WORK CAN BE PERFORMED AROUND THE CLOCK )N A DUAL SHORE MODEL REQUIREMENTS GATHERING AND THE DEVELOPMENT OF DETAILED SPECIlCATIONS IS DONE ONSITE WHILE PROGRAMMING OR PROCESS WORK IS DONE OFFSHORE 4HIS MODEL MAXIMIZES EFlCIENCY IN RESOURCES AND COSTS )DEALLY n OF WORK IS DONE ONSITE WHEREAS n IS OUTSOURCED OFFSHORE DEPENDING UPON THE CRITICALITY OF THE PROJECT 4HIS MODEL IS ONE OF THE MOST POPULAR TO HAVE EMERGED SO FAR )TS PROVEN BENElTS INCLUDE CONTINUOUS NEAR HOUR WORK CYCLES THE ABILITY TO STRUCTURE AND ASSEMBLE TEAMS WITH DIVERSE MULTIPLE SKILL SETS LOWER COST RESOURCES AND THE ABILITY TO QUICKLY SCALE UP OR DOWN DEPENDING ON THE REQUIREMENTS 0ART OF ITS SUCCESS CAN BE ATTRIBUTED TO THE FACT THAT THIS MODEL ENABLES CLIENTS TO DIRECTLY INTERACT WITH THE SERVICE PROVIDER THROUGH THE ONSITE TEAM AND SIMULTANEOUSLY ENJOY THE BENElTS OF OFFSHORE OUTSOURCING 4HIS MODEL HAS ITS OWN SET OF CHALLENGES INCLUDING PROJECT MANAGEMENT AND ADMINISTRATION COSTS OPTIMIZATION OF CROSS CULTURAL COMMUNICATION AND THE SUPERVISION OF ONSITE TEAMS
'LOBAL 3HARED 3ERVICES -ODEL 'LOBAL SHARED SERVICES CENTERS ALSO KNOWN AS CAPTIVE CENTERS OR OFFSHORE INSOURCING ARE A COMBINATION OF ONSHORE SHARED SERVICES AND OFFSHORE CAPTIVE CENTERS 4HE OBJECTIVE IS TO CONSOLIDATE THE SCATTERED AUTONOMOUSLY RUN INTERNAL SERVICES OPERATIONS OF A MULTINATIONAL ORGANIZATION INTO MEGA SERVICE CENTERS !NOTHER OBJECTIVE IS TO CREATE A CUSTOMER FOCUSED MIND SET WHICH ENABLES HIGH QUALITY COST EFFECTIVE AND TIMELY SERVICE 4HE GLOBAL CENTER IS RUN AS AN INDEPENDENT BUSINESS WITH ITS OWN BUDGET AND BOTTOM LINE ACCOUNTABILITY '% (3"# AND !MERICAN %XPRESS ARE CONSIDERED BY MANY TO BE THE MOST SOPHISTICATED IN DEPLOYING THIS MODEL (OW DOES THIS WORK 4O UNDERSTAND THIS MODEL BETTER LETS STUDY THE BEST PRACTICE EXAMPLE OF '% #APITAL )NTERNATIONAL 3ERVICES '%#)3 '%#)3 PROVIDES BACK ROOM SERVICES TO '% #APITAL BUSINESSES AND '% INDUSTRIAL BUSINESSES AT SIGNIlCANTLY LOWER COSTS AND HIGHER QUALITY LEVELS '%#)3 BEGAN WITH SIMPLE DATA PROCESSING AND HAS MOVED UP THE VALUE CHAIN TO SUPPORT MORE COMPLEX PROCESSES FROM DIVERSE BUSINESSES ACROSS '% '%#)3 HAS NINE #ENTERS OF %XCELLENCE #O%S
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IN THE FOLLOWING AREAS lNANCE AND ACCOUNTING INSURANCE COLLECTIONS CUSTOMER FULlLLMENT INDUSTRIAL AND EQUIPMENT ANALYTICS LEARNING AND REMOTE MARKETING )4 SERVICES AND SOFTWARE #APTIVE SHARED SERVICES CENTERS HAVE SIGNIlCANT ADVANTAGES &IRST THEY HAVE GUARANTEED MARKETS FOR THEIR SERVICES AND AN ESTABLISHED MANAGEMENT HIERARCHY 4HEY ALSO ALLEVIATE SOME OF THE ORGANIZATIONAL ISSUES SUCH AS CONTROL AND POLITICS THAT CROP UP WHEN lRMS RELOCATE BACK OFlCE ACTIVITIES OFFSHORE TO EXTERNAL VENDORS -ULTINATIONAL CAPTIVE CENTERS ARE LEADING THE WAY IN THE ESTABLISHMENT OF THE GLOBAL SHARED SERVICES BUSINESS OPERATIONS
"UILD /PERATE 4RANSFER -ODEL &OR MANY OF THE COMPANIES THAT HAVE STARTED THEIR OWN FOREIGN SUBSIDIARIES THE PROCESS HAS NOT BEEN AS SMOOTH AS THEY EXPECTED 4HEY FACED OBSTACLESLEGAL TAXES HIRING AND MANAGEMENTFROM START TO lNISH 7HILE SOME COMPANIES HAVE TAKEN A LONG TIME TO ATTAIN A STEADY STATE SOME ARE STILL STRUGGLING AND A FEW EVEN CLOSED THEIR OPERATIONS 4HE RISE OF CAPTIVE SUBSIDIARY FAILURES LED TO THE EVOLUTION OF A NEW BUSINESS MODEL IN THE OFFSHORE SERVICES INDUSTRY CALLED BUILD OPERATE TRANSFER "/4 )N THIS MODEL A lRM CONTRACTS WITH AN OFFSHORE PARTNER TO BUILD A SHARED SERVICES OR OFFSHORE DEVELOPMENT CENTER AND OPERATE IT FOR A lXED INTERIM PERIOD 4HE LOGIC BEHIND THE "/4 MODEL 4HE OFFSHORE PARTNER CAN INITIATE OPERATIONS AND REACH OPERATING STABILITY MUCH FASTER THAN IT CAN WITH AN IN HOUSE EFFORT ! TYPICAL "/4 IS BUILT AND MANAGED IN THREE PHASES "UILD 4HE OFFSHORE PARTNER PROVIDES A COMPLETE SOLUTION FOR BUILDING A PRESENCE IN A PARTICULAR COUNTRY 4HE CLIENTS RECEIVE THEIR OWN OFlCE SPACE AND ESTABLISH THEIR OWN BRAND IDENTITY AT A LOWER PRICE THAN COMPARABLE OUTSOURCING ARRANGEMENTS 4HE VENDORS STAFF TAKES CARE OF ALL ADMINISTRATIVE AND LEGAL ISSUES FROM REAL ESTATE UTILITIES AND PERMITS TO COMPUTERS COMMUNICATIONS AND OFlCE SUPPLIES 4HE VENDOR ALSO PROVIDES THE PROFESSIONAL SUPPORT STAFF AND OPERATING LICENSES TO RUN FUNCTIONS SUCH AS CALL CENTERS /PERATE 4HE OFFSHORE PARTNER PROVIDES A COMPREHENSIVE SET OF OPERATIONAL MANAGEMENT SERVICES FROM (2 AND STAFlNG TO ACCENT TRAINING ACCOUNTING PAYROLL LEGAL FACILITIES AND SECURITY 4HE CLIENTS ARE ABLE TO FOCUS THEIR MANAGEMENT TIME ON THEIR CORE BUSINESS RATHER THAN ON OPERATIONAL ISSUES /PTION TO 4RANSFER 4HE OFFSHORE PARTNER CANNOT LOCK IN CLIENTS 4HE CLIENTS HAVE THE OPTION TO BRING THE OPERATION IN HOUSE AT ANY TIME 4HE OUTSOURCING CONTRACT SHOULD DETAIL A WELL DElNED PROCESS TO ENSURE
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A SMOOTH TRANSITION 4YPICALLY THE CONTRACT INCLUDES A CLAUSE THAT SAYS THE CLIENT HAS THE OPTION TO BUY THE ENTIRE OPERATION AFTER A lXED PERIOD ! "/4 GIVES THE CLIENT THE ABILITY TO REALIZE THE BENElTS OF OFFSHORING QUICKLY WITH LIMITED EXECUTION RISK WHILE MINIMIZING UPFRONT COSTS AND LONG TERM lNANCIAL RISKS 4HE "/4 MODEL IS IDEAL FOR A RISK AVERSE COMPANY "UILDING YOUR OWN SUBSIDIARY IN A FOREIGN COUNTRY REQUIRES MUCH KNOWLEDGE AND INFORMATION ABOUT THE COUNTRY AND CULTURE AS WELL AS THE RIGHT PERSONNEL )F YOU ARENT UP TO THE TASK OF GATHERING THIS INFORMATION THEN A "/4 SOLUTION MAY BE THE RIGHT ANSWER FOR YOUR COMPANY 4HE "/4 MODEL IS USUALLY FOUND IN THE CIVIL AND CONSTRUCTION ENGINEERING BUSINESS ESPECIALLY IN THE MAINTENANCE OF HIGHWAYS AND AIRPORTS .OW THE "/4 MODEL IS BECOMING POPULAR IN THE OFFSHORE OUTSOURCING WORLD "/4 MODELS TEND TO BUILD ON lRST GENERATION /$# MODELS 7ITH THE /$# MODEL THE BASIC FRAMEWORK IS IN PLACE FOR THE hBUILDv AND hOPERATEv PARTS 7ITH "/4 THERE IS AN ADDITIONAL OPTION TO TRANSFER THE OPERATIONS AFTER A CERTAIN PERIOD 4HIS ARRANGEMENT PROVIDES CUSTOMERS WITH BOTTOM LINE ENHANCEMENTS AND FULLY OFmOADED COSTS RISKS AND OWNERSHIP OF THE NEW VENTURE 4HE RISK OF EXECUTION IS MINIMIZED AND THE MONEY CAN BE SPENT ON CORE FUNCTIONS
/FFSHORE -ULTISOURCING (UB AND 3POKE -ODEL 3IMILAR TO THE #HINESE PROVERB THAT STATES A CLEVER RABBIT WILL HAVE THREE OPENINGS TO ITS DEN MANY COMPANIES WILL WORK WITH MULTIPLE OFFSHORE VENDORS TO MITIGATE RISK &OR INSTANCE A COMPANY MIGHT ESTABLISH A SHARED SERVICES CENTER FOR ITS lNANCE AND ACCOUNTING OPERATION IT MAY RELY ON A THIRD PARTY VENDOR FOR ITS CALL CENTER OPERATIONS AND IT MIGHT HAVE A JOINT VENTURE WITH ANOTHER VENDOR FOR ITS 2$ -ULTISOURCING IS THE PRACTICE OF USING MULTIPLE OFFSHORE BUSINESS MODELS AND SUPPLIERS )T HELPS COMPANIES ACHIEVE THE ADVANTAGES OF A BEST OF BREED STRATEGY AND ALLOWS MORE mEXIBILITY #ITIBANK AND !MERICAN %XPRESS HAVE BOTH TAKEN A MULTISOURCING APPROACH THAT RESEMBLES A HUB AND SPOKE MODEL 4HEY HAVE OFFSHORE OPERATIONS OF THEIR OWN AS WELL AS THREE OR FOUR PARTNERS WITH WHOM THEY COLLABORATE 4HIS IS AN INTERESTING MODEL AS THE BUSINESSES GET SOME OF THEIR PARTNERS TO ACTUALLY WORK WITH THEM IN THEIR OWN HUB CENTERS TRAIN THEM AND THEN SEND THEM BACK TO THE SPOKE CENTER ! NARROWER VIEW OF MULTISOURCING IS SIMPLY DOING BUSINESS WITH MULTIPLE VENDORS TO MITIGATE RISK 'UARDIAN ,IFE )NSURANCE #OMPANY EMBRACES A MULTISOURCING APPROACH 4HE INSURER CONTRACTS WITH 0ATNI #OMPUTER 3YSTEMS -UMBAI .))4 4ECHNOLOGIES .EW $ELHI AND #OVANSYS -ICHIGAN )NSTEAD OF AWARDING ONE MAJOR LONG TERM CONTRACT TO A SINGLE SUPPLIER 'UARDIAN IS MITIGATING RISK BY WORKING WITH A CONSORTIUM OF VENDORS TO CREATE A MULTI LOCATION DISTRIBUTED DELIVERY MODEL
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4HE RISE OF MULTISOURCE DEALS COULD BE A SIGN THAT COMPANIES ARE TAKING A MORE CAUTIOUS RISK AVERSE APPROACH TO OUTSOURCING )N THE CASE OF 'UARDIAN AND OTHERS MULTISOURCING WORKS BECAUSE THE ORGANIZATION HAS THE INTERNAL ABILITY TO MANAGE AND INTEGRATE MULTIPLE PROVIDERS PRODUCTS PROJECTS AND SERVICES TO DERIVE A SINGLE SOLUTION 7HEN SHOULD ORGANIZATIONS CHOOSE FULL SERVICE OUTSOURCING USING ONE PROVIDER OVER MULTISOURCING )T DEPENDS ON THE MATURITY OF THE ORGANIZATION #OMPANIES THAT ARE NEW TO OUTSOURCING TEND TO MULTISOURCE UNTIL THEY GET COMFORTABLE WITH THE WHOLE PROCESS 7HEN THEY RENEGOTIATE CONTRACTS LATER THEY GIVE MORE THOUGHT TO USING ONE PROVIDER /FTEN TO REDUCE COMPLEXITY VERY LARGE BUSINESSES WILL LOOK FOR ONE DOMINANT PROVIDER AND THAT PROVIDER WILL THEN WORK WITH A BIG NETWORK OF COMPANIES 7HICHEVER BUSINESS MODEL COMPANIES SELECT WHETHER ITS COSOURCING MULTISOURCING OR SOME UNIQUE MODEL THAT THEY DEVISE ON THEIR OWN ONE THING IS CERTAIN 4HE MORE TIME THEY INVEST UPFRONT IN CHOOSING THE RIGHT BUSINESS MODEL THE HIGHER THEIR PROBABILITY OF SUCCESS
3UMMARY )NTERNET ENABLED OFFSHORE OUTSOURCING IS ENABLING lRMS TO BE COME AGILE 4HE STRATEGY HAS MATURED CONSIDERABLY OVER THE PAST lVE YEARS AND OFFERS SIGNIlCANT ADVANTAGES TO COMPANIES THAT KNOW HOW TO DO IT RIGHT #OMPANIES LOOKING TO CUT OPERATING COSTS FOCUS ON CORE COMPETENCIES EXTEND CUSTOMER SERVICE COMPLY WITH NEW REGULATIONS OR ACHIEVE OTHER GOALS NOW COUNT OFFSHORE OUTSOURCING AS ONE ORGANIZATIONAL STRATEGY THEY CAN USE TO PROCESS AND ABSORB CHANGE /RGANIZATIONAL STRATEGIES TEND TO COME AND GO BUT OFFSHORE OUTSOURCING HAS STAYING POWER )T IS A POWERFUL IDEA ALBEIT A DIFlCULT ONE TO IMPLEMENT THAT CAN PRODUCE SUBSTANTIAL REWARDS !DAPTIVE ENTERPRISES SUCH AS $ELL )"- (0 AND '% HAVE ALREADY SEIZED THIS MODEL TO CREATE NEW VALUE PROPOSITIONS #HANGE IS CONSTANT IN THE BUSINESS WORLD )NmEXIBILITY IN ANY FORM WHETHER IN LEGACY SYSTEMS OR EMPLOYEE ATTITUDES IS THE ENEMY OF ADAPTIVE COMPETITIVE COMPANIES )F AGILITY IS THE GOAL OFFSHORE OUTSOURCING IS ONE OF THE METHODS ORGANIZATIONS CAN USE TO ATTAIN IT
2EFERENCES
4HIS CHAPTER IS BASED ON MATERIAL FROM THE BOOK h/FFSHORE /UTSOURCING "USINESS -ODELS 2/) AND "EST 0RACTICES WRITTEN BY -ARCIA 2OBINSON AND 2AVI +ALAKOTA ;-IVAR 0RESS =
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).42/$5#4)/. 'ROWTH IS THE MANTRA UPPERMOST IN THE LIST OF STRATEGIC OBJECTIVES OF ENTERPRISES TODAY AND INNOVATION IS WIDELY REGARDED AS THE ENGINE THAT FUELS GROWTH 4HEREFORE EFFECTIVELY MANAGING INNOVATION IS VITAL TO ACHIEVING SUSTAINABLE GROWTH (OWEVER IN MANAGING INNOVATION lRMS ROUTINELY GET CAUGHT OFF GUARD AND WITHOUT PROPER RESPONSE MECHANISMS BY WHAT APPEARS TO BE A SUDDENLY CHANGED ENVIRONMENT SUCH AS AN ECONOMIC DOWNTURN OR THE BURSTING OF THE )NTERNET BUBBLE !S A CONSEQUENCE EXECUTIVES OFTEN BELIEVE THAT NIMBLE RESPONSES TO MARKET CHANGES ENGENDERED IN DECREASED CYCLE TIME IN NEW PRODUCT DEVELOPMENT FOR EXAMPLE ARE CRUCIAL TO SURVIVAL AND GROWTH +RISHNA .ATHAN WHO HEADS THE ENGINEERS IN )"-S :URICH BASED 2ESEARCH ,ABORATORY NOTED THAT h4HERE IS TREMENDOUS PRESSURE ON INDUSTRY TO INNOVATE MOREAND DO IT MORE QUICKLY v 2OBERTS 3ANDLER AND +OVAC %CHOING THIS CONCERN (EWITT !SSOCIATES REPORT THAT OF #%/S SURVEYED IN ESPOUSE SPEED AND AGILITY IN STRATEGY AS A HIGH PRIORITY
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(OWEVER FOCUS ON SPEED AND AGILITY ALONE WILL LIKELY PRODUCE hKNEE JERKv REACTIONS IN BUSINESS STRATEGY FORMULATION AND IMPLEMENTATION 4HIS IS ESPECIALLY TRUE IN THE DOMAIN OF INNOVATION WHERE AN OVERBEARING FOCUS ON SPEED CAN RESULT IN TOO MANY INCREMENTAL NEW PRODUCTS THAT ONLY SERVE TO OPTIMIZE WHAT IS CURRENTLY OFFERED RATHER THAN SEEK TO OPEN UP NEW MARKETS AND NEW WINDOWS OF FUTURE OPPORTUNITIES (AMEL )NTERESTINGLY ALTHOUGH MOST EXECUTIVES SEE INNOVATION AS A HIGH STRATEGIC PRIORITY AND 2$ SPENDING HAS BEEN GENERALLY INCREASING OF SENIOR EXECUTIVES SURVEYED BY "OSTON #ONSULTING REPORT THAT THEY ARE DISSATISlED WITH THE RETURN ON INNOVATION INVESTMENTS 2OBERTS 3ANDLER AND +OVAC )F EXECUTIVES RECOGNIZE THE IMPORTANCE OF INNOVATION AND SPEND ACCORDINGLY THEN WHY IS THERE THIS HIGH LEVEL OF DISSATISFACTION 7E SUGGEST THAT THE OVER EMPHASIS ON SPEED AND AGILITY MIGHT BE INDICATIVE OF A DEEPER PROBLEM IN INNOVATION MANAGEMENT AND RECOMMEND THAT THEY SHOULD NOT BE PURSUED AS A lNAL GOAL 2ATHER SPEED AND AGILITY SHOULD BE A BY PRODUCT OF A MORE FUNDAMENTAL STRATEGIC PROCESSADAPTIVE INNOVATION MANAGEMENT !DAPTIVE INNOVATION MANAGEMENT IS DIFFERENT FROM TRADITIONAL INNOVATION MANAGEMENT IN FUNDAMENTAL WAYS 7E HIGHLIGHT THESE DIFFERENCES DEVELOP A CONCEPTUAL FRAMEWORK OF ADAPTIVE INNOVATION MANAGEMENT AND DISCUSS THE IMPLICATIONS OF SUCH A MODEL FOR BUSINESS PRACTICE 4O ILLUSTRATE THE CONCEPTS WE DRAW UPON THE BUSINESS TO BUSINESS CONTEXT .EXT WE ILLUSTRATE HOW ADAPTIVE INNOVATION MANAGEMENT IS BASED ON A SOLID UNDERSTANDING OF CUSTOMER SOLUTIONS AND THE DIFFERENCES BETWEEN AGILITY AND ADAPTIVITY
3/,54)/.3 "!3%$ )../6!4)/. -!.!'%-%.4 !'),)49 6%2353 !$!04)6)49 #OMPANIES ARE MOVING BEYOND INTEGRATING PROCESSESxAND CHOOSING )"- SOLUTIONS FOR ON DEMAND PERFORMANCE 3O THEY CAN MANAGE EVEN CAPITALIZE ON CONTINUOUS CHANGE #ULTIVATE INNOVATION -ODEL NEW WAYS OF DOING BUSINESSFAST )"- "USINESS 3OLUTIONS WEBSITE HTTPWWW IBMCOMSOLUTIONSBUSINESSSOLUTIONS
7ITH MUCH TALK TODAY ABOUT AGILE ENTERPRISES AS EVIDENCED BY THE ABOVE QUOTE AND THE NEED FOR SWIFT RESPONSES TO CASCADING MARKET CHANGES MANAGERS NATURALLY FOCUS ON BUSINESS MODELS THAT ALLOW THEM TO GENERATE SHORT TERM RAPID ADJUSTMENTS TO THEIR MARKET OFFERINGS SUCH AS SENSE AND RESPOND MODELS (OWEVER OUR FRAMEWORK SUGGESTS THAT BY FOCUSING ON SWIFT RESPONSES MANAGERS IMPLICITLY BUILD INTO THEIR MODELS A FOCUS ON SHORT CYCLE TIMES LARGELY IGNORING THE LONG TERM STRATEGIC IMPLICATIONS OF THEIR ACTIONS 4HIS PROBLEM IS EXACERBATED BY THE lNANCIAL MARKETS
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CONSTANT PRESSURE TO PRODUCE SHORT TERM GROWTH )T OFTEN LEADS TO LESS THAN OPTIMAL DECISION MAKING TO THE EXTENT THAT h3PEED WITHOUT CLARITY AND FOCUS SIMPLY PROMOTES MANY DUMB DECISIONS FAST WHILE BEING TOO AGILE COULD TAKE YOU ASTRAY FROM YOUR CORE BUSINESS AND MISSIONv 'ANDOSSY (ENCE lRMS EASILY END UP BEING DRIVEN BY MARKET TRENDS RATHER THAN DRIVING THEIR MARKETS 7E SUGGEST IN CONTRAST THAT A LONG TERM VIEW AND A BUSINESS MODEL THAT EXPLICITLY INCORPORATES LONGER CYCLE TIMES WILL ALLOW COMPANIES TO REACT MORE EFFECTIVELY IN THE SHORT TERM IN ADDITION TO MAXIMIZING LONG TERM INNOVATION RETURNS 4HIS VIEW ENGENDERS A STRONG DISTINCTION BETWEEN AN AGILE AND AN ADAPTIVE ORGANIZATION AND HOW EACH APPROACHES INNOVATION MANAGEMENT 7E DElNE AGILITY AS THE ABILITY OF lRMS TO REACT TO MARKET CHANGES BY ADJUSTING THEIR MARKET OFFERING IN THE SHORT RUN /N THE OTHER HAND ADAPTIVITY IS THE lRMS ABILITY TO UNDERSTAND THE REASONS FOR AND IMPLICATIONS OF MARKET CHANGES AND TO ADAPT TO THEM BY CREATING AN INFRASTRUCTURE AND CULTURE FOR SUSTAINED INNOVATION IN THE LONG RUN 7HILE THIS DISTINCTION IS VITAL IT DOES NOT IMPLY THAT AGILITY AND ADAPTIVITY ARE MUTUALLY EXCLUSIVE CONCEPTS 2ATHER WE ARGUE THAT ADAPTIVITY SHOULD BE GIVEN PRIORITY OVER AGILITY SINCE AGILITY IS A BUILT IN CHARACTERISTIC OF AN ADAPTIVE INNOVATION MANAGEMENT MODEL 4HE QUESTION NATURALLY ARISES AS TO HOW TO SUSTAIN INNOVATION IN THE LONG RUN AND WHAT TYPE OF ORGANIZING hTOOLv TO UTILIZE FOR ENABLING ADAPTIVE INNOVATION 7E PROPOSE THAT THE APPROPRIATE GUIDING TOOL IN THIS CASE IS AN APPROACH BASED ON CUSTOMER SOLUTIONS 3OLUTION BASED INNOVATION FOCUSES COMPANIES TO DISCOVER DElNE AND EMPLOY PATTERNS OF PROBLEMS ACROSS CUSTOMERS AND CONNECT THEM TO A SET OF FUNDAMENTAL CAPABILITIES IN THE ORGANIZATION 3UCH SOLUTIONS BASED INNOVATION MANAGEMENT REQUIRES COMPANIES TO LOOK PAST WHAT DOESNT WORK FOR CUSTOMERS IN THEIR CURRENT PRODUCT OR SERVICE OFFERING AND FOCUS DOWN STREAM ON UNDERSTANDING THE PATTERNS IN WHAT PROBLEMS CUSTOMERS FACE 4HE PAY OFF FROM PROVIDING SOLUTIONS INSTEAD OF PRODUCTS OR SERVICES HAS BEEN EXTOLLED BY MANY AS PRODUCING CUSTOMER LOCK IN CUSTOMER LOYALTY AND INCREASED REVENUES +UMAR
)NSERT $RIVE TO 3OLUTIONS &IRMS ARE BEGINNING TO RECOGNIZE THE POTENTIAL OF CUSTOMER SOLUTIONS BOTH IN THE "# AND "" REALM s 0ROGRESSIVE )NSURANCE IS TESTING THE POSSIBILITY OF ANTICIPATING IDENTIFYING AND ARRANGING CAR REPAIRS FOR CUSTOMERS RATHER THAN ONLY PROVIDING A CHECK TO COVER REPAIR COSTS
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s 6ONAGE IS BANKING ON 6/)0 TECHNOLOGY TO OFFER COMPREHENSIVE COMMUNICATION SOLUTIONS BY CUSTOMER GROUPS RATHER THAN MERELY OFFERING 6/)0 BASED PRODUCT OFFERINGS s )"- FOCUSES ON PROVIDING INNOVATIVE INTEGRATED )4 SOLUTIONS TO ITS INDUSTRIAL CUSTOMERS INSTEAD OF PROVIDING )4 PRODUCTS AND SERVICES
#ONVENTIONAL )NNOVATION -ANAGEMENT
&IGURE !DAPTIVE )NNOVATION -ANAGEMENT
7(!4 )3 !$!04)6% )../6!4)/. -!.!'%-%.4 4(% -/$%, /UR FRAMEWORK BUILDS ON THE FUNDAMENTAL PREMISE THAT CUSTOMERS ARE A lRMS PRIMARY ASSETS !S WITH ANY OTHER TYPE OF ASSET CUSTOMERS ARE EITHER WORTHWHILE INVESTING IN OR NOT GIVEN THEIR RESPECTIVE EXPECTED LIFETIME VALUES )N THE BUSINESS
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TO CONSUMER MARKET THE VIEW OF CUSTOMERS AS ASSETS MEASURED VIA CUSTOMER EQUITY HAS BEEN SHOWN TO BE USEFUL IN MAKING MARKETING INVESTMENT DECISIONS 4HE FRAMEWORK PRESENTED HERE ADDRESSES INNOVATION MANAGEMENT AT A HIGHER ORGANIZATIONAL LEVEL TRANSCENDING THE USUAL NEW PRODUCT DEVELOPMENT .0$ FOCUS EXISTING IN MUCH OF THE INNOVATION MANAGEMENT LITERATURE )T ALSO BUILDS ON THE NOTION OF SYSTEMS THINKING AND NETWORK EFFECTS IN INNOVATION THAT EMPHASIZE hBIG PICTUREv VIEWS IN MANAGEMENT MODELS #HAKRAVORTI &IGURE SHOWS THE CONVENTIONAL INNOVATION MANAGEMENT MODEL ALONGSIDE THE ADAPTIVE INNOVATION MANAGEMENT MODEL )T HIGHLIGHTS THE mOW OF INNOVATION WHICH STARTS WITH A lRMS SET OF INTELLECTUAL ASSETS DRIVING ITS CAPABILITIES WHICH IN TURN INFORM THE GENERATION OF PRODUCTS AND SERVICES USUALLY ORGANIZED AROUND PRODUCTSERVICES PLATFORMS 7HILE CONVENTIONAL INNOVATION MANAGEMENT FOCUSES ON MAXIMIZING THE PRODUCTSERVICE LEVEL AND LINKING IT TO CUSTOMERS ADAPTIVE INNOVATION MANAGEMENT IS ABOUT THE IMPORTANCE OF CONTINUOUS SYSTEMATIC AND SYSTEMIC INNOVATION MANAGEMENT THAT LINKS A lRMS INTELLECTUAL ASSETS AND CAPABILITIES MORE CLOSELY OR DIRECTLY WITH THE PROBLEMS FACED BY CUSTOMERS 7E DISCUSS EACH OF THE LINKAGES BETWEEN THE MODEL COMPONENTS IN MORE DETAIL BELOW
-/6).' &2/- 02/$5#4 4/ #534/-%2 4/ #!0!"),)49 4/ #534/-%2 02/",%-3 ,).+).' 0EOPLE ASSUME THAT INNOVATION EQUALS NEW PRODUCTSxTHIS NARROW VIEW OF INNOVATION IS VERY UNLIKELY TO CREATE NEW MARKETS AND NEW WEALTH 'ARY (AMEL h)NNOVATION AS A $EEP #APABILITYv
#OPIOUS VOLUMES EXIST ON MANAGING INNOVATION BY STRENGTHENING THE LINK BETWEEN CUSTOMER NEEDS AND WANTS AND THE PRODUCT OR SERVICE CHARACTERISTICS 4OOLS TO STRENGTHEN THIS LINK COME IN FORMS OF TOOLS SUCH AS THE VOICE OF THE CUSTOMER LEAD USER INVOLVEMENT FOCUS GROUPS CUSTOMER SURVEYS AND OTHERS .OT SURPRISINGLY EFFORTS HAVE BEEN MADE NOT ONLY TO UNDERSTAND CUSTOMERS BETTER BUT ALSO TO DO SO MORE QUICKLY &OR EXAMPLE TO UNDERSTAND CUSTOMER PREFERENCE FUNCTIONS FOR CERTAIN PRODUCT ATTRIBUTES IN A NEW CAMERA PROTOTYPE A COMPANY CAN NOW UTILIZE A #ONJOINT !DAPTIVE 2ANKING $ATABASE 3YSTEM IN ONLINE CUSTOMER SURVEYS -)4 3LOAN 3CHOOL 7ITH JUST A FEW CLICKS REQUIRED BY TARGET CUSTOMERS MANAGERS CAN QUICKLY GAIN VALUABLE INSIGHT INTO HOW THEIR CUSTOMERS VALUE VARIOUS ATTRIBUTES AND FORM SEGMENTS BASED ON THIS ANALYSIS
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7HILE FEEDING INFORMATION ON CUSTOMER NEEDS AND PREFERENCES INTO NEW PRODUCT DEVELOPMENT IS HIGHLY VALUABLE FOR SHORT TERM INCREMENTAL INNOVATION IT RARELY AFFECTS LONG TERM STRATEGIC INNOVATION IN COMPANIES DIRECTLY &OR SUCH STRATEGIC ADAPTIVE INNOVATION TO HAPPEN TWO THINGS ARE NEEDED ! FOCUS ON UNDERSTANDING THE PROBLEM SETS THAT CUSTOMERS FACE RATHER THAN THE IMMEDIATE NEEDS AND PREFERENCES OF CUSTOMERS AND ABOVE AND BEYOND CUSTOMER RELATIONSHIP MANAGEMENT AND !N UNDERSTANDING OF THE lRMS OWN CAPABILITIES THAT CAN BE USED TO ADDRESS CUSTOMERS PROBLEM SETS "OTH OF THESE INITIATIVES LEAD TO APPROACHING INNOVATION IN TERMS OF CUSTOMER SOLUTIONS 4ABLE HIGHLIGHTS THE SIGNIlCANT DIFFERENCES BETWEEN CONVENTIONAL AND ADAPTIVE INNOVATION MANAGEMENT AND INTEGRATES THE NOTION OF SOLUTION BASED INNOVATION 4O ILLUSTRATE THE DIFFERENCES IN APPROACHES TO INNOVATION MANAGEMENT LET US EXAMINE HOW -ARRIOTT )NTERNATIONAL RECENTLY ENGAGED IN ADAPTIVE INNOVATION MANAGEMENT TO RETAIN 0EPSI#O AS ONE OF ITS MAJOR BUSINESS CUSTOMERS !S MOST COMPANIES 0EPSI#O HAS BEEN DEALING WITH COST PRESSURES IN A RECESSIVE ECONOMY AND LOOKING TO CUT COSTS WHERE POSSIBLE 7ITH EMPLOYEES TRAVELING OFTEN ON BUSINESS A RE EXAMINATION OF THE COSTS STEMMING FROM CORPORATE TRAVEL LED 0EPSI#O TO CONCLUDE THAT LODGING EXPENSES WERE TOO HIGH AND HAD TO BE CONTROLLED !S ONE OF ITS MAJOR LODGING SUPPLIERS -ARRIOTT WAS A NATURAL CANDIDATE FOR CONTROL MEASURES TO BE TAKEN 7HAT WAS -ARRIOTT TO DO 3INCE THE PROBLEM DID NOT LIE IN -ARRIOTTS QUALITY OF SERVICES BUT RATHER IN THEIR COST 5NDER THE CONVENTIONAL INNOVATION APPROACH BESIDES CUTTING THEIR PRICES -ARRIOTT WOULD BE DEVELOPING NEW LODGING SERVICES THAT WOULD PROVIDE CHEAPER YET STILL SATISFACTORY FULlLLMENT OF 0EPSI#OS NEEDS (ENCE THE CUSTOMER NEED IDENTIlED IE LOWER COSTS WOULD BE THE PRIMARY FOCUS FOR DEVELOPING NEW SERVICES AND ENGAGING IN INNOVATION 2ATHER THAN ACCEPT THIS CUSTOMER NEED FOR LOWER COSTS AND ENGAGE IN THE CONVENTIONAL INNOVATION MANAGEMENT APPROACH -ARRIOTT DUG DEEPER AND ASKED QUESTIONS FROM ITS MAJOR CUSTOMERS 7HAT WERE THE PROCESSES LIKE THAT LINKED 0EPSI#O TO -ARRIOTT 7HO MADE THE TRAVEL ARRANGEMENTS FOR 0EPSI#O 7HAT WERE THEIR OBJECTIVES AND PROBLEMS (ENCE -ARRIOTT REDElNED THEIR MARKET TO INCLUDE 0EPSI#OS SUPPLIER AND CUSTOMER NETWORK IN THE DOMAIN OF CORPORATE TRAVEL 4HE INSIGHT GAINED THROUGH THIS MARKET REDElNITION -ARRIOTT LEARNED IN DEPTH ABOUT HOW TRAVEL RELATED ISSUES AFFECTED 0EPSI#OS PERFORMANCE 4O LEARN ABOUT 0EPSI#OS EMPLOYEES TRAVEL HISTORY COSTS AND NEEDS -ARRIOTT ANALYZED DATA FROM !MERICAN %XPRESS THE CREDIT CARD AND TRAVEL SERVICES COMPANY THAT 0EPSI#O EMPLOYEES USED -ARIOTT ALSO DEVELOPED A SOLUTION FOR 0EPSI#O EMPLOYEES TO ACCESS THEIR CORPORATE INTRANET FROM -ARRIOTT HOTEL ROOMS BY PARTNERING WITH AN INFORMATION TECHNOLOGY SERVICES lRM
!$!04)6% )../6!4)/. -!.!'%-%.4
4ABLE #ONVENTIONAL 6ERSUS !DAPTIVE )NNOVATION -ANAGEMENT #ONVENTIONAL )NNOVATION -ANAGEMENT
!DAPTIVE )NNOVATION -ANAGEMENT
)NNOVATION DElNITION
)DENTIlCATION AND DEVELOPMENT OF A NEW PRODUCT OR SERVICE
)DENTIlCATION AND DEVELOPMENT OF NEW CUSTOMER SOLUTIONS
-ARKET DElNITION
! FOCUS ON SPECIlC CUSTOMERS OR CUSTOMER SEGMENTS AND THEIR NEEDS -ARKETS ARE DElNED SOLELY BY CUSTOMER GROUPS
-ARKETS ARE SETS OF CUSTOMER PROBLEMS THAT ARE ONLY IDENTIlABLE BY DElNING YOUR MARKET AS YOUR CUSTOMERS MARKETS
,INKING TO MARKET
2ESTRICTED DEEP LINKING FROM CUSTOMER TO PRODUCT OR PRODUCT PLATFORM
$EEP LINKING OF CUSTOMER AND CUSTOMER PROBLEM SETS TO INTERNAL lRM CAPABILITIES AND INTELLECTUAL RESOURCES
3OURCE OF PROBLEM SET INFORMATION
#USTOMER FEEDBACK
#USTOMER EXPERIENCES %XPERIENCES GO BEYOND FEEDBACK OBTAINED BY ASKING CUSTOMERS %XPERIENCE INCLUDES LEARNING WHILE STUDYING THE BUSINESS PROBLEMS FOR CUSTOMERS AND CUSTOMER GROUPS
)NNOVATION CYCLE AND SCOPE
3HORT TERM TACTICAL AND DIVISIONAL
,ONG TERM STRATEGIC AND SYSTEMATIC
3OURCES OF INNOVATION
#USTOMER NEEDS AND lRM TECHNOLOGIES
#USTOMER PROBLEM SETS AND lRM CAPABILITIES AND INTELLECTUAL RESOURCES
!S REQUIRED BY THE ADAPTIVE INNOVATION MANAGEMENT MODEL -ARRIOTT WORKED TOGETHER WITH !MERICAN %XPRESS AND AN INFORMATION TECHNOLOGY SERVICES lRM TO DEVELOP INNOVATIONS IN HOW CORPORATE TRAVEL WAS HANDLED FOR 0EPSI#O HELPING 0EPSI#O TO MORE COST EFFECTIVELY AND MORE CREATIVELY MEET ITS TRAVEL NEEDS -ORE IMPORTANTLY HOWEVER -ARRIOTT DREW ON ITS TRAVEL INDUSTRY KNOW HOW AND CAPABILITIES TO LINK TO 0EPSI#OS PROBLEM SETS AND DEVELOP A COMPREHENSIVE SOLUTION 2ATHER THAN BEING CONSTRAINED BY ITS OWN TECHNOLOGIES -ARRIOTT OUTSOURCED VARIOUS COMPONENTS OF THE CUSTOMER SOLUTION -ARRIOTT LEVERAGED THE CAPABILITY ARISING FROM THE INNOVATIVE SOLUTION IT DEVELOPED FOR 0EPSI#O BY BUILDING OTHER INNOVATIVE SOLUTIONS FOR PROBLEM SETS FACED BY OTHER BIG CORPORATE CUSTOMERS SUCH AS )"- AND 3IEMENS (AD -ARRIOTT STAYED FOCUSED ON ITS LODGING SERVICES AS THE APPROPRIATE LEVEL OF INNOVATION A MAJOR OPPORTUNITY TO SERVE ITS CUSTOMER WOULD HAVE BEEN MISSED
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$ESPITE ITS ADVANTAGES WHY DONT COMPANIES PRACTICE ADAPTIVE INNOVATION MANAGEMENT 5NDERSTANDING WHAT STANDS IN THE WAY OF ADAPTIVE INNOVATION MANAGEMENT IS AS IMPORTANT AS UNDERSTANDING HOW IS IT IS PRACTICED 7HILE IT IS NOT EXHAUSTIVE OUR DISCUSSION BELOW HIGHLIGHTS A FEW IMPORTANT HURDLES MOST COMPANIES WILL FACE IN ESTABLISHING A DEEP LINK BETWEEN CAPABILITIES AND THEIR CUSTOMERS PROBLEM SETS
"!22)%23 4/ $%%0 #!0!"),)49 4/ #534/-%2 02/",%-3 ,).+).' 4O SUCCESSFULLY LINK BETWEEN lRM CAPABILITIES AND CUSTOMERS PROBLEM SETS AS RECOMMENDED BY THE MODEL THE RELATIONSHIP BETWEEN THE COMPANY AND ITS CUSTOMERS SHOULD ALLOW FOR A DEEPER INVESTIGATION OF CUSTOMER PROBLEMS DOWNSTREAM 4HIS MAY NOT BE THE CASE IN SITUATIONS WHERE A lRMS STRATEGIC INTENT MIGHT BE DIRECTLY OPPOSED TO THAT OF ITS CUSTOMERS &OR EXAMPLE WHEN &RITO ,AY )NC ATTEMPTED TO UNDERSTAND MORE FULLY THE MARKET OF ITS POTATO CHIPS BUYER 3UBWAY IT RAN INTO SEVERAL SOURCES OF RESISTANCE THAT ARE COMMON IN MANY SUPPLIER BUYER RELATIONSHIPS s 4RUST 4HE LACK OF TRUST BETWEEN lRMS AND THEIR CUSTOMERS PRESENTS A POWERFUL BARRIER TO ACHIEVING FULL UNDERSTANDING OF A CUSTOMERS SITUATION AND THE PROBLEMS THEY FACE s 2ISK OF ACQUISITION "Y GETTING TO KNOW MORE ABOUT A CUSTOMERS BUSINESS A COMPANY MIGHT BE PERCEIVED BY THAT CUSTOMER TO POSE A GREATER RISK OF ACQUISITION &OR EXAMPLE 3UBWAY MIGHT FEAR THAT BY DIVULGING PROPRIETARY INFORMATION FROM ITS CUSTOMER BASE TO 0EPSI#O IT COULD INCREASE THE RISK OF PREDATORY ACTIONS BY 0EPSI#O s !DVERSE DECISION MAKING %QUIPPED WITH A BETTER UNDERSTANDING OF ITS CUSTOMERS MARKETS AND PROBLEMS BUYERS MIGHT FEAR THAT THEIR SUPPLIERS WILL UTILIZE THIS INFORMATION TO MAKE DECISIONS THAT WILL PROVE DETRIMENTAL TO THE BUYERS CURRENT BUSINESS MODEL &OR EXAMPLE THE STRATEGIC INTENT FOR &RITO ,AY AS THE SELLER IE MAXIMIZE REVENUE FROM CHIPS MIGHT BE DIRECTLY OPPOSED TO THE STRATEGIC INTENT OF 3UBWAY AS THE BUYER IE MAXIMIZE SALES OF NON FRIED FOOD s #OST OF INFORMATION 'ETTING INTO A CUSTOMERS SHOES REQUIRES SUBSTANTIAL TIME AND RESOURCES WHICH MIGHT BE SEEN AS BEING MORE VALUABLE IF DEPLOYED ELSEWHERE &OR EXAMPLE 0EPSI#O MIGHT PAY 3UBWAY MILLION
!$!04)6% )../6!4)/. -!.!'%-%.4
QUARTER FOR SHARING THEIR CUSTOMER SURVEYS .OT SURPRISINGLY RIVAL #OCA #OLA IS ALSO A STRONG BELIEVER IN hKNOWING YOUR CUSTOMERS CONSUMERSv AND HAS BEEN IMPLEMENTING THIS BELIEF s $IVISIONAL DEPARTMENTAL OR FUNCTIONAL SILOS !S A COMPANY GETS BIGGER ITS INTELLECTUAL ASSETS AND CAPABILITIES GET MORE DISTANCED AND EVEN DIVORCED FROM ONE ANOTHER AND FROM CUSTOMER PROBLEM SETS BOTH WITHIN AND ACROSS BUSINESS GROUPS OR MARKETS 4HIS PREVENTS THE INTELLECTUAL ASSETS FROM BEING DEPLOYED DIRECTLY TO COME UP WITH INNOVATIVE SOLUTIONS FOR LARGER CUSTOMER PROBLEM SETS LEADING TO MISSED INNOVATION OPPORTUNITIES &OR EXAMPLE (EWLETT 0ACKARD ,ABS IS A GROUP WITHIN (EWLETT 0ACKARD THAT HAS SEVERAL TALENTED SCIENTISTS AND ENGINEERS WHO WORK ON IMPROVING THE DESIGN AND DELIVERY OF OFFERINGS TO ITS CUSTOMER GROUPS 4HESE SCIENTISTS AND ENGINEERS ACT AS INTERNAL CONSULTANTS AND INTERACT MAINLY WITH DIVISIONAL MANAGERS RARELY WORKING DIRECTLY WITH CUSTOMERS ON THEIR PROBLEM SETS 3UCH A SETUP MAY ALLOW THE lRM TO BE AGILE BUT NOT ADAPTIVE WITH RESPECT TO INNOVATION MANAGEMENT )N CONTRAST 0ROCTER 'AMBLE 0' FOLLOWS WHAT THEY CALL h DEGREE INNOVATION v BRINGING TOGETHER FUNCTIONAL AREAS FOR CLOSE COLLABORATION AND INTENTLY MOVING TECHNOLOGIES AND IDEAS ACROSS THEIR VARIOUS BUSINESS UNITS TO MAXIMIZE SYNERGIES AND RECOGNIZE POTENTIAL CUSTOMER SOLUTIONS !T 0' )TS $EGREE )NNOVATION )N SUM A CLOSE RELATIONSHIP WITH CUSTOMERS IS ACCEPTED AS KEY IN TODAYS DYNAMIC ENVIRONMENT (OWEVER OUR EXPOSITION OF A FEW BARRIERS TO DEEP LINKING TO CUSTOMERS ILLUSTRATE THAT COMPANIES CANNOT ALWAYS RELY ON COOPERATION FROM THEIR BUYERS TO UNDERSTAND THEM BETTER 4O GAIN SUCH COOPERATION FROM SUPPLY CHAIN AND NETWORK MEMBERS COMPANIES MUST DEMONSTRATE VALUE TO EACH OF THE NETWORK MEMBERS !LTERNATIVE METHODS FOR DEVELOPING A DEEP UNDERSTANDING OF A lRMS CUSTOMER PROBLEM SETS NEED TO BE EXPLORED
(/7 #!. &)2-3 -/6% &2/- #/.6%.4)/.!, 4/ !$!04)6% )../6!4)/. -!.!'%-%.4 4O SURMOUNT THE EXTERNAL BARRIERS TO DEEP LINKING A lRMS CAPABILITIES TO THEIR CUSTOMERS PROBLEM SETS lRMS SHOULD FOLLOW A SIX STEP PROCESS OF ADAPTIVE INNOVATION MANAGEMENT 4HIS PROCESS LEADS COMPANIES FROM ASSESSING THEIR INTERNAL STRENGTHS AND CAPABILITIES TO MEASURE THE EFFECTIVENESS OF ADDRESSING
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&IGURE 3TEPS IN )MPLEMENTING !DAPTIVE )NNOVATION -ANAGEMENT
CUSTOMER PROBLEM SETS VIA SOLUTIONS &IGURE ILLUSTRATES THE SIX STEPS NECESSARY FOR SUCCESSFULLY IMPLEMENTING AN ADAPTIVE INNOVATION MANAGEMENT MODEL 7E EXPLAIN EACH OF THE STEPS IN MORE DETAIL BELOW )DENTIFY INTERNAL CAPABILITIES 4O IDENTIFY AN ORGANIZATIONS CAPABILITIES CORPORATE EXECUTIVES MUST WORK CLOSELY WITH DIVISIONAL MANAGERS /FTEN SUCCESSFULLY IDENTIFYING STRENGTHS AND WHAT THE COMPANY DOES WELL IS HAMPERED BY AN UNNECESSARILY NARROW VIEW OF CAPABILITIES &OR EXAMPLE COMPANIES EASILY FALL INTO THE TRAP OF IDENTIFYING TECHNOLOGIES AS CAPABILITIES +IMBERLY #LARK SEES AS ONE OF ITS MAJOR CAPABILITIES ITS KNOW HOW IN NON WOVEN FABRICS 3UCH A TECHNOLOGY ALLOWS IT TO SERVE DIVERSE CUSTOMER NEEDS FROM DIAPERS TO FEMININE HYGIENE (OWEVER THIS FOCUS CAN LEAD TO INNOVATION MYOPIA AND LEAVES OUT THE MOST IMPORTANT UNDERLYING CAPABILITY OF INTELLECTUAL CAPITAL AND OTHER ORGANIZATIONAL RESOURCES THAT DRIVE CAPABILITIES &OR EXAMPLE +IMBERLY #LARK HAS SEVERAL ENGINEERS AND SCIENTISTS WITH EXPERTISE IN mUID MECHANICS AND CHEMICAL ENGINEERING ,INKING THEIR EXPERTISE TO CUSTOMER PROBLEM SETS COULD PROVIDE THE SOURCE OF CONTINUING NEW INNOVATIONS (ENCE MANAGERS MUST TAKE A DEEPER VIEW OF CAPABILITIES ON WHICH TO BUILD "OEING FOR EXAMPLE REALIZED THAT ONE OF ITS MAIN CAPABILITIES WAS GROUNDED IN lNANCE AND INVESTMENT MANAGEMENT NOT IN MANUFACTURING "OEING WAS ABLE TO DEEPLY LINK THIS CAPABILITY AND ITS UNDERLYING SOURCES TO THE NEEDS OF !4! A POTENTIAL CUSTOMER 4HE RESULT "OEING WAS ABLE TO CLOSE A BILLION SALES CONTRACT WITH !4! WHICH WOULD NOT HAVE BEEN POSSIBLE OTHERWISE ACCORDING TO !4! PRESIDENT AND #%/ *OHN 0 4AGUE 0ROCTOR
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)DENTIFY CUSTOMER PROBLEM SETS !PART FROM SMALL AND MEDIUM SIZED COMPANIES BIGGER CORPORATIONS ARE PARTICULARLY CHALLENGED IN THEIR EFFORTS TO SCAN ACROSS CUSTOMER GROUPS AND SEGMENTS TO UNCOVER PATTERNS OF PROBLEM SETS 0ARTICULARLY IMPORTANT IS A FOCUS ON WHAT IS GOING ON IN YOUR CUSTOMERS MARKETS AND HOW THEIR SUPPLIERS AND CUSTOMERS ARE CHANGING THEREBY IDENTIFYING NEW PROBLEMS THAT CREATE OPPORTUNITIES FOR INNOVATIVE CUSTOMER SOLUTIONS -ARRIOTTS COMPREHENSIVE STUDY OF 0EPSI#OS RELATIONSHIP WITH !MERICAN %XPRESS LED TO A DEEP UNDERSTANDING OF NOT JUST 0EPSI#OS PROBLEMS BUT ALSO OF OTHER CUSTOMERS WITH SIMILAR PROBLEMS 4OO OFTEN CUSTOMER NEEDS AND REQUIREMENTS ARE VIEWED IN ISOLATION FROM THE CUSTOMERS OWN NETWORK OF SUPPLIERS BUYERS AND OTHER CHANNEL MEMBERS ! COMPREHENSIVE VIEW AND UNDERSTANDING OF ALL INVOLVED IS NEEDED FOR SUCCESSFUL ADAPTIVE INNOVATION MANAGEMENT -AP CAPABILITIES AND INTELLECTUAL RESOURCES TO CUSTOMER PROBLEM SETS 4OO MANY MANAGERS ARE CAUGHT UP IN PROVIDING THE CORRECTLY CONlGURED PRODUCT OR SERVICE TO THEIR CUSTOMERS &UELED BY THE OFT REPEATED ADVICE OF CONTINUOUSLY IMPROVING PRODUCT QUALITY MANAGERS SPEND THE BULK OF THEIR TIME IN ACTIVITIES THAN PROMOTE PRODUCT lNE TUNING 7HEN DEVELOPING AN ADAPTIVE INNOVATION MANAGEMENT PROCESS DO NOT THINK OF SPECIlC OFFERINGS IE NO SPECIlC PRODUCTS OR SERVICES BUT FOCUS ON STRATEGIC SOLUTIONS LINKING THE CAUSE OF CUSTOMER PROBLEM SETS TO A RESOLUTION OF THESE PROBLEMS NOT TO A SOLUTION WHICH REPRESENTS SPECIlC PRODUCTS OR SERVICES 4HIS NEEDS TO BE DONE ACROSS DIVISIONS $EVELOP A SUPPORTIVE INFRASTRUCTURE AND CULTURE (OW DO YOU MOVE FROM IDENTIFYING THE RIGHT CAPABILITIES AND INTELLECTUAL RESOURCES TO DEPLOYING THEM IN THE FORM OF THE RIGHT SET CUSTOMER SOLUTIONS /NE WAY TO ACHIEVE THIS IS TO ENSURE THAT YOUR VALUE SYSTEMS ARE SUPPORTIVE OF ADAPTIVE INNOVATION MANAGEMENT 7HEN 7HIRLPOOL DECIDED TO MAKE INNOVATION SYSTEMIC AND A PRIORITY FOR EVERYBODY IN THE ORGANIZATION EXECUTIVES RECOGNIZED THAT A SUPPORTIVE CULTURE WAS IMPERATIVE FOR THE CHANGE TO TAKE PLACE IN REALITY NOT ONLY ON PAPER 4HE RESULT WAS A PERVASIVE CHANGE IN VALUES AND BEHAVIOR THROUGHOUT THE ORGANIZATIONS DIVISIONS AND LEVELS "ECAUSE ADAPTIVE INNOVATION MANAGEMENT CALLS FOR DEEP LINKING CAPABILITIES AND INTELLECTUAL RESOURCES WITH CUSTOMERS PROBLEM SETS IT IS ALL THE MORE IMPERATIVE THAT VALUES AND INCENTIVES ARE ALIGNED TO PROMOTE SUCH A CULTURE AND INFRASTRUCTURE
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,INK STRATEGIC RESOLUTION TO TECHNICAL SOLUTION SPACES /NCE CAPABILITIES AND CUSTOMER PROBLEM SETS HAVE BEEN IDENTIlED AND A SUPPORTIVE CULTURE DEVELOPED IMPLEMENTATION OF INNOVATIVE CUSTOMER SOLUTIONS BECOME THE NEXT STEP ON WHICH TO FOCUS /NLY NOW SHOULD STRATEGIC SPACES IE RESOLUTIONS TO CUSTOMER PROBLEMS BE LINKED TO TECHNICAL SPACES IE SOLUTIONS EMBODIED IN PRODUCTS OR SERVICES *UST AS THE FRONT END OF PRODUCT INNOVATION REPRESENTS THE CONCEPTUAL IDEA OF SOME SOLUTION WHICH IS TRANSLATED IN LATER STAGES INTO A COMBINATION OF TECHNICAL FEATURES AND ATTRIBUTES THAT MAKE UP THE ACTUAL PRODUCT OR SERVICE SO STRATEGIC RESOLUTIONS NEED TO BE TRANSLATED INTO TECHNICAL SOLUTIONS )N .EW 0RODUCT $EVELOPMENT .0$ THIS TRANSLATION HAPPENS VIA TOOLS SUCH AS 1UALITY &UNCTION $EPLOYMENT 1&$ AND THE (OUSE OF 1UALITY )N ADAPTIVE INNOVATION MANAGEMENT THIS PROCESS OCCURS AT THE ORGANIZATIONAL CAPABILITIES AND INTELLECTUAL RESOURCES RATHER THAN AT THE PRODUCT LEVEL -EASURE RESULTS AND ADJUST PROCESSES !S WITH ANY NEW PROCESS MEASUREMENT IS CRITICAL FOR ASSESSING HOW SUCCESSFULLY CHANGE HAS BEEN IMPLEMENTED )N GENERAL TWO SETS OF MEASURES NEED TO BE APPLIED &IRST HAVE CAPABILITIES AND INTELLECTUAL RESOURCES BEEN LINKED SUCCESSFULLY TO CUSTOMER PROBLEM SETS 3ECOND HAVE STRATEGIC RESOLUTIONS BEEN LINKED SUCCESSFULLY TO TECHNICAL SOLUTIONS 4HE lRST SET OF MEASURES SHOULD ADDRESS THE CONCEPTUAL AND STRATEGIC ASPECTS OF IDENTIFYING CAPABILITIES AND CUSTOMER PROBLEMS 4HE SECOND SET OF MEASURES ASSESSES THE IMPLEMENTATION OF THE IDENTIlED CUSTOMER SOLUTIONS AND HOW SUCCESSFULLY THEY HAVE BEEN DEPLOYED INTO THE MARKET !N INNOVATION MANAGEMENT SCORECARD WILL BE A DElNITE PLUS 4HIS SCORECARD WOULD TRACK PERIODIC IDENTIlCATION OF CUSTOMER PROBLEM SETS AND CORRESPONDING INNOVATIONS AND A STOCK OF UTILIZATION OF THE lRMS INTELLECTUAL ASSETS !N EXAMPLE OF SUCH A SCORECARD IS SHOWN IN &IGURE
)-0,)#!4)/.3 /& !$!04)6% )../6!4)/. -!.!'%-%.4 %XCEPT FOR CRISIS SITUATIONS SIGNIlCANT AND LARGE SCALE ORGANIZATIONAL CHANGE TOWARD A DETERMINED DIRECTION IS EXTREMELY DIFlCULT AND VERY RARE %VEN RARER SEEMS TO BE THE ORGANIZATION THAT IS COMFORTABLE WITH CONSTANT CHANGE 9ET THAT IS THE ESSENCE OF AN ADAPTIVE ORGANIZATION OPERATING ON A RUGGED LANDSCAPE &ULMER P
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&IGURE !DAPTIVE )NNOVATION -ANAGEMENT 3CORECARD
4HE IDEAL SOLUTIONS PROVIDER HAS AN ORGANIZATION THAT IS PEOPLE KNOWLEDGE AND PROCESS INTENSIVE BUT ASSET LIGHT )TS FOCUS IS ON KNOWLEDGELEARNING ABOUT CUSTOMERS COLLABORATIVE LEARNING WITH PARTNERS AND LEARNING TO LEVERAGE NETWORK PARTNERS RESOURCES AND COMPETENCES +UMAR P
(OW DOES TRULY ADAPTIVE INNOVATION MANAGEMENT WORK IN COMPANIES 7HAT CAN MANAGERS EXPECT AND WHAT DO THEY NEED TO LOOK OUT FOR !DAPTIVE INNOVATION MANAGEMENT REQUIRES BOTH TOP DOWN AND BOTTOM UP IMPLEMENTATION AND THE DRIVING OF A NEW ADAPTIVE BUSINESS MODEL 6ISION AND VALUES NEED TO BE DISPERSED THROUGHOUT THE COMPANY BY TOP MANAGEMENT AND TANGIBLE EXPRESSIONS OF THE NEW MODEL EVEN SOMETHING AS SIMPLE AS POSTERS SHARED EMAILS ETC THAT EMBODY THE NEW INNOVATION MANAGEMENT APPROACH AND REmECT ACTIONABLE ENACTED VALUES )N ADDITION EMPOWERING MIDDLE MANAGEMENT TO IMPLEMENT VISION CAN BE ACHIEVED VIA RESTRUCTURED COMMUNICATIONS INCENTIVE STRUCTURE AND ALIGNED METRICS #ASE IN POINT IS 7HIRLPOOL WHERE INNOVATION WAS TRANSFORMED FROM BEING WHAT A FEW TOP MANAGERS DID TO INNOVATION BEING PART AND PARCEL OF EVERY EMPLOYEES JOB DESCRIPTION 4HE DRIVE TO EMBED INNOVATION AS A CORE COMPETENCY THROUGHOUT THE ORGANIZATION AND AT ALL LEVELS WAS DElNED BY #%/ $AVID 7HITWAM IN AS THE VISION h)NNOVATION FROM %VERYONE AND %VERYWHEREv 3NYDER AND $UARTE
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!DAPTIVE INNOVATION MANAGEMENT GOES BEYOND EMBEDDING INNOVATION AT ALL LEVELS BY MAKING DEEP LINKING A CORNERSTONE OF THE lRMS BUSINESS PHILOSOPHY 4HE IMPORTANCE OF SHARED VALUE SYSTEMS IN ORGANIZATIONS IS WELL DOCUMENTED AND ITS ESPECIALLY CRITICAL WHEN PERVASIVE CHANGES IN THE CULTURE AND STRATEGIC DIRECTION OF A lRM IS MADE *UST AS CUSTOMERS ENCOUNTERING A NEW PRODUCT ARE TRYING TO lT IT INTO THEIR EXISTING REPERTOIRE OF MENTAL MODELS WE ARGUE THAT MANAGERS AND COMPANIES TRY TO FORCE CHANGES IN THE ENVIRONMENT INTO EXISTING RESPONSE TEMPLATES AND A NEW INNOVATION MANAGEMENT MODEL REQUIRES ADJUSTING SUCH MENTAL AND RESPONSE TEMPLATES %VEN MORE IMPORTANT COMPANIES NEED mEXIBLE AND ADAPTIVE MENTAL MODELS THAT ARE EMBODIED IN THEIR BUSINESS MODELS 4HIS CAN BE ACHIEVED BY BUILDING IN EXPLICIT PARAMETERS OF CHANGE INTO THE INNOVATION MANAGEMENT MODEL FORCING CONSTANT REINTERPRETATION AND RECALIBRATION OF THE MODEL !NOTHER EXAMPLE OF SYSTEMS WIDE INNOVATION AND THE DRIVE TOWARDS HARNESSING CROSS DIVISIONAL SYNERGIES IE CAPABILITIES CAN BE FOUND IN 3IEMENS -EDICAL 3OLUTIONS #%/ %RICH 2EINHARDT SPELLS OUT THE IMPERATIVE OF STAYING CLOSE TO THE MARKET WHILE COORDINATING INNOVATION EFFORTS ACROSS DIVISIONS TO MAXIMIZE SYNERGIES 7E WORK WITH EACH DIVISION TO DElNE CLEAR GOALS AND OBJECTIVES BUT IT IS THEIR RESPONSIBILITY TO MEET THESE GOALS 4HEY ARE THE WORLDWIDE ENTREPRENEURS /NE ESPECIALLY IMPORTANT SKILL THAT ENTREPRENEURS IN A LARGE ORGANIZATION MUST HAVE IS THE ABILITY TO RECOGNIZE AND EFlCIENTLY USE INTERNAL CROSS DIVISION SYNERGIES $R %RICH 2EINHARDT #%/ AND PRESIDENT OF 3IEMENS -EDICAL 3OLUTIONS AND A MEMBER OF THE MANAGING BOARD OF 3IEMENS !' )N ADDITION TO THE SYSTEMIC NATURE OF ADAPTIVE INNOVATION MANAGEMENT A FOCUS ON STRATEGIC INNOVATION CAPABILITIES AND CUSTOMER SOLUTIONS WILL RESULT IN MORE SELECTIVE INVESTMENTS AND FEWER hKNEE JERKv INNOVATIONS THAT ARE NOT STRATEGICALLY LINKED TO A LONG TERM VISIONMISSION 4HE FOCUS ON CAPABILITIES AND SOLUTIONS FORCES MANAGEMENT TO CONSTANTLY RE EVALUATE AND REDElNE MARKETS AND FOCUS THEIR EFFORTS ON INTEGRATED STREAMS OF INNOVATION RATHER THAN ON COMPONENT BASED PRODUCT DRIVEN INNOVATION #ARDINAL (EALTH )NC FOR EXAMPLE DEMONSTRATES THIS STRATEGIC ADAPTIVE INNOVATION MANAGEMENT BY ADDRESSING CUSTOMERS PROBLEM SETS VIA COMPREHENSIVE SOLUTIONS )TS DRUG WHOLESALING BUSINESS HAS BEEN DEVELOPED TO CONTROL THE DISTRIBUTION OF DRUGS hALL THE WAY THROUGH HOSPITALS TO THE PATIENTS BEDSIDE WITH AUTOMATED SYSTEMS THAT CAN OFFER PHARMACIES AND HOSPITALS UP TO THE MINUTE DATA ABOUT WHERE A DRUG IS LOCATED OR WHICH NURSE HAS ITv #ROCKETT
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4HIS ADDRESSES HOSPITALS CONCERNS REGARDING ERRORS STEMMING FROM HUMAN DATA ENTRY &URTHERMORE #ARDINAL LINKS ITS INNOVATION EFFORTS IN AUTOMATION BY CONNECTING ITS DISTRIBUTION BUSINESS WITH ITS NON DISTRIBUTION DIVISION EXEMPLIFYING CAPABILITY DRIVEN INNOVATION MANAGEMENT ACROSS CUSTOMER PROBLEM SETS AND DIVISIONS &OR EXAMPLE IN #ARDINAL ACQUIRED 0YXIS THE MAKER OF A SMART MACHINE THAT MONITORS THE DRUG REQUIREMENTS OF PATIENTS AND HELPS NURSES IN ADMINISTERING THEM
#/.#,53)/. 4HE INCREASINGLY DYNAMIC MARKETPLACE WITH ALL ITS DISRUPTIVE ECONOMIC TECHNOLOGICAL OR SOCIOPOLITICAL SHIFTS CALLS FOR ORGANIZATIONS TO HAVE ADAPTIVE INNOVATION MANAGEMENT AND BUSINESS MODELS IN PLACE &IRMS ARE CAUGHT IN A CONVENTIONAL INNOVATION MANAGEMENT PROCESS THAT PRODUCES A DISTINCT DISCONNECT BETWEEN INNOVATION MANAGEMENT WHICH TAKES THE FORM OF .0$ OR PROJECT MANAGEMENT AND THE STRATEGIC VISION OF THE lRM WHICH GUIDES OVERALL MANAGERIAL ACTION 7HILE NARROWLY DElNING ONES BUSINESS NARROW PRODUCT BENElT DElNITION RESULTS IN MARKETING MYOPIA SOLUTION BASED ADAPTIVE INNOVATION MANAGEMENT CAN CONNECT MANAGERIAL ACTIVITIES WITHIN A lRM VIA STRATEGIC RESOLUTION SPACES AND THUS ENSURE SYNERGIES DEPLOYMENT OF CORE CAPABILITIES AND INTELLECTUAL ASSETS AND CLOSENESS TO MARKET ACROSS DIVISIONS )N THIS CHAPTER WE HAVE IDENTIlED THAT MANAGERS WHO PRIMARILY FOCUS ON INCREASING THE SPEED OF THEIR INNOVATION PROCESSES LOSE SIGHT OF THE LONG TERM STRATEGIC IMPLICATIONS OF THEIR INNOVATION DECISIONS )N EFFECT CONCENTRATING ON AGILITY IN INNOVATION PRODUCES IMPROVEMENTS IN THE STATUS QUO IE IMPROVEMENTS IN THE CURRENT PRODUCT OFFERING WITHIN CURRENT MARKETS -OREOVER AGILITY DEMANDS AN UNDERSTANDING OF CUSTOMER DEMANDS AND RELIANCE ON CUSTOMER FEEDBACK 3INCE THIS IS ADVOCATED BY MARKET ORIENTATION HOW CAN THAT BE DETRIMENTAL TO SUCCESSFUL INNOVATION )RONICALLY SIMPLE CUSTOMER FEEDBACK MASKS THE UNDERLYING CUSTOMER PROBLEM SETSAND ONLY A DEEP UNDERSTANDING OF CUSTOMER PROBLEM SETS ALLOW MANAGERS TO DEVELOP INNOVATIVE CUSTOMER SOLUTIONS THAT BREAK OUT OF STANDING CUSTOMER NEED AND PRODUCT DElNITIONS (ENCE MANAGERS MUST RECOGNIZE HOW IMPERATIVE A DEEP LINKING TO CUSTOMERS MARKETS AND PROBLEM SETS ARE )N LINKING TO CUSTOMER PROBLEM SETS THE SCOPE OF INNOVATION MUST ALSO BE REDElNED 2ATHER THAN WORKING ON DEVELOPING NEW PRODUCTS OR SERVICES OR PRODUCTSERVICE PLATFORMS COMPANIES MUST UNDERSTAND AND LINK THEIR INTERNAL CAPABILITIES TO CUSTOMER PROBLEM SETS 4HIS REQUIRES INNOVATION AT AN ORGANIZATIONAL
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LEVEL WITH A STRATEGIC SYSTEMATIC AND SYSTEMIC FOCUS #OMPANIES THAT IMPLEMENT SUCH AN ADAPTIVE INNOVATION MANAGEMENT MODEL WILL HAVE TO ENSURE A SUPPORTIVE INFRASTRUCTURE AND CULTURE BUT CAN LOOK FORWARD TO SIGNIlCANT RETURNS TO THEIR INNOVATION INVESTMENT #ASE IN POINT IS 0' WHEREAS #4/ 'ILBERT ,LOYD RECENTLY NOTEDA NEW INNOVATION MANAGEMENT MODEL THAT IDENTIlES AND CONNECTS CAPABILITIES FUNCTIONS AND DIVISIONS AND MOVES TECHNOLOGY AND IDEAS AROUND IN THE COMPANY PRODUCED A SIGNIlCANT INCREASE IN INNOVATION PRODUCTIVITYWITH A REDUCTION IN 2$ INVESTMENT
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5.#%24!).49 )3 4(% -/4(%2 /& ).6%.4)/.!.$ !'),)49 7HAT IS IT ABOUT CERTAIN WORDS THE WORD AGILITY FOR EXAMPLE !FTER A PERIOD OF ECLIPSE AGILITY IS CURRENTLY MORE THAN A HOT WORD ITS A BONA lDE HOT TOPIC A FAVORITE OF THE PRESS THE PUNDITS THE ANALYSTS AND VENDORS ! QUESTION IS WHY NOW OR WHY AGAIN 4HE ANSWER IS AS SIMPLE AS ITS IMPLICATIONS ARE PROFOUND WHATS DRIVING THIS HOT TOPIC IS A COLD REALITYTHE INEXORABLE MARKETPLACE UNCERTAINTY WE ALL FACE #ONSIDER )N A RECENT SURVEY 'LOBAL &UTURE &ORUM OF #8/S SENIOR CORPORATE EXECUTIVES THAT HAVE hCHIEF v IN THEIR TITLE AND SENIOR EXECUTIVES PERCENT REPORTED THAT IN THE PAST YEAR THEIR ORGANIZATION HAD EXPERIENCED RADICAL CHANGE 4HE THING IS THE UNCERTAINTY THAT DRIVES RADICAL CHANGE IS NOW THE ONLY CERTAINTY OF OUR COMPETITIVE LIFE "UT JUST HOW PREPARED IS BUSINESS TO DEAL WITH IT
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.OT VERY WELL PREPARED AT ALL )N THE SAME SURVEY PERCENT OF THE RESPONDENTS RATED THEIR ORGANIZATION AS hINEFFECTIVE IN MANAGING THE VARYING SCOPES OF CHANGEv 4HIS HELPS EXPLAIN THE CRITICAL NEED FOR AGILITY 7E ALL KNOW THAT WE FACE A SIGNIlCANT AMOUNT OF UNCERTAINTY WE ALSO ALL KNOW THAT SUCH UNCERTAINTY CREATES FAST MOVING BUSINESS OPPORTUNITIESFOR THOSE ABLE TO EXPLOIT THEM !S WE SEE IT THIS MEANS BUILDING THE CAPABILITIES AND MECHANISMS NEEDED TO EXPLOIT THOSE FAST MOVING BUSINESS OPPORTUNITIESINDEED THE VERY OPPORTUNITIES THAT UNCERTAINTY CREATES 4O PUT IT ANOTHER WAY UNCERTAINTY IS THE MOTHER OF INVENTION JUST AS AGILITY IS THE ABILITY TO MOBILIZE YOUR CAPABILITIES AND RESOURCES TO TAKE ADVANTAGE OF THOSE OPPORTUNITIES AND TO DO SO BEFORE FAST FOLLOWING COMPETITORS CAN GET INTO THE ACT COPYING THE MODEL AND BLEEDING OFF ITS VALUE 4HERE HAS BEEN MUCH WRITTEN ON ORGANIZATIONAL AGILITYON WHAT AN AGILE COMPANY LOOKS LIKE ON THE LEADERSHIP NEEDED TO CHAMPION AGILE CAPABILITIES THROUGHOUT THE ORGANIZATION AND ON SETS OF STUFF TO DO TO BECOME MORE AGILE !S WELL BRIEmY DISCUSS BELOW THERE ARE MULTIPLE AND SPECIlC CHALLENGES TO BEING AGILE CHALLENGES WE FACE EVERYDAY 9ET WHAT WE WANT TO EXPLORE IN THIS ARTICLE IS A TWO SIDED QUESTION IS THERE A ROOT CAUSE THAT IMPEDES ORGANIZATIONAL AGILITY AND IS THERE A CORRESPONDING $.! FOR ORGANIZATIONAL AGILITY 3UCH $.! IF IT EXISTS CAN BE EXCAVATED TO EXPOSE ANOTHER WAY OF MAKING SENSE OF THE CHALLENGES WE FACE AND FROM THAT BEING ABLE TO TAKE ACTION MORE EFFECTIVELY TO BECOME MORE AGILE /N THAT NOTE LETS BEGIN WITH A SIMPLE WORKING DElNITION /RGANIZATIONAL AGILITY IS THE CAPABILITY TO RESPOND TO NEW BUSINESS DEMANDS AND OPPORTUNITIES EFFECTIVELY AND EFlCIENTLY RAPIDLY SHIFTING AND ALIGNING BUSINESS ASSETS TO BEAT THE COMPETITION TO MARKET !ND JUST HOW IMPORTANT IS AGILITY TO EXECUTIVES 6ERY IMPORTANT ACCORDING TO PERCENT OF THE # LEVEL EXECUTIVES FROM MID TO LARGE SIZE COMPANIES IN THE 5NITED 3TATES AND THE %UROPEAN 5NION WHO SAID THAT hAGILE ORGANIZATIONS THAT CAN REACT QUICKLY TO CHANGING BUSINESS MODELS TECHNOLOGIES AND PROCESSES WILL OUTPERFORM COMPANIES THAT FOCUS ON COST EFlCIENCIESv 5NISYS #ORPORATION 0ONDER THAT FOR A MOMENT )N THE CALCULUS OF UNCERTAINTY AGILITY IS BEGINNING TO DETHRONE COST &ACED WITH THIS NECESSITY MANY EXECUTIVES PERCEIVE A NEW CHALLENGE HOW TO TRANSFORM THEIR COMPANY TO ACHIEVE AGILITY AND ALL THE SUCCESS THAT GOES WITH IT 3UCH CAPABILITY DEPENDS UPON BEING ABLE TO EXECUTE QUICKLY AND EFFECTIVELY 3O FAR SO GOODEASILY WELL ACCEPTED AND EVEN MORE EASILY SAID 4HE DIFlCULTY AS WE ALL KNOW LIES IN ACTUALLY BEING AGILE 7HAT IS IT ABOUT AN ORGANIZATION THAT MAKES AGILITY SO DIFlCULT TO ACHIEVE !ND WHAT IS COMMON TO THESE DIFlCULTIES ,ETS SEE
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#/2% #(!,,%.'%3 4/ /2'!.):!4)/.!, !'),)49 &OUR SPECIlC CHALLENGES WE ALL FACE EVERYDAY IMPEDE ORGANIZATIONAL AGILITY &IRST HOW DO YOU GET YOUR BUSINESS PROCESSES TO BE SUFlCIENTLY RESPONSIVE TO CHANGING MARKET CONDITIONS 7HETHER THOSE CHANGES ARE REGULATORY DRIVEN OR A RESULT OF DISRUPTIVE TECHNOLOGIES OR COMPETITOR MOVES THIS PARTICULAR CHALLENGE MANIFESTS ITSELF IN COMPLAINTS WE ALL HEAR AND LIVE THROUGH ABOUT HOW TO GET NEW PRODUCTS OR SERVICES OUT THE DOOR FASTER /R FROM A PUBLIC SECTOR PERSPECTIVE HOW TO BE MORE RESPONSIVE TO EVER CHANGING LEGISLATIVE DEMANDS FOR NEW SERVICES MUCH LESS CONVERT AN AGENCY OR DEPARTMENT INTO A MORE hCONSTITUENT DRIVENv ORGANIZATION 3ECOND HOW DO YOU INTEGRATE EXISTING WITH EMERGING TECHNOLOGY APPLICATIONS 7E KNOW THE STATISTICS ONLY TOO WELL 5P TO OF THE )4 BUDGET SPENT IS ON MAINTENANCE AND REDEVELOPMENT RATHER THAN NEW APPLICATION DEVELOPMENT AND OF APPLICATION FUNCTIONALITY IS REDUNDANT LEADING TO SIGNIlCANT DRAG ON COST LEVELS 4HESE AND OTHER STATISTICS MERELY MASK THE REAL ISSUE THAT A NEW SET OF TECHNICAL SKILLS IS REQUIRED TO COMPLEMENT THE ONES WE ALREADY HAVE GIVEN THE NEVER ENDING INTRODUCTIONS OF NEW TECHNOLOGIES AND TOOL SUITES 9ET THE PREPONDERANCE OF EFFORTS REMAINS TIED TO ENSURING THAT THE HERITAGE OR LEGACY APPLICATIONS ARE MAINTAINED AND FOR GOOD REASONTHEY WORK 4HIS TENSION BETWEEN WHAT WE HAVE AND WHAT WE NEED TO INCORPORATE IS EVEN FURTHER EXACERBATEDWHETHER BY EXTENSIVE CONSOLIDATION OR ACQUISITION OF COMPANIES INTO OTHER COMPANIES OR THE RESULT OF KICKING OFF MULTIPLE PROJECTS TO MEET MULTIPLE OBJECTIVES MULTIPLE TIMES OVER THE YEARS 4HIS LEADS TO WHAT %XTRAORDINARILY COMPLEX AND DIFFERENT TECHNICAL ENVIRONMENTS COMPOUNDING THE DIFlCULTY OF GETTING DIFFERENT SYSTEMS TO TALK WITH EACH OTHER MUCH LESS lGURING OUT HOW TO EVOLVE THE SKILL SETS OF YOUR PEOPLE AND EVEN MUCH LESS lGURING OUT EFFECTIVELY HOW TO INTEGRATE EXISTING WITH EMERGING TECHNOLOGIES !ND ON AND ON WE GO 4HESE lRST TWO PROBLEMS ARE WELL KNOWN HAVING BEEN A NON STOP CHALLENGE FOR MANY OF US FOR THE PAST THIRTY YEARS 4HE FOLLOWING TWO ARE INCREASINGLY BECOMING CRITICAL 4HIRD HOW DO YOU IDENTIFY AND LEVERAGE YOUR INTELLECTUAL ASSETS /FTEN THE TOPIC OF INTELLECTUAL ASSETS SLIDES QUICKLY INTO SQUISHY DISCUSSIONS OF KNOWLEDGE MANAGEMENT AND OTHER CONSULTANT OR MARKETING DRIVEN TERMS THAT LEAD MORE TO BRAIN LOCK THAN EFFECTIVE ACTIVITY ,ETS AVOID THIS BY ARTICULATING SOME SPECIlC BUSINESS CHALLENGES AND OPPORTUNITIES OF AND FROM THIS TOPIC
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4HE #)/ OF THE 2ETAIL "ANKING "USINESS 5NIT OF A MAJOR GLOBAL BANK HAS ARTICULATED TRAINING AS ONE OF HIS MOST STRATEGIC INITIATIVES 4HE REASONS ARE A COMBINATION OF ONGOING ECONOMIC AND COMPETITIVE PRESSURES ON MARGINS AS WELL AS THE FACT THAT THE MOMENTUM FOR OUTSOURCING HAS RESULTED IN SIGNIlCANT RIGHT SIZING OF THE RETAIL BANKING EMPLOYEE BASE 4HE CONCERN HE ARTICULATED WAS THAT MUCH OF THE ORGANIZATIONAL WISDOM OF HOW TO RUN AND MAINTAIN MUCH LESS DEVELOP AND DEPLOY SPECIlC RETAIL BANKING APPLICATIONS WAS EITHER hFORCED OUT OR WALKED OUT THE DOORv 4HIS ORGANIZATIONAL WISDOM WAS SOME OF THE KNOWLEDGE AND KNOW HOW CRITICAL TO KEEPING THE BUSINESS RUNNING -ARK &OREMAN FORMER #)/ OF THE FEDERAL GOVERNMENT DECRIED THE DEMOGRAPHIC IMPLICATIONS OF OF STATE AND LOCAL EMPLOYEES WHO ARE SCHEDULED TO RETIRE WITHIN THE NEXT lVE YEARS 7HAT WILL BE THE IMPLICATIONS ON SYSTEMS MAINTAINED AND DEVELOPED HE QUERIED 7HAT WILL BE THE IMPLICATIONS ON THE QUALITY OF CONSTITUENT SERVICES THAT THESE SYSTEMS ENABLE AS THESE PEOPLE RETIRE !S -ARK POINTED OUT AND A SURPRISE TO NO ONE MANY OF THESE SYSTEMS AND APPLICATIONS ARE UNDOCUMENTED HELD TOGETHER MERELY BY THE TACIT KNOWLEDGETHE KNOWLEDGE IN THE HEADS OF THE PEOPLE WHO BUILT THEM AND MAINTAINED THEM OVER THE YEARS !T A LATE FALL CONFERENCE IN %UROPE THE VICE CHAIRMAN OF ONE OF %UROPES AND ,ATIN !MERICAS PREMIERE lNANCIAL INSTITUTIONS ARTICULATED CONCERNS ABOUT THE hDEMOGRAPHIC TRANSFORMATIONv OF %UROPE AND ,ATIN !MERICA AND ITS IMPLICATION ON MAINTAINING A LEADERSHIP POSITION !S THE GRAYING AND INCREASINGLY RETIRING WORKFORCE IN %UROPE MEETS THE LABOR MIGRATION FROM .ORTH !FRICA AND %ASTERN %UROPE INTO 7ESTERN %UROPEAND THESE MEET BOTH THE GREENING OF ,ATIN !MERICA AND ITS EXPLOSIVE ENTRANCE INTO THE WORKFORCEWHAT WILL BE THE IMPLICATIONS ON MAINTAINING A COMPETITIVE POSITION AND EFFECTIVE OPERATIONS 3O MUCH OF WHAT PEOPLE KNOW WILL BE LOST AS THEY RETIRE YET THE DEMANDS FOR NEW PRODUCTS AND SERVICES WILL EXPLODE IN URGENCY AND NEED 7HO WILL BE THERE TO TRAIN THE NEW WORKFORCE (OW WILL WE MINIMIZE THE IMPACT OF THE BRAIN DRAIN AS THE EXISTING WORKFORCE MOVES ON 4HERE ARE TWO SPECIlC PARTS TO THIS hINTELLECTUAL ASSETv ISSUE 4HE lRST IS RECOGNIZING THE ROLE OF TACIT KNOWLEDGE AS ONE OF THE KEY INTELLECTUAL ASSETS OF YOUR EVERY DAY ACTIVITIES MORE ON THIS LATER !S WE ALL KNOW KNOWLEDGE IS EMBEDDED INTO SYSTEMS APPLICATIONS BUSINESS PROCESSES AND NORMS OF BEHAVIORS THAT TOGETHER FORM THE ORGANIZATIONAL GLUE THAT UNDERLIES WHAT YOU DO ON A DAY TO DAY BASIS 4HE TECHNICAL TERM FOR THIS IS THE INSTANTIATION OF KNOWLEDGE INTO YOUR BUSINESS PRACTICES RANGING FROM HARD ASSETS SYSTEMS APPLICATIONS AND DOCUMENTED BUSINESS PROCESSES TO SOFT ASSETS NORMS VALUES WORK AROUNDS AND UNDOCUMENTED BUSINESS PROCESSES 4HE SECOND PART IS TO lGURE OUT THE HALF LIFE OF THESE ASSETS HOW VALUABLE THEY ARE AND FOR HOW LONG 7HICH OF THESE ASSETS ADD COMPETITIVE ADVANTAGE TO YOU AND IN WHAT AREAS (OW LONG WILL THOSE ADVANTAGES LAST AND WHAT DO YOU DO WITH ASSETS THAT NO LONGER ENHANCE YOUR COMPETITIVE POSITIONING
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'EOFFREY -OORE THE BEST SELLING AUTHOR OF #ROSSING THE #HASM AND ,IVING ON THE &AULT ,INE APPROACHES THE HALF LIFE QUESTION OF INTELLECTUAL ASSETS IN TERMS OF CORE AND CONTEXT &OR -OORE WHAT IS CORE TO YOUR BUSINESS ARE THOSE ACTIVITIES AND INSTANTIATED ASSETS THAT ADD SHAREHOLDER VALUE AND ADD DIFFERENTIATED VALUE WHILE CONTEXT ACTIVITIES ARE THINGS THAT HAVE TO GET DONE BUT ADD NO DIRECT VALUE TO YOUR COMPETITIVE POSITION 4HE CHALLENGE AS -OORE SUMMARIZES IT IS TO CONTINUALLY EVALUATE YOUR CORE AND FOCUS ON IT AND lGURE OUT WHAT TO DO WITH YOUR CONTEXT WHETHER TO MERELY STOP REENGINEER OR OUTSOURCE IT &OR A QUICK EXAMPLE ).' )NSURANCE ONE OF THE WORLDS LARGEST AND MOST PROlTABLE INSURANCE COMPANIES HAS BEEN INVOLVED RECENTLY IN DEVELOPING A NEW POLICY ADMINISTRATION SYSTEM 4HROUGHOUT THE PROJECT THEY HAVE BEEN AS AGGRESSIVELY FOCUSED ON UNDERSTANDING WHAT THEIR INTELLECTUAL ASSETS WERE AS THE SPECIlC FUNCTIONALITY THAT HAD TO BE BUILT &OR EACH PROCESS AND APPLICATION THEY HAVE BEEN ASKING WHAT TYPE OF COMPETITIVE VALUE EACH ASSET PROVIDES FOR HOW LONG AND WHAT TO DO ABOUT IT RECOGNIZING THAT ANSWERS TO THESE QUESTIONS DETERMINES IF AND HOW TO EXPLOIT THE ASSET &OURTH HOW DO YOU MOBILIZE YOUR DIFFERENT TEAMS WITH THEIR DIFFERENT PERSPECTIVES AND PRIORITIES 7E ALL KNOW AND LIVE THE FRUSTRATIONS OF CONmICTING ORGANIZATIONAL ACTIVITIES SILOS REDUNDANT PROCESSES AND CONFUSING IF NOT COMPLICATED GOVERNANCE POLICIES 4HE COMMON CRY FOR THE NEED TO ALIGN METRICS IS STImED BY THE OPERATIONAL COMPLEXITY OF HOW TO DO SO GIVEN FUNDAMENTAL DIFFERENCES OF PRIORITIES AND FOCUSES 'EORGE #OLONY #%/ OF &ORRESTER 2ESEARCH AN INDUSTRY RESEARCH GROUP HUMOROUSLY CHARACTERIZES AN ORGANIZATION AS CONSISTING OF THREE TYPES OF PEOPLE 4 3HIRTS 4URTLENECKS AND 3UITS 4 3HIRTS ARE YOUR OPERATIONS PEOPLE 4URTLENECKS THE MARKETING TEAMS AND 3UITS THE MANAGEMENT FOLKS %VEN THOUGH THEY MAY ALL ACKNOWLEDGE THE SAME SET OF ORGANIZATIONAL OBJECTIVES AND EVEN HIGH LEVEL BUSINESS METRICS HOW THEY UNDERSTAND THEM AND HOW EACH GROUPS ORIENTATION TO REALIZING THEM ARE SO VASTLY DIFFERENT IT MAKES THEM IRRECONCILABLE )T IS CONSEQUENTLY NO WONDER THAT ORGANIZATIONS SO SELDOM EXPERIENCE WHAT WE CALL THE EXECUTIONAL CONSISTENCY NECESSARY BETWEEN STRATEGY AND OPERATIONS THE DIFFERENCES IN APPROACH IN UNDERSTANDING IN ORIENTATION AND IN PERSPECTIVES ARE SO DIFFERENT THAT IT MAKES ANY TYPE OF EXECUTIONAL CONSISTENCY A PLEASANT SURPRISE WHEN IT HAPPENS RATHER THAN AN OPERATIONAL NORM
2//4 #!53%3 7ERE SURE THAT WE CAN ALL NOD OUR HEADS AT ONE IF NOT ALL OF THESE CHALLENGES TO ORGANIZATIONAL AGILITY 4HEY CREATE TREMENDOUS AMOUNTS OF FRUSTRATION AND COSTS
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BOTH PERSONAL AND ORGANIZATIONAL 3O WHY ARE THESE CHALLENGES SO HARD TO ADDRESS 4HESE PROBLEMS HAVE BEEN AROUND FOR YEARS )S THERE REALLY ANYTHING TODAY THAT IS SIGNIlCANTLY DIFFERENT FROM YESTERDAY TO ALLOW US TO TAKE ON THESE CHALLENGES DIFFERENTLY )S THERE A COMMON CHALLENGE OR A ROOT CAUSE UNDERLYING THEM THAT IF REDRESSED COULD BEGIN TO STEM THE FRUSTRATIONS THEY ENGENDER AND THUS ENHANCE ORGANIZATIONAL AGILITY /N THE SURFACE THEIR DIFFERENT FOCUSES SEEM SO DIFFUSED AS TO FRUSTRATE ANY ATTEMPTS TO lND COMMON GROUND AMONG THEM "UT CAN WE NOT lND COMMON GROUND UPON WHICH TO MAKE SENSE AND TAKE ACTION MORE EFFECTIVELY REGARDING ORGANIZATIONAL AGILITY 4HE ANSWER TO THESE QUESTIONS IS THE SAME YES 5NDERLYING EACH OF THESE CHALLENGESTHE COMMON STRAND TO THEM ALLIS WHAT WE CALL A SEMANTIC DISCONNECT 7ELBORN AND +ASTEN 3EMANTICS IS DElNED AS THE SHARING OF MEANINGS AMONG DIFFERENT PEOPLE 4HUS A SEMANTIC DISCONNECT OCCURS WHEN DIFFERENT PEOPLE TAKE AWAY DIFFERENT UNDERSTANDINGS OF WHAT HAS TO GET DONE TO REACH AN OBJECTIVE %ACH OF THE AGILITY CHALLENGES LISTED ABOVE RESTS UPON THIS SEMANTIC DISCONNECT ,ETS TAKE A SIMPLE EXAMPLEONE THAT WEVE ALL LIKELY EXPERIENCED TIME AND TIME AGAINTHAT OF FRUSTRATIONS WITH REGARDS TO SPECIFYING BUSINESS REQUIREMENTS FOR A NEW APPLICATION TO BE BUILT 7E DESCRIBE THIS PROCESS BETWEEN THE BUSINESS OPERATIONS PERSON *OHN AND THE TECHNOLOGY DEVELOPMENT PERSON -ARY IN THE FORM OF AN ABSTRACTED BUT WAY TOO OFTEN CONDUCTED DIALOGUE s *OHN AFTER SIGNING ONTO TO THE NEW CREDIT CARD ASSESSMENT APPLICATION THAT -ARY HAS JUST SUPPLIED HIM TO EVALUATE h"UT THIS ISNT WHAT ) ASKED FORv s -ARY TAKEN ABACK h3URE IT IS 7EVE BEEN WORKING ON THE REQUIREMENTS TOGETHER FOR MONTHS AND )VE BEEN PROVIDING YOU STATUS UPDATES AND EVEN ACCESS TO TEST OUT CERTAIN FEATURES FOR FOUR WEEKS NOWv s *OHN ACKNOWLEDGING THE COMMENT h4HATS TRUE BUT THIS ISNT WHAT WE NEED HERE )T DOESNT REFRESH THE CREDIT CONlGURATION CALCULATOR TO ACCOUNT FOR CHANGES IN THE INTEREST RATESv s -ARY A BIT FRUSTRATED h"UT *OHN WE CLEARLY WORKED THROUGH PAGES AND PAGES OF REQUIREMENTS 9OU EVEN SIGNED OFF ON THEM AGAIN AND AGAIN 3EE v SHE SAYS AS SHE POINTS TO THE REQUIREMENT DOCUMENTS WITH *OHNS SIGNATURE ON THEM h(ERE IS YOUR SIGNATUREv s *OHN EQUALLY FRUSTRATED VOICE RISING h7ELL THAT MAY BE WHAT ) SAID BUT THATS NOT WHAT ) MEANT OR WHAT WE NEEDv %VER HAD ONE OF THESE CONVERSATIONS /R ASKED DIFFERENTLY EVER NOT HAD ONE OF THESE CONVERSATIONS 7HO IS AT FAULT )S ANYONE 7E WOULD SAY THAT *OHN AND -ARYASSUMING THAT EACH IS A DILIGENT PROFESSIONALEXPERIENCED A SEMANTIC
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DISCONNECT PROBABLY DUE TO THE FACT THAT BUSINESS PEOPLE AND TECHNICAL PEOPLE HAVE DIFFERENT VOCABULARIES SO COMMUNICATION BETWEEN THEM IS PROBLEMATIC 3UCH SEMANTIC DISCONNECTS OCCUR AGAIN AND AGAIN IN ORGANIZATIONS ALL OVER THE WORLD LEADING TO THE REWORK ADDITIONAL COSTS lNGER POINTING PERSONAL AND PERSONNEL FRUSTRATIONS BUDGET BLOWOUTS EXACERBATED ORGANIZATIONAL SILOS AND NEED WE ADD PROJECT DELAYS THAT SAP THE ORGANIZATIONS ABILITY TO MOBILIZE IN RESPONSE TO A NEED FOR CHANGE %ACH OF THESE CONTRIBUTES TO ALL FOUR OF THE AGILITY CHALLENGES WE LISTED EARLIER )T IS CONSEQUENTLY NO SURPRISE THAT THERE IS A LACK OF EXECUTIONAL CONSISTENCY (OW CAN THERE BE IF THE FUNDAMENTAL SEMANTICS OF HOW TO EXPRESS AND EXECUTE ACROSS DIFFERENCES CANNOT BE OVERCOME 4HUS THE ISSUE OF SEMANTICS IS NOT MERELY ONE OF MAKING SENSE IT IS TIGHTLY COUPLED WITH THE CHALLENGE OF TAKING ACTION )T IS CONSEQUENTLY NO SURPRISE THAT ORGANIZATIONAL AGILITY REMAINS SUCH AN ORGANIZATIONAL BUGBEAR AND A KEY FOCUS OF ORGANIZATIONS )F SEMANTIC DISCONNECT IS THE ROOT CAUSE HINDERING ORGANIZATIONAL AGILITY THE COROLLARY QUESTION BECOMES HOW TO SEMANTICALLY RECONNECT 3TATED MORE FORMALLY THE CRITICAL REQUIREMENT FOR ORGANIZATIONAL AGILITY IS TO DRIVE EXECUTIONAL CONSISTENCY THROUGH OVERCOMING THE SEMANTIC DISCONNECTS THAT PERMEATE MANY OF YOUR ORGANIZATIONAL ACTIVITIES 4HIS ENTAILS HAVING THE TOOLS AND METHODS TO CREATE COMMON EXPRESSIONS TO DRIVE THE EXECUTIONAL CONSISTENCY NEEDED 4HIS IS NOT AN ISSUE OF CHANGING YOUR LANGUAGES OF ALIGNING YOUR METRICS OF CHANGING YOUR GOVERNANCE PROCESSES OF COMMUNICATING MORE AND MORE )T IS FUNDAMENTALLY ABOUT CREATING SHARED AND SHAREABLE CAPABILITIES TO DRIVE CONSISTENT EXECUTION )T IS FUNDAMENTALLY ABOUT CREATING THE CAPABILITIES TO ENSURE THAT THE DECISIONS TAKING PLACE AT THE TOP OF AN ORGANIZATION OR ITS STRATEGY CAN BE AND ARE CONSISTENTLY EXECUTED DOWN AND THROUGHOUT AN ORGANIZATIONTHROUGH ITS BUSINESS PROCESSES APPLICATIONS AND INFRASTRUCTURE /K YOU SAY .ICE VISION /R SOME AT THIS POINT MIGHT SAY HUH 3UCH A CLAIM HAS BEEN A HOLY GRAIL FOR YEARS 3O WHATS DIFFERENT NOW AND HOW DO WE MAKE IT HAPPEN ,ETS ANSWER THOSE QUESTIONS IN TWO PARTS lRST HOW TO THINK ABOUT IT AND SECOND HOW TO INSTANTIATE IT INTO YOUR BUSINESS PROCESS
4(% $.! /& /2'!.):!4)/.!, !'),)49 !.37%2).' 4(% 15%34)/. /& 4(% h(/7v 3O FAR WEVE DESCRIBED CORE CHALLENGES TO ORGANIZATIONAL AGILITY DESCRIBED KEY REQUIREMENTS FOR IT PROVIDED SOME QUICK EXAMPLES AND STATED THE UNDERLYING
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$.! FOR ORGANIZATIONAL AGILITY "UT WE HAVE YET TO DESCRIBE HOW TO LOOK FOR THAT $.! AND HOW TO MANIPULATE IT FOR YOUR PURPOSES !S WEVE SEEN AGILITY ESSENTIALLY ENTAILS TWO THINGS &IRST IT REQUIRES THAT MANY PEOPLE MUST RAPIDLY MAKE SENSE OF AN OPPORTUNITY 3ECOND THEY MUST EFFECTIVELY TAKE ACTION BY MOBILIZING A RANGE OF PEOPLE AND RESOURCES AND EXECUTING CONSISTENTLY ,ETS TAKE A DEEPER LOOK AT THE UNDERLYING CONDITIONS FOR THIS TO HAPPEN ! NEW BUSINESS OPPORTUNITY EMERGES WHEN SOMEONE HAS AN IDEA OR SEES AN OPPORTUNITY THAT OTHERS HAVE NOT SEEN AND THEREIN LIES THE RUB 4HE UNDERLYING VALUE PROPOSITION IS NOVEL RELATIVELY UNEXPLOITED OR DIFlCULT TO REPLICATE BECAUSE MORE THAN LIKELY IT RESIDES SOLELY IN ITS CREATORS HEAD 4AKING EFFECTIVE AND SCALABLE ACTION DEPENDS UPON TAKING THIS TACIT IDEA THE KNOWLEDGE IN SOMEONES HEAD AND MOBILIZING THAT IDEA SO OTHERSAND IDEALLY MANY OTHERSCAN UNDERSTAND THEN EXECUTE THAT INSIGHT ON A LARGE SCALE 4HIS ABILITY TO TAKE ACTION ON A LARGE SCALE DEMANDS AN ABILITY TO CODIFY THE TACIT IDEA IN OTHER WORDS TO TURN IT INTO AN EXPLICIT FORM THAT THEN CAN BE COMMUNICATED UNDERSTOOD AND USED BY MANY OTHERS )MAGINE IT AS A RECIPE 7ITHOUT THE RECIPE YOU HAVE THE BOUTIQUE RESTAURANTTHE MASTER CHEF WITH THE MASTERS TOUCH CREATING MASTERPIECES FOR A HANDFUL OF DINERS 7ITH THE RECIPE ON THE OTHER HAND YOU CAN HAVE THE GLOBAL FRANCHISE 4HATS SCALE AND THE SECRET SAUCE IS CODIlCATION THE RECIPE TO EVERYTHING FROM POTATO CHIPS TO MICROCHIPS 4HE DIFFERENCE IN AN UNCERTAIN WORLD IS HOW FAST THE RECIPE CHANGESAND MUST CHANGEBEFORE COMPETITORS CAN BREAK THE RECIPE OR CRACK THE CODE DILUTING MARKETS AND ERODING MARGINS !GILITY SPEAKS TO THIS PROCESS OF CODIFYING AND SCALING TACIT KNOWLEDGE INTO THE WELL DElNED BUSINESS PROCESSES TECHNOLOGY ENABLERS AND OTHER ASSETS THAT OTHERS CAN USE CONSISTENTLY EFFECTIVELY AND COST EFFECTIVELY 4ACIT KNOWLEDGE ALL THOSE INTANGIBLES OF WHAT WE KNOW AND EXPERIENCE ITSELF HAS POTENTIALLY HIGH VALUE AND HIGH MARGIN BUT BEING INACCESSIBLE IS NOT SCALABLE 7E CAN BREAK THROUGH THE INHERENT SCALING LIMITS OF TACIT KNOWLEDGE BY CODIFYING THAT KNOWLEDGE INTO THE PROCESSES FRAMEWORKS AND STANDARDS WHERE THE POWER OF SCALING CAN KICK IN (OW WELL A COMPANY DOES THIS IN OUR VIEW IS THE TRUE DETERMINANT OF HOW AGILE IT IS 3TATED DIFFERENTLY THIS PROCESS OF CODIlCATION COMPRISES THE UNDERLYING $.! FOR ORGANIZATIONAL AGILITY 7EVE REDUCED IT TO A SIMPLE AGILITY MANTRA THE MORE CODIlED THE MORE EXECUTABLE THE MORE EXECUTABLE THE MORE SCALABLE THE MORE SCALABLE THE MORE AGILE AND THE MORE AGILE THE MORE COMPETITIVE 3EE 5NDERSTANDING #OMPETITION
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5NDERSTANDING #OMPETITION #OMPETITION RESULTS FROM DIFFERENT COMPANIES ATTEMPTING TO EXPLOIT A SUFlCIENTLY ATTRACTIVE MARKET OPPORTUNITY )NITIAL MARKET OPPORTUNITIES ARE USUALLY HIGH MARGIN ANDOR HIGH REVENUE OPPORTUNITIES THE RESULTS OF THEIR UNDERLYING VALUE PROPOSITIONS BEING NOVEL CONSEQUENTLY RELATIVELY UNEXPLOITED OR DIFlCULT TO REPLICATE AND LARGELY EMBEDDED IN THE HEADS OF RELATIVELY FEW PEOPLE /VER TIME THESE MARGINS TEND TO GET ARBITRAGED AWAY OR SHRUNK AS NEW COMPETITORS RECOGNIZING THE POTENTIAL OF THOSE MARKET OPPORTUNITIES ENTER THE COMPETITIVE FRAY 7HAT SHRINKS THOSE MARGINS ARE PROCESSES TECHNOLOGIES AND OTHER ACTIVITIES THAT BRING DOWN THEIR OPERATIONAL COSTS AND ALLOWS THEM TO BECOME MORE SCALABLE HENCE EXECUTABLE BY MANY 4HE MEANS OF DRIVING SUCH SCALABLE ACTIVITIES IS THE ENABLING CODIlCATION OF THOSE ACTIVITIES n OF THE TACIT KNOWLEDGE THE KNOWLEDGE IN THE HEADS OF FEW INTO FRAMEWORKS INTO STANDARDS INTO EXECUTABLE AND REPEATABLE ACTIVITIES 7HAT IS IT ABOUT THIS PROCESS THIS DYNAMIC THAT MAKES IT SO IMPORTANT AND SO ESSENTIAL TO EXPLAIN COMPETITIVE PRESSURES 4ACIT KNOWLEDGE HAS POTENTIALLY HIGH VALUE AND HIGH MARGIN 9ET IT IS NOT SCALABLE )T RESIDES IN A FEW HEADS AND IS SUBJECT TO MULTIPLE INTERPRETATIONS HENCE FRAGMENTED USES AND POSSIBLE CONmICTING STANDARDS 4ACIT KNOWLEDGE THEN BY DESIGN AND STRUCTURE HAS INHERENT SCALING LIMITS ,ETS THINK ABOUT THIS THROUGH AN EXAMPLE -ANY OF US HAVE BEEN INVOLVED OR SUBJECTED TO CORPORATE STRATEGY PROJECTS OR PROCLAMATIONS 9ET WHAT MANY OF US AGAIN HAVE COME AWAY WITH FROM SUCH INVOLVEMENT IS THE RECOGNITION THAT STRATEGY IS ONLY CONCEPTUALLY CLEAN AND ANALYTICALLY PURE BUT OPERATIONALLY USELESS 7HY "ECAUSE THERE IS FREQUENTLY A SIGNIlCANT hEXECUTIONv GAP BETWEEN STRATEGIC PROCLAMATION AND OPERATIONAL REALITY A RESULT OFTEN DUE TO THE DEVELOPMENT OF THE STRATEGY BY A FEW WITHOUT THINKING THROUGH OF HOW TO SCALE THE SHARED ASSUMPTIONS EXPECTATIONS AND OBJECTIVES TO THE MANY OF US WHO NEED TO EXECUTE ON THAT STRATEGY 9ET IT IS CERTAINLY UNDERSTANDABLE WHY THERE IS SUCH DIFlCULTY OF DOING SO 3TRATEGY FORMULATION IS INHERENTLY A MESSY PROCESS HEAVILY RELIANT ON TACIT KNOWLEDGE FROM A FEW PEOPLE WITH THEIR OWN SET OF ASSUMPTIONS BELIEFS AND PERSPECTIVES ATTEMPTING TO CREATE SOME SHARED SETS OF OVERALL OBJECTIVES 9ET EVEN UPON SOME AGREEMENT OF SHARED OBJECTIVES AND STRATEGIC FORMULATION THERE ARE NO CONSISTENT SETS OF STANDARDS FRAMEWORKS OR CONSISTENT PROCESS TO DRIVE STRATEGIC THINKING INTO EVERYDAY OPERATIONAL EXECUTION
7HAT DO WE MEAN BY CODIlCATION AND HOW DO WE KNOW IT WHEN WE SEE IT /NE TOOL WE USE IS CALLED THE 3EMANTIC 3TACK A SIMPLE WAY OF THINKING ABOUT THE DEGREE OF CODIlCATION 3EE 5NDERSTANDING #ODIlCATION
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5NDERSTANDING #ODIlCATION "EFORE DESCRIBING THE SEMANTIC STACK LETS STEP BACK ONE MORE TIME AND EXPLORE THE QUESTION WHAT DO WE MEAN BY CODIlCATION AND HOW DO YOU KNOW IT WHEN YOU SEE IT !T SOME POINT IN THE DISTANT PAST PEOPLE BEGAN EXPRESSING THEMSELVES USING WORDS lRST SPOKEN AND THEN WRITTEN &ROM THESE WORDS EMERGED COMMON WAYS OF SPEAKING SHARED COMMUNICATIONS COMMON VIEWPOINTS AND SHARED CULTURE AND THE ABILITY TO MOBILIZE PEOPLE TO EFFECTIVE ACTION 7HAT MADE AND MAKES EFFECTIVE ACTIONS ARE THE SHARED UNDERSTANDING OF WHAT IS EXPECTED OF WHAT TO DO OF HOW TO DO IT AND OF MEASURING AND REALIZING THE VALUE OF THOSE ACTIONS 4HIS SHARING OF MEANING AND HENCE OF SCALABLE ACTION DERIVES FROM HAVING SHARED hSEMANTICSv 7HY IS THIS IMPORTANT "ECAUSE SHARED KNOWLEDGE AND UNDERSTANDING BECOMES MORE SCALABLE AND CHEAPER WHEN KNOWLEDGE IS CODIlED SO THE DEGREE OF CODIlCATION IN ANY AREA IS A CRITICAL MEASURE OF ORGANIZATIONAL AGILITY .OW BACK TO THE 3EMANTIC 3TACK
4(% 3%-!.4)# 34!#+ &)'52% 4HE 3EMANTIC 3TACK IS DEPICTED AS A SIMPLE GRID 4HE HORIZONTAL DIMENSION OF THE STACK DEPICTS THE DEGREE TO WHICH ORGANIZATIONAL KNOWLEDGE OF BEST PRACTICES NEW BUSINESS IDEAS ETC IS CODIlED !ND NOTICE AS YOU MOVE TO THE RIGHT ALONG THE STACK THE GREATER THE CODIlCATION HENCE THE MORE SCALABLE AND EXECUTABLE THE ACTIVITY 4HE VERTICAL DIMENSION OF THE STACK REFERS TO DIFFERENT TYPES OF ORGANIZATIONAL ACTIVITIES 4HE SHADED AREAS ROUGHLY DEPICT THE CURRENT STATE TO WHICH THE PARTICULAR TYPE OF ORGANIZATIONAL ACTIVITY HAS BEEN CODIlED &OR EXAMPLE INDUSTRY STANDARDS BODIES VENDORS AND THE MAJORITY OF GLOBAL BUSINESSES HAVE FULLY AGREED TO THE STANDARDS AND SHARED SEMANTICS UNDERLYING INFRASTRUCTURAL CONNECTIVITY AROUND 4#0)0 TO ENABLE PRODUCTS AND SERVICES TO BE FULLY AUTOMATED OR EXECUTED 4HE ONCE TACIT KNOWLEDGE EMBEDDED IN 4#0)0 DESIGN HAS BEEN FULLY EMBEDDED INTO 4#0)0 ENABLED PRODUCTS AND SERVICES ALLOWING A DEGREE OF AUTOMATION AND AUTOMATIC EXECUTION THAT FAR EXCEEDS ANY OTHER SET OF ORGANIZATIONAL ACTIVITY IN THIS FRAMEWORK !S WE CAN QUICKLY SEE THE HIGHER UP THE STACK THE LOWER THE DEGREE OF CODIlCATION AND THEREFORE THE CHALLENGE FOR BEING ABLE TO SCALE AND EXECUTE QUICKLY AND EFFECTIVELY AROUND THAT SET OF ACTIVITIES !S WE WILL SEE IN TERMS OF THE STACK INCREASING ORGANIZATIONAL AGILITY CAN BE DESCRIBED AS MOVING FROM TACIT TO EXECUTABLE AND OF DOING SO ACROSS MORE AND MORE OF THE ACTIVITIES 4HIS PROCESS IS CALLED WALKING UP AND ACROSS THE STACK 3EE !BOUT THE 3EMANTIC 3TACK !S WE SEE FROM THE SIMPLE 4#0)0 EXAMPLE SHARED KNOWLEDGE AND UNDERSTANDING BECOMES MORE SCALABLE AND CHEAPER WHEN THE KNOWLEDGE IS CODIlED 4HEREFORE GIVEN THAT SHARED KNOWLEDGE AND UNDERSTANDING BECOMES MORE SCALABLE AND CHEAPER WHEN THE KNOWLEDGE IS CHEAPER THE DEGREE OF CODIlCATION IN ANY
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!BOUT 4HE 3EMANTIC 3TACK 4HERE ARE ENORMOUS IMPLICATIONS OF THE 3EMANTIC 3TACK IN TERMS OF COMPETITIVE POSITIONING ASSESSING SPECIlC BUSINESS OPPORTUNITIES AS A RESULT AND ITS IMPLICATIONS ON PEOPLE PROCESS AND TECHNOLOGY 7E EXPLORE THE STACK ITS UNDERLYING LOGIC AND SPECIlC BUSINESS IMPLICATIONS IN DETAIL IN OUR BOOK 4HE *ERICHO 0RINCIPLE (OW #OMPANIES 5SE 3TRATEGIC #OLLABORATION TO &IND .EW 3OURCES OF 6ALUE .9 *OHN 7ILEY 3ONS !S WE LOOK AT THE STACK WE SHOULD KEEP IN MIND THE SPIRIT IN WHICH IT IS OFFERED 7HILE WE CAN CHANGE THE LABELS ALONG THE LEFT THE KEY ISSUE IS THAT THIS SERVES AS A SIMPLE TOOL TO MAKE EXPLICIT THE CRITICAL ROLE OF CODIFYING TACIT KNOWLEDGE AS WELL AS THE COMPETITIVE PRESSURE TO INEXORABLY MOVE TOWARDS GREATER LEVELS OF CODIlCATION WITH PROFOUND IMPLICATIONS ON WHO YOUR COMPETITORS ARE THE SOURCE OF THE COMPETITION AND THE IMPLICATIONS ON ORGANIZATIONAL AGILITY
OF THESE AREAS IS AN IMPORTANT MEASURE OF POTENTIAL ORGANIZATIONAL AGILITY 3EE !BOUT THE 3EMANTIC 3TACK 3O WHAT 4HERE ARE TWO THINGS THAT YOU CAN TAKE FROM THE SEMANTIC STACK 4HE lRST IS THAT THE STACK ACTS AS A MIRROR THAT YOU CAN HOLD UP TO YOUR COMPANY AND SEE WHAT IS REmECTED BACK "Y SHOWING THE DEGREE OF CODIlCATION IN A PARTICULAR LAYER THE STACK GIVES YOU A MEANSAT A HIGH LEVEL BUT PROVOCATIVE WAYTO SEE HOW YOUR COMPANY MEASURES UP 3ECOND THE STACK SHOWS HOW THE INTELLECTUAL ASSETS IN YOUR COMPANY ARE STRATIlED FROM ABSTRACT THINGS LIKE hBUSINESS OBJECTIVESv TO CONCRETE THINGS LIKE hCONNECTIVITYv AND hPLATFORMSv 4HIS IS IMPORTANT BECAUSE AGILITY COMES FROM CODIlCATION BOTH WITHIN A LAYER AND FROM BEING ABLE TO EXECUTE CONSISTENTLY ACROSS LAYERS AS WELL 4O MAKE THIS POINT LETS FOCUS ON TWO OF THE LAYERS OF THE STACK ONE THE !PPLICATIONS ,AYER AND TWO THE "USINESS 0ROCESSES ,AYER AND DISCUSS CODIlCATION WITHIN EACH LAYER THEN CODIlCATION BETWEEN THE TWO LAYERS 4HIS WILL BY FOLLOWED BY THE NEXT SECTION ON $ "USINESS "LUEPRINTING IN WHICH WE WILL DISCUSS THE NOTION OF TRACEABILITY AS A PARTICULAR WAY TO CREATE CODIlCATION ACROSS THE LAYERS 4HE !PPLICATIONS ,AYER IS WHERE AUTOMATION MEETS THE PEOPLE IN YOUR COMPANY 4ODAY THAT GENERALLY MEANS COMPUTER APPLICATIONS BUT IT CAN ALSO MEAN PHYSICAL MACHINERY LIKE A CHECK SORTING MACHINE )N THE APPLICATIONS LAYER REFERRING NOW TO COMPUTER APPLICATIONS CODIlCATION TRANSLATES TO AMONG OTHER THINGS CLEARLY DELINEATED APPLICATION FUNCTIONALITY AND CLEARLY SPECIlED INTERFACES BETWEEN APPLICATIONS 4AKING THEM ONE AT A TIME s !PPLICATION FUNCTIONALITY !PPLICATIONS EXIST TO SUPPORT BUSINESS PROCESSES AND FOR MOST OF THE TIME THAT PEOPLE HAVE BEEN WRITING COMPUTER APPLICATIONS THEY HAVE FOCUSED ON CREATING AUTOMATION TO
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&IGURE 3EMANTIC 3TACK
SUPPORT ONE OR A NUMBER OF LINKED BUSINESS PROCESSES 4HE PROBLEM WITH THAT APPROACH IS THAT IN RAPIDLY CHANGING TIMES BUSINESS PROCESSES NEED TO CHANGE MUCH FASTER THAN APPLICATIONS CAN BE RE ENGINEERED &OR EXAMPLE A NEW WIRELESS TELEPHONE CARRIER CAN OFFER CALLING PLANS WITH BILLING IN ONE SECOND INCREMENTS WITH ROLLOVER 4HE LEGACY CARRIERS HAVE BEEN CHALLENGED TO RESPOND RAPIDLY TO THIS COMPETITION PARTLY BECAUSE THEIR BILLING APPLICATIONS HAVE A LEGACY BACK TO TIMES WHEN THE TELEPHONE INDUSTRY WAS STABLE AND PEOPLE WERE BILLED hFOR THE lRST THREE MINUTESv AND THE BILLING APPLICATIONS DID MORE THAN JUST BILLING FOR PHONE USETHEY INCLUDED FUNCTIONALITY FOR MARKETING FRAUD DETECTION TARIFFS AND MANY THINGS NOT STRICTLY RELATED TO BILLING -ORE RECENTLY APPLICATION DEVELOPMENT DISCIPLINES SUCH AS /BJECT /RIENTED $ESIGN //$ HAVE EVOLVED THAT ALLOW SOFTWARE ENGINEERS TO UNDERSTAND PROBLEMS IN TERMS OF CLEARLY PARTITIONED FUNCTIONALITY !PPLICATIONS CREATED USING THESE NEW ENGINEERING PRINCIPLES COMPRISE DISCRETE COMPONENTS EACH OF WHICH CLEARLY IMPLEMENTS SELF CONTAINED FUNCTIONALITY THAT CAN BE MODIlED WITH MINIMAL IMPACT ON OTHER COMPONENTS 4HUS A WELL DESIGNED BILLER CREATED USING //$ PRINCIPLES CAN BE EASILY MODIlED TO ACCOMMODATE BILLING INCREMENTS OTHER THAN hTHE lRST THREE MINUTESv //$ AND RELATED DISCIPLINES PROVIDE CODIlCATION THAT CREATES THE CONDITIONS FOR AGILITY IN APPLICATIONS
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s )NTERFACES !PPLICATIONS NEED TO COMMUNICATE WITH OTHER APPLICATIONS BOTH WITHIN AN ORGANIZATION AND AMONG ORGANIZATIONS !GAIN USING THE TELEPHONE COMPANY EXAMPLE TO OPEN A NEW CUSTOMER ACCOUNT THE BILLER COMMUNICATES WITH THE CUSTOMER CARE APPLICATIONS WITH THE PROVISIONING APPLICATIONS THAT TURN ON NEW SERVICE AND WITH THE BILLERS OF OTHER TELEPHONE CARRIERS &OR APPLICATIONS TO INTERFACE THERE NEEDS TO BE AN OPEN CHANNEL AND A CLEAR LANGUAGE #ODIlCATION IN INTERFACES MEANS WIDESPREAD AGREEMENT ON THE COMMUNICATIONS CHANNEL AND ON THE LANGUAGE hSPOKENv ACROSS THAT CHANNEL (ISTORICALLY INTERFACES HAVE BEEN CREATED ONE APPLICATION AT A TIME WITH SLIGHT REGARD FOR OTHER APPLICATION INTERFACES AND THUS LITTLE STANDARDIZATION /VER THE PAST lVE YEARS HOWEVER THE )NTERNET AND ITS RELATED TECHNOLOGIES HAVE EMERGED AS THE CLEAR CHANNEL FOR COMMUNICATIONS BETWEEN APPLICATIONS AND ORGANIZATIONS !LONG WITH THIS hLANGUAGESv SUCH AS (YPER4EXT -ARKUP ,ANGUAGE (4-, AND E8TENSIBLE -ARKUP ,ANGUAGE 8-, HAVE EMERGED AS STANDARD LANGUAGES FOR APPLICATION TO APPLICATION COMMUNICATIONS 3PECIlC VOCABULARIES OF 8-, SUCH AS E BUSINESS 8-, %"8-, AND SECURITY ASSERTION MARKUP LANGUAGE 3!-, PROVIDE WIDELY UNDERSTOOD AND ACCEPTED MEANS FOR COMMUNICATING AMONG APPLICATIONS &INALLY 7EB 3ERVICES AN EMERGING STANDARD FOR APPLICATION TO APPLICATION INTERACTION ACROSS THE )NTERNET PROVIDES A STANDARD WAY FOR APPLICATIONS TO ADVERTISE AND FUND FUNCTIONALITY CONNECT AND COMMUNICATE VIA 8-, 4HIS CODIlCATION IN INTERFACES CREATES THE CONDITIONS FOR AGILITY SINCE APPLICATIONS SUPPORTING BUSINESS FUNCTION CAN MORE EASILY AND ROBUSTLY COMMUNICATE WITH OTHER APPLICATIONS MEANING THAT AS BUSINESS FUNCTIONS CHANGE APPLICATIONS CAN BE RAPIDLY DEPLOYED TO SUPPORT THE CHANGE 4HE "USINESS 0ROCESSES ,AYER IS WHERE THE COMPANYS PRODUCTION HAPPENS AND WHERE THE COMPANY INTERFACES WITH THE OUTSIDE WORLD EG ITS CUSTOMERS AND ITS PARTNERS "USINESS 0ROCESSES COMPRISE THE SET OF ACTIVITIES TO ACCOMPLISH A PARTICULAR OBJECTIVE THEY DESCRIBE THE FUNCTIONS AND INTERACTIONS BETWEEN PEOPLE DEPARTMENTS AND COMPANIES DElNING THE RULES AND PROCEDURES BY WHICH THE COMPANY RUNS AS WELL AS THE OWNERSHIP AND mOW OF INFORMATION )N THE "USINESS 0ROCESSES ,AYER CODIlCATION TRANSLATES TO AMONG OTHER THINGS CLEARLY DELINEATED JOB FUNCTIONS AND CLEAR EXPRESSIONS OF WORKmOW AND BUSINESS RULES 4HE SEMANTIC STACK INDICATES THAT THE "USINESS 0ROCESS ,AYER IS NOT AS CODIlED AS THE APPLICATION LAYER /NE BIG REASON FOR THIS IS THATIN CONTRAST TO THE //$ DISCIPLINES THAT WE DISCUSSED IN THE !PPLICATION ,AYERTHERE IS NO COMMONLY ACCEPTED DISCIPLINE FOR DESCRIBING MUCH LESS MODELING ANALYZING AND ENGINEERING GOOD BUSINESS PROCESS
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.OR IS THERE COMMON AGREEMENT ON HOW TO EXPRESS BUSINESS PROCESS DESIGN -OST OF US ARE FAMILIAR WITH ORGANIZATIONAL PROCESSES THAT HAVE BEEN PASSED DOWN OVER TIME OR THAT DEPEND CRITICALLY ON ONE KEY PERSON /RGANIZATIONAL AGILITY DEMANDS THE ABILITY TO RAPIDLY CHANGE BUSINESS PROCESSES TO ADDRESS CHANGING BUSINESS NEEDS 4HIS MEANS THAT LIKE THE RECIPE DISCUSSED IN THE OPENING OF THIS ARTICLE ITS ALL WRITTEN DOWN IN A WAY THAT IS UNDERSTOOD BY EVERYONE WITH A NEED TO KNOW AND CRITICALLY ITS ACCESSIBLE BY BUSINESS PEOPLE SO THEY CAN CHANGE IT WITHOUT NEEDING TO REWRITE APPLICATIONS "USINESS PROCESS CODIlCATION REQUIRES A COMMONLY ACCEPTED WAY OR A STANDARD OF EXPRESSING PROCESSES %MERGING LANGUAGES BASED ON 8-, SUCH AS "USINESS 0ROCESS %XECUTION ,ANGUAGE "0%, AND "USINESS 0ROCESS -ODELING ,ANGUAGE "0-, PROVIDE A MEANS TO ENABLE TASK SHARING WITHIN AND ACROSS ORGANIZATIONS 'IVEN THAT THERE IS MORE THAN ONE WAY TO EXPRESS THE BUSINESS PROCESS THERE REMAINS CODIlCATION TO BE DONE #LEARLY THOUGH BUSINESSES SEEKING AGILITY NEED TO BEGIN THE PROCESS OF DESCRIBING AND DElNING BUSINESS PROCESSES IN TERMS THAT CAN BE READILY EXPRESSED AND HENCE UNDERSTOOD AND EXECUTED ON TO DIFFERENT PARTIES IN WHATEVER STANDARD EMERGES #ODIlCATION WITHIN THE !PPLICATION ,AYER AND THE "USINESS 0ROCESS ,AYER ALLOWS EACH LAYER TO BE ENGINEERED AND MANAGED MORE EFlCIENTLY 7E STATED EARLIER THAT AGILITY DEPENDS ALSO ON CODIlCATION BETWEEN THE LAYERS -OST BUSINESS PROCESSES ARE SUPPORTED IN SOME WAY BY APPLICATION FUNCTIONALITY AND CONVERSELY MOST APPLICATION FUNCTIONALITY EXISTS IN SUPPORT OF SOME BUSINESS PROCESSES 4HUS CODIlCATION BETWEEN THE "USINESS 0ROCESS AND !PPLICATION ,AYERS MEANS THAT THERE EXISTS CLEAR TRACEABILITY BETWEEN A BUSINESS PROCESS AND ITS SUPPORTING APPLICATION FUNCTIONALITY 4RACEABILITY MEANS THAT CHANGES TO A BUSINESS PROCESS TO SUPPORT A NEW BUSINESS OPPORTUNITY FOR EXAMPLECAN QUICKLY BE TRANSLATED INTO CHANGES TO UNDERLYING APPLICATIONS SPEEDING IMPLEMENTATIONS AND INCREASING AGILITY 3IMILARLY TRACEABILITY MEANS THAT CHANGES IN THE APPLICATION LAYERTO ACCOMMODATE A NEW RELEASE OF VENDOR SOFTWARE FOR EXAMPLECAN BE EVALUATED QUICKLY AND ACCURATELY FOR POSSIBLE IMPACT TO BUSINESS PROCESS ELIMINATING NASTY SURPRISES 3EE 4RACEABILITY #ODIlCATION AND 4HE #OMPETITIVE %NVIRONMENT )DENTIFYING THE $.! OF ORGANIZATIONAL AGILITY AS A PROCESS OF CODIFYING TACIT INTO EXECUTABLE KNOWLEDGE HAS A NUMBER OF OPERATIONAL IMPLICATIONS 3IMILAR TO THE SIMPLICITY OF THE MERE DEPICTION OF $.! COMPARED TO THE COMPLEXITY OF ITS IMPLICATIONS HIGHLIGHTING THE UNDERLYING CONSTITUENT ELEMENTS FOR AGILITY IS A FAR CRY FROM BEING ABLE TO MANIPULATE THEM EFFECTIVELY TO REALIZE THEIR POTENTIAL 9ET KNOWING THE UNDERLYING ROOT CAUSE OF AGILITY COMPLEMENTS MUCH OF THE PRACTICAL AND MUCH NEEDED SET OF OTHER RECOMMENDATIONS REGARDING BECOMING MORE AGILE )T ALSO PROVIDES A SIMPLE MEANS BOTH TO ANTICIPATE AND TO ASSESS THE LIKELIHOOD OF OTHER COMPLEMENTARY EFFORTS TO MAKE YOUR OBJECTIVE OF BECOMING MORE AGILE
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4RACEABILITY #ODIlCATION AND 4HE #OMPETITIVE %NVIRONMENT )NTERESTINGLY ENOUGH BUT NOT SURPRISINGLY SO THE CODIlCATION INTO EXECUTABLE STANDARDS HAS SIGNIlCANT IMPLICATIONS ON THE COMPETITIVE ENVIRONMENT 3TATED DIFFERENTLY AS ACTIVITIES BECOME MORE CODIlED THE VERY NATURE OF COMPETITION SHIFTS 4HIS TACIT CODIlED MARKET TRANSFORMATION PROCESS WELL CHARACTERIZED THE S AND S WITH RESPECT TO NETWORK CONNECTIVITY THE S AND THROUGHOUT THE S WITH RESPECT TO STANDARD TECHNICAL ARCHITECTURES AND PLATFORMS RESULTING IN TODAYS EMERGING ACCEPTANCE OF EITHER *%% OR .%4 AS ARCHITECTURAL STANDARDS AND WELL CHARACTERIZES TODAYS BATTLElELD AMONG ENTERPRISE APPLICATION PROVIDERS AND THOSE ATTEMPTING TO CREATE MORE STANDARDS AROUND BUSINESS PROCESSES &OR A QUICK EXAMPLE NOT UNTIL )NTERNET 0ROTOCOLS WERE CLEARLY CODIlED INTO A SET OF EXECUTABLE GLOBAL STANDARDS COULD WE WITNESS THE RISE OF #ISCO 3YSTEMS AND OTHER ONCE NETWORK DOMINANT ENTERPRISES NOR COULD WE HAVE A RELIABLE NETWORK ENVIRONMENT ENABLING THE @PLUG AND PLAY OF 4#0)0 ENABLED DEVICES 7ITH GLOBAL ACCEPTANCE OF THE 4#0)0 STANDARDS THE COMPETITIVE BATTLElELD AMONG NETWORK COMPETITORS SHIFTED 2ATHER THAN BATTLING OVER WHICH PROTOCOLS WOULD UNDERLIE GLOBAL CONNECTIVITY AND hLOCK INv THE NETWORK ENVIRONMENT COMPETITORS JOUSTED OVER WHAT ARCHITECTURAL PLATFORMS WHAT APPLICATIONS AND HOW TO ACCELERATE THE SPEED OF THOSE PROTOCOLS 4HUS WHAT WAS ONCE A HIGH VALUE HIGH MARGIN BUSINESSDElNING THE 4#0)0 STANDARDSBECAME A COMMODITIZED HIGHLY SCALABLE CODIlED BUSINESS SHIFTING THE COMPETITIVE BATTLEGROUND )T IS THIS COMPETITIVE LOGIC THAT WE SEE OVER AND OVER AGAIN AND THAT UNDERLIES THE UNDERLYING BASES OF ORGANIZATIONAL AGILITY
MORE LIKELY 4HE lNAL TWO SECTIONS OF THIS ARTICLE SKETCH AN APPROACH FOR CREATING SEMANTIC CONSISTENCY AND SOME POSSIBLE NEXT STEPS TO START MANIPULATING THE $.! STRANDS OF ORGANIZATIONAL AGILITY
4(% $ "53).%33 ",5%02).4#2%!4).' 3%-!.4)# #/.3)34%.#9 ! MOTORIST TRAVELING IN AN UNFAMILIAR CITY MAKES SURE TO CONSULT A MAP 4HE MAPS THAT MOST PEOPLE WORK WITH OFFER ONLY TWO DIMENSIONS LENGTH AND WIDTH 3UCH MAPS SHOW HOW STREETS INTERSECT MAJOR LANDMARKS AND THE NAMES OF LAKES AND RIVERS &OR GETTING FROM PLACE TO PLACE SUCH TWO DIMENSIONAL MAPS PROVE VERY USEFUL "UT THEY OFFER LITTLE INSIGHT INTO WHY THINGS HAPPEN OR HOW THEY WORK 4O GET AN IDEA OF HOW THE BUILDINGS AND STREETS REMAIN USEFUL ONE NEEDS TO LOOK UNDERGROUND AT THE PIPES WIRES CABLES SUPPORT STRUCTURES AND TUNNELS THAT PROVIDE WATER TRANSFER DATA KEEP THE LIGHTS ON STOP BRIDGES FROM COLLAPSING AND CARRY SUBWAY TRAINS %VEN THIS LEVEL OF DETAIL HOWEVER DOES NOT PROVIDE A COMPLETE PICTURE OF HOW A CITY FUNCTIONS 4O KNOW EVERYTHING ABOUT A CITY ONE
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&IGURE $ "USINESS "LUEPRINT
MUST HAVE MULTIPLE MAPS THE DOCUMENTS LAYING OUT THE PRINCIPLES OF PLANNING AND GOVERNANCE THAT HOLD SWAY AND THOSE DOCUMENTS OUTLINING THE UNDERLYING MECHANICAL AND ELECTRONIC OPERATIONS OF THE PUMPS GENERATING PLANTS AND COMPUTERS THAT KEEP THE CITY HUMMING 3UCH AN IDEAL MAP ALTHOUGH FAR BEYOND THE NEEDS OF A MOTORIST WOULD PROVIDE A MANAGER WITH A COMPLETE VIEW OF A CITY EACH WITH ITS OWN FOCUS AND OWN SET OF ACTIVITIES YET ALL NECESSARILY WORKING TOGETHER AND LINKED TOGETHER TO PROVIDE AN EFFECTIVE UNDERSTANDING OF WHAT HAS TO GET DONE AND HOW IT DOES SO &IGURE DEPICTS SUCH A MAP OF AN ORGANIZATION OR WHAT WE CALL A $ "USINESS "LUEPRINT 4HE DEPICTED "USINESS "LUEPRINT CONSISTS OF FOUR LAYERS ANALOGOUS TO THE FOUR LAYERS OF AN IDEAL URBAN MAP 7ELL WALK THROUGH THIS BLUEPRINT USING AN EXAMPLE OF A NATIONAL JUDICIALCOURT SYSTEM )N A COURT SYSTEM THE TOP LAYER "USINESS -ODEL 3TRATEGY OUTLINES THE PRINCIPLES AND GOALS OF THE JUSTICE SYSTEM EQUAL JUSTICE UNDER THE LAW FAIRNESS DIGNITY AND SUPERIOR CUSTOMER SERVICE 4HIS LAYER HELPS ADMINISTRATORS JUDGES COMMUNITY MEMBERS AND LEGISLATORS DECIDE WHAT THE COURT SYSTEM WILL ACCOMPLISH OUTLINES THE MEASURE BY WHICH THAT ACCOMPLISHMENT IS JUDGED AND MAPS THE SOCIAL CONTEXT IN WHICH THE COURTS OPERATE 4HE SECOND LAYER "USINESS 0ROCESSES MAPS THE ACTUAL WORK OF A COURT SYSTEM lLING PAPERWORK SCHEDULING COURTROOMS HOLDING HEARINGS SELECTING JURIES AND ISSUING DECISIONS 4HIS LAYER IS MOST ANALOGOUS TO A STREET MAP SINCE IT DISTINGUISHES THE PROCESSES BY WHICH THINGS GET DONE FROM THE PARTICULAR SYSTEMS THAT DO THEM 1UITE OFTEN CLIENTS DISCOVER REDUNDANCIES AND lND OUT HOW TO ELIMINATE THEM
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-ANY COURT SYSTEMS FOR EXAMPLE HAVE MORE THAN ONE SYSTEM FOR PROCESSING PAYMENTS 4HE THIRD LAYER !PPLICATIONS MAPS THE TYPES OF APPLICATIONS AND FUNCTIONS CRITICAL TO ACCOMPLISH A COURT SYSTEMS WORK THE SOFTWARE CODE AND COMPONENTS THAT ACTUALLY GET THINGS DONE 4HE FOURTH LAYER )NFRASTRUCTURE MAPS THE SERVICES ROUTERS SERVERS AND 0#S THAT GET WORK DONE -APPING THE INFRASTRUCTURE THIS WAY LETS A COURT SYSTEM SEE WHAT PARTS OF ITS COMPUTER SYSTEMS DO A GOOD JOB AND WHICH ONES NEED REPLACEMENT 7HEN A COURT SYSTEM WANTS TO REPLACE A PIECE OF SOFTWARE WITH AN IMPROVED OR DIFFERENT ONE HAVING A BLUEPRINT OF THIS LAYER MAKES THE PROCESS FASTER EASIER AND LESS COSTLY 4HE RESULT IS A MAP OF AN ORGANIZATION AND THE ABSTRACTED CORE ACTIVITIES IT PERFORMS %ACH LAYER HAS ITS OWN SET OF ACTIVITIES AND ITS SET OF METRICS PRIORITIES OWNERS OFTEN ITS CULTURE AND CONSEQUENTLY NORMS EXPECTATIONS AND BEHAVIORS 4HE CORE AGILITY CHALLENGE AS WE DISCUSSED EARLIER IS TO GET THE ALIGNMENT ACROSS THESE LAYERS TO DRIVE THE EXECUTIONAL CONSISTENCY NEEDED 4HE $ "USINESS "LUEPRINT PROVIDES SPECIlC CODIlCATION TO HELP MAKE THIS HAPPEN 4HERE ARE THREE FUNDAMENTAL REQUIREMENTS OF THIS $ "USINESS "LUEPRINT s 6ISIBILITY 4HE VISIBILITY REQUIREMENT PROVIDES THE CAPABILITY TO SEE ACROSS THE ACTIVITIES OF EACH LAYER !S WEVE ALREADY DISCUSSED SILOS OFTEN RESULT FROM THE DIFFERENT SETS OF ACTIVITIES OWNERS METRICS AND BEHAVIORS OF EACH OF THESE FOUR LAYERS #ONSEQUENTLY IT IS NO SURPRISE THAT SEEING ACROSS THESE LAYERS OFTEN LEADS TO SIGNIlCANT DISCONNECTS IN TERMS OF BOTH UNDERSTANDINGS AND EXPECTATIONS OF WHAT HAS TO GET DONE BY WHEN AND BY WHOM (OW OFTEN HAVE YOU MENTIONED TO YOURSELF OR YOUR COLLEAGUES WHILE STANDING AT ANY OF THE LAYERS h) DONT KNOW OR UNDERSTAND WHAT THEY DO OVER THERE v DISCUSSING THE ACTIVITIES AT ANOTHER LAYER 4HE DISCONNECTS BETWEEN *OHN AND -ARY ARE EXAMPLES OF DISCONNECTS THAT OCCUR BETWEEN THE SECOND BUSINESS PROCESS AND THIRD APPLICATIONS LAYERS s 4RACEABILITY 4HE TRACEABILITY REQUIREMENT PROVIDES THE CAPABILITY TO KNOW WHAT IMPACTS WHAT WHERE HOW WHEN AND BY WHOM 4HIS IS THE CAPABILITY TO UNDERSTAND THE IMPACTS OF DECISIONS MADE WHEREVER THEY OCCUR "ACK TO OUR COURTS EXAMPLE 7HILE HAVING VISIBILITY INTO HOW THINGS WORK IS IMPORTANT lGURING OUT HOW THEY CONNECT IS EVEN MORE IMPORTANT &OR EXAMPLE THAT A COURT ADMINISTRATOR CAN QUICKLY UNDERSTAND HOW A CHANGE TO AN ADMINISTRATIVE VISION IMPACTS EVERY OTHER ASPECT OF A COURT SYSTEMS BUSINESS AND LIKEWISE HOW CHANGES TO A COMPUTER SYSTEM MIGHT IMPACT ITS ADMINISTRATIVE VISION WOULD OFFER TREMENDOUS SAVINGS OPPORTUNITIES IF
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THEY COULD SEE ANTICIPATE AND UNDERSTAND THE IMPACTS THAT DECISIONS MADE AT ANY LAYER WOULD HAVE ON OTHERS /R TAKE THE lNANCIAL SERVICES #HECK REGULATORY CHANGE WHEREBY CHECKS CAN BE TRUNCATED AT BANKS AND THEIR ELECTRONIC IMAGE COULD BECOME A lDUCIARY INSTRUMENT RATHER THAN RELYING SOLELY UPON THEIR PAPER FORM +NOWING WHAT BUSINESS PROCESSES APPLICATIONS AND SERVER CLUSTERS AMONG OTHER THINGS WOULD BE IMPACTED IN A MANNER THAT IS EXPLICITLY TRACEABLE WOULD OFFER SIGNIlCANT SAVINGS AND FAST MOVER ADVANTAGES TO THOSE ABLE TO DO SO s &LEXIBILITY 4HE mEXIBILITY REQUIREMENT PROVIDES THE CAPABILITY TO MAKE CHANGES TO DECISIONS PRIOR TO THEIR BEING CARRIED OUT BY KNOWING WHAT IMPACTS YOUR DECISIONS WILL HAVE .OW MANY SIMULATION CAPABILITIES EXIST IN A WIDE NUMBER OF TOOLSEG BUSINESS PROCESS SIMULATIONS APPLICATION ESTIMATION AND COSTING TOOLS ETC 9ET VERY FEW EXIST THAT CAPTURE THE IMPACT ACROSS ALL FOUR LAYERS AND CONSEQUENTLY LIMIT THE mEXIBILITY CRITICAL TO MODIFY DECISIONS BEFORE THEY ARE MADE !S WEVE SAID EACH LAYER OF THIS $ "LUEPRINT HAS ITS OWN SET OF ACTIVITIES METRICS OWNERS AND BEHAVIORS 4HE CHALLENGE AS WEVE ARTICULATED IT IS TO MOBILIZE THE INTELLECTUAL ASSETS OF ALL OF THE OWNERS INTO A COMMON EXPRESSION OF A PROBLEM TO BE SOLVED AND TO CREATE COMMON EXPRESSIONS ACROSS THE LAYERS SO THAT THE REQUIREMENTS AND EXPECTATIONS AT THE "USINESS 0ROCESS ,AYER FOR EXAMPLE ARE EQUALLY UNDERSTANDABLE AND USABLE TO THOSE AT THE !PPLICATIONS ,AYER AND SO ON 4HIS CREATION OF SHARED EXPRESSIONS OF DIFFERENCES IS THE CRUX OF CREATING THE EXECUTIONAL CONSISTENCY SO CRITICAL TO MEET THE REQUIREMENTS LISTED ABOVE 4HAT IS WHAT $ "USINESS "LUEPRINTING IS ALL ABOUT )T IS A SET OF TOOLS AND METHODS THAT CREATE COMMON EXPRESSIONS TO DRIVE EXECUTIONAL CONSISTENCY 3URE WEVE ALL BEEN HANKERING AFTER THESE OBJECTIVES FOR YEARS BUT NOW WE CAN REALIZE THEM 4HERE ARE TOOLS AND METHODS ALL BASED ON RE THINKING WHAT IS COMMON TO BECOMING AGILE THAT CAN BE AND ARE BEING EXPLOITED TO HELP US GET CLOSER TO THE OBJECTIVES OF AGILITY THAN WE HAVE BEFORE ,ETS DESCRIBE WHAT SOME OF THESE CHALLENGES MEAN IN PRACTICE AND HOW OTHERS HAVE TACKLED THEM
&2%$ 3+)..%2 &!#%3 ! #2)3)3 &RED 3KINNER A COURT ADMINISTRATOR IN A MID SIZED COUNTY KNEW HOW TO DEAL WITH TIGHT BUDGETS ANGRY JUDGES OBSTINATE LITIGANTS AND DIFlCULT EMPLOYEES $ESPITE FUNDING THAT NEVER SEEMED TO KEEP UP WITH HIS SYSTEMS SWELLING CASELOAD AND CHANGING NEEDS HE STRETCHED HIS BUDGET TO PROVIDE CLEAN BUILDINGS FRIENDLY
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CUSTOMER SERVICE A FUNCTIONAL COMPUTER SYSTEM AND EVEN START A FEW NEW PROGRAMS .ORMALLY HE WOULD HAVE BEEN HAPPY THAT THE LATEST DEMAND FOR A NEW PROGRAMTHE STATE LEGISLATURES MANDATE TO ESTABLISH A DRUG COURTCAME WITH A GRANT ATTACHED %VEN THOUGH IT WAS ONLY -ONDAY MORNING &RED COULD HARDLY WAIT FOR THE WEEKEND (E KNEW HIS COMPUTER SYSTEM WOULD NEED SIGNIlCANT UPGRADES TO SUPPORT THE DRUG COURT 4HE IRONY OF &REDS SITUATION DID NOT ESCAPE HIM &ROM THE TIME HE MOVED INTO THE ADMINISTRATORS OFlCE EIGHT YEARS EARLIER &RED HAD MADE lXING THE COURTS lFTEEN YEAR OLD MAINFRAME COMPUTER SYSTEM HIS TOP PRIORITY ! COMMITTEE OF JUDGES ADMINISTRATORS LAWYERS AND A FEW OUTSIDE EXPERTS HAD VISITED OTHER NEARBY COURT SYSTEMS HIRED A WELL KNOWN CONSULTANT AND EVENTUALLY SELECTED A COURT SPECIlC SOFTWARE PACKAGE USED IN SEVERAL SMALL JURISDICTIONS NEARBY 4HE COMMITTEE DECIDED THAT THE PACKAGED SOFTWARE OFFERED THE LOWEST RISK THE BEST OPPORTUNITY FOR RAPID AVAILABILITY OF FUNCTIONALITY AND EXCELLENT LONG TERM STABILITY 4HE COUNTY BOARD AGREED TO SPEND ON NEW HARDWARE AND SOFTWARE 4HE NEXT YEAR WAS &REDS WORST ON THE JOB 'ETTING THE SYSTEM TO WORK PROPERLY &RED DISCOVERED WOULD COST SEVERAL MILLION DOLLARS AND REQUIRE SIGNIlCANT CUSTOM DEVELOPMENT !FTER SPENDING ALMOST &RED lRED THE VENDOR AND HAD TO TELL AN ANGRY COUNTY BOARD THAT THE COURTS STILL LACKED A DECENT COMPUTER SYSTEM $ESPITE SOME LOSS OF CREDIBILITY HOWEVER &RED MANAGED TO STAY EMPLOYED !FTER A YEAR OF DILIGENT EFFORT HE CONVINCED THE COUNTY BOARD TO ALLOCATE ANOTHER TO BUILD A BETTER COMPUTER SYSTEM 7ITH THE LARGER BUDGET IN HAND &REDS COMMITTEE SELECTED ANOTHER WELL RESPECTED SOFTWARE PACKAGE THAT SEVERAL SIMILARLY SIZED COUNTIES USED 4HIS TIME THINGS WENT A LITTLE BETTER %VEN SO IMPLEMENTING IT HAD MEANT NEARLY TWO YEARS OF HEADACHES 4HE PACKAGE REQUIRED SUBSTANTIAL CUSTOMIZATION TO MEET JUDGES INDIVIDUAL DEMANDS AND THE ECCENTRICITIES OF LOCAL LAWS &RED SPENT SEVERAL UNPLEASANT EVENINGS ANSWERING QUESTIONS ABOUT COST OVERRUNS FROM THE COUNTY BOARD )N THE END GETTING THE SYSTEM TO WORK COST MILLION 4HEN TWO YEARS AGO A BRIEF E MAIL ARRIVED IN &REDS INBOX INDICATING THAT THE SOFTWARE VENDOR WAS SHUTTING DOWN &REDS )4 DEPARTMENT RECEIVED A FEW DISKS CONTAINING THE PRODUCTS SOURCE CODE AND WITH LOTS OF HARD WORK MANAGED TO KEEP THE SYSTEM RUNNING 7ITH NO UPGRADES COMING HOWEVER THE COSTLY SYSTEM FAILED TO KEEP UP WITH THE TIMES 'IVEN ALL THE EXPENSIVE MODIlCATIONS &RED WASNT SURE IF HE WOULD HAVE WANTED TO RISK INSTALLING UPGRADES ANYWAY 7HILE HE SOMETIMES JOKED THAT LITTLE MORE THAN CHEWING GUM AND ELBOW GREASE KEPT THE SYSTEM GOING FEW USERS HAD SERIOUS COMPLAINTS .OW &RED WAS AFRAID THAT TRYING TO START THE DRUG COURT MIGHT DESTROY THE DELICATE BALANCE THAT KEPT THE COMPUTERS HUMMING .ARROWLY CUSTOMIZED TO THE TYPICAL COURTS WORK THE EXISTING SYSTEM OFFERED NO EASY WAY TO INTEGRATE WITH THE TWO DOZEN SOCIAL SERVICE AGENCIES THAT WOULD SHARE INFORMATION WITH THE DRUG
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COURT (IS EXISTING )4 STAFF HAD NEITHER THE TIME NOR THE SKILLS TO MODIFY THE DATED SOURCE CODE )NSTALLING A NEW SYSTEM JUST FOR THE DRUG COURTS WOULD PROBABLY COST OVER AND DOING THAT WOULD LEAVE THEM UNABLE TO SHARE INFORMATION WITH THE REST OF THE SYSTEM 3HARING INFORMATION WOULD PROBABLY REQUIRE A BRAND NEW COURT MANAGEMENT SYSTEM WITH A PRICE TAG OVER MILLION %ITHER WAY &RED FACED DOZENS OF COUNTY BOARD HEARINGS AS WELL AS A LONG AND RISKY UPGRADE PROCESS BEFORE HE COULD EVEN THINK ABOUT MEETING THE DRUG COURTS NEEDS (E SAT AT HIS COMPUTER AND SET TO THE UNPLEASANT TASK OF E MAILING THE COUNTY lNANCE DIRECTOR ABOUT HIS SITUATION )T WAS GOING TO BE A LONG WEEK &RED 3KINNERS STORY IS lCTIONAL BUT MANY COURT ADMINISTRATORS AND OTHERS THAT HOLD SIMILAR POSITIONS IN DIFFERENT INDUSTRIES CAN RECOGNIZE THE REALITIES HE FACES TIGHT BUDGETS MANDATES TO CREATE NEW TYPES OF THERAPEUTIC COURTS AND COMPUTER SYSTEMS THAT CANNOT EASILY MEET CONSTANTLY INCREASING DEMANDS h7E NEED TO BE ABLE TO USE TECHNOLOGY MORE EFFECTIVELY NOT ONLY TO OBTAIN THE INFORMATION THAT WE NEED BUT TO PROVIDE PUBLIC ACCESS TO THE COURTS AS WELL v OBSERVES 7ILLIAM # 6ICKREY THE 3TATE OF #ALIFORNIAS !DMINISTRATIVE $IRECTOR OF THE #OURTS 4RYING TO PROVIDE THE INFORMATION REQUIRED BY THE CHANGING NEEDS OF CITIZENS AND INSTITUTIONS HOWEVER PROVES QUITE DIFlCULT 7HAT (ARVARD ,AW 3CHOOL $EAN 2OSCOE 0OUND SAID ABOUT THE LAW ALSO HOLDS TRUE FOR THE TECHNOLOGY THAT SUPPORTS THE ADMINISTRATION OF JUSTICE )T hMUST BE STABLE BUT IT MUST NOT STAND STILLv #OURT SYSTEMS MUST BE SOLID AND RELIABLE BUT THEY MUST ALSO EFFECTIVELY AND EFlCIENTLY ADAPT TO CHANGETHEY MUST BECOME AGILE
"5),$).' 4(% !'),% #/524 3934%7HILE THE VALUES AND TRADITIONS OF THE LAW REMAIN CONSTANT THE REGULATIONS STATUTES TECHNOLOGY CITIZEN EXPECTATIONS AND lSCAL CLIMATE AROUND THE COURTS CHANGE CONSTANTLY -OST ADMINISTRATORS FORESEE CERTAIN CHANGES % lLING WILL CONTINUE TO GROW MORE OUTSIDE AGENCIES WILL WANT TO SHARE INFORMATION WITH THE COURTS VIDEO TESTIMONY WILL CONTINUE TO GAIN IN POPULARITY AND INFORMATION SECURITY WILL REMAIN A VITAL CONCERN 0OTENTIALLY DISRUPTIVE CHANGES WILL ALMOST CERTAINLY OCCUR THAT RADICALLY ALTER OUR CONCEPT OF THE COURTROOM ITSELF *UDGES FOR EXAMPLE MIGHT START CONDUCTING SOME TYPES OF HEARINGS ON THE )NTERNET AND BEGIN TO SIGN REQUESTS FOR TEMPORARY RESTRAINING ORDERS ONLINE 4HE .ATIONAL #ENTER FOR 3TATE #OURTS SUMMARIZES THE CHALLENGE THIS WAY h/VER THE NEXT YEARS COURTS WILL BE REQUIRED TO DEVELOP INFORMATION SYSTEMS THAT TAKE INTO ACCOUNT THE FACT THAT THEY ARE DEPENDENT UPON OTHERS FOR THE INFORMATION THEY NEED TO ADMINISTER
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JUSTICE AND IN TURN ARE A MAJOR SOURCE OF INFORMATION FOR OTHERS !T THE SAME TIME TECHNOLOGY DEVELOPMENTS CENTERED ON THE USE OF THE )NTERNET ARE SIMPLIFYING THE TASK OF MOVING DATA ACROSS INSTITUTIONAL AND SYSTEM BOUNDARIES 4HE )NTERNET HAS GENERATED TOOLS AND SYSTEM DEVELOPMENT PROCEDURES THAT PROMISE IF USED EFFECTIVELY TO MAKE THE YEAR OLD VISION OF A SEAMLESS MOVEMENT OF INFORMATION AMONG COURTS PROSECUTORS LAW ENFORCEMENT AND CORRECTIONS A REALITY INSTEAD OF A CHASE AFTER A WILL O THE WISP 7E CAN NO LONGER BLAME THE LIMITATIONS OF OUR TECHNOLOGY FOR FAILURE 4HE BURDEN FOR SUCCESS NOW LIES ON THOSE WHO MUST DEVELOP SOUND BUSINESS PRACTICES NOT ON THE TECHNICAL GURUSv (ENDERSON !N AGILE COURT UNDERSTANDS HOW IT RELATES TO A WIDE RANGE OF GROUPS LITIGANTS DEFENDANTS LEGISLATURES AND THE COMMUNITY AS A WHOLE )T KNOWS HOW THE NEEDS OF THE COURTS AND THESE GROUPS RELATE TO THE INFORMATION UNDERPINNING ITS OPERATION THE PROCESSES IT USES TO MANAGE THAT INFORMATION AND THE TECHNOLOGY THAT SUPPORTS THOSE PROCESSES )T EXECUTES A WELL DElNED MISSION IN A WAY THAT DRIVES THE ALIGNMENT OF ITS INFORMATION BUSINESS PROCESS AND TECHNOLOGY )F THE MISSION OR ANY OF THESE RELATIONSHIPS CHANGE AN AGILE COURT CAN RESPOND WITH EFlCIENCY AND ALACRITY 4O DO THIS ADMINISTRATIVE MANAGERS AND JUDGES MUST HAVE THREE DIMENSIONAL VISIBILITY OF THE ENTERPRISE 4HEY MUST UNDERSTAND THE RESULTS OF DECISIONS BEFORE THEY ARE MADE AND COMPREHEND THE BENElTS OF SPENDING MONEY BEFORE IT IS SPENT )N SHORT THEY CAN UNDERSTAND THE RELATIONSHIP BETWEEN ACTIONS AND THE CHANGES THEY WILL CAUSE &OR THIS TO HAPPEN PLANSRANGING FROM LONG TERM VISIONS TO THE SPECIlC WAY DATA CONCERNING LITIGATION GETS ENTEREDMUST ALIGN WITH ONE ANOTHER AND WITH THE BUSINESS PROCESS AND TECHNOLOGY THAT BRING THOSE PLANS TO FRUITION 3UCH ALIGNMENT REQUIRES THE ABILITY TO TRACE CLEARLY AMONG MISSION BUSINESS PROCESS AND THE ACTUAL COMPUTER SYSTEMS THAT SUPPORT COURTS 4HIS TRACEABILITY ENSURES THAT THE ACTUAL NEEDS OF JUDGES LAWYERS LITIGANTS AND DEFENDANTSAND NOT THE RESTRICTIONS OF A PARTICULAR TECHNOLOGY IMPLEMENTATIONDICTATE THE WAY COURTS DO BUSINESS 4HIS VISION AND REQUIREMENT IS NOT JUST A VISION AND A REQUIREMENT 4HEY CAN BE EXECUTED ON AS WELL ,ETS USE ANOTHER COURTS EXAMPLE
35##%33 ). 7%34%2. !5342!,)! 4HE 7ESTERN !USTRALIA $EPARTMENT OF *USTICE HAS CREATED AN AGILE COURT ENVIRONMENT ENABLING THEM SIMULTANEOUSLY TO ENHANCE SERVICE SAVE MONEY AND IMPROVE ITS ABILITY TO FACE THE FUTURE 3EE 7ESTERN !USTRALIAS $EPARTMENT OF
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7ESTERN !USTRALIAS $EPARTMENT OF *USTICE !USTRALIAS 0ARLIAMENT CREATED THE 7ESTERN !USTRALIA $EPARTMENT OF *USTICE IN AS PART OF A JUSTICE SYSTEM OVERHAUL )TS RESPONSIBILITIES COMBINE THOSE OF AN !MERICAN STATE COURT SYSTEM PRISON SYSTEM STATES ATTORNEYS OFlCES PUBLIC DEFENDERS PRACTICE LIQUOR CONTROL BOARD AND VITAL STATISTICS OFlCE )TS JURISDICTION COVERS ALMOST EXACTLY HALF OF !USTRALIAS LAND AN AREA ROUGHLY ONE THIRD THE SIZE OF THE CONTINENTAL 5NITED 3TATES AND INCLUDES THE COSMOPOLITAN CITY OF 0ERTH AS WELL AS /UTBACK HAMLETS LIKE (ALLS #REEK )N ITS lSCAL YEAR THE DEPARTMENT HAD A BUDGET OF ABOUT MILLION )T EMPLOYS ABOUT INDIVIDUALS AND RUNS lFTY lVE LOCAL TRIBUNALS DISTRICT COURTS FOR THE ENTIRE REGION A SUPREME COURT A DOZEN COURTHOUSES AND SIX PRISONS 7HEN FULLY OPERATIONAL IN MID A SINGLE )NTEGRATED #OURTS -ANAGEMENT 3YSTEM WILL REPLACE ALL FOURTEEN LEGACY SYSTEMS AND MEET THE NEEDS OF EVERYTHING FROM THE LIQUOR LICENSING TRIBUNAL TO 7ESTERN !USTRALIAS 3UPREME #OURT %ACH TRIBUNAL WILL RETAIN ALL THE UNIQUE FUNCTIONALITY IT NEEDS AND HAVE THE ABILITY TO SHARE DATA WITH EVERY OTHER PART OF THE DEPARTMENT )NDEED THE COMPONENTS DEVELOPED FOR THE COURT SYSTEMS PROVE mEXIBLE ENOUGH THAT THEY EVEN SERVE AS THE BASE FOR THE DEPARTMENTS OFFENDER MANAGEMENT SYSTEM THAT HAS A NUMBER OF SIMILARITIES TO THE COURTS SYSTEMS
*USTICE 4HE CHALLENGES THEY FACED IN DOING SO HOWEVER WERE COMPLEX INCLUDING A MULTIPLICITY OF AGENCIES AND A WIDE RANGE OF COMPUTER SYSTEMSTHE DEPARTMENT HAD FOURTEENWHICH MADE INTRADEPARTMENTAL COMMUNICATION DIFlCULT AND COSTLY %VERYTHING THAT PRISONS AND LAWYERS DID AS WELL AS MUCH OF THE WORK OF VITAL RECORDS OFlCES DEPENDED ON TIMELY AND ACCURATE INFORMATION mOWING FROM THE COURT SYSTEM AND THE COMPUTERS DID NOT COMMUNICATE AS WELL AS THEY MIGHT HAVE 4HE 7ESTERN !USTRALIA #OURT PROJECT TEAM RECOGNIZED THE SEMANTIC DISCONNECTS THAT STOPPED THEM FROM REACHING THEIR OBJECTIVES 4HEY RECOGNIZED THE NEED TO BRIDGE THOSE DISCONNECTS THROUGH CREATING MODELS AND CAPABILITIES THAT NOT ONLY EXPRESSED DIFFERENCES QUICKLY BUT ALSO COULD BE ACTED ON EFFECTIVELY )N A SERIES OF WORKSHOPS THE 7ESTERN !USTRALIA $EPARTMENT OF *USTICE STAFF DISCOVERED THAT DOZENS OF APPARENTLY DISCRETE TASKS WERE IN FACT SLIGHT VARIATIONS ON THE SAME PROCESSEG THERE WERE PATTERNS OF ACTIVITIES THAT COULD BE IDENTIlED AND USED AGAIN AND AGAIN 4HAT THE BUSINESS PROCESSES REQUIREMENTS COULD BE EXPRESSED IN A WAY THAT THE TECHNOLOGY DESIGNERS NEEDED THEM WAS AN INSIGHT THAT HELPED BREAK THE LOGJAM OF WORKING TOGETHER 5SING THIS INFORMATION THE DEPARTMENT CREATED A SERIES OF BUSINESS MODELS AND BUSINESS PROCESSSOFTWARE COMPONENTS THAT DESCRIBED AND MODELED THE DEPARTMENTS BUSINESS 4HE RESULT HAS BEEN A SIGNIlCANTLY MORE AGILE ORGANIZATION 2ATHER THAN HAVING TO WRITE NEW CODE EACH TIME ADMINISTRATORS AND JUDGES WANT TO MODIFY THE SYSTEM MODELS WERE UPDATED REmECTING THE $EPARTMENTS GOALS AND VISIONS 4HESE MODIlCATIONS CREATE
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AUTOMATIC CHANGES IN CODE AND BUSINESS APPLICATIONS AND PROCESSES !S A RESULT THE 7ESTERN !USTRALIA $EPARTMENT OF *USTICE CAN ROLL OUT NEW SYSTEMS WITH IMPRESSIVE SPEED AND A COST UNLIKE THEYVE EVER EXPERIENCED BEFORE &OR THE 3UPREME #OURT COSTS PER CASE lNALIZED TRIED SETTLED PLEA BARGAINED OR DISMISSED FELL ALMOST PERCENT EXCEEDING EVEN THE DEPARTMENTS AMBITIOUS INTERNAL TARGET BY NEARLY SEVEN PERCENT )N 0ERTH LAWYERS lLED OVER BRIEFS USING A NEW ALL ELECTRONIC SYSTEM $ATABASE LICENSING COSTS FELL BY SEVENTY lVE PERCENT AND MAINTENANCE COSTS WERE HALVED 4HE SYSTEM ALSO BECAME EASIER TO USE A SINGLE UNIlED MANUAL AND TRAINING PROCEDURE REPLACED SEPARATE ONES "ECAUSE ABOUT A THIRD OF THE SYSTEMS COMPONENTS WERE REUSED ALL THIS WAS DELIVERED AT A PRICE COMPETITIVE TO WHAT IT WOULD HAVE COST TO MODIFY PACKAGED SOFTWARE !FTER BUILDING A SYSTEM FOR THE DISTRICT COURTS WHICH INCLUDED A GREAT DEAL OF UNDERLYING INFRASTRUCTURE THE COURT SYSTEM WAS ABLE TO ROLL OUT A FULL SCALE CIVIL LITIGATION SYSTEM FOR THE 3UPREME #OURT IN ONLY SEVEN WEEKS "UILDING A SYSTEM FOR ALL lFTY lVE LOCAL TRIBUNALS MANY OF WHICH HAD TO RESPOND TO PARTICULAR LOCAL LAWS AND CUSTOMS TOOK ONLY THREE MONTHS 3EE 7ESTERN !USTRALIAS $EPARTMENT OF *USTICE .OBODY CAN KNOW EVERY CHALLENGE OR DEMAND THE FUTURE MAY BRING BUT IT IS POSSIBLE TO BUILD A SYSTEM THAT PROVIDES AGILITY TO ROLL WITH THE PUNCHESTO CHANGE AS THE SOCIETY AND ITS LAWS CHANGE h"USINESS AGILITY v SAYS "OB "ERG $IRECTOR OF )NFORMATION 3ERVICES FOR THE 7ESTERN !USTRALIA $EPARTMENT OF *USTICE IS ENABLING THE DEPARTMENT hTO WORK TOWARD REDUCING THE POOL OF CRIME RATHER THAN REACTING TO ITv
! $!9 0,!. #/.6%24).' 4(% !'),)49 $.! 4/ 53% 7HATS THE BOTTOM LINE HERE 3IMPLY THE RECOGNITION THAT AGILITY IS A PROCESS RATHER THAN ANY PARTICULAR END STATE A PROCESS WITH SIGNIlCANT IMPLICATIONS ON THE CLASSIC ELEMENTS OF AN ORGANIZATION ITS PEOPLE PROCESS AND TECHNOLOGY 2ATHER THAN ENUMERATE WHAT THESE IMPLICATIONS ARE FROM EACH PERSPECTIVE WE LIST SOME SPECIlC DAY ACTIVITIES TO START EXPLOITING THE $.! FOR ORGANIZATIONAL AGILITY 3EE 4HE *ERICHO 0RINCIPLE FOR A MORE DETAILED DESCRIPTION OF SPECIlC ORGANIZATIONAL IMPLICATIONS ENGENDERING ORGANIZATIONAL AGILITY FROM EACH THE PERSPECTIVES OF PEOPLE PROCESS AND TECHNOLOGY AND WITH A PARTICULAR AROUND ALL OF THESE IMPLICATIONS ON OPPORTUNITIES AND MEANS TO EXPLOIT EMERGING COLLABORATION MODELS 3OME OF THESE IMPLICATIONS INCLUDE s 0RIORITIZE SOME PROJECTS TO HELP YOU ACCELERATE THE hPROCESSv FROM TACIT TO MORE SCALABLE AND HENCE EXECUTABLE ACTIVITIES 0ROJECTS TEND TO GENERATE
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TREMENDOUS ASSETS AND POTENTIALLY NEW ORGANIZATIONAL CAPABILITIES 2E EVALUATING AND PROVIDING A FOCUS ON THE PROCESS AND CRITICALITY OF CODIFYING CERTAIN TYPES OF SPECIlC ASSETS PARTICULARLY IN THOSE AREAS THAT OFFER A COMPETITIVE ADVANTAGE OR WILL HELP STEER YOU TOWARDS NEW BUSINESS OPPORTUNITIES IS A LIGHT WEIGHT BUT HIGH IMPACT ACTIVITY FOR YOUR EXISTING PROJECTS 3O EXAMINE YOUR PROJECTS TO IDENTIFY SPECIlC AND POWERFUL INTELLECTUAL ASSETSBUSINESS VALUE THAT NEEDS TO BE EXTRACTED AND SCALEDEG A CLEVER WAY OF CREATING NEW PRODUCTS A NOVEL IDEA THAT CAN BE CONVERTED INTO A NEW lNANCIAL PRODUCT OR SERVICE A NEW MARKETING DESIGN THAT SHOULD BE EXPLOITED BROADLY AN INNOVATIVE WAY TO INTEGRATE DISPARATE SYSTEMS AND SO ON ,OOK AT YOUR BUSINESS PROCESSES YOUR TECHNOLOGY APPLICATIONS AMONG OTHER ACTIVITIES AND lGURE OUT IF YOU HAVE A COMMON WAY TO EXPRESS THEM TO MODEL THEM TO COMMUNICATE ABOUT THEM OR TO DEVELOP SHARED SEMANTICS ACROSS THEM !N EVALUATION OF THIS TYPE IS A CRITICAL lRST STEP IN STARTING THE CODIlCATION PROCESS 4HIS ENTAILS BECOMING ACUTELY SENSITIVE TO HOW YOU DElNE AND COMMUNICATE 7E OFTEN HEAR ABOUT DISAGREEMENTS h!H THATS JUST SEMANTICSv /UR COUNTER WOULD BE h3EMANTICS ARE ALL WE HAVE v AND SHARED SEMANTICS ARE CRITICAL TO EXECUTE CONSISTENTLY s %XAMINE YOUR TOP TEN STRATEGIC INITIATIVES hGRADE AND SHADE THEMv AGAINST THE SEMANTIC STACK IN TERMS OF THE DEGREE TO WHICH THE PROJECT ACTIVITIES ARE CODIlED %VERY PROJECT HAS PARTICULAR ASSETS AND BEST PRACTICES THAT CAN AND SHOULD BE EXPLOITED BY MANY IN THE ORGDQL]DTION 4O START GETTING MORE AGILE START THINKING ABOUT HOW YOU CAN PROGRAMMATICALLY START TO EXPLOIT THE CODIlED PATTERNS AND ACTIVITIES YOU SEE ACROSS THESE TOP TEN PROJECTS s )TS ALL ABOUT STANDARDS STANDARDS STANDARDS 4HERE IS STRONG AGREEMENT AMONG #8/S IN THE REPORT 4HE !GILE #ORPORATION CITED EARLIER THAT MINIMIZING OBSOLESCENCE THROUGH OPEN STANDARDS WILL BE ONE OF THE PRINCIPAL CRITERIA FOR INVESTING IN NEW TECHNOLOGY 5NISYS #ORPORATION ! QUOTE FROM ONE OF THE REPORTS RESPONDENTS WAS hCHOOSING )4 VENDORS WITH OPEN SOLUTIONS THAT FACILITATE THE EASY ADOPTION OF NEW TECHNOLOGY AND STANDARDS WILL BE MORE IMPORTANT THAN LEAST COST SOLUTIONSv 7HY IS THIS &OR THE SIMPLE REASON THAT YOUR SCARCE TIME AND GREAT TALENTS CAN FOCUS ON WHAT THE VALUE IS TO BE GAINED RATHER THAN HOW TO GET THEM CONNECTED TO EACH OTHER !GAIN FOLLOWING THROUGH THE AGILITY $.! ARGUMENT ABOVE IT IS CLEARLY EASY TO SEE AND UNDERSTAND THE REASONING FOR THIS STATEMENT !FTER ALL AT THEIR CORE WHAT ARE STANDARDS .OTHING MORE THAN THE CODIlCATION OF BEST PRACTICES THAT HAVE BEEN RElNED IN THE CRUCIBLE OF THE MARKETPLACE USING STANDARDS THEN ARE SIMPLE AND LOGICAL MEANS TO REDUCE YOUR RISKS AND INCREASE USING THE BRAINS OF THE MANY
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s 7ORK WITH YOUR SERVICE PROVIDERS TO GIVE UP THEIR PROPRIETARY METHODOLOGIES TOOLS AND FRAMEWORKS )NSTEAD CHALLENGE THEM TO PROVIDE A MEANS FOR ALL OF THEIR DIFFERENT METHODOLOGIES TOOLS AND FRAMEWORKS TO WORK TOGETHER COLLABORATIVELYIN OTHER WORDS IN SOME FORM OF COLLABORATIVE DELIVERY FRAMEWORK !GAIN THIS IS A MEANS TO RECONCILE THEIR DIFFERING UNDERLYING SEMANTICS s "EGIN TO ASSESS WHERE AND WITH WHOM TO PARTNER TO ACCELERATE THE SCALING PROCESS 4HE MARKETPLACE UNCERTAINTY WE FACE AND DYNAMIC PRESSURES WITH WHICH WE ALL DEAL REQUIRES AN AGILITY TO RESPOND AS COMPETITIVE PLATES SHIFT OPENING UP SPECIlC MARKET INEFlCIENCES AND OPPORTUNITIES THAT NEED TO BE EXPLOITED QUICKLY ! PROBLEM MANY OF OUR ORGANIZATIONS FACE HOWEVER IS THE DIFlCULTY IN RESPONDING EFFECTIVELY )TS JUST TOO HARD TO MOBILIZE RESOURCES INTERNALLY TO RESPOND %NTER COLLABORATION #OLLABORATION IS BECOMING A CRITICAL CAPABILITY TO MOBILIZE RESOURCES FROM DIFFERENT PARTIES TO EXPLOIT FAST MOVING OPPORTUNITIES 4HEY ARE A MEANS AROUND OUR WELL STRUCTURED PROCESSES 4HEY OFFER AN OPPORTUNITY TO BUILD UPON CORE STRENGTHS OF ONE TWO OR MORE COMPANIES IN A NASCENT BUSINESS ENVIRONMENT THAT CAN BE STRUCTURED OUTSIDE OF OUR TRADITIONAL PROCESSES TO TAKE ADVANTAGE OF PARTICULAR MARKET OPPORTUNITIES #ONSEQUENTLY LOOKING TO PARTNER TO COLLABORATE AND TO POOL SHARED ASSETS COLLABORATIVE CAPABILITIES ARE INCREASINGLY BECOMING LESS A NICE TO HAVE THAN A STRATEGIC NECESSITY 4HEY SERVE AS ADDITIONAL MEANS OF ACCELERATING ORGANIZATIONAL AGILITY AGILITY THROUGH PARTNERSHIPS 7ELBORN AND +ASTEN 4HE BOTTOM LINE IS THIS 4HERE ARE FOUR SEPARATE BUT COMPLEMENTARY ACTIVITIES THAT COMPRISE A DAY PLAN THE BUSINESS RESULTS OF WHICH CAN HELP YOU POSITION YOURSELF BOTH STRATEGICALLY AND OPERATIONALLY TO MANIPULATE THE $.! OF ORGANIZATIONAL AGILITY !CCELERATE COMMON AND SHARED FRAMEWORKS AND STANDARDS FROM AS MUCH THE BUSINESS AS THE TECHNOLOGY SIDES OF YOUR HOUSE AND THROUGH THIS PROCESS IDENTIFY THE CORE ASSETS TO HARVEST TO LEVERAGE ELSEWHERE THOSE HIDDEN TACIT ASSETS THAT ACTUALLY DRIVE YOUR VALUE AS OPPOSED TO THE FORMAL DECLARATIONS THAT PROCLAIM THEY DRIVE YOUR VALUE 2E EVALUATE YOUR TOP TEN STRATEGIC PRIORITIES TO EXPLOITCODIFY INTELLECTUAL ASSETS THAT CAN BE SCALEDTHE RE USE ISSUE 7ORK WITH YOUR SERVICE PROVIDERS TO EXPRESS THEIR TOOLS METHODS AND APPROACHES IN SOME FORM OF COLLABORATIVE DELIVERY MANNERTHE DELIVERY ISSUE
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"EGIN TO ASSESS WITH WHOM TO ACCELERATE THE SCALING PROCESS TO TAKE ADVANTAGE OF YOUR ASSETSTHE COLLABORATIVE ISSUE %XAMINE YOUR CORE VALUE PROPOSITION FROM THE PERSPECTIVE OF THE SEMANTIC STACK TO RE EVALUATE POTENTIAL BUSINESS PARTNERS COMPETITORS AND STRATEGIC INITIATIVESTHE COMPETITIVE POSITIONING ISSUE
&2/- 4!#)4 4/ %8%#54!",%4(% #258 &/2 !'),)49/.% -/2% 4)-%x %XECUTING QUICKLY AND EFlCIENTLY ACROSS THE BREADTH OF ANY ORGANIZATION REQUIRES THAT MANY PEOPLE BE ABLE TO hMAKE SENSEv OF A NEW BUSINESS OPPORTUNITY AND THEN hTAKE ACTIONv EFFECTIVELY .EW MARKET OPPORTUNITIES ARE OFTEN HIGH MARGIN ANDOR HIGH REVENUE POTENTIAL OPPORTUNITIES THE RESULTS OF THEIR UNDERLYING VALUE PROPOSITION BEING NOVEL AND CONSEQUENTLY RELATIVELY UNEXPLOITED OR DIFlCULT TO REPLICATE 4HESE OPPORTUNITIES TEND BE DERIVED FROM SOMEONE HAVING AN IDEA OR hSEEING THE OPPORTUNITYv THAT OTHERS HAVE NOT SEEN OR HAVE NOT BEEN ABLE TO EXECUTE ON ! CHALLENGE FOR EFFECTIVE AND SCALABLE ACTION DEPENDS UPON TAKING THIS hTACITv IDEATHE KNOWLEDGE IN SOMEONES HEAD AROUND THE PARTICULAR NEW BUSINESS OPPORTUNITYAND hSCALING ITv SO THAT OTHERS CAN UNDERSTAND MOBILIZE AND EXECUTE ON THE OPPORTUNITY h4AKING ACTIONv EFFECTIVELY THEN DEPENDS UPON CODIFYING THIS TACIT KNOWLEDGE INTO SOME FORMS THAT CAN BE USED AND USED SUCH THAT IT CAN BE USED BY MANY OR SUFlCIENTLY SCALED THAT IT CAN BE EXECUTED BROADLY 4HIS PROCESS OF CODIFYING AND SCALING TACIT KNOWLEDGE INTO WELL DElNED BUSINESS PROCESSES TECHNOLOGY ENABLERS AND OTHER hHARDv ASSETS AND ARTIFACTS THAT MANY OTHERS CAN USE CONSISTENTLY EFFECTIVELY AND COST EFFECTIVELY DETERMINES WHETHER OR NOT AN ORGANIZATION CAN BE AND IS AGILE (OW SO "EING AGILE REQUIRES A CRITICAL MASS OF PEOPLE AND UNDERLYING PROCESSES SUPPORTING THOSE PEOPLE TO BE ABLE TO MOVE QUICKLY IN RESPONSE OR IN ANTICIPATION OF SPECIlC OPPORTUNITIES 4HE ONLY WAY TO MOBILIZE SUCH A BROAD BASE OF PEOPLE AND PROCESSES MOVING IN A DIRECTED FASHION IS THROUGH A SHARED UNDERSTANDING OF WHAT IS EXPECTED OF WHAT TO DO OF HOW TO DO IT AND OF MEASURING THE VALUE OF THOSE ACTIONS 7E OFTEN HEAR THE DISCUSSIONS AROUND STANDARDS FRAMEWORKS AND THE NEED FOR SHARED BUSINESS ANDOR TECHNOLOGY SEMANTICS FOR EFFECTIVE ACTION ALL OF WHICH REmECT THE END RESULT OF THIS PROCESS OF CODIFYING IDEAS NASCENT VALUE PROPOSITIONS AND BEST PRACTICES INTO ORGANIZATIONAL ACTIVITIES AND MEANS THAT CAN BE SCALED !ND IT IS THIS PROCESS OF CODIlCATION THAT COMPRISES THE UNDERLYING $.! FOR ORGANIZATIONAL AGILITY 4HE RESULTING AGILITY MANTRA IS SIMPLE THE MORE CODIlED THE MORE EXECUTABLE THE MORE
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EXECUTABLE THE MORE SCALABLE THE MORE SCALABLE THE MORE AGILE AND THE MORE AGILE THE MORE COMPETITIVE
2EFERENCES 4HE 'LOBAL &UTURE &ORUM 5P THE /RGANIZATIONxOR $OWN .OVEMBER ! SURVEY OF #8/S AND 3ENIOR %XECUTIVES PRIMARILY IN %UROPE AND .ORTH !MERICA (ENDERSON 4HOMAS ! )NTEGRATED *USTICE )NFORMATION 3YSTEMS4RENDS IN .P .ATIONAL #ENTER FOR 3TATE #OURTS 5NISYS #ORPORATION 4HE !GILE #ORPORATION n ! GLOBAL SURVEY OF SENIOR BUSINESS AND )4 EXECUTIVES AND INDUSTRY ANALYSTS 7ELBORN 2 AND 6 +ASTEN 4HE *ERICHO 0RINCIPLE (OW #OMPANIES 5SE 3TRATEGIC #OLLABORATION TO &IND .EW 3OURCES OF 6ALUE .EW 9ORK *OHN 7ILEY 3ONS ,TD
!'),% 4/ !$!04)6% ) -AKING /RGANIZATIONS -ORE 2ESPONSIVE TO #USTOMERS! 8EROX #ASE 3TUDY $)!.% -#'!229 &/2-%2 #()%& -!2+%4).' /&&)#%2 8%2/8 &2%$ (%,,%2 &/2-%2 6)#% 02%3)$%.4 !.$ '%.%2!, -!.!'%2 8%2/8#/-
h)TS THE CUSTOMER STUPID v !NNE -ULCAHY CHAIRMAN AND #%/ OF 8EROX #ORPORATION TOLD THE 7ORLD "USINESS &ORUM IN .EW 9ORK #ITY IN -AY h4HATS WHAT )VE LEARNED IS THE BASIC TRUISM FOR ANY BUSINESSv -ULCAHY LEARNED IT THE HARD WAY 7HEN SHE WAS THRUST INTO THE LEADERSHIP OF 8EROX TO PULL THE COMPANY BACK FROM THE BRINK OF BANKRUPTCY IN SHE FOUND THAT CUSTOMERS WERE IRATE h7HILE OUR CUSTOMERS WERE LOYAL AND WANTED 8EROX TO SURVIVE OUR RESPONSE TO THEM HAD SLIPPED BADLYv !CCORDING TO -ULCAHY LOSING CUSTOMER FOCUS WAS hxONE OF THE THINGS THAT GOT 8EROX IN TROUBLE 7E WERENT LISTENING TO THE CUSTOMER AS CLOSELY AS WE SHOULDv )N DEVELOPING THE AMBITIOUS PLAN FOR 8EROXS SUCCESSFUL TURNAROUND THE COMPANY SET A GOAL OF TRANSFORMING ITSELF TO PUT A STRONG FOCUS ON REBUILDING CUSTOMER LOYALTY n TO BECOME MORE AGILE AND ADAPTABLE SO THAT IT COULD BETTER MEET ANY AND ALL CUSTOMER PROBLEMS AND NEEDS QUICKLY AND COMPLETELY )T BEGAN MAKING CHANGES IN THE COMPANY SO THAT ITS PEOPLE COULD TAKE THE ACTIONS NEEDED TO REBUILD FOCUS ON ITS CUSTOMERS ONE BY ONExSO PEOPLE AT ALL LEVELS IN THE COMPANY
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COULD BECOME MORE TIGHTLY CONNECTED TO CUSTOMERS AND THEIR BUSINESSESAND UNDERSTAND BETTER WHAT THEY HAD TO DO TO HELP THEIR CUSTOMERS UPGRADE THEIR EXPERIENCE IN DEALING WITH 8EROX 4HE CHALLENGE WAS TO s )DENTIFY AND DEVELOP A CLEAR UNDERSTANDING OF ALL OF EACH CUSTOMERS CURRENT PROBLEMS n DOWN TO AN INDIVIDUAL END USER IF NECESSARY s 1UICKLY TRANSLATE THAT KNOWLEDGE INTO SPECIlC APPROPRIATE ACTIONS TO RESOLVE EACH PROBLEM s 4RACK THE RESULTS OF THOSE ACTIONS AND LEARN FROM THEM !T 8EROX AS WITH MANY INFORMATION TECHNOLOGY SUPPLIERS THIS CHALLENGE IS COMPOUNDED BY THE FACT THAT ESPECIALLY IN A LARGE CUSTOMER ORGANIZATION THERE MAY BE HUNDREDS OR EVEN THOUSANDS OF END USERS OF ITS EQUIPMENT OR SERVICES OR THE DOCUMENTS PRODUCED BY THEM 8EROX NEEDED TO BUILD A WAY TO NOT ONLY ENABLE THESE THOUSANDS OF CUSTOMERS TO COMMUNICATE THEIR INDIVIDUAL PROBLEMS TO ITS ACCOUNT SALES AND CUSTOMER SUPPORT PEOPLE BUT ALSO ENSURE THAT ITS PEOPLE THEN ADDRESSED THOSE CUSTOMER PROBLEMS QUICKLY %QUALLY IMPORTANT IT NEEDED TO BE ASSURED THAT THE CUSTOMERS WERE SATISlED THAT THE 8EROX ACTION HAD INDEED SOLVED THEIR PROBLEM 4HE 3ENTINEL #USTOMER 3ATISFACTION !SSURANCE 3YSTEM4- WAS DEVELOPED TO DO JUST THAT )T IS DIRECTLY AIMED AT DRAMATICALLY IMPROVING AN INDIVIDUAL CUSTOMERS SATISFACTION WITH 8EROX BY IDENTIFYING UNDERSTANDING AND RAPIDLY AND APPROPRIATELY RESPONDING TO HIS OR HER CURRENT PROBLEMS AND NEEDS 4HE SITUATION THAT 3ENTINEL WAS CREATED TO ADDRESS WILL BE FAMILIAR TO MANY COMPANIES (ERES HOW THE PROBLEM PLAYED OUT AT 8EROX
4(% ()$$%. 02/",%- 5.+./7. !.$ 5.3/,6%$ #534/-%2 02/",%-3 3ENIOR 8EROX OPERATIONS EXECUTIVES WERE VERY CONCERNED BY THE CONTINUED LOSS OF GOOD CUSTOMERS AND BY THE FACT THAT THE 8EROX SATISFACTION MEASUREMENT DATA GAVE THEM FEW CLUES AS TO WHY CUSTOMERS WERE DEFECTING OR WHAT SPECIlC CORRECTIVE ACTION 8EROX MIGHT TAKE TO KEEP THEM 4HE SATISFACTION DATA WAS AN ENIGMA 8EROX MANAGERS FOUND THEY DID NOT ASSURE CUSTOMER LOYALTY AND DID NOT PROVIDE THE SPECIlC INFORMATION 8EROX NEEDED TO INCREASE CUSTOMER RETENTION 6INCE 6ACCARELLI AND HIS 8EROX "USINESS 2ESEARCH 'ROUP 8"2' TEAM WAS ASKED TO UNDERTAKE A FORMAL INVESTIGATION INTO THE SATISFACTION MEASUREMENT PROCESS AND WAYS TO MAKE THE DATA MORE USEFUL IN ACTUALLY BUILDING CUSTOMER LOYALTY )T
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FOUND A MULTI FACETED PROBLEM INCORPORATING BOTH MEASUREMENT METHODOLOGY DATA ANALYSIS AND REPORTING AND A MUCH BROADER CUSTOMER RELATIONSHIP ISSUETHE TIMELY IDENTIlCATION AND RESOLUTION OF SPECIlC INDIVIDUAL CUSTOMER PROBLEMS DOWN TO THE END USER LEVEL IN A GIVEN ACCOUNT &OR A MORE DETAILED DESCRIPTION OF THE 8"2' lNDINGS SEE )NSET 8"2' &INDINGS /N 4HE 8EROX 3ATISFACTION -EASUREMENT 0ROCESS3EEING 4HE &OREST .OT 4HE 4REES
).3%4 8"2' &).$).'3 /. 4(% 8%2/8 3!4)3&!#4)/. -%!352%-%.4 02/#%333%%).' 4(% &/2%34 ./4 4(% 42%%3 ,IKE MANY OTHER LARGE COMPANIES 8EROX FORMALLY TRACKS THE SATISFACTION OF ITS CUSTOMERS USING CONVENTIONAL SATISFACTION MEASUREMENT TECHNIQUES BASED PRIMARILY ON SURVEYS CONDUCTED BY ITS CUSTOMER OPERATIONS UNITS 8"2' LOOKED lRST AT WHO IN CUSTOMER ORGANIZATION PROVIDED INPUT ON SATISFACTION !S WITH MOST COMPANIES IN INFORMATION TECHNOLOGY MARKETS 8EROXS RELATIONS WITH CUSTOMER ORGANIZATIONS OCCUR ON SEVERAL LEVELS s 3ENIOR CUSTOMER EXECUTIVES WHO MUST APPROVE EXPENDITURES OR CONTRACTS FOR LARGE EQUIPMENT OR SERVICE PROCUREMENTS s #USTOMER PURCHASE DECISION MAKERS WHO EVALUATE RECOMMEND AND ADMINISTER PROCUREMENTS OF 8EROX OFFERINGS AND CONTRACTS AND WITH WHOM 8EROX REPRESENTATIVES TYPICALLY HAVE DAY TO DAY CONTACT s %ND USERSxTHE HUNDREDS OR THOUSANDS OF OPERATIONAL AND FUNCTIONAL PEOPLE IN THE CUSTOMER ORGANIZATION WHO ACTUALLY REQUEST AND USE 8EROX PRODUCTS AND SERVICES OR THE DOCUMENTS AND INFORMATION PRODUCED BY THEM 8EROX ACCOUNT MANAGERS AND SENIOR EXECUTIVES CHARGED WITH SUPPORTING HIGH LEVEL PERSONAL RELATIONSHIPS WITH 8EROXS LARGEST ACCOUNTS HEAR DIRECTLY FROM CUSTOMER EXECUTIVES ABOUT SATISFACTION IN FACE TO FACE MEETINGS AND OTHER CONVERSATIONS #USTOMER PURCHASE DECISION MAKERS ALSO PROVIDE ANECDOTAL INFORMATION ON SATISFACTION IN THE SAME WAY (OWEVER THE PRIMARY MEANS OF COLLECTING FORMAL SATISFACTION DATA FROM CUSTOMER DECISION MAKERS HAS BEEN THE #USTOMER 3ATISFACTION -EASUREMENT 3YSTEM 3URVEY CONDUCTED BY 8EROX CUSTOMER OPERATIONS UNITS AROUND THE WORLD (ERES HOW THE DATA IS ACTUALLY DEVELOPED 0ERIODICALLY A RANDOM SAMPLE OF PURCHASE DECISION MAKERS IS CHOSEN FROM THE LIST OF CURRENT ACCOUNTS AND INTERVIEWED 1UESTIONNAIRES
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ASK CUSTOMER DECISION MAKERS TO USE A NUMERICAL SCALE TO RATE THEIR SATISFACTION ON VARIOUS FACTORS INCLUDING 8EROX SALES SUPPORT EQUIPMENT INSTALLATION TECHNICAL SUPPORT USER TRAINING AND EQUIPMENT OR SERVICE CENTER PERFORMANCE 3URVEY DATA IS THEN AGGREGATED AND REPORTED ON A REGULAR BASIS TO CUSTOMER OPERATIONS AND CORPORATE MANAGEMENT !GGREGATED RATING DATA IS ALSO INCLUDED AS INPUT TO 8EROXS ANNUAL CUSTOMER SATISFACTION IMPROVEMENT PLANNING PROCESSES 8"2' FOUND THAT WHILE THESE DATA ARE USEFUL FOR IDENTIFYING BROAD TRENDS AND FORMULATING GENERAL POLICIES FOR CUSTOMER SATISFACTION THEIR MEASUREMENT AND CUSTOMER ACTION SUPPORT PROBLEMS LIMIT THEIR VALUE TO CUSTOMER OPERATIONS UNITS 4HOSE UNITS NEED TO TAKE IMMEDIATE ACTIONS TO RETAIN SPECIlC CUSTOMERS AND BUILD CUSTOMER LOYALTY AND THE DATA IS INADEQUATE FOR THAT PURPOSE
4HE 3ATISFACTION -EASUREMENT 0ROBLEM n -ASKING CUSTOMER PROBLEMSx AGGREGATION RISKS AGGRAVATION )N ITS INVESTIGATION 8"2' FOUND THAT THE AGGREGATED SATISFACTION DATA ACROSS A BROAD CUSTOMER POPULATION PRODUCED BY THE ABOVE PROCESS MASKS THE INDIVIDUAL PROBLEMS OR CONDITIONS THAT OFTEN PRODUCE CUSTOMER DEFECTIONS LIKE MISSING THE BAD APPLE IN THE BARREL BY LOOKING AT THE AVERAGE CONDITION OF A SAMPLE OF THEM 8"2' FOUND THAT A KEY REASON WHY PROBLEMS ARE MASKED IS THAT THE TYPICAL SURVEY BASED PROCESSES DO NOT IMMEDIATELY AND CONTINUOUSLY COMMUNICATE THE LEVEL OF SATISFACTION OR PROBLEMS OF INDIVIDUAL CUSTOMER END USERS TO 8EROX CUSTOMER OPERATIONS OR SUPPORT ORGANIZATIONS "Y DEPENDING ON THESE SURVEYS 8"2' FOUND THAT 8EROX WAS OFTEN THE LAST KNOW ABOUT THESE PROBLEMS !S IMPORTANT 8"2' ALSO FOUND THAT THE ACTUAL SATISFACTION SURVEY RESPONDENTS PURCHASE DECISION MAKERS WERE UNLIKELY TO BE AWARE OF THE TRUE LEVEL OF END USER SATISFACTION OR PROBLEMS IN THEIR OWN ORGANIZATIONGOOD OR BAD 0URCHASE DECISION MAKERS RARELY IF EVER HEAR COMPLIMENTS OR LAUDATORY COMMENTS FROM END USERS "UT INDIVIDUAL COMPLAINTS OR REPORTS OF PROBLEMS EVEN RARE OR RANDOM ONES DO BUBBLE UP AND ARE FUNNELED TO DECISION MAKERS )N FACT SOMETIMES PROBLEMS ARE THE ONLY THINGS A DECISION MAKER HEARS FROM END USERS ABOUT 8EROX 8"2' CONCLUDED THAT SUCH EXPERIENCES COULD LEAD PURCHASE DECISION MAKERS TO AN OVERLY NEGATIVE AND POSSIBLY UNWARRANTED VIEW OF 8EROX PERFORMANCE IN THEIR ORGANIZATIONTO PERCEIVE 8EROX AS UNRESPONSIVE TO THEIR NEEDS )N ADDITION 8"2' FOUND THAT 8EROX ACCOUNT SALES OR LOCAL SUPPORT TEAMS SIMPLY DO NOT HAVE THE ABILITY TO CONSTANTLY SCAN HUNDREDS OR THOUSANDS OF CUSTOMER END USERS TO IDENTIFY ALL UNRESOLVED PROBLEMS THESE INDIVIDUALS MAY HAVE !ND SUPPORT ORGANIZATIONS MAY ALSO NOT HAVE THE RESOURCES TO TRACK THE QUALITY OF
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THEIR RESPONSES TO DETERMINE IF OR WHEN THE CUSTOMER BECOMES TRULY SATISlED 9ET EITHER INSTANCE COULD CAUSE 8EROX TO BE PERCEIVED BY CUSTOMERS AS UNRESPONSIVE LEADING TO THE POSSIBLE LOSS OF IMPORTANT ACCOUNTS 4HE CONVENTIONAL 8EROX CUSTOMER SATISFACTION MEASUREMENT SYSTEM PROVIDES LIMITED SUPPORT IN THESE SITUATIONS ,IKE OTHER SUCH BROAD BASED SURVEY DRIVEN SYSTEMS IT IS PRIMARILY DESIGNED TO CAPTURE DATA AND REPORT ON BROAD ISSUES AND TRENDS IN CUSTOMER SATISFACTION ACROSS AN ENTERPRISE NOT TO CONTINUOUSLY TRIGGER AND TRACK ACTION TO SOLVE SPECIlC PROBLEMS OF ALL INDIVIDUAL CUSTOMERS %XACERBATING THE SITUATION THE TYPICAL LAG BETWEEN THE COMPLETION OF A SURVEY AND THE RESOLUTION OF ANY INDIVIDUAL PROBLEMS IDENTIlED IN A SURVEY COULD BE MORE THAN SIX MONTHS FURTHER CEMENTING A PERCEPTION OF UNRESPONSIVENESS IN THE MINDS OF AFFECTED CUSTOMERS #USTOMERS LEAVE A RELATIONSHIP WITH A SUPPLIER ONE BY ONE WITH EACH HAVING ITS OWN SPECIlC PROBLEMS OR ISSUES THAT EVENTUALLY PROVIDE SUFlCIENT MOTIVATION TO END THE RELATIONSHIP !S CUSTOMERS ARE LOST ONE BY ONE SO MUST THEY BE SAVED 8"2' BELIEVED THAT WHAT WAS NEEDED WAS SPECIlC INFORMATION THAT WOULD ALLOW 8EROX CUSTOMER SUPPORT PEOPLE IN A PARTICULAR ACCOUNT TO s 1UICKLY IDENTIFY UNDERSTAND AND DETERMINE THE APPROPRIATE ACTION NEEDED TO DEAL WITH ANY AND ALL PROBLEMS OF INDIVIDUAL END USERS s %NSURE THAT THOSE RESPONSIBLE ACTUALLY TAKE THE APPROPRIATE ACTION IN A TIMELY MANNER AND DETERMINE THAT THE ACTION TAKEN TRULY RESOLVES THE CUSTOMERS PROBLEM IF NOT s %NSURE THAT ADDITIONAL ACTION IS TAKEN UNTIL THE CUSTOMER IS TRULY SATISlED THAT THE PROBLEM IS SOLVED
4(% 3/,54)/. ! .%7 7!9 /& +%%0).' 3!4)3&)%$ #534/-%23x+%%0).' #534/-%23 3!4)3&)%$ 4HE 8EROX "USINESS 2ESEARCH 'ROUPS INVESTIGATION FOUND THAT THE BASIS OF CUSTOMER SATISFACTION IS AN ABSENCE OF PROBLEMS OR THE QUICK RESOLUTION OF THEM s 4HAT AN IMPORTANT UNDERLYING CAUSE OF LOSING CUSTOMERS IS AN INABILITY TO RESOLVE INDIVIDUAL END USER PROBLEMS IN A TIMELY MANNER AND TO THE CUSTOMERS COMPLETE SATISFACTION
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s 4HAT END USERS OF 8EROX DOCUMENT MANAGEMENT PRODUCTS AND SERVICES DEPEND ON THE DOCUMENTS OR INFORMATION PRODUCED BY THOSE PRODUCTS OR SERVICES TO RUN THEIR OPERATIONS 4O THEM THE CONSEQUENCES OF A PROBLEM CAN BE EXTREMELY SERIOUS SO THEY ARE OFTEN QUITE VOCAL ABOUT AND INmUENTIAL IN THE CHOICE OF DOCUMENT MANAGEMENT SUPPLIERS s 4HAT END USERS ARE HOWEVER WIDESPREAD THROUGHOUT CUSTOMER ENTERPRISES AND 8EROX SALES AND SERVICE SUPPORT RESOURCES BEING lNITE ARE UNABLE TO CONTINUOUSLY QUERY THESE LARGE AND DISPERSED POPULATIONS FOR PROBLEMS THEY MAY HAVE s !ND THAT EXISTING SATISFACTION MEASUREMENT SYSTEMS WERE NOT DESIGNED TO PROVIDE SUPPORT TO 8EROX ACCOUNT TEAMS IN DOING THIS 4HEY WERE NEITHER AN EFFECTIVE WAY FOR INDIVIDUAL CUSTOMERS TO COMMUNICATE THEIR SPECIlC NEEDS DIRECTLY TO THESE SUPPORT GROUPS NOR A TIMELY WAY TO ENSURE THESE NEEDS WERE COMPLETELY AND SATISFACTORILY FULlLLED )N HIS BOOK !DAPTIVE %NTERPRISES #REATING AND ,EADING 3ENSE !ND 2ESPOND /RGANIZATIONS 3TEPHAN (AECKEL ARGUES THAT IT HAS BECOME ALMOST IMPOSSIBLE TO PREDICT AND PLAN IN ADVANCE FOR CUSTOMER PROBLEMS AND OPPORTUNITIES ESPECIALLY WITH INFORMATION BASED PRODUCTS AND SERVICES (AECKEL STATES THAT SUCCESSFUL ORGANIZATIONS MUST INSTEAD BECOME ADAPTIVE TO LEARN HOW TO CONTINUOUSLY IDENTIFY AND UNDERSTAND THESE PROBLEMS OR OPPORTUNITIES AS THEY OCCUR AND RESPOND TO THEM QUICKLY AND APPROPRIATELY CUSTOMER BY CUSTOMER 3UCCESSFUL ADOPTION OF THIS ADAPTIVE MODE OF OPERATION HE SUGGESTS REQUIRES THAT AN ORGANIZATION INSTALL THE CAPABILITIES AND MANAGEMENT CONTEXT OF WHAT HE CALLS THE !DAPTIVE ,OOP WHICH SHOWS THE mOW BETWEEN THE 3ENSING SYSTEM OF SENSE AND INTERPRETATION INTO THE 2ESPONSE SYSTEM OF DECIDING AND ACTING )T ENABLES PEOPLE ON THE LINE TO CONTINUOUSLY RECEIVE INFORMATION FROM CUSTOMERS UNDERSTAND WHAT IT MEANS DECIDE ON AND TAKE APPROPRIATE ACTION AND THEN REPEAT THE CYCLE FACTORING IN AND LEARNING FROM THE CUSTOMERS REACTION TO THE PREVIOUS CYCLE 6ACCARELLI BELIEVED THAT (AECKELS CONCEPTS OF ADAPTABILITY AND SENSE AND RESPONDAND THE MANAGEMENT CONTEXT AND PROCESSES THEY INSTALLCOULD PROVIDE THE UNDERPINNINGS OF A SOLUTION TO 8EROXS PROBLEM WITH SATISFACTION MEASUREMENT AND ULTIMATELY COULD CURE THE REAL PROBLEM OF CUSTOMER SATISFACTION AND RETENTION (E THOUGHT THAT THESE CONCEPTS WOULD HELP 8EROX ENSURE THAT s 4HE CURRENT LEVEL OF SATISFACTION OF ALL INDIVIDUAL CUSTOMERS AND ALL THEIR PEOPLE WAS KNOWN AND CONTINUOUSLY UPDATED THROUGHOUT 8EROX s !LL PROBLEMS LEADING TO CURRENT DISSATISFACTION WERE CLEARLY IDENTIlED BY INDIVIDUAL USERS IN THEIR OWN WORDS AND REPORTED DIRECTLY TO THE 8EROX PEOPLE RESPONSIBLE FOR THEIR RESOLUTION
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&IGURE $ESIRED 3TATE h!DAPTIVE ,OOPv !PPLIED BY 8EROX
s 8EROX PEOPLE WERE PROMPTED AND MOTIVATED TO TAKE THE TIMELY ACTIONS NEEDED TO RESOLVE EACH INDIVIDUAL PROBLEM UNTIL THE AFFECTED CUSTOMER WAS COMPLETELY SATISlED 7HAT THE 8"2' SOUGHT WAS A WAY TO USE (AECKELS !DAPTIVE ,OOP TO DEVELOP A MANAGEMENT PROCESS THAT WOULD SIMULTANEOUSLY SOLVE THE SATISFACTION MEASUREMENT PROBLEM AND ENABLE THE 8EROX SALES AND SUPPORT PEOPLE RESPONSIBLE FOR THE SATISFACTION OF INDIVIDUAL CUSTOMERS TO AS SHOWN IN &IGURE s #ONTINUOUSLY SENSE OR RECEIVE EXPLICIT INFORMATION FROM ALL INDIVIDUAL END USERS IN ANY ACCOUNT THEIR LEVEL OF SATISFACTION OR THE PROBLEMS THAT THEY HAVE
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s )MMEDIATELY INTERPRET THAT INFORMATION TO UNDERSTAND WHETHER A USER IS SATISlED OR WHETHER A PROBLEM EXISTS THEN DETERMINE THE NATURE OF THAT PROBLEM AND IDENTIFY WHAT IS NEEDED TO DEAL WITH IT s $ECIDE ON AND COMMIT TO AN APPROPRIATE COURSE AND SCHEDULE OF REQUIRED ACTION s #ARRY OUT THAT ACTION COMMITMENT s 2ECEIVE INFORMATION FROM THE CUSTOMER ON WHETHER OR NOT THE ACTION HAD RESOLVED THE COMPLAINT REPEATING THE CYCLE IF NECESSARY UNTIL THE CUSTOMER IS SATISlED THAT THE PROBLEM IS SOLVED 4HE LAST TWO OF THE ABOVE STEPS WERE ESPECIALLY IMPORTANT TO IMPLEMENT *EFFERY 0FEFFER AND 2OBERT 3UTTON IN THEIR BOOK 4HE +NOWING $OING 'AP (OW 3MART #OMPANIES 4URN +NOWLEDGE )NTO !CTION OBSERVE THAT MANY ORGANIZATIONS FAIL TO TURN THEIR KNOWLEDGE ABOUT SPECIlC SITUATIONS INTO EFFECTIVE ACTIONTHAT THESE ORGANIZATIONS MAY KNOW EXACTLY WHAT TO DO BUT OFTEN THEY DONT DO IT 0FEFFER AND 3UTTON ARGUE THAT PROCESSES THAT ENCOURAGE AN ACTION ORIENTATIONINTERACTION WITH CUSTOMER SITUATIONS CONFRONTING AND DEALING WITH SERIOUS PROBLEMS DIRECTLY AND QUICKLY FOLLOW UP TO ENSURE THAT WHAT WAS SAID IS ACTUALLY DONE AND IS EFFECTIVEARE NEEDED TO MOTIVATE ACTUAL INDIVIDUAL PERFORMANCE OF APPROPRIATE ACTIONS &ROM THIS THE 8"2' TEAM REALIZED THAT TO CRAFT AN EFFECTIVE SOLUTION TO 8EROXS CUSTOMER RETENTION PROBLEM ADAPTABILITY UNDERSTANDING ANY AND ALL PROBLEMS CUSTOMERS HAD AND DEVELOPING APPROPRIATE RESPONSES TO THEM HAD TO BE MARRIED TO AGILITYLEARNING NOT JUST TO RESPOND TO A CUSTOMER QUICKLY BUT ALSO TO CHANGE THE RESPONSE IF THE CUSTOMER WASNT SATISlED WITH WHAT WAS BEING DONE !S *OHN 'RINDER PRINCIPAL INVENTOR OF THE 0RECISION -ODEL OF LEARNING AND COMMUNICATION PUT IT h)F WHAT YOURE DOING ISNT WORKING DONT KEEP TRYING HARDER TO MAKE IT WORK TRY SOMETHING ELSExFASTv 4HE TEAM CONCLUDED THAT ANY SATISFACTION MEASUREMENT IT RECOMMENDED HAD TO SUPPORT THIS END )N THEIR BOOKS BOTH (AECKEL AND 0FEFFER AND 3UTTON POINT OUT THAT ACHIEVING ORGANIZATIONAL ADAPTABILITY AND AGILITY USUALLY REQUIRES A SUBSTANTIAL CHANGE IN THE CULTURE OF AN ORGANIZATION AND ITS PEOPLE MOVING FROM AN ANALYZE PLAN DEPLOY AT THE CENTER OF THE ENTERPRISE MODEL TO A SEE KNOW COMMIT ACT AT THE EDGE OF THE ENTERPRISE BASIS AND CHANGING ITS ORIENTATION FROM COMPANY OUT TO CUSTOMER BACK 4HE 8"2' TEAM BELIEVED THAT IMPROVING SATISFACTION AND RETENTION CUSTOMER BY CUSTOMER SHOULD NOT REQUIRE AN OVERT CULTURE CHANGE OF THIS SCALE ALTHOUGH A SUCCESSFUL SOLUTION TO THAT PROBLEM COULD WELL CHANGE THE BASIS OF BEHAVIOR THROUGHOUT 8EROX OVER TIME )T THOUGHT THE SCOPE OF CHANGE COULD BE MANAGED BY SHARPLY FOCUSING THE SOLUTION ON INDIVIDUAL CUSTOMER TEAMS INTERACTING WITH INDIVIDUAL CUSTOMERS
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"UT 8"2' DID CONCLUDE THAT A CHANGE IN THE CULTURE AND BEHAVIOR OF INDIVIDUAL 8EROX CUSTOMER TEAMS AND SUPPORT PEOPLE WAS NEEDED TO MAKE THEM EVEN MORE RESPONSIVE TO CUSTOMERS 4HE TEAM THOUGHT THAT IF ASTRONAUTS COULD BE CONDITIONED TO CONTINUOUSLY SENSE PROBLEMS IN THEIR ENVIRONMENT AND RESPOND TO THEM SO COULD THE 8EROX CUSTOMER SUPPORT TEAMS 8"2' CONCLUDED THAT THE MODIlED ADAPTIVE LOOP PROCESS SHOWN IN &IGURE COULD PRODUCE THE CONDITIONED LEARNING NEEDED TO DO THAT
4(% 3%.4).%, #534/-%2 3!4)3&!#4)/. !3352!.#% 3934%-47HAT THE 8"2' TEAM WANTED TO DO WAS lND A SIMPLE SOLUTION TO 8EROXS CUSTOMER SATISFACTION MEASUREMENT PROBLEM ONE THAT WOULD REVERSE THE CURRENT STATE THEY HAD FOUND 4HEY WANTED TO s 0ROVIDE 8EROX PEOPLE AS WELL AS CUSTOMER EXECUTIVES AND DECISION MAKERS WITH A CURRENT AND ACCURATE VIEW OF THE ACTUAL STATE OF SATISFACTION AT ANY TIME IN ANY INDIVIDUAL ACCOUNTGOOD OR BAD COMPLIMENTS AS WELL AS COMPLAINTSNOT AGGREGATED AND POSSIBLY OUT OF DATE OR UNWARRANTED PERCEPTIONS FROM SURVEY DATA s -AKE SURE THAT 8EROX PEOPLE WERE THE lRST TO KNOW ABOUT AND RESPOND TO ANY AND ALL CUSTOMER PROBLEMSNOT THE LAST )N ADDITION THE 8"2' TEAM BELIEVED THAT ANY SOLUTION THEY RECOMMENDED HAD TO s 0ROVIDE A DIRECT COMMUNICATION LINK AT ANY TIME BETWEEN ANY AND ALL CUSTOMER WORKERS WHO RELY ON 8EROX AND THE 8EROX TEAM THAT SUPPORTED THEM s "E EASILY AND QUICKLY DEPLOYED TO ANY 8EROX ACCOUNT ANYWHERE IN THE WORLD s 2EQUIRE LITTLE OR NO TRAINING OR TIME FOR CUSTOMERS TO USE AND CAPTURE THEIR PROBLEMS AND COMMENTS IN THEIR OWN WORDS s 0ROVIDE A WAY OF MANAGING THE ACTION COMMITMENTS OF 8EROX PEOPLE TO PROMPT MOTIVATE AND TRACK RESPONSE TO CUSTOMER PROBLEMS s 0ROVIDE FOR LEARNING BY DOING OR EXPERIENCING BASED ON THE 8EROX RESPONSE TO PROBLEMS AND COMMENTS FOR BOTH 8EROX PEOPLE AND CUSTOMERS WHO DIRECTLY EXPERIENCE 8EROX 4HE SOLUTION THAT RESULTED FROM 8"2'S INVESTIGATION IS 3ENTINEL A 7EB BASED CUSTOMER RELATIONSHIP MANAGEMENT SYSTEM THAT HAS CAPABILITIES UNIQUE ENOUGH
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FOR 8EROX TO SEEK PATENT COVERAGE #ONlGURED AS SHOWN IN &IGURE AROUND A RELATIONAL DATABASE AND CUSTOM SOFTWARE DEVELOPED BY 8"2'S RESEARCH PARTNER )NTERNATIONAL "USINESS 2ESEARCH #ENTER )NC )"2# 3ENTINEL IS A SENSE AND RESPOND SYSTEM THAT DETECTS AND HELPS MANAGE THE RESOLUTION OF CUSTOMER PROBLEMS AND THEN STRUCTURES AND REPORTS THE CUSTOMER AND 8EROX INFORMATION COLLECTED SO LEARNING CAN TAKE PLACE FROM BOTH THE NATURE OF THE PROBLEM AND THE WAY IT WAS SUCCESSFULLY RESOLVED FOR A BRIEF FUNCTIONAL DESCRIPTION OF THE SYSTEM SEE )NSET !FTER MORE THAN A YEAR OF SUCCESSFUL lELD TESTING 8EROX IS NOW DEPLOYING THE SOLUTION TO ALL OF ITS LARGEST ACCOUNTS WORLDWIDE
&IGURE 3ENTINEL &UNCTIONAL "UILDING "LOCKS
(/7 3%.4).%, 7/2+3 7HEN A CUSTOMER ORGANIZATION AGREES TO PARTICIPATE IN THE PROGRAM IT PROVIDES A LISTING OF THE E MAIL ADDRESSES OF ALL PEOPLE IN THAT ORGANIZATION THAT RELY ON 8EROX PRODUCTS SERVICES SUPPORT OR BUSINESS PROCESSES IN ANY WAY 3ENTINEL WORKS ON THE SIMPLE PREMISE THAT SATISFACTION STEMS FROM AN ABSENCE OF PROBLEMS !T A SET INTERVAL OR UPON THE COMPLETION OF AN EVENT 3ENTINEL E MAILS A CHECK IN TO EACH PERSON IN THE ORGANIZATION A SHORT MESSAGE h!RE YOU EXPERIENCING AN UNRESOLVED PROBLEM WITH 8EROX v )F THE PEOPLE RECEIVING THE
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).3%4 &5.#4)/.!, $%3#2)04)/. /& 3%.4).%, 3934%- "5),$).' ",/#+3 !S SHOWN IN &IGURE AT THE HEART OF THE 3ENTINEL SYSTEM ARE ITS CUSTOMER RELATIONSHIP MANAGEMENT #2- AND REPORTING MODULES 4HE #2- MODULE IMPLEMENTS 3ENTINELS ADAPTIVE LOOP AND FORCES ACTION ON THE PART OF 8EROX PROBLEM SOLVERS 4HE REPORTING MODULE PROVIDES THE CRITICAL CAPABILITY FOR 8EROX AND CUSTOMER MANAGERS TO SEE INTO THE SYSTEM TO MONITOR 8EROX PERFORMANCE AND CUSTOMER END USER SATISFACTION 4HE FRONT END OF THE #2- MODULE IS THE A 7EB BASED PRESENCE THAT PROVIDES THE AUTOMATED TWO WAY COMMUNICATION LINK THROUGH WHICH 8EROX CONTINUOUSLY SENSES CUSTOMER END USERS SATISFACTION OR UNRESOLVED PROBLEMS 5SING A CUSTOMER PROVIDED LIST OF E MAIL CONTACTS OF END USERS WHO WILL PARTICIPATE IN THE 3ENTINEL PROGRAM THE FRONT END MANAGES THE AUTOMATED E MAIL SYSTEM THAT SENDS THE END USERS PERIODIC OR EVENT BASED CHECK IN MESSAGES )T ALSO PROVIDES THE AUTOMATED 7EB BASED LINKAGES AND TOOLS THROUGH WHICH USERS CAN RESPOND TO CHECK INS WITH PROBLEMS COMMENTSCOMPLIMENTS OR SUGGESTIONS AND RECEIVE CONlRMATIONS OF THOSE 4HE FRONT END ALSO PROVIDES THE 3ENTINEL 7EB SITE THAT CUSTOMER END USERS OR MANAGERS CAN ACCESS TO REPORT UNRESOLVED PROBLEMS AT ANY TIME BETWEEN CHECK INS OR TO ACCESS 8EROX PERFORMANCE DATA AND REPORTS 4HE #2- BACK END CONSISTS OF A 7EB BASED RELATIONAL DATABASE AND CUSTOMIZED TICKET MANAGEMENT WORKmOW SOFTWARE PLATFORM s 4HE RELATIONAL DATABASE STORES ALL CUSTOMER PROVIDED END USER E MAIL AND OTHER CONTACT DATA )T ALSO STORES A COMPLETE TRAIL ON ALL END USER RESPONSESUNRESOLVED PROBLEMS COMMENTSCOMPLIMENTS AND SUGGESTIONS INCLUDING PROBLEM TICKET RECORDS AND VERBATIM END USER PROBLEM SOLVER DIALOGUES s 4HE TICKET MANAGEMENT WORKmOW PLATFORM PROVIDES THE 3ENTINEL SYSTEMS AUTOMATED CLOSED LOOP PROBLEM AND COMMITMENT MANAGEMENT CAPABILITY )T IS THE SYSTEM ELEMENT THAT FORCES AND TRACKS ACTION )T STARTS THE CLOCK WHEN AN UNRESOLVED PROBLEM IS DETECTED TRACKS THE 8EROX PROBLEM SOLVERS RESPONSE AND ESCALATES THE CASE FOR MANAGEMENT ACTION IF RESPONSE IS NOT MADE WITHIN THE REQUIRED TIME WINDOW )T ALSO PROVIDES A CONSOLE WHERE 8EROX PROBLEM SOLVERS INTERACT WITH ASSIGN RESOLUTION RESPONSIBILITY FOR AND MANAGE ALL OPEN END USER PROBLEMS OR COMMENTS 4HIS WORKmOW PLATFORM WAS CUSTOM DEVELOPED BY )"2# BECAUSE NO COMMERCIAL SYSTEM COULD PROVIDE THE mEXIBLE CAPABILITIES NEEDED TO IMPLEMENT 3ENTINELS DESIGN GOALS
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s 4HE REPORTING MODULE IS BASED ON LICENSED REPORTING ENGINE SOFTWARE 5SING INFORMATION STORED IN THE RELATIONAL DATABASE IT PROVIDES AN AUTOMATED CAPABILITY TO PRODUCE REPORTS OF 3ENTINEL ACTIVITY USER SATISFACTION AND PROBLEM RESOLUTION FOR BOTH 8EROX AND CUSTOMER MANAGERS )T ALSO PROVIDES THE CAPABILITY FOR 8EROX AND CUSTOMER MANAGERS TO DRILL DOWN ON ANY VARIABLE IN STANDARD REPORTS ALL THE WAY TO ORIGINAL VERBATIM END USER OR PROBLEM SOLVER MESSAGES IF DESIRED MESSAGE HAVE NO PROBLEM THEY SIMPLY DELETE IT WITH THE UNDERSTANDING THAT BY DELETING THE MESSAGE THEY ARE REALLY ANSWERING THAT THEY ARE SATISlED WITH 8EROXS CURRENT PERFORMANCE )F AN END USER DOES HAVE AN UNRESOLVED PROBLEM OR A COMMENT HE OR SHE CLICKS ON THE INDICATED LINK IN THE MESSAGE )N THE MESSAGE THAT RESULTS THE CUSTOMER CAN CLICK ON A HAPPY FACE OR LIGHT BULB AND WRITE A COMMENT COMPLIMENT OR SUGGESTION 5SERS WITH A PROBLEM HOWEVER CLICK ON A FROWNING FACE THAT OPENS WHAT 8"2' CALLS A CONDITIONING LOOP A PROCESS FOR IMMEDIATE RESOLUTION OF THE PROBLEM BY 8EROX 5SERS ARE LINKED TO A 7EB SITE WHERE THEY CAN FREELY EXPLAIN THE PROBLEM IN THEIR OWN WORDS 4HE SYSTEM IMMEDIATELY NOTIlES A DESIGNATED 8EROX PROBLEM SOLVER CREATES AN ELECTRONIC PROBLEM TICKET PROMPTS AN IMMEDIATE TELEPHONE CALL TO THE CUSTOMER AND STARTS A TENACIOUS COMMITMENT MANAGEMENT LOOP THAT KEEPS THE ISSUE ACTIVE UNTIL CUSTOMERS CONlRM THAT THE PROBLEM HAS BEEN RESOLVED TO THEIR SATISFACTION !ND IF FOR SOME REASON RESOLUTION OF THE PROBLEM DOES NOT TAKE PLACE WITHIN A SET TIME WHICH IS MOST OFTEN TO HOURS THE 3ENTINEL COMMITMENT MANAGEMENT SYSTEM ELEVATES THE RESOLUTION PROCESS IN THE 8EROX SUPPORT GROUP TO ACCELERATE PROGRESS
(/7 3%.4).%, )3 $%0,/9%$ 3ENTINEL WAS DESIGNED TO BE QUICKLY AND SIMPLY DEPLOYED ANYWHERE IN THE WORLD 4HE BASIC CONTENT OF CUSTOMER CHECK IN E MAIL MESSAGES AND LINKAGES USE EITHER GRAPHICS THAT ARE UNIVERSALLY UNDERSTOOD OR LANGUAGE THAT IS EASILY TRANSLATED 4HE SAME IS TRUE OF THE 8EROX PROBLEM SOLVER PROBLEM AND COMMITMENT MANAGEMENT CONSOLES &ORMAL TRAINING OF NEW 8EROX PROBLEM COORDINATORS REQUIRES ONLY ONE TO TWO HOURS ONCE THEIR CUSTOMER ORGANIZATION GOES LIVE ON 3ENTINEL THE CHECK IN PROBLEM IDENTIlCATION AND RESOLUTION AND RESPONSE PROCESSES SHOULD BE AT OR ABOVE EXPECTED PERFORMANCE IN LESS THAN DAYS
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3ENTINEL IS USUALLY PRESENTED TO NEW CUSTOMER CANDIDATES AS THE NEW WAY 8EROX HAS DEVELOPED TO COMMUNICATE WITH AND BETTER SERVE CUSTOMER ORGANIZATIONS DOWN TO THEIR INDIVIDUAL END USERS !PPROVAL OF PARTICIPATION IN 3ENTINEL BY CUSTOMER MANAGEMENT HAS BEEN REASONABLY FAST CUSTOMER EXECUTIVES READILY RECOGNIZE AND APPRECIATE THE BENElTS OF THIS 8EROX INNOVATION /NCE APPROVED 8"2' ASSISTS THE CUSTOMER IN OBTAINING END USER CONTACT INFORMATION THAT IS LOADED IN THE 3ENTINEL CUSTOMER RELATIONSHIP MANAGEMENT DATABASE AND THE lRST CHECK IN PROCESS IS PLANNED AND IMPLEMENTED
5.)15% #(!2!#4%2)34)#3 /& 3%.4).%, !LTHOUGH AT lRST GLANCE 3ENTINEL MAY SEEM TO BE A VARIATION OF CONVENTIONAL SATISFACTION MEASUREMENT SYSTEMS 8"2'S 6INCE 6ACCARELLI AND "ARBARA VON "ERGMAN CO INVENTORS OF THE SYSTEM SAY THAT h3ENTINEL IS ABOUT AS MUCH LIKE A SATISFACTION SURVEY AS RADAR IS LIKE A mASHLIGHT IT DIFFERS IN BOTH SCOPE AND EXECUTIONv 4HE PILOT TESTS AND DEPLOYMENT OF THE SYSTEM HAVE SHOWN THAT IT A ELIMINATES OR CORRECTS MANY OF THE CRITICAL DElCIENCIES OF SURVEY BASED SYSTEMS B PROVIDES FOR EXPERIENCE BASED LEARNING IN PROBLEM RESOLUTION AND C PROVIDES MORE TIMELY MANAGEMENT INFORMATION ON CUSTOMER SATISFACTION PROBLEMS AND RESPONSE INFORMATION THAT CAN HELP ASSURE AND IMPROVE THE CUSTOMER EXPERIENCE WITH 8EROX
#/-0!2)3/. 7)4( 3!4)3&!#4)/. 3526%93 &IRST 3ENTINEL ELIMINATES ANY PROBLEMS WITH QUALITY OF THE DATA THAT MAY BE CAUSED BY THE SAMPLING TECHNIQUES USED BY CONVENTIONAL SURVEYS INCLUDING THE POSSIBILITY OF OVERLOOKING PEOPLE OR ORGANIZATIONS WITH SERIOUS SATISFACTION ISSUES OR PROBLEMS BECAUSE THEY WERENT INCLUDED IN THE SAMPLE h%VERY WORKER IN A CUSTOMERS ORGANIZATION THAT DEPENDS ON 8EROX FOR SOMETHING IS CONTACTED EVERY TIME v SAYS 6ACCARELLI h4HAT MEANS THAT 3ENTINEL CAN EVEN CATCH NASCENT PROBLEMS AND SOLVE THEM BEFORE CUSTOMER DECISION MAKERS OR EXECUTIVES ARE AWARE THEY EXISTv 3ECOND 3ENTINEL ELIMINATES MOST OF THE COMPLAINTS CUSTOMERS HAVE WITH CONVENTIONAL SURVEYSLONG SURVEYS THAT OFTEN REQUIRE RESPONDENTS TO DEAL WITH QUESTIONS THAT DO NOT APPLY TO THEM OR RATING SCALES THAT ARE TEDIOUS TO USE 4HESE ARE COMPLAINTS THAT LEAD TO POOR SURVEY RESPONSE ONLY ABOUT TO PERCENT AT BEST AND THEREFORE POTENTIALLY UNRELIABLE DATA "ARBARA VON "ERGMAN POINTS OUT THAT h)F YOURE SATISlED AND MOST PEOPLE WE CONTACT ARE IT TAKES ALMOST NO TIME
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TO ANSWER A 3ENTINEL QUERYxALL YOU DO IS DELETE IT BY DOING THAT YOU KNOW YOUVE ANSWERED OUR MAIN QUESTIONv 4HIRD BY CAPTURING AND REPORTING THE CUSTOMERS OWN WORDS 3ENTINEL MINIMIZES THE POSSIBILITY 8EROX MAY MISINTERPRET THE NATURE CUSTOMER PROBLEMS OR COMPLIMENTS RECEIVED 4HIS IMPROVES BOTH THE QUALITY OF THE 8EROX RESPONSE TO THE CUSTOMER AND QUALITY OF THE LEARNING FROM THE INFORMATION COLLECTED &INALLY AND MOST IMPORTANT IF A CUSTOMER DOES HAVE A PROBLEM 3ENTINEL INITIATES AN IMMEDIATE RESPONSE TO IT ELIMINATING ANY LAG DUE TO THE ANALYSIS REPORTING PROBLEM SOLVING PROCESS ASSOCIATED WITH CONVENTIONAL CUSTOMER SATISFACTION MEASUREMENT SYSTEMS !CCORDING TO 6ACCARELLI AND VON "ERGMAN h4HIS IS PROBABLY THE FEATURE OF 3ENTINEL THAT IS MOST APPRECIATED BY BOTH CUSTOMERS AND 8EROX PEOPLE #USTOMERS ARE HAPPY BECAUSE 8EROX NOW QUICKLY SOLVES PROBLEMS THAT WE MAY HAVE MISSED BEFORE 8EROX PEOPLE ARE HAPPY BECAUSE 3ENTINEL HELPS THEM lND AND SOLVE PROBLEMS xTURNING THEM INTO @PLUSES THAT KEEP CUSTOMERS COMING BACKv
%80%2)%.#% "!3%$ ,%!2.).' 3ENTINEL TEACHES 8EROX PEOPLE TO SENSE WHATS GOING ON AND MAKE ADJUSTMENTS IN REAL TIME 4HEY NO LONGER WAIT UNTIL A CUSTOMER COMPLAINS AND THEN ENTER INTO A PROTRACTED PROBLEM SOLVING PROCESS "Y PROMPTING ENGAGEMENT WITH A BROAD VARIETY OF PROBLEMS AND BY REQUIRING USE OF DIFFERENT APPROACHES UNTIL THEY ARE SOLVED 3ENTINEL IS HELPING 8EROX PEOPLE LEARN MORE ABOUT THE CIRCUMSTANCES UNDER WHICH CERTAIN PROBLEMS MIGHT OCCUR WHAT WORKS AND WHAT DOESNT AND WHAT THEY HAVE TO DO TO SATISFY CUSTOMERS COMPLETELY !CCORDING TO 6ACCARELLI h7E KNOW CONDITIONED LEARNING IS TAKING PLACE BY THE INCREASED SPEED WITH WHICH THE SAME PROBLEMS ARE BEING SOLVED AND BY THE FACT THAT OVER TIME SOME PROBLEMS NO LONGER COME UP BECAUSE OUR PEOPLE ARE ANTICIPATING AND PREVENTING THEMv 7ORKING WITH 3ENTINEL IS ALSO TEACHING 8EROX PEOPLE THE BROADER VALUE OF BEING CUSTOMER BACK RATHER THAN COMPANY OUT IN THEIR RELATIONSHIPS WITH CUSTOMERS 3ENTINEL ENCOURAGES 8EROX PEOPLE TO PAY MORE ATTENTION TO CREATING ADDED VALUE FOR END USERS SOLVING THEIR PROBLEMS AND MAKING THEM MORE SUCCESSFUL AND THE RESULT IS A REAL BUSINESS BENElT !S ONE 8EROX ACCOUNT MANAGER PUTS IT h)LL BET THE COMPANY HAS PROBABLY LOST BUSINESS IN SOME ACCOUNTS BECAUSE WE DIDNT HAVE SOMETHING LIKE 3ENTINELv !CCORDING TO THE 8EROX ACCOUNT MANAGER FOR A MAJOR lNANCIAL INSTITUTION h4HE INFORMATION THAT 3ENTINEL PROVIDED OUR SALES TEAM IS ONE OF THE MAJOR REASONS WE WERE ABLE TO RENEW THE CONTRACT WITH OUR CUSTOMERSx ITS A COMPETITIVE DIFFERENTIATORv
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3ENTINEL ALSO CONDITIONS CUSTOMERS TO GIVE MORE FEEDBACK TO THE 8EROX PEOPLE WHO SUPPORT THEM BECAUSE THEY HAVE LEARNED THAT IT WILL BE ACTED ON )N THE PAST CUSTOMERS MIGHT HAVE GIVEN UP RESPONDING TO SURVEYS BECAUSE THEY PERCEIVED THAT 8EROXS RESPONSE OFTEN CAME TOO LATE TO RESOLVE THEIR ISSUES .OW CUSTOMERS CAN CLEARLY SEE THE VALUE OF THEIR COOPERATION IN THE PROGRAM THROUGH THE SPEED AND QUALITY OF THE 8EROX RESPONSE TO THE PROBLEMS THEY IDENTIFY 4HEIR PERCEPTION OF 8EROX HAS IMPROVED AND THEIR COMMUNICATION IS BECOMING MORE PROACTIVE
).&/2-!4)/. 4(!4 -!.!'%-%.4 .%6%2 (!$ /NE OF THE MOST IMPORTANT BY PRODUCTS OF THE 3ENTINEL SYSTEM IS THE REAL TIME UP TO DATE INFORMATION THAT IT PROVIDES TO 8EROX MANAGEMENT ABOUT THE STATE OF SATISFACTION ACROSS THE CUSTOMER BASE COVERED BY THE PROGRAM 3ENTINEL PROVIDES 8EROX ACCOUNT TEAMS AND SENIOR MANAGERS WITH CURRENT INFORMATION TO TRACK s s s s
4HE OVERALL LEVEL OF END USER SATISFACTION IN AN ACCOUNT 4HE NUMBER AND NATURE OF COMPLIMENTS CUSTOMERS HAVE MADE 4HE PROBLEMS IT HAS FOUND AND IS WORKING 4HE PROGRESS AND RESPONSIVENESS OF 8EROX PROBLEM SOLVERS IN DEALING WITH THOSE PROBLEMS s 4HE NATURE AND SUCCESS OF SOLUTIONS DEVELOPED s 4HE REACTION OF AFFECTED CUSTOMERS TO THOSE SOLUTIONS )F NECESSARY 8EROX MANAGERS CAN DRILL DOWN TO THE SPECIlC VERBATIM COMMENTS OF CUSTOMERS OR 8EROX REPRESENTATIVES ON ANY OF THESE DIMENSIONS 3ENTINEL DATA SHOWS FOR EXAMPLE THAT RESPONSE RATES TO 3ENTINEL E MAIL CHECK INS ARE LOW 5NLIKE CONVENTIONAL SURVEYS THATS GOOD NEWS MEANING THAT CUSTOMER END USERS ARE FOR THE MOST PART SATISlED WITH OR EVEN COMPLIMENTARY ABOUT 8EROX PERFORMANCE /N THE OTHER HAND CUSTOMER CHECK IN RESPONSES REPORTING A PROBLEM MOST CONCERNING QUALITY OR SERVICE SUPPORT ARE LOWER THAN PERCENT OF MESSAGES SENT AND HALF OR MORE OF THOSE ARE NOW RESOLVED WITHIN HOURS 4HATS VERY GOOD NEWS 4HIS IS POWERFUL INFORMATION THAT 8EROX PEOPLE HAVE NEVER HAD BEFORE WITH A LEVEL OF QUALITY AND TIMELINESS UNATTAINABLE BY ANY OTHER MEANS )T ALLOWS LOCAL TEAMS TO MANAGE RELATIONSHIPS WITH ACCOUNTS BETTER THAN EVER BEFORE )T ALERTS SENIOR MANAGEMENT TO DEAL WITH PROBLEM SITUATIONS BEFORE THEY BECOME A THREAT TO CUSTOMER LOYALTY AND RETENTION .O WONDER THAT 8EROX #%/ !NNE -ULCAHY TOLD A GROUP OF SENIOR EXECUTIVES OF THE LARGEST CUSTOMERS OF JOINT VENTURE PARTNER
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&UJI 8EROX h3ENTINEL INFORMATION IS A REAL #%/ TOOL ) USE IT EVERY DAY TO CHECK ON HOW WERE DOING WITH ALL THE 3ENTINEL CUSTOMERS AS WELL AS THE ACCOUNT ) PERSONALLY SUPPORTv 7HEN MADE AVAILABLE TO CUSTOMER DECISION MAKERS AND SENIOR EXECUTIVES 8EROX HAS FOUND THAT 3ENTINEL DATA IS SEEN BY THOSE KEY CUSTOMER MANAGERS AS A IMPORTANT SOURCE OF ADDED VALUE IN DOING BUSINESS WITH 8EROX AND IN SOME CASES A SIGNIlCANT FACTOR IN THEIR DECISION TO CONTINUE DOING BUSINESS WITH THE COMPANY 3HARING 3ENTINEL DATA WITH CUSTOMER DECISION MAKERS AND EXECUTIVES GIVES THEM THE ABILITY TO UNDERSTAND AND TRACK 8EROX PERFORMANCE IN THEIR ORGANIZATION TO SEE HOW WELL 8EROX IS DOING AND HELP THEM WORK WITH 8EROX TO IMPROVE PERFORMANCE !ND SHARING 3ENTINEL DATA WITH CUSTOMERS CAN HELP 8EROX CORRECT POSSIBLE MISPERCEPTIONS OF PREVALENT PROBLEMS OR 8EROX UNRESPONSIVENESS WITH SOLID DATA ON HIGH LEVELS OF END USER SATISFACTION THE RELATIVELY SMALL NUMBER OF PROBLEMS DETECTED AND HOW QUICKLY 8EROX HAS RESPONDED TO THEM !S SENIOR EXECUTIVES OF CURRENT CUSTOMER PARTICIPANT PUT IT h4HE INITIAL RESULTS HAVE BEEN GOOD )T 3ENTINEL PROVIDES US AN EASY NON THREATENING WAY FOR US TO GIVE YOU FEEDBACK 4HIS IS THE TYPE OF INNOVATION WE ARE LOOKING FOR FROM OUR BUSINESS PARTNERSv
-%!352%3 /& 35##%33 3ENTINEL IS A SENSE AND RESPOND CUSTOMER SATISFACTION MEASUREMENT AND PROBLEM RESOLUTION SYSTEM )TS PRIMARY PURPOSE AND GOAL IS TO BUILD A FOUNDATION OF STRONG CUSTOMER SATISFACTION ON WHICH 8EROX CAN BUILD STRONG CUSTOMER LOYALTY 4HE CRITICAL CUSTOMER ORIENTED MEASURES OF SUCCESS FOR THE 3ENTINEL PROGRAM INCLUDE s s s s
)MPROVEMENT IN THE OVERALL 8EROX 3ENTINEL CUSTOMER RETENTION RATE !SSURED OVERALL SATISFACTION OF THE 8EROX CUSTOMER BASE !SSURED END USER SATISFACTION IN INDIVIDUAL CUSTOMER ORGANIZATIONS )MPROVED CUSTOMER PERCEPTION OF 8EROX AS A HIGH VALUE BUSINESS PARTNER
4HE CRITICAL 8EROX ORIENTED MEASURES OF SUCCESS INCLUDE s s s s
)NCREASED 8EROX TEAM AWARENESS OF CUSTOMER PROBLEMS AND NEEDS )NCREASED 8EROX TEAM RESPONSIVENESS TO CUSTOMERS )MPROVED ACCOUNT MANAGEMENT AND CONTROL )MPROVED ACCOUNT TEAM SATISFACTION
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4HE 3ENTINEL PROGRAM BEGAN ITS lRST PILOT TEST IN AND HAS ONLY EXPANDED SIGNIlCANTLY SINCE MID 3UBSTANTIVE AND CONCLUSIVE DATA ON MOST OF THE CRITICAL SUCCESS MEASURES FOR THE PROGRAM ARE THEREFORE NOT YET AVAILABLE "UT EARLY CUSTOMER RESULTS ARE STRONGLY ENCOURAGING s )MPROVEMENT IN SATISFACTION IN lELD TEST ACCOUNTS IS SIGNIlCANT RISING FROM TO PERCENT IN ONE NATIONAL CUSTOMER ORGANIZATION s 1UALITATIVE AND ANECDOTAL EVIDENCE INDICATES THAT CUSTOMER LOYALTY HAS IMPROVED AMONG PARTICIPATING CUSTOMERS 3EVERAL HAVE SAID THAT THEIR DECISION TO CONTINUE OR RENEW BUSINESS WITH 8EROX WAS VERY MUCH INmUENCED BY THEIR PARTICIPATION IN THE PROGRAM s #USTOMER EXECUTIVES IN 3ENTINEL ACCOUNTS HAVE TOLD 8EROX ACCOUNT TEAMS AND 8EROX EXECUTIVES THAT THEIR VIEW OF 8EROX AS AN INNOVATOR AND BUSINESS PARTNER HAS IMPROVED SUBSTANTIALLY SINCE BEGINNING 3ENTINEL PARTICIPATION s !CCEPTANCE AND USE OF 3ENTINEL DATA BY CUSTOMER DECISION MAKERS AND EXECUTIVES IS PREVALENT AND GROWING s %ND USERS IN 3ENTINEL ACCOUNTS ARE PROVIDING AN INCREASING NUMBER OF COMPLIMENTS AND POSITIVE FEEDBACK ABOUT 8EROX PERFORMANCE 2ESULTS ON THE 8EROX SIDE ARE ALSO ENCOURAGING !S MENTIONED PREVIOUSLY s 0ROBLEM CHECK IN REPORTS ARE STABLE AT ONE PERCENT OR LESS OF TOTAL CHECK INS SENT s (ALF OF PROBLEMS REPORTED ARE RESOLVED IN LESS THAN HOURS s 8EROX TEAM LEARNING BY DOING HAS LED TO SIGNIlCANTLY IMPROVED PERFORMANCE 0ROBLEM RESOLUTION FOR EXAMPLE IMPROVES QUICKLY AFTER INSTALLATION )N NEW 3ENTINEL ACCOUNTS ABOUT PERCENT OF PROBLEMS ARE RESOLVED WITHIN HOURS IN ONGOING ACCOUNTS MORE THAN PERCENT ARE /THER ENCOURAGING 8EROX RESULTS INCLUDE s )NCREASED AND EFFECTIVE USE OF 3ENTINEL DATA BY ACCOUNT MANAGERS TO IMPROVE CUSTOMER OPERATIONS AND COMMUNICATION MAINTAIN OR IMPROVE 8EROX POSITION IN THE ACCOUNT AND SECURE NEW BUSINESS s )NCREASED USE OF 3ENTINEL DATA BY 8EROX FOCUSED EXECUTIVESSENIOR 8EROX PEOPLE DEDICATED TO SUPPORT OF A SPECIlC MAJOR CUSTOMERIN TRACKING THEIR ASSIGNED CUSTOMER ORGANIZATION AND IMPROVING RELATIONSHIPS WITH IT
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#534/-%2 %80%2)%.#%3 7)4( 3%.4).%, 8EROX EXPERIENCES IN THREE CUSTOMER ORGANIZATIONS PARTICIPATING IN 3ENTINEL A GLOBAL BANKING AND lNANCIAL SERVICES ORGANIZATION A MULTINATIONAL MULTI DIVISION TECHNOLOGY MANUFACTURING COMPANY AND A REGIONAL GOVERNMENT HOSPITAL ADMINISTRATION ORGANIZATION FURTHER AMPLIFY THE EARLY SUCCESS AND FUTURE PROMISE OF THE PROGRAM
'LOBAL "ANK 8EROX PROVIDES ALL OF THE 5NITED 3TATES FACILITIES AND LINES OF BUSINESS OF THIS INTERNATIONAL BANKING AND lNANCIAL SERVICES ORGANIZATION WITH s 4HOUSANDS OF CONVENTIONAL AND DIGITAL DOCUMENT PRODUCTION AND MANAGEMENT PRODUCTS THROUGH AN OFlCE mEET MANAGEMENT PROGRAM WHERE 8EROX LEASES AND PROVIDES ON SITE REPLENISHMENT AND MAINTENANCE SERVICES FOR ALL EQUIPMENT s 0RODUCTION lNISHING FULlLLMENT AND GRAPHIC DESIGN SERVICES FOR MOST OF ITS INTERNAL BLACK AND WHITE AND COLOR DOCUMENTS s /THER DOCUMENT MANAGEMENT SERVICES SUCH AS MAILROOM AND IMAGE CAPTURE AND CONVERSION #URRENTLY 8EROX USES 3ENTINEL TO COMMUNICATE WITH END USERS OF THE DOCUMENT PRODUCTION SERVICES IT PROVIDES 8EROX OPERATES FOUR CONSOLIDATED $OCUMENT #ENTERS FOR THE BANK IN THE 5NITED 3TATES 4HESE CENTERS PRODUCE PERCENT OR MORE OF THE INTERNAL DOCUMENTS THE BANK NEEDS TO ENSURE IT CONSISTENT SERVICES TO CUSTOMERS AND REGULATORY COMPLIANCE THROUGHOUT ALL OF ITS LINES OF BUSINESS AND FACILITIES NATIONWIDE 4HE DOCUMENTS PRODUCED INCLUDE HIGH VOLUME APPLICATIONS SUCH AS TRAINING MANUALS PRODUCT MANUALS FOR ALL OF THE LINES OF BUSINESS SIX SIGMA QUALITY IMPROVEMENT DOCUMENTATION AND GRAPHICS AND OTHER KEY INTERNAL OPERATIONS AND ADMINISTRATIVE DOCUMENTS AS WELL AS SOME DIRECT MAIL PRODUCT PROMOTIONAL DOCUMENTATION /N BEHALF OF THE BANKS LINES OF BUSINESS ITS $OCUMENT -ANAGEMENT ORGANIZATION ADMINISTERS ALL PRODUCT AND SERVICE CONTRACTS WITH 8EROX AND IS RESPONSIBLE FOR ENSURING THAT 8EROX IS MEETING LINE OF BUSINESS REQUIREMENTS 4O CARRY OUT THAT RESPONSIBILITY IN BANK $OCUMENT -ANAGEMENT EXECUTIVES APPROACHED 8EROX TO SEE IF THE COMPANY COULD PROVIDE A WAY FOR THE BANK TO MONITOR THE LEVEL OF END USER SATISFACTION WITH 8EROXS SERVICE PERFORMANCE 4O PROVIDE THAT CAPABILITY THE 8EROX ACCOUNT MANAGER WHO HAD RECENTLY LEARNED
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ABOUT THE PROGRAM RECOMMENDED PARTICIPATION IN THE INITIAL PILOT TEST OF 3ENTINEL 4HE BANK AGREED AND THE SYSTEM WAS INSTALLED TO COVER ALL END USERS SERVED BY THE FOUR 8EROX STAFFED $OCUMENT #ENTERS 4O DATE 3ENTINEL HAS BEEN A SUCCESS "OTH 8EROX ACCOUNT MANAGEMENT AND CUSTOMER EXECUTIVES AGREE THAT 3ENTINEL FULlLLS THE SATISFACTION MONITORING ROLE AND MORE IMPORTANT HAS BEEN AN IMPORTANT CONTRIBUTOR TO BUILDING AND MAINTAINING 8EROXS HIGH LEVEL OF SERVICE QUALITY FOR THE BANKS LINES OF BUSINESS 3ENTINEL PROVIDES BOTH 8EROX AND CUSTOMER MANAGERS WITH A HIGH LEVEL OF CONlDENCE THAT ANY SERVICE LEVEL PROBLEM WILL BE PROACTIVELY IDENTIlED BY 8EROX THAT THERE IS A PROCESS IN PLACE TO BY WHICH 8EROX WILL RESPOND THAT PROBLEM IN A TIMELY MANNER THE RESOLUTION OF THE PROBLEM GETS DOCUMENTED IN THE END USERS OWN WORDS 4HE SYSTEM PROVIDES BOTH 8EROX AND BANK MANAGERS WITH FACTUAL DATA AND SOLID VERBATIM EVIDENCE TO SHOW THAT 8EROX IS MEETING OR EXCEEDING ITS SERVICE LEVEL AGREEMENTS AND IMPROVES PERFORMANCE QUICKLY WHERE THAT IT IS NEEDED 4HE 8EROX ACCOUNT GENERAL MANAGER POINTS OUT THAT h4HE INFORMATION THAT 3ENTINEL PROVIDES WAS AN IMPORTANT ENABLER IN OUR EFFORT TO RENEW THE CONTRACT WITH OUR CUSTOMERxWE HAD OBJECTIVE DATA TO SUBSTANTIATE AND QUANTIFY END USER SATISFACTION AND CONTINUED IMPROVEMENT IN LEVELS OF SERVICE )T ALSO HELPS US IN NEW BUSINESS SITUATIONS BECAUSE WE CAN CONlDENTLY TALK ABOUT THE DEMONSTRATED LEVELS OF QUALITY WE CAN DELIVERv 3ENIOR BANK EXECUTIVES HAVE TOLD 8EROX THAT THEY PERCEIVE 3ENTINEL AS AN INDUSTRY BENCHMARK hVERY CREATIVExSTATE OF THE ARTxBRINGS IN NEW VALUE ADDED TO THE BUSINESSxWHAT WE WANT IN A STRATEGIC SUPPLIERv 4HE BANKS $OCUMENT -ANAGEMENT ORGANIZATION IS NOW CONSIDERING POSSIBLE DEPLOYMENT OF 3ENTINEL TO END USERS COVERED BY THEIR MASSIVE EQUIPMENT mEET MANAGEMENT CONTRACT WITH 8EROX
'OVERNMENT (OSPITAL !DMINISTRATOR 8EROX HOLDS THE MASTER CONTRACT TO PROVIDE THE DIGITAL MULTIFUNCTION DOCUMENT MANAGEMENT EQUIPMENT DISTRIBUTED THROUGHOUT THIS GROUP OF lVE LARGE REGIONAL FEDERAL GOVERNMENT MEDICAL CENTERS 4HE CONTRACT COVERS SEVERAL HUNDRED SEPARATE PIECES OF EQUIPMENT AS WELL AS ACCOUNT ASSOCIATE EQUIPMENT OPERATORS IN ALL lVE FACILITIES 4HE PRIMARY PURCHASE DECISION MAKER FOR THIS CUSTOMER HAD BEEN ASKING 8EROX ACCOUNT TEAM FOR SOME CAPABILITY TO COMMUNICATE MORE CLOSELY AND FREQUENTLY WITH END USERS OF THE EQUIPMENT WHO ARE SPREAD OVER A BROAD GEOGRAPHIC AREA IN THE WESTERN 5NITED 3TATES 4HE ACCOUNT TEAM ALSO SAW SIGNIlCANT VALUE IN THIS
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BECAUSE AS THE 8EROX BUSINESS SERVICES MANAGER PUT IT h7HEN YOURE DEALING WITH END USERS THERES NO WAY THAT YOU CAN TOUCH EVERY ONE OF THEM EVERY DAYv 4HE EQUIPMENT CONTRACT WAS RENEWED IN AND 3ENTINEL WAS INSTALLED IN ONE OF THE CENTERS AT THE SAME TIME TO SEE IF THE SYSTEM COULD PROVIDE THE DESIRED END USER COMMUNICATION CAPABILITY )NSTALLATION OF THE 3ENTINEL SYSTEM PAID OFF FOR BOTH 8EROX AND THE CUSTOMER ALMOST IMMEDIATELY 7HEN THE lRST CHECK IN MESSAGES WERE SENT SEVERAL END USERS REPLIED THAT WHEN THE CONTRACT WAS RENEWED THEIR REQUEST TO THEIR MANAGEMENT FOR UPGRADED EQUIPMENT PRODUCTIVITY OPTIONS HAD NOT BEEN lLLED 4HE 8EROX ACCOUNT TEAM WAS ABLE TO RESPOND IMMEDIATELY HELPING THE END USERS TO MAKE AN APPROPRIATE REQUEST FOR THE NEEDED EQUIPMENT THAT WAS QUICKLY APPROVED BY THEIR MANAGEMENT 4HE RESULT A WIN WINxTHE USERS WERE SATISlED BECAUSE THEY GOT THE PRODUCTIVITY EQUIPMENT THEY NEEDED SO QUICKLY THE DECISION MAKER WAS PLEASED WITH THE QUICK RESPONSE THAT WAS PROMPTED BY 3ENTINEL AND 8EROX RECEIVED INCREMENTAL REVENUE FROM SUPPLYING THE UPGRADED EQUIPMENT "ASED ON THE EARLY FEEDBACK FROM THIS TEST INSTALLATION 3ENTINEL WAS QUICKLY MADE AVAILABLE TO END USERS AND ADMINISTRATORS IN THE REMAINING MEDICAL CENTERS IN THIS DIVISION "OTH 8EROX AND CUSTOMER ADMINISTRATORS HAVE FOUND THE MOST VALUABLE BENElT OF 3ENTINELS USE TO BE THE INSTANT FEEDBACK FROM END USERS AND IMMEDIATE RESPONSE TO THAT FEEDBACK ON THE PART OF 8EROX 8EROX IS ABLE TO UNDERSTAND AND RESPOND QUICKLY TO A USERS NEED BECAUSE THE COMMUNICATION FROM THE USER GOES DIRECTLY TO THE 8EROX PERSON WHO CAN BEST DEAL IT #USTOMER PURCHASE DECISION MAKERS CAN NOW KNOW WHAT END USERS THROUGHOUT THE DIVISION NEED AT ANY GIVEN MOMENT AND MORE IMPORTANT KNOW THAT THERE IS NOW A PROCESS IN PLACE THAT ASSURES AND TRACKS THE 8EROX RESPONSE TO THOSE NEEDS )N FACT CUSTOMER DECISION MAKERS GOT A DRAMATIC EXAMPLE OF JUST HOW WELL 3ENTINEL CAN DELIVER SHORTLY AFTER THE SYSTEM WAS INSTALLED ! CUSTOMER CONTRACT ADMINISTRATOR USED 3ENTINEL TO COMMUNICATE THAT A 8EROX POLICY IN PLACE WAS A BARRIER TO CONTRACT UPGRADES OR CHANGES 4HE 8EROX BUSINESS SERVICES MANAGER NOTES THAT hxTHE ACCOUNT SALES TEAM COULDNT RESOLVE THAT BUT THROUGH THE 3ENTINEL ESCALATION PROCESS THE ISSUE PRETTY QUICKLY GOT UP TO THE TOP OF 8EROX MARKETING 4HEY REMOVED THE BARRIER NOT JUST FOR OUR ACCOUNT BUT ACROSS THE WHOLE COMPANY 7HEN OUR CONTACT HEARD THAT ALL SHE COULD SAY WAS @7OWxTHIS IS REALLY WORKINGv
4ECHNOLOGY -ANUFACTURER 5NDER A MANAGED SERVICES CONTRACT 8EROX IS THE SOLE PROVIDER OF DOCUMENT MANAGEMENT PRODUCTS AND SERVICES FOR THIS MULTI DIVISION MANUFACTURER OF
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ENGINEERED AND HIGH TECHNOLOGY PRODUCTS FOR CONSUMER COMMERCIAL AND DEFENSE APPLICATIONS &OR THIS CUSTOMER 8EROX PROVIDES IN THE 5NITED 3TATES s 3EVERAL THOUSAND UNITS OF DOCUMENT MANAGEMENT EQUIPMENT AT LOCATIONS ON A mEET MANAGEMENT SERVICE BASIS s $OCUMENT PRODUCTION AND GRAPHIC SERVICES AT MAJOR PRODUCTION CENTERS s -AILROOM SERVICES 5NDER THIS MANAGED SERVICES CONTRACT 8EROX IS RESPONSIBLE TO END USERS FOR TENS OF THOUSANDS OF INDIVIDUAL JOBS INVOLVING HUNDREDS OF MILLIONS OF PAGES PER YEAR ! MAJOR CHALLENGE THAT 8EROX FACED WAS TO ENSURE THAT IT WAS IN COMPLIANCE WITH NEGOTIATED PERFORMANCE COMMITMENTS IN THE MANAGED SERVICES CONTRACT ESPECIALLY THE SERVICE LEVEL AGREEMENTS ON JOB QUALITY AND TURNAROUND TIME 8EROX HAD COMMITTED TO IN THE PRODUCTION FACILITIES 4O OBTAIN CUSTOMER FEEDBACK ON PERFORMANCE 8EROX USED PAPER BASED SURVEYS THAT ASKED CUSTOMERS TO CHECK BOXES RATING PERFORMANCE QUALITY ON CRITERIA SUCH AS DOCUMENT QUALITY TURNAROUND TIME EQUIPMENT AVAILABILITY EQUIPMENT SERVICE RESPONSE TIME AND SO ON "UT OVER TIME RESPONSE TO THESE SURVEYS SUFFERED AND 8EROX ACCOUNT MANAGEMENT KNEW IT HAD TO lND A REPLACEMENT METHOD OF GATHERING USER SATISFACTION OR PROBLEM RESOLUTION INFORMATION OR LOSE THE ABILITY TO CERTIFY PERFORMANCE LEVELS TO CUSTOMER PURCHASE DECISION MAKERS AND SENIOR MANAGEMENTTHE OUTCOME OF WHICH COULD HAVE BEEN LOSS OF PART OR ALL OF THE CUSTOMERS BUSINESS !S THE 8EROX GLOBAL ACCOUNT GENERAL MANAGER PUTS IT h/VER TIME THESE SURVEYS BECOME PRETTY REPETITIVE AND WHILE THE CUSTOMERS ALWAYS FELT BAD ABOUT THROWING THEM AWAY THEYD TELL US @(OW MANY TIMES CAN ) TELL YOU THAT YOU DID A GOOD JOB AND EVERYTHINGS lNE 7E KNEW WE WERE DOING A GOOD JOB BUT DIDNT HAVE A GOOD WAY TO PROVE THATv !FTER A BRIEF TEST AT THE END OF 3ENTINEL WAS INSTALLED THROUGHOUT THIS ACCOUNT IN *ANUARY TO ADDRESS THIS ISSUE 0OSITIVE RESULTS WERE ALMOST IMMEDIATELY APPARENT %ND USERS WERE HAPPY TO BE ABLE TO TELL 8EROX THEY WERE SATISlED WITH A JOB OR ITS PERFORMANCE JUST BY DELETING AN E MAIL SAVING THEM TIME AND TROUBLE "UT THE REAL SURPRISE FOR 8EROX WAS WHEN THEY FOUND HOW MANY CUSTOMER USERS PROVIDED POSITIVE COMMENTS ON THE QUALITY OF 8EROX SERVICES !T A PERFORMANCE REVIEW WITH SENIOR CUSTOMER EXECUTIVES IN MID THE 8EROX GLOBAL ACCOUNT GENERAL MANAGER WAS ABLE TO SHOW PAGES OF POSITIVE VERBATIM END USER COMMENTS FROM FACILITIES ACROSS THE COUNTRY ABOUT THE CUSTOMER ORIENTATION AND GOOD PERFORMANCE OF 8EROX PRODUCTION CENTER PEOPLE h)T WAS CLEAR TO THE CUSTOMER THAT WE WERE DOING A GOOD JOB v OBSERVED 8EROXS ACCOUNT MANAGER v"EFORE THIS THE CUSTOMER AND ) HAD NO IDEA HOW PASSIONATE THEIR PEOPLE WERE ABOUT OUR SERVICEv
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"ESIDES PROVIDING OBJECTIVE EVIDENCE THAT 8EROX IS MEETING ITS SERVICE LEVEL COMMITMENTS 3ENTINEL ALLOWS 8EROX PEOPLE TO MAINTAIN THAT HIGH LEVEL OF PERFORMANCE BY PROVIDING THEM THE INFORMATION TO QUICKLY CORRECT PROBLEMS BEFORE THEY BECOME SERIOUS PERFORMANCE ISSUES 8EROX ACCOUNT MANAGERS APPRECIATE THE EFFECTIVENESS OF 3ENTINELS REAL TIME CLOSED LOOP PROBLEM RESOLUTION AND TRACKING PROCESS IN HELPING THEM QUICKLY DEAL WITH DEVELOPING PROBLEMS h7E CAN ACTUALLY TIME HOW QUICKLY WE CAN lX A PROBLEM WHEN ONE OCCURS v SAY 8EROX ACCOUNT MANAGERS 4HE ACCOUNT TEAM IS PLANNING TO EXPAND USE OF 3ENTINEL EVEN FURTHER ADDRESSING POTENTIAL APPLICATIONS IN JOB BILLING AND HELP DESK SERVICES AMONG OTHERS
&5452% $%6%,/0-%.4 8EROXS USE OF 3ENTINEL TODAY IS IN ITS INFANCY 4HE lRST TWO YEARS HAVE BEEN SPENT IN DEVELOPMENT OF THE BASIC CUSTOMER SATISFACTION ASSURANCE SYSTEM BY 8"2' lLING OF PATENT APPLICATIONS A RIGOROUS BETA TEST IN A NATIONAL CUSTOMER ORGANIZATION AND INITIAL DEPLOYMENT TO THE lRST LARGE CUSTOMER AND INTERNAL 8EROX ORGANIZATIONS 3ENTINELS NEXT STEP WILL BE COMPLETION OF DEPLOYMENT TO 8EROXS LARGEST ACCOUNTS IN THE 5NITED 3TATES #ANADA %UROPE ,ATIN !MERICA AND ELSEWHERE 8EROX MANAGEMENT IS STRONGLY SUPPORTING THIS EXPANSION AND THE 8"2' EXPECTS THAT IT WILL BE MOSTLY COMPLETED IN "UT WHAT STARTED AS A CUSTOMER SATISFACTION MEASUREMENT TOOL COULD ULTIMATELY CAUSE 8EROX TO RETHINK THE WAY IT DELIVERS CUSTOMER SERVICE &UTURE VERSIONS OF THE SYSTEM COULD INTEGRATE KNOWLEDGE MANAGEMENT TOOLS SUCH AS DATA MINING LINGUISTIC ANALYSIS TEXT CATEGORIZATION AND PATTERN RECOGNITION CAPABILITIES UNDER DEVELOPMENT BY 8EROX 2ESEARCH #ENTRE %UROPE AND OTHERS TO CONTINUOUSLY MONITOR AND LEARN FROM CUSTOMER PROBLEMS 4HIS WOULD BUILD A KNOWLEDGE BASE OF PROBLEMS AND SOLUTIONS THAT COULD ENABLE 3ENTINEL TO COMMUNICATE DIRECTLY TO CUSTOMERS SUGGESTING SOLUTIONS OR SHORT CIRCUITING THE DEVELOPMENT OF POTENTIAL PROBLEMS IN A CUSTOMER ORGANIZATION 4HESE TOOLS COULD ALSO COMB THE CONTENT OF COMPLIMENTS AND COMMENTS RECEIVED TO PROVIDE 8EROX CUSTOMER SUPPORT ORGANIZATIONS WITH KNOWLEDGE ABOUT hBEST PRACTICESv MOST APPRECIATED BY CUSTOMERS 4HESE COULD BE BUILT INTO NEW CORPORATE WIDE PROGRAMS TO IMPROVE CUSTOMER VALUE AND SATISFACTION +NOWLEDGE GLEANED FROM THESE COMPLIMENTS AND COMMENTS COULD ALSO PROVIDE POWERFUL INPUT TO MARKETING AND STRATEGIC COMMUNICATION PROGRAMS TO IMPROVE CUSTOMER AWARENESS AND ATTITUDES TOWARD 8EROX &INALLY CUSTOMERS ARE ALREADY PROVIDING A WEALTH OF COMMENTS ABOUT UNMET NEEDS FOR DOCUMENT AND INFORMATION
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MANAGEMENT PRODUCTS AND SERVICES !DVANCED KNOWLEDGE MANAGEMENT TOOLS COULD COMBINE THIS DATA WITH DATA COLLECTED ON PROBLEMS TO GUIDE 8EROX BUSINESS STRATEGY NEW PRODUCT AND SERVICE DEVELOPMENT PLANNING AND RAPID PROTOTYPING AND PROMOTION OF NEW OFFERINGS
#/.#,53)/. 7HAT STARTED AS A SEARCH FOR REASONS WHY 8EROX CUSTOMER SATISFACTION DATA WERE NOT ASSURING CUSTOMER LOYALTY OR EXPLAINING DEFECTIONS FROM 8EROX HAS GONE WELL BEYOND THAT CREATING A MODEL FOR CUSTOMER RELATIONSHIPS THAT IS MAKING 8EROX BOTH MORE AGILE AND MORE ADAPTABLE IN SERVING CUSTOMERS 4HE WORK THAT LED TO THE DEVELOPMENT OF 3ENTINEL HAS PROVIDED PLAUSIBLE REASONS WHY MANY CUSTOMERS DEFECT THE LACK OF QUICK IDENTIlCATION AND APPROPRIATE SOLUTION OF ALL PROBLEMS CUSTOMER END USERS MAY HAVE #ONVENTIONAL CUSTOMER SATISFACTION MEASUREMENT CANNOT ADDRESS THIS LACK IT TOOK THE DEVELOPMENT OF AN INNOVATIVE NEW SOLUTION 3ENTINEL TO DO THAT "UT ACCORDING TO 3TEPHAN (AECKEL 3ENTINEL IS REALLY A TRUE SENSE AND RESPOND SYSTEMA CUSTOMER BACK ROLE AND ACCOUNTABILITY STRUCTURE FOR ACTION (AECKEL THINKS ITS MUCH MORE THAN A GREAT MARKETING IDEA HE BELIEVES 3ENTINEL IS A WAY FOR 8EROX AND ITS CUSTOMERS TO CO CREATE NEW VALUE !ND IN HIS MIND THATS THE REAL DElNITION OF ADAPTABILITY (AECKEL THINKS THAT THE REAL TEST OF 3ENTINEL IS THREE OR FOUR YEARS DOWN THE ROAD 7ILL IT BECOME THE WAY THAT 8EROX RELATES WITH ALL ITS CUSTOMERS 4HE EARLY USE OF THIS SYSTEM BY 8EROX ALREADY SHOWS GREAT PROMISE "UT IN THE FUTURE THE GREATEST BENElT OF 3ENTINEL TO BOTH CUSTOMERS AND 8EROX MAY BE THE ORGANIZATIONAL AND STRUCTURAL CHANGE PRODUCED BY NEW GENERATIONS OF THE SYSTEM THAT PROVIDE FOR NOW UNIMAGINED IMPROVEMENTS IN CREATION OF CUSTOMER VALUE
)-0,%-%.4).' 4(% !'),% %.4%202)3% ) 4HE % "USINESS /PPORTUNITY -ODEL $!6)$ 3#(5&& !33)34!.4 02/&%33/2 &/8 3#(//, /& "53).%33 !.$ -!.!'%-%.4 4%-0,% 5.)6%23)49 *!#15%,).% :).. 02/&%33/2 &/8 3#(//, /& "53).%33 !.$ -!.!'%-%.4 4%-0,% 5.)6%23)49 -5.)2 -!.$6)7!,,! #/22%30/.$).' !54(/2 %8%#54)6% $)2%#4/2 )27). , '2/33 %"53).%33 ).34)454% !.$ !33/#)!4% 02/&%33/2 &/8 3#(//, /& "53).%33 !.$ -!.!'%-%.4 4%-0,% 5.)6%23)49
%8%#54)6% /6%26)%7 %STABLISHED ORGANIZATIONS CONTINUE TO STRUGGLE WITH HOW TO EVALUATE THE POTENTIAL OF APPLYING )NTERNET 4ECHNOLOGIES TO CREATE COMPETITIVE ADVANTAGE AND IMPLEMENT THE CONCEPT OF AN AGILE ENTERPRISE 4HE EXAMPLES AND INSIGHTS PRESENTED BY OBVIOUS )NTERNET SUCCESS STORIES SUCH AS !MAZONCOM DO NOT EASILY APPLY OR LEVERAGE THE STRENGTHS AND WEAKNESSES OF ESTABLISHED lRMS AND INDUSTRIES 4HE % "USINESS
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/PPORTUNITY -ODEL %/- AND ITS ASSOCIATED % "USINESS /PPORTUNITY )NDEX %/) DESCRIBED IN THIS ARTICLE PROVIDES MANAGERS WITH AN EASY TO APPLY AND COMPREHENSIVE TOOL FOR ANALYZING AN INDUSTRY AND TARGETING AREAS OF OPPORTUNITY TO IMPLEMENT THE AGILE ENTERPRISE 4HE %/- INTEGRATES MULTIPLE PERSPECTIVES INTO A SET OF lFTEEN FACTORS THAT ARE GROUPED INTO CONTEXT PRODUCT AND TRANSACTIONAL CATEGORIES 4HE FACTORS COMPRISE THE HEART OF THE MODEL AND INDEX AND ARE USED TO ASSESS THE POTENTIAL OF APPLYING )NTERNET TECHNOLOGIES 4HE ARTICLE ALSO INCLUDES TWO EXAMPLES OF APPLYING THE %/- TO THE PHARMACEUTICAL MANUFACTURING AND LIFE INSURANCE INDUSTRIES 4HE RESULTS PROVIDE INTERESTING INSIGHTS INTO THE FUNDAMENTAL STRUCTURE OF EACH INDUSTRY AS WELL AS MORE GENERIC CONCLUSIONS THAT MAY APPLY ACROSS DIFFERENT INDUSTRIES
5.$%234!.$).' 4(% 0/4%.4)!, /& % "53).%33 4%#(./,/')%3 4HE USE OF INFORMATION TECHNOLOGY IN BUSINESS STRATEGY TO LEVERAGE OPPORTUNITIES AND TO TRANSFORM BUSINESS HAS INCREASED IN IMPORTANCE OVER THE PAST SEVERAL YEARS AS lRMS STRIVE FOR COMPETITIVE ADVANTAGE IN A DIVERSE AND CHANGING MARKETPLACE % BUSINESS IS THE USE OF )NTERNET TECHNOLOGIES TO IMPROVE AND TRANSFORM KEY BUSINESS PROCESSES )"- E "USINESS $ESPITE THE RECENT SLOWDOWN IN VENTURE CAPITAL FUNDING THE OPPORTUNITIES PRESENTED BY E BUSINESS CONTINUE TO EXPAND BEYOND THE CAPABILITIES THAT MOST EXPERTS HAVE TO FULLY COMPREHEND THEM -ANY CAN EXPLAIN IN GREAT DEPTH THE SIMPLE BUSINESS TO CONSUMER TRANSACTIONAL MODELS OF BOOK SELLING OR AIRLINE TICKET RESERVATION (OWEVER WHAT WE HAVE ALREADY LEARNED ABOUT THE SUCCESS AND FAILURE OF E BUSINESSES SUGGESTS THAT THE BEST OPPORTUNITIES EXIST IN MORE mEXIBLE AND ADVANCED hSECOND GENERATIONv BUSINESS STRATEGIES REPRESENTED BY DIVERSE APPLICATIONS SUCH AS SHOPPING hBOTS v ONLINE AUCTIONS AND )NTERNET BASED BUSINESS TO BUSINESS EXCHANGES )NDEED THE LONG TERM ECONOMIC VALUE OF E BUSINESS MAY LIE LESS IN THE SINGLE PURPOSE hDOT COMv THAN IN THE MORE TRADITIONAL LINE MANUFACTURER WHO CAN CREATE OPPORTUNITY BY LEVERAGING CORE STRENGTHS &ROM THIS PERSPECTIVE E BUSINESS IS VIEWED AS AN OPPORTUNITY TO ENHANCE THE COMPETITIVE CAPABILITY OF THE lRM )N THIS PAPER WE DEVELOP AN APPROACH TO EVALUATE E BUSINESS COMPETITIVE CAPABILITIES 7E BUILD THE % BUSINESS /PPORTUNITY -ODEL %/- WHICH DRAWS UPON CONCEPTS FROM MULTIPLE THEORETICAL PERSPECTIVES IN BOTH THE ORGANIZATION AND STRATEGIC MANAGEMENT LITERATURE 3UCH AN INTEGRATED APPROACH IS NEEDED BECAUSE EXISTING MODELS ONLY EXPLAIN PORTIONS OF E BUSINESS POTENTIAL AND APPLICATION &ROM THIS MODEL WE DERIVE A TOOL CALLED THE % BUSINESS /PPORTUNITY )NDEX %/)
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WHICH CAN BE USED TO MEASURE AND EVALUATE E BUSINESS POTENTIAL 4HIS TOOL ALLOWS MANAGERS TO IDENTIFY WHERE E BUSINESS CAN PROVIDE OPPORTUNITIES TO IMPLEMENT THE AGILE ENTERPRISE 4HE INDEX WILL HELP MANAGERS IDENTIFY SPECIlC AREAS AND RESOURCES TO TARGET FOR ADAPTATION ANDOR INNOVATION 0AL AND ,IM )N OTHER WORDS E BUSINESS AS A CONCEPT IS A TOOL TO ACHIEVE AGILITY AND OUR MODEL AND ASSOCIATED INDEX PROVIDES THE UNDERLYING CONCEPTUAL FRAMEWORK TO IDENTIFY AREAS IN THE ORGANIZATION WHERE AGILITY CAN BE ATTAINED BY APPLYING THE lTADAPTATION APPROACH ANDOR THE INNOVATIVE APPROACH AS OUTLINED BY 0AL AND ,IM ELSEWHERE IN THIS BOOK &INALLY WE PRESENT CASE STUDIES FROM TWO INDUSTRIES LIFE INSURANCE AND PHARMACEUTICAL MANUFACTURING WHICH DEMONSTRATE HOW THE %/) CAN BE USED TO MEASURE HOW INFORMATION TECHNOLOGY CAN BE LEVERAGED TO CREATE AGILITY )N ADDITION TO INDUSTRY SPECIlC ANALYSES WE IDENTIFY OPPORTUNITIES AND CHALLENGES THAT ARE COMMON TO BOTH INDUSTRIES 4HE APPLICATION OF THE %/) TO THESE TWO INDUSTRIES SHOWS HOW E BUSINESS REDUCES BARRIERS TO ENTRY AND PROVIDES OPPORTUNITIES FOR INCREASING THE EFlCIENCY OF TRANSACTIONS 7E ALSO SEE HOW THE COMPLEXITY IN GOVERNMENT REGULATION AND THE LACK OF A SENSORY EXPERIENCE CAN BE BARRIERS TO THE IMPLEMENTATION OF AN E BUSINESS STRATEGY
"5),$).' 4(% % "53).%33 /00/245.)49 -/$%, 'IVEN THAT THE FOCUS OF OUR WORK IS ON IDENTIFYING OPPORTUNITIES IT IS SIMPLER FOR THE MANAGER AND ANALYST TO THINK IN TERMS OF ISSUES RELATED TO PRODUCT THE CONTEXT AND THE TRANSACTION 4HESE THREE CATEGORIES REPRESENT KEY AREAS FOR IDENTIFYING OPPORTUNITIES FOR LEVERAGING % BUSINESS TECHNOLOGIES %XAMINING THE PRODUCT OFFERS OPPORTUNITIES FOR INFUSING INFORMATION AND INCREASING EFlCIENCY AND EFFECTIVENESS IN PRODUCTION AND DISTRIBUTION #ONSIDERING THE CONTEXT CAN REVEAL OPPORTUNITIES TO EXPLOIT ITS ENVIRONMENT OR MARKET AND ITS CONSTRAINTS 2EGARDING THE TRANSACTION OPPORTUNITIES MAY EXIST FOR DRAMATICALLY INCREASING THE EFlCIENCY OF MOVING THE PRODUCT OR LEVERAGING INFORMATION IN ORDER TO PERSONALIZE THE CUSTOMER EXPERIENCE 4HESE CATEGORIES AND THE FACTORS WHICH COMPRISE THEM ARE THE BASIC BUILDING BLOCKS OF THE % BUSINESS /PPORTUNITY -ODEL %/- !LTHOUGH THE CATEGORIES ARE LOGICAL THEY ARE NOT MEANT TO LIMIT THINKING &OR EXAMPLE THE MOST INTERESTING ANALYSIS MAY DEPEND ON COMBINING FACTORS FROM SEVERAL CATEGORIES 4HE MODEL PRESENTED IN &IGURE DESCRIBES THE RELATIONSHIPS BETWEEN CONTEXTUAL PRODUCT AND TRANSACTIONAL OPPORTUNITIES IN AN INDUSTRY AND THEIR EFFECT ON THE OVERALL E BUSINESS OPPORTUNITY IN THAT INDUSTRY 4HE lGURE ALSO ILLUSTRATES THE MODELS MULTILAYERED NATUREEACH AREA OF OPPORTUNITY CAN BE VIEWED FROM THE CUSTOMER SUPPLIER AND PROCESSES PERSPECTIVES
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4HE % "USINESS /PPORTUNITY -ODEL
&IGURE 4HE % "USINESS /PPORTUNITY -ODEL
#ONTEXTUAL /PPORTUNITY &ACTORS &ACTORS 2ELATED TO -ARKETS /NE COMMON COMPREHENSIVE STRATEGIC PERSPECTIVE THAT ADDRESSES MARKET EVALUATION AND SELECTION IS 0ORTERS &IVE &ORCES -ODEL 0ORTER 4HIS MODEL DESCRIBES THE COMPETITIVE STRUCTURE OF AN INDUSTRY AS A FUNCTION OF THE THREAT OF NEW ENTRANTS TO THE MARKET THE INTENSITY OF RIVALRY AMONG INCUMBENTS THE THREAT OF SUBSTITUTE PRODUCTS OR SERVICES AND THE BARGAINING POWER OF BUYERS AND SUPPLIERS &IGURE 4HE EXISTENCE AND THE POTENCY OF THESE FORCES DETERMINE THE DEGREE OF COMPETITION WHICH IN TURN DETERMINES THE OPPORTUNITY TO PROlT IN AN INDUSTRY &OR EXAMPLE HIGH CAPITAL REQUIREMENTS EXTENSIVE REGULATION AND CULTURE ARE MAJOR BARRIERS TO ENTRY IN MANY INDUSTRIES (IGH CAPITAL REQUIREMENTS MAY LIMIT E BUSINESS POTENTIAL BECAUSE OF THE lNANCIAL CONSTRAINTS IN ADOPTING NEW STRATEGIES /N THE OTHER HAND WHILE IT MAY BE DIFlCULT TO LEVERAGE E BUSINESS POTENTIAL IN A HIGHLY REGULATED INDUSTRY THERE MAY ALSO BE AN OPPORTUNITY IF E BUSINESS IMPROVES REGULATORY RESPONSIVENESS (IGH CULTURAL OR REGIONAL SPECIlCITY MAY LOWER E BUSINESS POTENTIAL 7ITH RESPECT TO COMPETITIVE FORM AND INTENSITY AND SUBSTITUTE AVAILABILITY IF THE COMPETITIVE STRUCTURE IS SUCH THAT NEW PRODUCTS OR SERVICES THREATEN EXISTING ONES THEN E BUSINESS POTENTIAL IS HIGHER &INALLY POWERFUL BUYERS OR SUPPLIERS SUGGEST A HIGH LEVEL OF PARTNER DEPENDENCE THAT MAY REDUCE E BUSINESS POTENTIAL UNLESS IT PROVIDES THE POTENTIAL TO CONNECT WITH OR OUT MANEUVER PARTNERS )N ADDITION ORGANIZATIONAL COMPATIBILITY IS ALSO A CONCERN WITH RESPECT TO HUMAN RESOURCES 4HE CULTURE OF THE ORGANIZATION COMMUNICATED BY MANAGEMENT STYLE MISSION AND VALUES CAN EITHER BE EITHER A CONDUIT OR A BARRIER TO E BUSINESS POTENTIAL
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&IVE &ORCES -ODEL
&IGURE 4HE &IVE &ORCES -ODEL
0RODUCT /PPORTUNITY &ACTORS &ACTORS 2ELATED TO #ORE #OMPETENCIES &OR MOST ORGANIZATIONS THE MAIN CONTRIBUTION OF E BUSINESS TO BUSINESS STRATEGY MAY BE TO ENHANCE DISTINCTIVE COMPETENCIES IN THE MARKETPLACE THEREBY INCREASING THE VALUE OF THAT BUSINESS PRODUCTS OR SERVICES 0RAHALAD AND (AMEL PROVIDE THREE TESTS TO IDENTIFY CORE STRATEGIC COMPETENCIES &IRST A CORE COMPETENCE PROVIDES POTENTIAL ACCESS TO A WIDE VARIETY OF MARKETS 3ECOND A CORE COMPETENCE MAKES A SIGNIlCANT CONTRIBUTION TO THE CONSUMERS PERCEIVED BENElTS OF THE END PRODUCT $EPENDING ON THE NATURE OF THE PERCEIVED BENElT E BUSINESS CAN BE AN ENABLER OR AN INHIBITOR &OR EXAMPLE IF ONE OF A lRMS CORE COMPETENCIES IS ITS HIGH LEVEL OF PERSONALIZED CUSTOMER SERVICE THE SUCCESS OF AN E BUSINESS STRATEGY WOULD DEPEND ON ITS ABILITY TO ENHANCE OR AT LEAST NOT INHIBIT THE CURRENT LEVEL OF SERVICE &INALLY A CORE COMPETENCE SHOULD BE DIFlCULT FOR COMPETITORS TO IMITATE 4HIS SUGGESTS THAT THE POTENTIAL FOR E BUSINESS TO ENHANCE DISTINCTIVE COMPETENCIES MAY DEPEND ON THE FEATURES OF THE PRODUCT OR SERVICE THAT PROVIDE THE BASIS FOR DISTINCTION 4HE THREE TESTS CAN BE APPLIED TO AN EXAMINATION OF ISSUES RELEVANT TO E BUSINESS % BUSINESS POTENTIAL IS HIGHER FOR PRODUCTS WITH HIGH BRAND EQUITY BECAUSE IT IS EASIER TO ESTABLISH RECOGNITION AS AN ON LINE PRESENCE &ROM ANOTHER PERSPECTIVE PRODUCTION COMPLEXITY IS ALSO IMPORTANT BECAUSE THE MANUFACTURING PROCESS MAY REmECT A CORE COMPETENCY (IGH PRODUCTION COMPLEXITY CAN RESULT IN LOWER E BUSINESS POTENTIAL SINCE THE PRODUCT MAY BE DIFlCULT TO SERVICE REMOTELY
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(OWEVER HIGH INFORMATION INTENSITY IMPLIES A HIGH E BUSINESS POTENTIAL SINCE IT CAN BE USED TO SIMPLIFY STRUCTURE AND MANIPULATE INFORMATION OR CREATE HIGH SWITCHING COSTS THROUGH CUSTOMER RELATIONSHIP MANAGEMENT
&!#4/23 2%,!4%$ 4/ 4(% #534/-%2 %80%2)%.#% )VES AND -ASONS CUSTOMER SERVICE LIFECYCLE MODEL OR #3,# SEE &IGURE PROVIDES ANOTHER LENS TO VIEW THE KEY OPPORTUNITY ASPECTS OF E BUSINESS INVESTMENTS 4HE MODEL EMPHASIZES THE hCUSTOMER FACINGv PORTION OF THE BUSINESS BY ANALYZING THE STEPS A CUSTOMER WILL TAKE IN PURCHASING AND USING A PRODUCT OR SERVICE 4HE CYCLE IS DIVIDED INTO FOUR PHASES REQUIREMENTS ACQUISITION OWNERSHIP AND RETIREMENT 4HE REQUIREMENTS PHASE ADDRESSES ESTABLISHING A NEED FOR THE PRODUCT WHILE THE ACQUISITIONS PHASE ADDRESSES THE ACTUAL PURCHASE PROCESS )N THE OWNERSHIP PHASE THE CONSUMER USES THE PURCHASED PRODUCT AND ANTICIPATES AND PLANS FOR ANY FUTURE CHANGES &INALLY THE RETIREMENT PHASE MARKS THE END OF THE PRODUCTS LIFE CYCLE "RAND EQUITY EMOTIVE CONTENT SENSORY IMPACT AND INFORMATION INTENSITY ARE ALL PRODUCT RELATED ATTRIBUTES THAT FOLLOW DIRECTLY FROM THE hREQUIREMENTSv PHASE OF THE #3,# 4RANSACTIONAL FACTORS DESCRIBED FURTHER IN THE NEXT SECTION SUCH AS FREQUENCY COMPLEXITY AND LOGISTICAL mEXIBILITY FOLLOW FROM THE hACQUISITIONv
4HE #USTOMER 3ERVICE ,IFE #YCLE -ODEL #3,#
&IGURE 4HE #3,# -ODEL )VES AND -ASON
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4HE 6ALUE #HAIN
&IGURE 4HE 6ALUE #HAIN PHASE (IGH EMOTIVE CONTENT COULD RESULT IN LOWER E BUSINESS POTENTIAL BECAUSE OF THE IMPERSONAL NATURE OF THE )NTERNET UNLESS THERE IS A WAY TO LEVERAGE EMOTIVE CONTENT TO REACH OUT TO A PARTICULAR MARKET SEGMENT 3IMILARLY PRODUCTS WITH A HIGH SENSORY IMPACT MAY HAVE LOWER E BUSINESS POTENTIAL SINCE THE TACTILE ASPECTS OF A PRODUCT ARE DIFlCULT TO CONVEY ON LINE !NOTHER FRAMEWORK FOR ASSESSING CONTRIBUTION TO CUSTOMER VALUE IS VALUE CHAIN ANALYSIS &IGURE ! VALUE CHAIN ANALYSIS ALLOWS FOR THE EVALUATION OF THE CONTRIBUTION OF INDIVIDUAL BUSINESS ACTIVITIES TO THE OVERALL LEVEL OF CUSTOMER VALUE 2AYPORT AND 3VIOKLA (ERE APPROPRIATE STRATEGIC ALIGNMENT BETWEEN hOFF LINEv BUSINESS AND hON LINEv E BUSINESS STRATEGIES COULD ADD VALUE THROUGH PROCESS IMPROVEMENT 4HIS HEIGHTENED UNDERSTANDING OF INDIVIDUAL PROCESSES HELPS IDENTIFY WHERE E BUSINESS TECHNOLOGIES CREATE ADDITIONAL VALUE TARGETING hLOW VALUEv PROCESSES FOR ENHANCEMENT ,OGISTICAL mEXIBILITY PRODUCTION COMPLEXITY AND TRANSACTION COMPLEXITY FACTORS THAT HAVE BEEN PREVIOUSLY DISCUSSED ALSO ARE INDICATORS OF THOSE LOW VALUE PROCESSES &OR EXAMPLE PROCESSES WITH LOW mEXIBILITY AND HIGH COMPLEXITY ARE CANDIDATES FOR AUTOMATION THROUGH THE USE OF E BUSINESS TECHNOLOGIES
4RANSACTIONAL /PPORTUNITY &ACTORS &ACTORS 2ELATED TO 4RANSACTION #OSTS !LSO IMPORTANT TO THE VALUE OF AN E BUSINESS INVESTMENT IS TO LOOK AT ITS COST IMPLICATIONS &OR THIS TRANSACTION COST ECONOMICS 4#% CAN PROVIDE SOME
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GUIDANCE ! FUNDAMENTAL PRINCIPLE OF 4#% THEORY IS THAT ORGANIZATIONS INCUR COSTS AS A RESULT OF PLANNING IMPLEMENTING AND ENFORCING EXCHANGES WITH OTHER ORGANIZATIONS AND STRUCTURE THESE EXCHANGES IN WAYS THAT WILL MINIMIZE THESE COSTS 4HOSE CONTRACTUAL RELATIONSHIPS ARISE FROM EFlCIENCY SEEKING BEHAVIOR IN A WORLD OF LIMITED INFORMATION AND INCOMPLETE ENFORCEMENT POSSIBILITIES /STER &ROM THIS PERSPECTIVE THE ECONOMIC OPPORTUNITY PRESENTED BY E BUSINESS RESIDES IN ITS ABILITY TO REDUCE TRANSACTION COSTS ASSOCIATED WITH BOTH INTERNAL AND EXTERNAL EXCHANGE BY INCREASING THE PRODUCTIVITY OF THE EXISTING TRANSACTION PROCESSING INFRASTRUCTURE #HARACTERISTICS OF TRANSACTIONS THAT INCREASE TRANSACTIONS COSTS INCLUDE FREQUENCY AND COMPLEXITY &OR EXAMPLE IN COMPLEX TRANSACTIONS E BUSINESS HAS THE POTENTIAL TO SIMPLIFY AND STREAMLINE BUSINESS PROCESSES 4HE INHERENT VALUE OF AN INDIVIDUAL TRANSACTION IS IMPORTANT WHEN ASSESSING ITS ASSOCIATED COSTS 4RANSACTIONS WITH A HIGH VALUE COULD MORE EASILY ABSORB HIGHER COSTS INCURRED DUE TO A HIGHER LEVEL OF COMPLEXITY OR FREQUENCY /F COURSE THE AUTOMATION OF HIGH VALUE LOW COST TRANSACTIONS THROUGH E BUSINESS TECHNOLOGIES WOULD BE HIGHLY PREFERABLE )N ADDITION THE EXISTENCE OF ASSET SPECIlCITY THE DEGREE TO WHICH ASSETS CAN BE EMPLOYED FOR USES OUTSIDE THE SPECIlC TRANSACTION AND BOUNDED RATIONALITY LIMITATIONS ON THE INFORMATION CAPACITY OF EITHER PARTNER IN THE TRANSACTION INCREASE TRANSACTION COSTS (IGHER LOGISTICAL mEXIBILITY WHICH LEADS TO LOWER ASSET SPECIlCITY CAN RESULT IN HIGHER E BUSINESS POTENTIAL BECAUSE IT IMPLIES LOCATION INDEPENDENCE (IGH INFORMATION INTEROPERABILITY WHICH LEADS TO LOWER BOUNDED RATIONALITY TRANSLATES INTO HIGHER E BUSINESS POTENTIAL SINCE IT IMPLIES A RELATIONSHIP WELL SUITED TO THE EXCHANGE OF STRUCTURED INFORMATION
/0%2!4)/.!,):).' 4(% %/- !3 4(% %/) 4HE lFTEEN FACTORS INTRODUCED IN THE PREVIOUS SECTION CAN BE GROUPED INTO CONTEXT PRODUCT AND TRANSACTION CATEGORIES 4HE CONTEXT CATEGORY INCLUDES THE COLLECTION OF MARKET RELATED FACTORS 0RODUCT FACTORS REmECT THE CHARACTERISTICS OF THE PRODUCT OR SERVICE UNDER CONSIDERATION &INALLY TRANSACTION FACTORS REmECT CHARACTERISTICS OF THE EXCHANGES OCCURRING AT ANY POINT IN THE lRMS VALUE CHAIN #OMBINING THESE FACTORS WITH THE MODEL DESCRIBED IN &IGURE RESULTS IN THE FULL % "USINESS /PPORTUNITY -ODEL &IGURE &ROM THE % "USINESS /PPORTUNITY -ODEL WE DERIVE AN INDEX THAT PROVIDES A METHOD OF QUANTIFYING THE LEVEL OF OPPORTUNITY THAT EXISTS IN AN INDUSTRY !N INDEX IS USEFUL BECAUSE IT FOCUSES THE ANALYSIS BY REQUIRING THE ANALYST TO ASSIGN NUMERICAL RATINGS AND WEIGHTS ! SCORE IS COMPUTED BY RATING EACH OF THE INDIVIDUAL FACTORS
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4HE E "USINESS /PPORTUNITY -ODEL FULL
&IGURE 4HE % "USINESS /PPORTUNITY -ODEL
AND LOOKING AT THE AGGREGATE VALUE FOR EACH CATEGORY CONTEXTUAL PRODUCT AND TRANSACTIONAL 4HE RESULTING TOOL IS THE % "USINESS /PPORTUNITY )NDEX %/) ! SIMPLE SPREADSHEET TOOL IS USED TO PERFORM THE ANALYSIS SEE &IGURE %ACH FACTOR IS LISTED AND THEN FOLLOWED BY A DESCRIPTION AND BRIEF ANALYSIS OF ITS IMPLICATION FOR E BUSINESS ! DETAILED ANALYSIS OF THE FACTOR FROM THE PERSPECTIVE OF CUSTOMERS BUSINESS PROCESSES AND SUPPLIERS IS THE BASIS FOR ASSIGNING VALUES FOR E BUSINESS POTENTIAL AND IMPORTANCE 4HE RESULTS OF THE ABOVE PROCESS WILL HELP THE MANAGER DECIDE WHICH FACTORS ARE APPROPRIATE AND READY FOR AGILITY ENHANCEMENT THROUGH THE APPLICATION OF STRATEGIC ALIGNMENT PROCESSES ANDOR RADICAL INNOVATION AND WHICH FACTORS ARE ALREADY REmECTIVE OF HIGH AGILITY %ACH FACTOR IN THE %/) IS RATED ON TWO SCALES 4HE lRST REmECTS THE E BUSINESS POTENTIAL AND HAS A VALUE FROM TO 6ERY ,OW TO 6ERY (IGH 4HE POTENTIAL SCALE ADDRESSES THE SPECIlC % BUSINESS FEASIBILITY OF A FACTOR AND CONSISTS OF THE INTEGRATION OF TWO ELEMENTS 4HE GENERAL BUSINESS POTENTIAL OF THE FACTOR AND THE INFORMATION TECHNOLOGY POTENTIAL 4HE SECOND SCALE REmECTS THE IMPORTANCE OF THAT
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&IGURE 3PREADSHEET 4OOL FOR THE % "USINESS /PPORTUNITY )NDEX %/)
FACTOR AND ALSO HAS A VALUE FROM TO 6ERY ,OW TO 6ERY (IGH 4HE IMPORTANCE SCALE PROVIDES A MECHANISM TO ASSIGN RELATIVE WEIGHTS TO THE FACTORS WITHIN A PARTICULAR INDUSTRY 4HE SCORES FOR POTENTIAL AND IMPORTANCE ARE MULTIPLIED TOGETHER TO ARRIVE AT AN OVERALL SCORE FROM TO FOR THAT FACTOR 4HE ENTIRE %/) SPREADSHEET SHOWING A CALCULATION FOR SCORING THE OPPORTUNITY FACTORS IS PROVIDED IN THE !PPENDIX
!33)'.).' 7%)'(43 4/ 4(% &!#4/23 4(% h )-0/24!.#%v 3#!,% ! TWO PHASE PROCESS WAS USED IN THE ASSIGNMENT OF FACTOR WEIGHTS &IRST THE AUTHORS RESEARCHED REPRESENTATIVE INDUSTRIES ,IFE )NSURANCE AND 0HARMACEUTICAL -ANUFACTURING IN ORDER TO GATHER THE BASELINE DATA NEEDED TO COMPLETE THE %/) )NDUSTRY EXPERTS ASSOCIATED WITH A MAJOR CONSULTING lRM THEN VALIDATED THE ACCURACY OF OUR APPLICATION OF THE INFORMATION TO THE %/) 4HE %/) WAS
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REVISED AS NEEDED BASED ON THEIR INPUT 4HE AUTHORS THEN ASSIGNED INITIAL WEIGHTS BASED ON THE %/) 4HE INDUSTRY EXPERTS WERE THEN ASKED TO VALIDATE THE WEIGHTS AND ADJUSTMENTS WERE MADE 7E THEN AGGREGATED THE WEIGHTED SCORE TO ARRIVE AT A SINGLE INDEX VALUE MEASURING E BUSINESS POTENTIAL BY DIVIDING THE SUM OF THE FACTOR SCORES BY THE MAXIMUM POSSIBLE SCORE FOR THAT CATEGORY IE USING hv FOR EACH FACTOR SCORE 4HE RESULTING RATIO THEREFORE RANGES FROM NO E BUSINESS POTENTIAL TO CERTAIN E BUSINESS POTENTIAL 4HE FOLLOWING CASE STUDIES ILLUSTRATE THE APPLICATION OF THE %/) IN TWO REPRESENTATIVE INDUSTRIES LIFE INSURANCE AND PHARMACEUTICAL MANUFACTURING
!PPLICATION OF THE %/) ,IFE )NSURANCE AND 0HARMACEUTICAL -ANUFACTURING ,IFE )NSURANCE )NDUSTRY 7HILE OTHER SECTORS OF THE lNANCIAL SERVICES INDUSTRY HAVE MADE SIGNIlCANT STRIDES IN PERFORMING ONLINE TRANSACTIONS AND AUTOMATING CUSTOMER SERVICE FUNCTIONS THE INSURANCE INDUSTRY HAS BEEN RELATIVELY SLOW TO PURSUE THIS MEDIUM AGGRESSIVELY !CCORDING TO AN )6!.3 STUDY ONLINE INSURANCE SALES ARE ESTIMATED TO BE LESS THAN ONE PERCENT OF THE BILLION INSURANCE MARKET !N ARTICLE BY #ARR ET AL STUDIED THE USE OF INFORMATION TECHNOLOGY IN LIFE INSURANCE DISTRIBUTION AND FOUND THAT INSURERS THAT PERFORMED MORE FUNCTIONS ONLINE WERE MORE EFlCIENT THAN THOSE THAT DID NOT -ANY DISJOINTED INFORMATION SYSTEMS ARE CURRENTLY IN USE BY THE INSURANCE INDUSTRY MAKING BUSINESS TO BUSINESS TRANSACTIONS INEFlCIENT AND DIFlCULT #ONSEQUENTLY THE HANDLING OF CLAIMS IS OFTEN INCONSISTENT AND WITHOUT VERIlCATION 4HE ABOVE SCENARIO PRESENTS A SIGNIlCANT OPPORTUNITY FOR lRMS IN THE INSURANCE INDUSTRY 2ESOLVING INEFlCIENCIES IN OPERATIONS IS NOT ONLY IMPORTANT TO CONTROLLING COSTS FOR THE MAJOR CARRIERS BUT ALSO FOR PROVIDING THE CUSTOMER WITH BETTER MORE CONSISTENT SERVICE 0HARMACEUTICAL -ANUFACTURING )NDUSTRY )NVESTMENTS IN E BUSINESS BY THE PHARMACEUTICAL MANUFACTURING INDUSTRY ARE SECOND ONLY TO THOSE OF VENTURE CAPITALISTS +LEINKE 0OTENTIAL OPPORTUNITIES IN E BUSINESS ARE ALREADY DRIVING MAJOR STRATEGIC DECISIONS &OR EXAMPLE THE 7ALL 3TREET *OURNAL REPORTED THAT ONE OF THE SPECIlC GOALS OF THE 'LAXO 7ELLCOME MERGER WITH 3MITH+LINE "EECHAM WAS TO EXPLOIT OPPORTUNITIES TO MORE AGGRESSIVELY PURSUE USE OF THE )NTERNET FOR DIRECT TO CONSUMER ADVERTISING 7ALDHOLZ AND -OORE 'IVEN THE IRREVERSIBILITY OF THESE INVESTMENTS IT IS CRITICALLY IMPORTANT THAT INDUSTRY PARTICIPANTS HAVE MECHANISMS THAT ALLOW THEM TO ANALYZE STRATEGIC INITIATIVES AND MAXIMIZE OPPORTUNITIES THAT INCREASE THE LIKELIHOOD OF SUCCESS
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).$53429 !.!,93)3 ,)&% ).352!.#% 4HE RESULT OF APPLYING THE %/) TO THE LIFE INSURANCE INDUSTRY INDICATES A MODERATE OPPORTUNITY FOR THE APPLICATION OF E BUSINESS 4HE OVERALL %/) RATIO OF SUGGESTS THAT ALTHOUGH OPPORTUNITY EXISTS THERE ARE SIGNIlCANT OBSTACLES !N INTERESTING INSIGHT IS FOUND BY COMPARING THE TRANSACTIONAL CATEGORY VALUE OF WITH THE PRODUCT AND CONTEXTUAL CATEGORIES 4HIS SUGGESTS THAT THE MOST SIGNIlCANT OPPORTUNITIES CAN BE REALIZED THROUGH INCREASES IN EFlCIENCIES IN TRANSACTIONS WITH THE CUSTOMER WHILE THE STRUCTURE OF THE INDUSTRY AND THE PRODUCT ITSELF PRESENT FEWER OPPORTUNITIES 4HESE OPPORTUNITIES ARE DISCUSSED FURTHER BELOW #ONTEXTUAL &ACTORS %/) 3CORE 4HE HIGHEST SCORES IN THIS CATEGORY WERE GIVEN TO 0ARTNER $EPENDENCE AND #ULTURAL2EGIONAL 3PECIlCITY 4HIS HIGHLIGHTS TWO IMPORTANT IMPLICATIONS FOR E BUSINESS &IRST THE EXCHANGE OF INFORMATION BETWEEN PARTNERS SPECIlCALLY AGENTS AND CARRIERS IS ESSENTIAL FOR CUSTOMER RELATIONSHIP MANAGEMENT IN THIS INDUSTRY 3TREAMLINING THIS EXCHANGE OF INFORMATION HAS THE POTENTIAL TO RESULT IN A SIGNIlCANT REDUCTION IN OVERHEAD #OMPANIES THAT EFFECTIVELY EMPLOY E BUSINESS IN THIS AREA HAVE THE OPPORTUNITY TO TURN INFORMATION EXCHANGE AND CUSTOMER MANAGEMENT INTO A CORE COMPETENCE 3ECOND LIFE INSURANCE IS A PRODUCT THAT CAN lND A POTENTIAL MARKET IN ALL INDUSTRIALIZED SOCIETIES 4HEREFORE ALTHOUGH REGIONAL CUSTOMIZATION MAY BE NECESSARY WITH REGARD TO LANGUAGE CULTURE AND REGULATIONS THE UNDERLYING PRODUCT FUNDAMENTALS REMAIN THE SAME 4HIS PRESENTS AN OPPORTUNITY TO LEVERAGE THE GLOBAL REACH OF THE )NTERNET TO SELL POLICIES INTERNATIONALLY ,OWEST SCORES IN THIS CATEGORY WERE ASSIGNED TO #OMPETITIVE &ORM)NTENSITY AND /RGANIZATION #OMPATIBILITY 4HIS REmECTS THE FUNDAMENTAL INERTIA IN THE INDUSTRY WHICH IS DOMINATED BY A FEW LARGE lRMS WITH A COMPLEX EXISTING INFRASTRUCTURE 4HESE CHARACTERISTICS ARE LIKELY TO INHIBIT CHANGE SPECIlCALLY THE TRANSFORMATION REQUIRED BY AN E BUSINESS EFFORT 0RODUCT &ACTORS %/) 3CORE 4HE HIGHEST SCORES IN THIS CATEGORY WERE GIVEN TO "RAND %QUITY)MAGE )NFORMATION )NTENSITY AND 3ENSORY )MPACT "ECAUSE OF THE DOMINANCE OF LARGE ESTABLISHED lRMS IT IS POSSIBLE FOR CARRIERS TO LEVERAGE THEIR BRAND RECOGNITION WHEN LAUNCHING AN ONLINE PRESENCE !DDITIONALLY AN INSURANCE POLICY IS A LARGELY INFORMATION BASED PRODUCT WHICH MAKES IT POSSIBLE FOR A CARRIERS E BUSINESS PRESENCE TO DELIVER MOST OR ALL OF THEIR PRODUCT TO THE CUSTOMER ONLINE !NOTHER STRONG INDICATION OF THE OPPORTUNITY FOR E BUSINESS EXISTS IN THE LIFE INSURANCE PRODUCTS LACK OF RELIANCE ON A SENSORY EXPERIENCE /NE CONSEQUENCE
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OF A POLICY BEING INFORMATION BASED IS THAT A TACTILE AUDITORY OR VISUAL CUSTOMER EXPERIENCE IS NOT NECESSARY 4HEREFORE THIS FACILITATES THE SALE DELIVERY AND MAINTENANCE OF THE PRODUCT THROUGH AN )NTERNET CHANNEL 4HE LOWEST SCORE IN THE 0RODUCT CATEGORY WAS GIVEN TO %MOTIVE #ONNECTION 4HE STRONG EMOTIONAL COMPONENT ASSOCIATED WITH THE SALE AND MAINTENANCE OF A LIFE INSURANCE POLICY IS EXTREMELY DIFlCULT TO CONDUCT THROUGH THE ONLINE CHANNEL 4HE COMBINATION OF ITS IMPORTANCE AND ITS DIFlCULTY TO IMPLEMENT PRESENT A SIGNIlCANT BARRIER TO E BUSINESS FOR THIS INDUSTRY 4RANSACTIONAL &ACTORS %/) 3CORE 4RANSACTION #OMPLEXITY AND )NFORMATION )NTEROPERABILITY RECEIVED THE HIGHEST SCORES IN THIS CATEGORY BOTH REmECTING THE STRONG INFORMATIONAL COMPONENT OF THE LIFE INSURANCE PRODUCT 4HE NEED TO TRANSMIT AND EXCHANGE THIS INFORMATION AMONG AGENTS CARRIERS AND CUSTOMERS MAKES THE SALE DELIVERY AND MAINTENANCE OF A POLICY EXTREMELY COMPLEX % BUSINESS CONNECTIVITY AMONG PARTNERS AS WELL AS THE ESTABLISHMENT OF AN ONLINE PRESENCE FOR CUSTOMERS PRESENTS TANGIBLE OPPORTUNITIES TO REDUCE THIS COMPLEXITY 4HIS CAN TAKE THE FORM OF A SIMPLER CUSTOMER EXPERIENCE THE SIMPLIlCATION OF BUSINESS PROCESSES ALONG THE VALUE CHAIN AND AUTOMATION THROUGH h""v E BUSINESS SYSTEMS 4HE EXISTING hLEGACYv INFRASTRUCTURE OF THE LARGE CARRIERS PRESENTS A SIGNIlCANT OPPORTUNITY FOR E BUSINESS THROUGH THE FACILITATION OF INFORMATION INTEROPERABILITY !S STANDARDS EMERGE AND ARE ADOPTED THE NEED FOR MANUAL SYSTEMS OR COMPLEX %$) INTERFACES WILL BECOME UNNECESSARY REDUCING TRANSACTION COSTS AND IMPROVING CUSTOMER SERVICE 4HE LOWEST SCORE IN THIS CATEGORY WAS GIVEN TO ,OGISTICAL &LEXIBILITY 2EGULATION OF THE INSURANCE INDUSTRY VARIES FROM STATE TO STATE !LTHOUGH A CARRIER THROUGH AN ONLINE PRESENCE COULD EASILY REACH ITS CUSTOMERS DOMESTICALLY AND INTERNATIONALLY THE MOVEMENT OF CUSTOMERS BETWEEN STATES AND THE LICENSING PROCESS CREATES LEGAL ISSUES WHICH E BUSINESS SYSTEMS ALONE CANNOT RESOLVE
).$53429 !.!,93)3 0(!2-!#%54)#!, -!.5&!#452).' !PPLICATION OF THE %/) MODEL TO THE PHARMACEUTICAL MANUFACTURING INDUSTRY INDICATES A MODERATE LEVEL OF OPPORTUNITY FOR % BUSINESS 4HE OVERALL %/) RATIO OF SUGGESTS THAT ALTHOUGH OPPORTUNITIES EXIST THEY MAY BE CONlNED TO DElNED AREAS OF ACTIVITY WHERE THE PAYOFF WILL BE SIZABLE 2ESULTS FOR CONTEXTUAL PRODUCT AND TRANSACTIONAL FACTOR CATEGORIES ARE SUMMARIZED BELOW
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#ONTEXTUAL &ACTORS %/) 3CORE 4HE HIGHEST SCORES IN THIS CATEGORY WERE FOR CAPITALIZATION THE FORM AND INTENSITY OF COMPETITION AND PARTNER DEPENDENCE 4HE HIGH COSTS OF CAPITAL ASSOCIATED WITH 2$ AND MARKETING POSE MAJOR BARRIERS TO ENTRY INTO PHARMACEUTICAL MANUFACTURING PLACING SMALLER lRMS AT A DISADVANTAGE )F % BUSINESS APPLICATIONS REDUCE THE COSTS ASSOCIATED WITH CONDUCTING BUSINESS THESE BARRIERS CAN BE LOWERED 3IMILARLY COMPETITION IN THIS INDUSTRY IS BASED ON THE ABILITY TO GET TO THE MARKET WITH PATENTABLE hBREAKTHROUGHv DRUGS &IRST MOVER ADVANTAGES ARE HUGE SINCE ONCE A PATIENT BEGINS AN ACCEPTABLE TREATMENT REGIMEN THERE IS LITTLE INCENTIVE TO SWITCH TO A SUBSTITUTE ON THE PART OF EITHER THE PATIENT OR THE PHYSICIAN 4HIS IS ANOTHER OPPORTUNITY FOR SMALLER lRMS TO BE COMPETITIVE THROUGH LOWERED COSTS 4HE RELATIONSHIPS BETWEEN THE BIG PHARMACEUTICAL lRMS AND SOME OF THEIR DISTRIBUTION PARTNERS THREATEN TO COMMODITIZE THIS INDUSTRY % BUSINESS BY ENABLING DIRECT TO CONSUMER MARKETING MAY ALLOW MANUFACTURERS TO BY PASS THESE DISTRIBUTION PARTNERS PARTICULARLY MANAGED CARE CHANNELS /N THE OTHER HAND WHILE REGULATION IS A VERY IMPORTANT FEATURE OF THIS INDUSTRY THE POTENTIAL FOR EXPEDITING THE REGULATORY PROCESS IS UNCLEAR GENERATING A RELATIVELY LOW SCORE 7HILE MANUFACTURING AND 2$ ARE HIGHLY GLOBALIZED MOST OF THE OPPORTUNITIES FOR GLOBALIZATION HAVE ALREADY BEEN ACHIEVED GENERATING THE LOW SCORE OF FOR THIS FACTOR 0RODUCT &ACTORS %/) 3CORE 7HILE THIS CATEGORY RECEIVED THE LOWEST SCORE OVERALL SOME INDIVIDUAL FACTORS WERE FOUND TO HAVE HIGH IMPACT (IGHEST SCORES IN THIS CATEGORY WERE FOR EMOTIVE CONNECTION INFORMATION INTENSITY AND BRAND EQUITYIMAGE 7HILE CONSUMERS ARE HIGHLY INVESTED IN MATTERS OF PERSONAL HEALTH THEY ARE FRUSTRATED BY THE COMPLEXITY OF THE INFORMATION SEEKING PROCESS !S INDICATED BY THE NUMBER OF CONSUMERS ATTEMPTING TO ACCESS INFORMATION ON THE WEB THE )NTERNET HAS ALREADY GAINED ACCEPTANCE AS AN INFORMATION SOURCE "ECOMING THE hPREFERRED PROVIDERv FOR THIS INFORMATION GIVES PHARMACEUTICAL MANUFACTURERS THE OPPORTUNITY TO IMPROVE COMPLIANCE PROMOTE BRAND RECOGNITION AND POTENTIALLY REDUCE ERRORS ATTRIBUTABLE TO DRUG INTERACTIONS )N THIS REGARD THE FORMATION OF ON LINE THERAPEUTIC COMMUNITIES HAS BEEN PARTICULARLY EFFECTIVE (OWEVER GIVEN THE LOW COMPLEXITY OF THE PRODUCTION PROCESS AND THE LACK OF SENSORY IMPACT ASSOCIATED WITH THE PRODUCT ITSELF THESE FACTORS RECEIVED RELATIVELY LOW SCORES AND RESPECTIVELY 4RANSACTIONAL &ACTORS %/) 3CORE -OST OF THE WEIGHT IN THIS CATEGORY IS CARRIED BY A SINGLE HIGH IMPACT FACTOR )NFORMATION )NTEROPERABILITY WITH THE HIGHEST POSSIBLE RATING )NFORMATION STANDARDS HAVE BEEN MANDATED IN VIRTUALLY ALL AREAS OF HEALTHCARE AND PHARMACEUTICAL COMPANIES ARE WELL POSITIONED
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TO BE AT THE FOREFRONT OF THESE DEVELOPMENTS 7ITHIN THE INDUSTRY UNIFORM STANDARDS FOR SUPPLIER SPECIlCATIONS ARE ALREADY IN PLACE 7HILE THE OTHER FACTORS 4RANSACTION 6ALUE AND &REQUENCY 4RANSACTION #OMPLEXITY AND ,OGISTICAL &LEXIBILITY ARE OF MODERATE IMPORTANCE THE POTENTIAL FOR E BUSINESS IS NOT AS HIGH &OR EXAMPLE UNLESS RESTRICTED BY CONDITIONS OF THEIR HEALTH CARE INSURANCE PLAN CONSUMERS CAN GO TO VIRTUALLY ANY DRUGSTORE TO lLL PRESCRIPTIONS AND IT IS NOT CLEAR WHAT ADVANTAGE E BUSINESS WOULD OFFER OVER ANY MAIL IN SERVICE "ECAUSE MOST INPUTS INTO THE PRODUCTION PROCESS ARE COMMODITIES THERE IS CONSIDERABLE LOGISTICAL mEXIBILITY WITH RESPECT TO PROCUREMENT
#/--/. % "53).%33 /00/245.)4)%3 !#2/33 ).$5342)%3 !S STATED PREVIOUSLY THE ANALYSIS RESULTING FROM THE %/) AND THE %/- ALSO REVEAL COMMON OPPORTUNITIES ACROSS INDUSTRIES PROVIDING SOME GENERAL GUIDELINES FOR GAUGING THE POTENTIAL SUCCESS OF AN % BUSINESS INITIATIVE "Y COMPARING THE RESULTS OF THE %/) ANALYSIS FOR THE LIFE INSURANCE AND PHARMACEUTICAL INDUSTRIES WE CAN IDENTIFY THESE COMMON OPPORTUNITIES FOR THE USE OF % BUSINESS )T APPEARS THAT TWO SIGNIlCANT ONES EXIST &IRST % BUSINESS CAN BE USED TO TRANSFORM THE NATURE OF COMPETITION BY REDUCING BARRIERS TO ENTRY 3ECOND USING ELECTRONIC LINKAGES CAN CREATE EFlCIENCIES THROUGH INCREASED TRANSFER OF INFORMATION BETWEEN STAKEHOLDERS
/PPORTUNITY 2EDUCING "ARRIERS TO %NTRY 4HE %/) ANALYSIS INDICATES THAT THE AUTOMATIONAL ANALYTICAL AND GEOGRAPHICAL POWER OF )4 CAN BE USED TO SIGNIlCANTLY INCREASE INFORMATION SHARING AMONG SMALL TO MID SIZE LIFE INSURANCE CARRIERS 4HIS CAN BE DONE BY SIGNIlCANTLY REDUCING TRANSACTION COMPLEXITY AND INCREASING INFORMATION INTEROPERABILITY 3UCH INFORMATION SHARING COULD LEAD TO NEW EFlCIENCIES AND NEW OPPORTUNITIES FOR SMALLER lRMS TO MORE EFFECTIVELY COMPETE AGAINST THE PREVAILING LARGER lRMS ! KEY BARRIER IS THE LACK OF STANDARDS FOR IMPLEMENTING INFORMATION SHARING 4HE )NTERNET COULD REPRESENT AN OPPORTUNITY FOR INDEPENDENT AGENTS TO COMPETE WITH AFlLIATED AGENTS BY CREATING AN IDENTITY BASED MORE ON THEIR OWN SERVICE THAN THE QUALITY OF THEIR AFlLIATED CARRIER 3UCH A CHANGE IF SUCCESSFUL WOULD REPRESENT A
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NEW BREAKTHROUGH BUSINESS MODEL CONCEPT FOR CREATING THE AGILE ENTERPRISE )N THE PHARMACEUTICAL MANUFACTURING INDUSTRY THE POTENTIAL FOR E BUSINESS TO CHANGE THE STRUCTURAL CHARACTERISTICS OF COMPETITION ARE SIGNIlCANT ,OWERING CAPITAL COSTS WILL ALLOW NEW AND MORE DIVERSE COMPETITORS TO ENTER THE MARKET 4HE POTENTIAL TO BYPASS POWERFUL MANAGED CARE DISTRIBUTION CHANNELS THROUGH DIRECT TO CONSUMER ADVERTISING MAY PREVENT OR AT THE VERY LEAST DELAY THE COMMODITIZATION OF PHARMACEUTICAL PRODUCTS
/PPORTUNITY )NCREASE %FlCIENCY IN THE 4RANSFER OF )NFORMATION .OT ONLY DOES INCREASED INTEROPERABILITY INCREASE THE ABILITY OF SMALLER lRMS TO ENTER THE MARKET AND COMPETE BUT % BUSINESS ALSO OFFERS COMPANIES THE ABILITY TO IMPROVE THE EFlCIENCY OF THEIR OPERATIONS THROUGH AUTOMATION AN EXAMPLE OF SEEKING AGILITY THROUGH INCREMENTAL AND CONTINUOUS CHANGES 4HIS OPPORTUNITY IS PARTICULARLY SIGNIlCANT IN INDUSTRIES WITH A HIGH LEVEL OF INFORMATION INTENSITY SUCH AS LIFE INSURANCE AND PHARMACEUTICAL MANUFACTURING &IGURES AND ILLUSTRATE THIS POINT BY SHOWING EACH INDUSTRYS PHYSICAL AND VIRTUAL VALUE CHAIN HIGHLIGHTING OPPORTUNITIES FOR IMPROVING EFlCIENCY IN THE TRANSFER OF INFORMATION 4HE REDUCED COMPLEXITY OF THE INSURANCE TRANSACTION CAN POTENTIALLY REDUCE THE INSURANCE CARRIERS DEPENDENCY ON PARTNERS SPECIlCALLY THE ROLE OF AGENTS 4HE )NTERNET CAN BE USED TO CREATE INTERACTION DIRECTLY BETWEEN CUSTOMERS AND CARRIERS OR TO AUGMENT THE PRODUCTIVITY OF AGENTS 4HIS COULD BE DONE THROUGH THE DEVELOPMENT OF A PORTAL SITE THAT INCLUDES INFORMATION ABOUT LIFE INSURANCE AND OVERALL QUALITY OF LIFE ISSUES ALONG WITH AN ONLINE MECHANISM TO ACCESS PERSONAL ACCOUNT INFORMATION 4HIS TYPE OF SITE COULD BE USED FOR THE DISSEMINATION OF PRODUCT INFORMATION VIA A CARRIERS )NTERNET PRESENCE 4HIS IS CURRENTLY SEEN ON SOME SITES IN A RELATIVELY SUBTLE FORM THROUGH THE IMPLEMENTATION OF hWAGE CALCULATORv TOOLS ,IKE THE LIFE INSURANCE INDUSTRY PHARMACEUTICAL MANUFACTURING IS AN INFORMATION INTENSIVE INDUSTRY 4HERE ARE OPPORTUNITIES ACROSS THE ENTIRE VALUE CHAIN TO TRANSFER INFORMATION ELECTRONICALLY )NFORMATION RELEVANT TO THIS INDUSTRY INVOLVES BOTH INFORMATION GENERATED BY THE CUSTOMER PERSONAL INFORMATION AS WELL AS INFORMATION GENERATED BY THE COMPANY PRODUCT AND LOGISTICAL INFORMATION %STABLISHING STANDARDS FOR HOW THIS INFORMATION IS GATHERED AND DISTRIBUTED PARTICULARLY WITH RESPECT TO PRIVACY ISSUES MAY ULTIMATELY DETERMINE THE VALUE OF E BUSINESS IN THE PHARMACEUTICAL INDUSTRY /NLINE COMMUNITIES ARE ANOTHER IMPORTANT WAY THAT BRAND AWARENESS CAN BE ESTABLISHED AND INFORMATION CAN BE SHARED WITH CUSTOMERS 4HE FORMATION
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#/--/. % "53).%33 #(!,,%.'%3 !#2/33 ).$5342)%3 )N SEARCHING FOR COMMON OPPORTUNITIES FOR E BUSINESS ACROSS INDUSTRIES THE ANALYSIS RESULTING FROM THE USE OF THE %/) ALSO HIGHLIGHTS TWO IMPORTANT CHALLENGES 4HESE CHALLENGES INVOLVE THE COMPLEXITIES OF GOVERNMENTAL REGULATION AND THE INHERENT LIMITATIONS OF E BUSINESS IN DELIVERING A SENSORY EXPERIENCE 4HE CHALLENGES IN OTHER WORDS ARE ALSO BARRIERS TO CREATING A TRULY AGILE ENTERPRISE
#HALLENGE 2EGULATORY )SSUES !CROSS 'EOPOLITICAL "OUNDARIES "OTH THE LIFE INSURANCE AND PHARMACEUTICAL INDUSTRIES ARE HEAVILY REGULATED INDUSTRIES IN THE COUNTRIES IN WHICH THEY OPERATE (OWEVER AS CAN BE EXPECTED THE LEVEL AND NATURE OF THE REGULATION VARIES WIDELY DEPENDING ON THE COUNTRY IN WHICH THE COMPANY IS OPERATING )N THE CASE OF THE 5NITED 3TATES REGULATORY ISSUES
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VARY WITHIN THE COUNTRY DEPENDING ON THE STATE 4HESE REGULATORY DIFFERENCES NECESSARILY HAVE IMPLICATIONS FOR DEVELOPING UNIFORM STANDARDS FOR THE EXCHANGE OF INFORMATION ACROSS AN ENTIRE INDUSTRY 4HEREFORE METHODS TO FACILITATE INFORMATION EXCHANGE WILL HAVE TO BE DEVELOPED 4HIS CAN BE DONE THROUGH TECHNICAL MEANS LIKE 8-, BASED MESSAGING OR THROUGH REGULATORY MEANS SUCH AS THE IMPLEMENTATION OF THE ()0!! RELATED STANDARDS THAT GOVERN THE PRIVACY OF INFORMATION RELATED TO HEALTH INSURANCE AND PHARMACEUTICAL PRESCRIPTION INFORMATION
#HALLENGE $EALING WITH ,OW 3ENSORY )MPACT 0RODUCTS 7E GENERALLY VIEWED PRODUCTS WITH LOW SENSORY IMPACT AS ADVANTAGEOUS FOR E BUSINESS 4HIS IS BECAUSE THE ONLINE CHANNELS REDUCED ABILITY TO CONVEY A SENSORY EXPERIENCE WOULD AFFECT THESE PRODUCTS THE LEAST (OWEVER THIS ALSO UNDERSCORES A SIGNIlCANT LIMITATION THAT STILL EXISTS WITH AN % BUSINESS STRATEGY $ESPITE INCREASING MULTIMEDIA CAPABILITY AND INTERACTIVITY AN ONLINE PRESENCE IS STILL NOT OFTEN AN ADEQUATE SUBSTITUTE FOR hLIVEv INTERACTION !S STATED EARLIER EVEN THE LIFE INSURANCE AND PHARMACEUTICAL MANUFACTURING CASES INVOLVE SOME ATTEMPT TO INCLUDE INTERACTIVITY INTO THEIR ONLINE PRESENCE EITHER THROUGH THE INSURANCE SITES WAGE CALCULATORS OR THE PHARMACEUTICAL INDUSTRYS ONLINE COMMUNITIES &OR PRODUCTS WITH A HIGHER SENSORY IMPACT THE ABILITY TO REPLICATE THE IN STORE EXPERIENCE IS EVEN MORE CRITICAL
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-ARKETPLACE CONDITIONS CHANGE FASTER THAN MOST ENTERPRISES CAN FORECAST OR PLAN FOR %NTERPRISES MUST MAINTAIN AN AGILE POSTURE THAT SUPPORTS THEM IN QUICKLY ALIGNING WITH NEWLY DEVELOPED OPPORTUNITIES !N AGILE ENTERPRISE POSSESSES THE NECESSARY INFRASTRUCTURE AND PROCESSES TO GIVE THEM THE mEXIBILITY TO ADAPT TO THE CONSTANTLY CHANGING MARKETPLACE CONDITIONS ENABLING THEM TO TAKE ADVANTAGE OF NEW AND EXISTING OPPORTUNITIES "EING AGILE DOES NOT HOWEVER MEAN EXPOSING AN ENTERPRISE TO ADDITIONAL RISKS THAT MAY ULTIMATELY OUTWEIGH THE REWARDS THAT STEM FROM TAKING ADVANTAGE OF THE OPPORTUNITIES AT HAND SUCH AS LOWER COSTS OR IMPROVED EFlCIENCIES 4O MANAGE TWO SPECIlC POTENTIAL RISKS TO THE ENTERPRISE SECURITY AND PRIVACY THE ESTABLISHMENT OF A SECURITY AND PRIVACY INFRASTRUCTURE ACCOMPANIED BY THE APPROPRIATE MANAGEMENT IMPLEMENTATION GOVERNANCE AND RISK MANAGEMENT WILL BE A CRITICAL COMPONENT TO SUPPORT THE ENTERPRISES DRIVE TOWARDS AGILITY
./4 4(% 2/!$",/#+ "54 ! 02/#%33 "2%!+$/7. /FTEN SECURITY AND PRIVACY HAVE BEEN SEEN AS ROADBLOCKS IMPEDING OR EVEN HALTING PARTICULAR BUSINESS INITIATIVES WITHIN AN ENTERPRISE 4HE ROADBLOCK LABEL TYPICALLY STEMS FROM AN ENTERPRISES SUB OPTIMAL EXECUTION OF THOSE PARTICULAR INITIATIVES 3PECIlCALLY SECURITY AND PRIVACY ISSUES ARE OFTEN NOT ADDRESSED UNTIL AFTER THE
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2//4 #!53% ,!#+ /& #/--/. 2)3+ ,!.'5!'% ! PRIMARY ROOT CAUSE FOR SECURITY AND PRIVACY BEING SEEN AS A ROADBLOCK CAN BE TRACED TO THE COMMUNICATION BARRIER IN MOST ORGANIZATIONS REGARDING THE VIEW AND DElNITION OF RISK AS ILLUSTRATED IN &IGURE
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THAT ALLOW CUSTOMERS TO ACCESS AND MANAGE THEIR PERSONAL DATA THROUGH ON LINE SYSTEMS REDUCE THE AMOUNT OF CUSTOMER SERVICE CALLS BUT HAVE OPENED UP THEIR )4 ENVIRONMENT TO POTENTIAL THREATS ASSOCIATED WITH USING THE )NTERNET AS A MEANS OF COMMUNICATION 4HE PROTECTION OF DATA NOW REQUIRES THAT ORGANIZATIONS HAVE A DYNAMIC VIEW OF THE WAYS IN WHICH DATA IS USED AND ACCESSED IE ACCESSING INFORMATION ON LINE OR OUTSOURCING DATA PROCESSING 4HEREFORE THE !GILE %NTERPRISE NEEDS TO HAVE A SECURITY AND PRIVACY FOUNDATION IN PLACE THAT EFlCIENTLY AND EFFECTIVELY SUPPORTS THE REVIEW OF THE RISKS RELATED TO ITS CURRENT ENVIRONMENT AND NEW BUSINESS INITIATIVES AND PROVIDES THE APPROPRIATE RISK MANAGEMENT STRATEGIES THAT WOULD ALLOW IT TO TAKE ADVANTAGE OF CHANGES IN THE MARKETPLACE WITHOUT ADDING ADDITIONAL RISK TO THE OVERALL ORGANIZATION 4HAT SECURITY AND PRIVACY FOUNDATION IS COMPRISED OF TWO MAIN COMPONENTS )NFRASTRUCTURE AND "LUEPRINTS AS ILLUSTRATED IN &IGURE
&OUNDATION 0ART 3ECURITY AND 0RIVACY )NFRASTRUCTURE 4HE 3ECURITY AND 0RIVACY )NFRASTRUCTURE PROVIDES AN ANCHOR FOR THE FOUNDATION BY PROVIDING THE SIX KEY PIECES NEEDED TO MANAGE SECURITY AND PRIVACY THROUGH A HOLISTIC PROGRAMMATIC APPROACH 4HAT APPROACH ESTABLISHES THE REQUIREMENTS FOR DETERMINING ITS EFFECTIVENESS FOR MAKING ADJUSTMENTS BASED ON PERIODIC TESTING AND MONITORING METRICS
'OVERNANCE !N IDEAL STARTING POINT FOR ESTABLISHING A SUCCESSFUL FOUNDATION IN AN ORGANIZATION IS WITH A STRONG LEVEL OF EXECUTIVE SUPPORT AND DIRECTION %XECUTIVE SUPPORT COMES IN SEVERAL FORMS INCLUDING % 4HE APPROPRIATE COMMUNICATION TO THE ORGANIZATION % %STABLISHING A LEVEL OF BUY IN FROM THE VARIOUS INDIVIDUALS AND ENTITIES THAT ARE INVOLVED OR AFFECTED % 0ROVIDING THE NECESSARY BUSINESS CASE BEHIND THE INITIATIVE % 0ROVIDING THE REQUISITE LEVEL OF FUNDING AND RESOURCE COMMITMENTS TO MAKE THE FOUNDATION A COMPETENCY THAT CAN BE LEVERAGED THROUGHOUT THE ORGANIZATION
/RGANIZATION !LIGNING THE ORGANIZATION SO THAT IT HAS MORE SECURITY AND PRIVACY AGILITY REQUIRES PLANNING AND ANALYSIS TO UNDERSTAND THE ABILITIES OF THE RESOURCES AND ASSIGNING THE APPROPRIATE ROLES AND RESPONSIBILITIES TO THEM AS WELL AS PROVIDING THE NECESSARY TRAINING TO ENABLE EMPLOYEES TO FULlLL NEW ROLES AND RESPONSIBILITIES &OR THE AGILE
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ENTERPRISE INDIVIDUAL RESOURCES MAY BE WEARING MULTIPLE SECURITY AND PRIVACY HATS TO HELP THE ORGANIZATION MAINTAIN mEXIBILITY AND BECOME AS ADAPTABLE AS NECESSARY TO MEET MARKET DEMANDS 7ITH RESPONSIBILITY HOWEVER SHOULD COME THE NECESSARY AUTHORITY AND OVERSIGHT )T IS IMPORTANT THAT THE APPROPRIATE REPORTING STRUCTURES DECISION MAKING AUTHORITY AND ACCOUNTABILITY ARE ALL ESTABLISHED FOR EACH SECURITY AND PRIVACY ROLE AND FUNCTION
&RAMEWORK $ElNITIONS AND 0OLICIES %FFECTIVE COMMUNICATION WITHIN ITS VARIOUS GROUPS AND BUSINESS UNITS IS AN IMPORTANT CHARACTERISTIC OF THE AGILE ENTERPRISE )F EACH GROUP USES DIFFERENT TERMS POLICIES PROCEDURES AND GUIDELINES TO ADDRESS VARIOUS ELEMENTS OF SECURITY AND PRIVACY EG SILO SECURITY AND PRIVACY THEN IT IS GOING TO BE DIFlCULT TO INTEROPERATE AND EVEN MORE DIFlCULT TO MAKE CROSS FUNCTIONAL CHANGES AND ADJUSTMENTS IN RESPONSE TO MARKET NEEDS 4HEREFORE SEVERAL ELEMENTS NEED TO BE PUT IN PLACE TO MAKE THIS HAPPEN ! GLOSSARY OF TERMS AND DElNITIONS CAN SERVE AS A STARTING POINT TO ACHIEVING CONSISTENCY OF THE IMPORTANT SECURITY AND PRIVACY TERMS AND CONCEPTS ACROSS THE
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ENTERPRISE "UILDING UPON THE DElNITIONS IS THE CREATION OF A STANDARDIZED SECURITY AND PRIVACY FRAMEWORK INCORPORATING THE RELEVANT SECURITY AND PRIVACY STANDARDS TO BE APPLIED AGAINST THE VARIOUS ORGANIZATIONAL UNITS OR INITIATIVES OF THE ENTERPRISE 5LTIMATELY THE SECURITY AND PRIVACY FRAMEWORK DRIVES THE ESTABLISHMENT OF A COMMON RISK PROlLE FOR THE ENTERPRISE THIS PROlLE MUST BE CONSTANTLY MAINTAINED TO REmECT THE LEVEL OF RISK THE ENTERPRISE IS TAKING AGAINST VARIABLE MARKET CONDITIONS )N ADDITION TO THE INTERNAL STANDARDIZATION OF SECURITY AND PRIVACY REQUIREMENTS POLICIES PROCEDURES AND GUIDELINES FOR THE FRAMEWORK ENABLE THE ORGANIZATION TO INCLUDE ANY EXTERNAL REGULATORY REQUIREMENTS AND COMPLIANCE THAT RELATE TO ITS PRODUCTS SERVICES AND OVERALL OPERATIONS
#OMMUNICATIONS 4RAINING AND !WARENESS h,ACK OF INTERNAL SECURITY AWARENESS IS STILL ONE OF OUR BIGGEST THREATS 4ECHNOLOGY CAN REDUCE RISKS TO A POINT BUT IT IS PEOPLE WHO ARE THE WEAKEST LINKv n $ELOITTE 'LOBAL 3ECURITY 3URVEY 4O HELP CREATE AWARENESS OF THE AGILE ENTERPRISE STRATEGY AMONG MANAGEMENT AND STAFF IT IS IMPORTANT TO GO BEYOND TYPICAL TACTICS SUCH AS EMAILS AND VOICEMAILS ! FORMAL TRAINING AND AWARENESS PROGRAM ALLOWS THE ENTERPRISE TO MANAGE THE LEVEL OF COMMUNICATION AS WELL AS THE ADOPTION OF THE STRATEGY #ONTEXT BASED TRAINING IS A VALUABLE WAY TO EFlCIENTLY EXECUTE A TRAINING AND AWARENESS PROGRAM 4HIS TYPE OF TRAINING IS PREFERABLE BECAUSE SECURITY AND PRIVACY TRAINING INFORMATION IS ORGANIZED ON A USER ROLE BASIS !S SUCH INDIVIDUALS ARE PROVIDED WITH INFORMATION THAT IS SPECIlCALLY RELEVANT TO THEIR ROLES WITHIN THE ENTERPRISE RATHER THAN BEING PRESENTED WITH A BROAD BASED DOCUMENT OR TRAINING GUIDE THAT IS INTENDED TO COVER A VARYING AUDIENCE )MPLEMENTING SOME FORM OF RECURRING TRAINING TO REFRESH AND UPDATE INDIVIDUALS ON A PERIODIC BASIS AS WELL AS ASKING QUESTIONS TO ASSESS ADOPTION AND EFFECTIVENESS ARE ALSO GOOD WAYS TO OPTIMIZE THE TRAINING AND AWARENESS PROGRAM AND MEASURE ITS EFFECTIVENESS
2ISK !SSESSMENT AND !UDIT 0ERIODIC RISK ASSESSMENTS ARE NECESSARY TO HELP THE ENTERPRISE MANAGE RISK AND UNDERSTAND IF ITS RISK PROlLE IS IN LINE WITH REALITY 4HIS IS PART OF THE OVERALL GOVERNANCE FUNCTION BUT IT CAN BE CARRIED OUT BY A VARIETY OF UNITS WITHIN THE ORGANIZATION )NTERNAL AUDIT FOR EXAMPLE MIGHT INCLUDE CERTAIN SECURITY AND
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PRIVACY CONTROL OBJECTIVES AS PART OF THEIR PERIODIC INTERNAL REVIEW PROCESS AND SYSTEM AUDITS 3IMILARLY )4 MAY INCLUDE CERTAIN SECURITY AND PRIVACY REQUIREMENTS AS PART OF THEIR INFRASTRUCTURE MANAGEMENT PROCEDURES 5LTIMATELY IT IS IMPORTANT TO RESPOND TO CHANGES IN THE MARKETPLACE AND TO MAKE SURE THAT THE ENTERPRISE IS ABLE TO EFFECTIVELY ACCOUNT FOR THEM IN ITS RISK PROlLE 4O DO THIS THE ENTERPRISE SHOULD BUILD CHECKS AND MEASURES INTO ITS BUSINESS PROCESSES SUCH AS AN APPLICATION OR PRODUCT DEVELOPMENT LIFECYCLE AND REEVALUATE THE REQUIREMENTS ON A PERIODIC BASIS
%FFECTIVENESS-ETRICS AND 2EPORTING ! KEY THEME IN MAKING THE ENTERPRISE MORE AGILE IS CONSISTENCY %STABLISHING AN AGREED UPON SET OF MEASUREMENTS BY WHICH TO CARRY OUT FUNCTIONS SUCH AS GOVERNANCE RISK ASSESSMENT AND TRAINING AND AWARENESS ALLOWS FOR A CONSISTENT AND BALANCED COMPARISON OF HOW VARIOUS PROCESSES ARE BEING IMPLEMENTED AND MANAGED
&OUNDATION 0ART 3ECURITY AND 0RIVACY "LUEPRINTS h)N 4ODAYS UNCERTAIN ENVIRONMENT COMPANIES MUST lRST OF ALL UNDERSTAND THEIR GREATEST RISKS THREATS AND VULNERABILITIES 7HILE THIS SOUNDS RELATIVELY OBVIOUS MANY COMPANIES DONT HAVE A CLEAR GRASP ON THEIR RISK hPROlLEv )N FACT PERCENT OF THE CORPORATE DIRECTORS SURVEYED ADMIT THEY DONT FULLY UNDERSTAND THE RISKS THEIR COMPANIES FACE n 0ROSPERING IN THE 3ECURE %CONOMY $ELOITTE 2ESEARCH 4O EFFECTIVELY IMPLEMENT SECURITY AND PRIVACY DEVELOPMENT SHOULD BE DONE IN THE CONTEXT OF BUSINESS PROCESSES 4HIS MEANS GOING FROM THE INITIAL BUY IN AT THE BUSINESS UNIT LEVEL THROUGH THE FOLLOWING % 4HE GATHERING OF REQUIREMENTS % 4HE ANALYSIS OF RISKS TO THE ENTERPRISE WITH RESPECT TO THE PROBLEM BEING SOLVED % 4HE DESIGN OR STRUCTURE OF COMPONENTS OF A SOLUTION AND LEVERAGING OF ITS CORE PROCESSES !LL OF THIS SHOULD RESULT IN THE IMPLEMENTATION OF A lNAL DESIGN OF AN AGILE BLUEPRINT 4HESE PROCESSES ARE BUILT ON TOP OF A SECURITY AND PRIVACY INFRASTRUCTURE THAT CAN BE IMPLEMENTED AT SEVERAL LEVELS INCLUDING POLICIES GUIDELINES PROCEDURES
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AND AUTOMATED CONTROLS 7HAT SECURITY AND PRIVACY MEASURES ARE USED TO ADDRESS SPECIlC REQUIREMENTS WHAT THEIR PRIORITIES ARE AND AT WHAT LEVEL OF DETAIL THEY ARE IMPLEMENTED CAN BE EVALUATED VIA A RISK BASED APPROACH 4HE IMPETUS TO DRIVE THE ENTIRE PROCESS OF BUILDING THE BLUEPRINTS MUST REALLY START WITH THE BUSINESS UNITS
"USINESS 5NITS "USINESS UNITS MUST OBTAIN THE REQUISITE BUY IN FOR AN INITIATIVE TO COMMENCE AND THEN HELP DRIVE THE PROCESS FROM CONCEPTION TO DEPLOYMENT 4HEY ARE USUALLY RESPONSIBLE FOR PAYING FOR A PROJECT AND WILL OFTEN BE THE END USERS 4HUS IT IS ESSENTIAL THAT THEY TAKE THE APPROPRIATE OWNERSHIP AND MAKE CERTAIN THAT THE VARIOUS SECURITY AND PRIVACY PROCESSES AS WELL AS THE SUPPORTING INFRASTRUCTURE MEET THEIR NEEDS
"USINESS AND 4ECHNICAL 2EQUIREMENTS !S DISCUSSED IT IS IMPORTANT TO CONSIDER SECURITY AND PRIVACY IN THE CONTEXT OF THE ORGANIZATIONS OVERALL BUSINESS AND FUNCTIONAL REQUIREMENTS 4O DO SO THEY NEED TO BE INTEGRATED AS FUNDAMENTAL ELEMENTS OF EACH AREA THAT IS INCLUDED IN THE SCOPE OF THE INFRASTRUCTURE DESIGN EFFORT &OR EXAMPLE IF THE INFRASTRUCTURE IS SUPPORTING THE ENTIRE ENTERPRISE SECURITY AND PRIVACY REQUIREMENTS SHOULD BE CONSIDERED IN THE CONTEXT OF (2 lNANCE )4 AUDIT LEGAL AND THE VARIOUS SALES AND BUSINESS UNITS THAT COMPRISE AN ORGANIZATION 4HERE ARE MANY mAVORS TO THE CONTROLS THEMSELVES 4HEY CAN BE GROUPED INTO ORGANIZATIONAL CONTROLS TECHNICAL CONTROLS OPERATIONAL CONTROLS AND PHYSICAL SECURITY CONTROLS 4HIS APPROACH TO ADDRESSING SECURITY AND PRIVACY CONTROLS IS THE BASIS FOR MANY WIDELY ACCEPTED FRAMEWORKS AND RECOMMENDED APPROACHES SUCH AS THE )NTERNATIONAL 3TANDARDS /RGANIZATIONS )3/ BASED ON THE "RITISH 3TANDARD AND VARIOUS GUIDELINES FROM THE 53 .ATIONAL )NSTITUTE OF 3TANDARDS AND 4ECHNOLOGY .)34 /NCE A COMMON FRAMEWORK IS ADOPTED THE ENTERPRISE WILL HAVE A COMMON LANGUAGE BY WHICH TO GAUGE RISK WHETHER RELATED TO EMPLOYEES OPERATIONS SYSTEMS SOFTWARE VULNERABILITIES OR SOME OTHER AREA 4HE COMBINATION OF ALL OF THESE RISKS WILL AID IN DElNING THE ENTERPRISES OVERALL RISK PROlLE
2ISK !NALYSIS AND 0RIORITIZATION )N PARTICULAR WHAT NEEDS TO BE UNDERSTOOD FOR EACH SECURITY AND PRIVACY MEASURE IS THE BUSINESS RISK ASSOCIATED WITH NOT HAVING THAT MEASURE IN PLACE THE IMPACT TO THE ENTERPRISE IN THE EVENT THAT THE PARTICULAR REQUIREMENT IS NOT MET AND THE
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LIKELIHOOD THAT THE PROPOSED MEASURE COULD BE DEFEATED 4HOSE THREE COMPONENTS COMBINED YIELD AN OVERALL RISK FACTOR FOR EACH REQUIREMENT &OR EXAMPLE TO PROTECT PERSONAL INFORMATION THERE ARE SEVERAL MEASURES THAT COULD BE CONSIDERED 4HEY MIGHT BE A SIMPLE POLICY ASKING USERS TO ACCESS ONLY THOSE THINGS WHICH THEY SHOULD HAVE ACCESS TO SOME GUIDELINES AND PROCEDURES ON HOW TO GO ABOUT ACCESSING ONLY RELEVANT INFORMATION OR SOME FORM OF TECHNICAL CONTROL SUCH AS A SHORT NUMERIC PIN A STRONG PASSWORD A HARDWARE TOKEN OR A BIOMETRIC AUTHENTICATION DEVICE .OW THAT WE UNDERSTAND THE POTENTIAL MEASURES THAT COULD BE TAKEN UNDERSTANDING THE VALUE OF THE INFORMATION BEING PROTECTED IE THE RISK SHOULD THAT INFORMATION BE COMPROMISED IN SOME WAY AND THE COST OF IMPLEMENTING AND MAINTAINING THE CONTROL WILL DICTATE WHICH ONE IS SELECTED !S AN EXAMPLE ONE WOULD PROBABLY NOT PROTECT A MARKETING MAILING LIST WITH BIOMETRIC AUTHENTICATION TOKENS JUST AS ONE IS NOT LIKELY TO PROTECT A SET OF ACTIVE CUSTOMER CREDIT CARD NUMBERS AND EXPIRATION DATES WITH A FOUR DIGIT NUMERIC PIN 5NDERSTANDING AND ADDRESSING THE RISKS THAT AN ORGANIZATION IS EXPOSED TO FROM A SECURITY AND PRIVACY PERSPECTIVE IS ONLY THE lRST STEP IN THE PROCESS (OWEVER IT IS ESSENTIAL THAT AN ONGOING MANAGEMENT PROCESS IS PUT IN PLACE TO MONITOR REPORT ON AND REGULARLY EVALUATE THE PERFORMANCE EFFECTIVENESS OF THE MEASURES THAT HAVE BEEN IMPLEMENTED TO COUNTER VARIOUS SECURITY AND PRIVACY RISKS ACROSS THE ENTERPRISES #ORE "USINESS 0ROCESSES #ORE 4ECHNOLOGY )NFRASTRUCTURE AND #ORE -ANAGEMENT 0ROCESSES
#ORE 0ROCESS $ESIGN #ORE "USINESS 0ROCESSES AND #ORE 4ECHNOLOGY )NFRASTRUCTURE NEED TO BE DElNED DEVELOPED AND DEPLOYED IN CONCERT WITH THE ENTERPRISES #ORE 3ECURITY /PERATING -ODEL AND RISK DRIVE STANDARDS BASED RISK REQUIREMENTS !S WITH ALL OTHER ELEMENTS OF THE AGILE ENTERPRISE THIS APPROACH PROVIDES FUNDAMENTAL SECURITY AND PRIVACY BUILDING BLOCKS TO ADDRESS CORE PROCESSES AND THEIR SUPPORTING TECHNOLOGIES WHICH CAN SUBSEQUENTLY BE LEVERAGED IN A mEXIBLE YET RELIABLE MANNER DEPENDING UPON THE BUSINESS RISKS ASSOCIATED WITH A PARTICULAR FUNCTION /NE EXAMPLE OF SUCH A #ORE "USINESS 0ROCESS IS %LECTRONIC $ATA )NTERCHANGE %$) &ROM A SECURITY AND PRIVACY STANDPOINT CLEARLY SOME REQUIREMENTS NEED TO BE PUT IN PLACE HOWEVER THEY DEPEND STRONGLY ON THE CONTEXT IN WHICH THE %$) IS TAKING PLACE EG THE EXCHANGE OF SENSITIVE OR CONlDENTIAL PERSONALLY IDENTIlABLE INFORMATION REQUIRES A MORE STRINGENT APPROACH THAN SAY EXCHANGING A LIST OF PART NUMBERS )DEALLY ONE OR MORE #ORE 4ECHNOLOGY )NFRASTRUCTURE COMPONENTS WOULD BE IN PLACE TO HANDLE THE SECURITY NEEDS AGAIN DEPENDING ON THE SPECIlC CONTEXT 'IVEN THAT THIS FOUNDATION PROVIDES US WITH A SUITABLE VEHICLE TO PROPAGATE SECURITY AND PRIVACY ACROSS THE ENTERPRISE THERE IS STILL A LEVEL OF ABSTRACTION THAT
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NEEDS TO BE IMPLEMENTED IN ORDER TO MAKE THESE CORE PROCESSES AND TECHNOLOGY INFRASTRUCTURE USABLE !S WITH MANY FOUNDATIONAL COMPONENTS SUCH CORE BUILDING BLOCKS CAN OFTEN BE LEVERAGED IN SEVERAL WAYS %STABLISHING A SERIES OF STRATEGIC BLUEPRINTS WILL PROVIDE THE ENTERPRISE WITH A STREAMLINED METHOD BY WHICH TO CONSISTENTLY IMPLEMENT SECURITY AND PRIVACY 4HE PREVIOUS EXAMPLE OF %$) WHICH FEATURED A #ORE "USINESS 0ROCESS AND SUPPORTING #ORE 4ECHNOLOGY )NFRASTRUCTURE AROUND %$) LACKED A SPECIlC CONTEXT ! BLUEPRINT WOULD PROVIDE THAT CONTEXT !N EXAMPLE MIGHT BE A BLUEPRINT TO ADDRESS THE ELECTRONIC TRANSFER OF CONlDENTIAL OR SENSITIVE PERSONALLY IDENTIlABLE INFORMATION 4HERE ARE MANY OPERATIONS ACROSS AN ENTERPRISE SUCH AS CUSTOMER SUPPORT SALES MARKETING AND OTHERS THAT MIGHT HAVE CAUSE TO ADDRESS SUCH A REQUIREMENT 5SING A BLUEPRINT PROVIDES A CONSISTENT WAY FOR EVERYONE TO HANDLE THE SITUATION IN TERMS OF WHAT #ORE "USINESS 0ROCESSES NEED TO BE LEVERAGED AND WHAT SUPPORTING #ORE 4ECHNOLOGY )NFRASTRUCTURE COMPONENTS NEED TO BE INCLUDED %XTENDING THE %$) EXAMPLE NOW THAT WE HAVE A BLUEPRINT THAT ADDRESSES THE ELECTRONIC TRANSFER OF CONlDENTIAL OR SENSITIVE PERSONALLY IDENTIlABLE INFORMATION LET US SAY THAT THE SPECIlC SCENARIO WE ARE CONCERNED WITH IS AN OUTSOURCED PAYROLL FUNCTION #LEARLY WE WOULD BE CONCERNED WITH VARIOUS PROCEDURES AND TECHNOLOGY CONTROLS TO SAFEGUARD SENSITIVE INFORMATION AS IT IS BEING TRANSFERRED TO AND FROM A THIRD PARTY
"LUEPRINTS /NCE KEY STRATEGIC BLUEPRINTS ARE IN PLACE IT IS ESSENTIAL THAT THEY BE LEVERAGED WHERE POSSIBLE OTHERWISE THE ENTIRE EFFORT INVOLVED IN THE BUILD UP TO THIS POINT WILL BE FOR NAUGHT !S VARIOUS FUNCTIONAL PROCESSES ARE RE CALIBRATED TO REmECT THE RELEVANT BLUEPRINTS THE APPROPRIATE SECURITY AND PRIVACY COMPONENTS INTEGRATED INTO EACH BLUEPRINT WILL ALSO BE REmECTED AS PART OF THE OVERALL CHANGES THAT ARE MADE #ASE 3TUDY ILLUSTRATES THE USE OF THE AGILE SECURITY AND PRIVACY BLUEPRINT THROUGH A HYPOTHETICAL %20 SYSTEM IMPLEMENTATION SCENARIO
#!3% 345$9 %20 3ECURITY AND 0RIVACY #ONSIDERATIONS $EPLOYING A %20 SYSTEM REQUIRES SIGNIlCANT FORWARD PLANNING TO UNDERSTAND THE DESIGN ELEMENTS OF THE SYSTEM THE SPECIlCS AROUND SYSTEM IMPLEMENTATION AND TESTING AND THE ROLL OUT STRATEGY /UR HYPOTHETICAL %20 SYSTEM IMPLEMENTATION OUTLINES THE PROCESS FOR DEVELOPING A SECURITY AND PRIVACY BLUEPRINT
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!GILE 3ECURITY AND 0RIVACY 3TRATEGIC !PPROACH AND &OUNDATION %VEN WITH ALL OF THE ADVANTAGES PUT FORTH BY OUTSOURCING OR COLLABORATION NOT ADDRESSING THE SECURITY AND PRIVACY ISSUES RELATED TO THESE EFFORTS UP FRONT AND EARLY MAY CAUSE THESE INITIATIVES TO FAIL DUE TO THE INCREASED RISK TO THE ORGANIZATION BASED ON THE COMPLEXITY OF HANDING COMPANY DATA TO THIRD PARTIES OR ALLOWING THIRD PARTIES TO ACCESS AN ORGANIZATIONS ENVIRONMENT 3ECURITY AND 0RIVACY NEED NOT BE THE ROADBLOCK FOR AGILE ORGANIZATIONS 4HE REALITY IS IT CAN BE THE ENABLER !GILE ORGANIZATIONS CAN TYPICALLY BREAKDOWN THE COMMUNICATION BARRIERS AND ADDRESS THE KEY FACTORS LEADING TO AN OVERALL FAILURE IN SECURITY AND PRIVACY THROUGH ADOPTING A 3TRATEGIC !PPROACH )N PARTICULAR ESTABLISHING A CONDUIT FOR COMMUNICATION AND PUTTING INTO PLACE A SECURITY AND PRIVACY INFRASTRUCTURE AND BLUEPRINTS SHOULD PROVIDE !GILE ORGANIZATIONS WITH THE ABILITY TO TAKE ADVANTAGE OF OPPORTUNITIES THAT ENHANCE REVENUE REDUCE COST MAXIMIZE SHAREHOLDER VALUE OR PRESERVE MARKET SHARE WHILE PROTECTING BRAND REPUTATION AND IMPROVING RISK MANAGEMENT 4HE USE OF A HOLISTIC CROSS FUNCTIONAL APPROACH AS DETAILED IN THIS CHAPTER IS ESSENTIAL IN HELPING AN ENTERPRISE EFFECTIVELY ADDRESS THE MANY SECURITY AND PRIVACY ISSUES AND NEEDS THAT IT HAS -ORE IMPORTANTLY SUCH AN APPROACH PROVIDES A STRONG FRAMEWORK TO STRATEGICALLY HELP THE ORGANIZATION BE AGILE THAT IS TO UNDERSTAND ITS SECURITY AND PRIVACY POSTURE ADDRESS THE ISSUES IN AN ORGANIZED AND EASY TO LEVERAGE MANNER AND THEN MANAGE AND EVOLVE THE EXECUTION OF THE STRATEGY TO ACCOUNT FOR THE CHANGING MARKETPLACE 4HE KEY TO SOLVING SECURITY AND PRIVACY ISSUES EFlCIENTLY IS TO LOOK AT EACH ISSUE AS A SERIES OF STEPS RATHER THAN BREAKING IT OUT SEPARATELY FOR EACH FUNCTION OR DEPARTMENT 4HIS IS THE IDEA BEHIND CORE BUSINESS AND TECHNICAL PROCESSES 4HAT ALLOWS FOR CONSISTENCY ACROSS THE ORGANIZATION IN TERMS OF HOW A PROBLEM IS LOOKED AT IE ITS CONSTITUENT COMPONENTS AND EFlCIENCY IN TERMS OF SOLVING THE VARIOUS ELEMENTS OF THE ISSUE ONE TIME FOR THE ENTIRE ORGANIZATION ,EVERAGING THESE BUILDING BLOCKS AND USING THE NOTION OF BLUEPRINTS TO TAKE A SET OF CORE PROCESSES AND TURN THEM INTO A SPECIlC SOLUTION FOR A PARTICULAR AREA OF THE BUSINESS ALLOWS FOR mEXIBILITY IN TERMS OF BEING ABLE TO USE THOSE CORE PROCESSES THAT BEST lT A PARTICULAR PART OF THE ENTERPRISE 4HE BUILT IN CONSIDERATIONS FOR THE SUPPORTING INFRASTRUCTURE INCLUDING OVERSIGHT IN THE FORM OF BOTH MONITORING AND GENERAL OVERSIGHT ALLOW FOR THE IDENTIlCATION AND HANDLING OF QUICK ADJUSTMENTS AND LONGER TERM STRATEGIC CHANGES TO TAKE PLACE IN AN ORGANIZED AND CONSISTENT MANNER
2EFERENCES #OHEN & 2ISK !GGREGATION 4HE 5NINTENDED #ONSEQUENCE "URTON 'ROUP !PRIL -EARS 2 + $E*ARNETTE AND 2 *ONES 0ARTNERS $ELOITTE 4OUCHE ,,# $ELOITTE 2ESEARCH 0ROSPERING IN THE 3ECURE %CONOMY
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).42/$5#4)/. 4HE !GILE %NTERPRISE IS A BUSINESS STRUCTURE AND BEHAVIOR PATTERN THAT RESPONDS TO THE CONSTANT CHANGES IMPOSED ON TODAYS BUSINESSES BY THE MARKET FORCES TECHNOLOGY TRENDS AND GLOBALIZATION IMPERATIVES "ECOMING AN AGILE ENTERPRISE WITH THE ABILITY TO RESPOND QUICKLY AND EFFECTIVELY TO CHANGES IN THE GLOBAL BUSINESS ENVIRONMENT IS A BUSINESS NECESSITY 4HAT MEANS ADDING THE TOOLS TECHNIQUES AND TECHNOLOGIES TO YOUR SMALL BUSINESS OPERATIONS 7HICH TOOLS WHICH TECHNIQUES AND WHICH TECHNOLOGIES DEPENDS ON YOUR CUSTOMERS AND MARKETS )TS AN ORGANIZATION WITH A mEXIBLE BUSINESS MODEL AND THE CAPABILITIES TO RESPOND QUICKLY EFFECTIVELY AND PROlTABLY TO CHANGES IN CUSTOMERS MARKETS AND COMPETITORS 4HE KEYS TO ACHIEVING SUCH AN ORGANIZATION LIE IN EACH PARTICULAR COMPANYS STRUCTURE AND BEHAVIORITS PRODUCTS PROCESSES SYSTEMS CULTURES AND LEADERSHIP 4HE WHATS AND HOW TOS DIFFER FROM COMPANY TO COMPANY INDUSTRY TO INDUSTRY AND SUPPLY CHAIN TO SUPPLY CHAIN 7HAT YOU DO AND HOW YOU DO IT DEPENDS ON HOW LARGE OR SMALL YOUR COMPANY IS WHAT RESOURCES YOU HAVE AVAILABLE TO INVEST IN CHANGE AND ADAPTATION WHERE YOU ARE IN THE SUPPLY CHAIN AS WELL AS WHAT POWER YOU HOLD IN IT AND YOUR WILLINGNESS TO TAKE RISKS ! RECENT STUDY ,EHTIHET 7ILSON AND 3USMAN FOR THE .ATIONAL )NSTITUTE OF 3TANDARDS AND
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4ECHNOLOGYS .)34 -ANUFACTURING %XTENSION 0ARTNERSHIP -%0 LOOKED AT THE FUTURE OF MANUFACTURING BUSINESSES IN THE 53 AND IDENTIlED A NUMBER OF FACTORS THAT WILL AFFECT MANUFACTURING BUSINESSES &IGURE SHOWS THE LINKAGES BETWEEN GLOBAL TRENDS STRATEGIC RESPONSES AND 3-% CHOICES 3OME OF THESE THINGS ARE IN YOUR CONTROL AND SOME ARE NOT
&IGURE &RAMEWORK FOR THINKING ABOUT THE FUTURE OF MANUFACTURING BUSINESSES AFTER ,EHTIHET 7ILSON AND 3USMAN
!MONG THE FACTORS ARE GLOBALIZATION ECOLOGICAL AWARENESS DEMOGRAPHICS AND TECHNOLOGICAL ADVANCES %ACH OF THESE FACTORS INCLUDES SEVERAL SUBCATEGORIES THAT WILL IMPACT NOT JUST MANUFACTURERS BUT ALL BUSINESS &OR EXAMPLE UNDER TECHNOLOGICAL ADVANCES ONE MIGHT INCLUDE LARGE TECHNOLOGY CATEGORIES LIKE BIOTECHNOLOGY AND NANOTECHNOLOGY MANY ASPECTS OF WHICH ARE STILL IN THE EARLY STAGES AND WHOSE IMPACTS ARE NOT YET KNOWN AND ADVANCES IN A SPECIlC TECHNOLOGY SUCH AS MICROELECTRICAL MECHANICAL SYSTEMS -%-3 AND RADIO FREQUENCY IDENTIlCATION 2&)$ SYSTEMS )N RESPONSE TO THESE FACTORS lRMS CAN CHOOSE FROM A NUMBER OF STRATEGIC CHOICES AS A RESPONSE 4HESE CHOICES MIGHT INCLUDE THINGS LIKE SHEDDING OF PHYSICAL ASSETS BUNDLING OF GOODS AND SERVICES CUSTOMIZATION MASS AND INNOVATION )MPLEMENTATION OF THOSE CHOICES IN TURN REQUIRES ORGANIZATIONAL CHANGE AND ADAPTATION 4HE LEADERSHIP OF AN AGILE ENTERPRISE KNOWS THAT THINGS WILL CONTINUE TO CHANGE AND PUTS IN PLACE AN ADAPTABLE STRUCTURE AND SET OF BEHAVIORS THAT CAN BEST TAKE ADVANTAGE OF CHANGE 4HIS IS WHAT WILL MAKE A COMPANY AN AGILE ENTERPRISE )N THIS CHAPTER WE WILL FOCUS PRINCIPALLY ON SMALLER MANUFACTURERS AS THEY ARE THE PRINCIPAL FOCUS OF .)34S -ANUFACTURING %XTENSION 0ARTNERSHIP PROGRAM
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4HE .ATIONAL !CADEMY OF 0UBLIC !DMINISTRATORS .!0! HAS DESCRIBED THE CHALLENGES AND BARRIERS THEY FACE IN IMPROVING PERFORMANCE IN A RECENT REPORT 4HE -ANUFACTURING %XTENSION 0ARTNERSHIP 0ROGRAM 4HOSE REPORTS BUILD ON AN EARLIER STUDY OF SMALL MANUFACTURERS BY THE .ATIONAL 2ESEARCH #OUNCIL .2# ,EARNING TO #HANGE "OTH REPORTS CONCLUDED THAT SMALL MANUFACTURERS FACE THE FOLLOWING BARRIERS % % % % %
$ISPROPORTIONATE IMPACT OF REGULATION ,ACK OF AWARENESS )SOLATION 7HERE TO SEEK ADVICE 3CARCITY OF CAPITAL
)N ADDITION THE .!0! REPORT CONCLUDED THAT ADDITIONAL CHALLENGES HAVE EMERGED SINCE INCLUDING % 2APIDLY INCREASING COMPETITION FROM COMPANIES LOCATED IN LOW COST COUNTRIES % %XPLOSION IN AVAILABILITY OF INFORMATION AND INFORMATION TECHNOLOGY % )NSUFlCIENT ACCESS TO KNOWLEDGE WORKERS % (IGH COST OF PROVIDING HEALTH INSURANCE FOR EMPLOYEES .!0! ALSO POINTED OUT THAT SOME OF THE BARRIERS IDENTIlED IN THE .2# REPORT ARE LESS IMPORTANT THAN THEY ONCE WERE ,ETS LOOK AT EACH OF THESE BARRIERS IN TURN AND WHAT THEY MEAN FOR SMALLER MANUFACTURERS 4HE REGULATORY ENVIRONMENT CREATES A DISPROPORTIONATE BURDEN FOR SMALLER lRMS .ATIONAL STATE AND LOCAL INITIATIVES AND DECISIONS CONCERNING TRADE THE ENVIRONMENT EMPLOYMENT WORK PLACE SAFETY HEALTH CARE AND LIABILITY HAVE A DIRECT IMPACT ON THE COMPETITIVENESS OF MANUFACTURING COMPANIES 4HE AMOUNT OF TIME AND EFFORT REQUIRED TO COMPLY WITH COMPLEX REGULATIONS IS A DISPROPORTIONATE BURDEN FOR SMALLER ORGANIZATIONS /NE RESULT IS THAT THE ECONOMIC IMPACT OF REGULATORY COMPLIANCE IS MUCH GREATER AS A PERCENTAGE OF CAPITAL INVESTMENT THAN IT IS FOR LARGER BUSINESSES 3MALLER MANUFACTURERS ARE OFTEN UNFAMILIAR WITH CHANGING TECHNOLOGY PRODUCTION TECHNIQUES AND BUSINESS MANAGEMENT PRACTICES 4HE STAFF AND SENIOR MANAGERS OF SMALLER MANUFACTURING COMPANIES MUST DEVOTE MOST OF THEIR TIME AND ENERGIES TO MANAGING THE DAY TO DAY OPERATIONS OF THE lRM !S A CONSEQUENCE THOSE COMPANIES ARE LESS LIKELY TO BE AWARE OF THE BEST MANUFACTURING PRACTICES INNOVATIVE APPLICATION OF NEW TECHNOLOGIES AND FRESH APPROACHES TO IMPROVED PRODUCTION EFlCIENCY 7ITH LESS RELEVANT EXPERIENCE AND EXPERTISE THEIR
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EXPECTATIONS FOR SUCCESSFULLY SELECTING AND EFFECTIVELY ASSIMILATING NEW TECHNOLOGY ARE NOT HIGH AND SO THEY ARE LESS LIKELY TO RISK INVESTMENT IN NEW WAYS OF DOING THINGS OR IN MAJOR CHANGES TO THE MANAGEMENT STRUCTURE AND RELATIONSHIPS WITHIN THE BUSINESS 3MALLER MANUFACTURERS ARE GENERALLY ISOLATED AND HAVE TOO FEW OPPORTUNITIES FOR INTERACTION WITH OTHER COMPANIES IN SIMILAR SITUATIONS )NTERACTION WITH OTHER lRMS IS ESSENTIAL TO CONTINUOUS IMPROVEMENT 4HESE ASSOCIATIONS SEEM TO BE MOST PRODUCTIVE WHEN THEY OCCUR AMONG COMPANIES OF SIMILAR SIZE AND WITH LARGER ORGANIZATIONS THAT MIGHT BE ROLE MODELS FOR SMALLER lRMS 4HE CHANCE FOR SUPPLIERS TO INTERACT WITH MAJOR CUSTOMERS TO BENElT FROM MEMBERSHIP IN A SUPPLIER IMPROVEMENT PROGRAM OR KEIRETSU LIKE CONFEDERATION OF COMPANIES A *APANESE INTERLOCKING COMPANY STRUCTURE CAN SIGNIlCANTLY IMPROVE THE CHANCES FOR SMALLER lRMS TO IMPROVE THEIR PERFORMANCE )T IS DIFlCULT FOR OWNERS AND MANAGERS OF SMALLER COMPANIES TO lND HIGH QUALITY UNBIASED INFORMATION ADVICE AND ASSISTANCE 7HEN COMPANIES NEED HELP WITH TECHNICAL PROBLEMS WHEN THEY WANT TO REPLACE PRODUCTION OR DESIGN EQUIPMENT OR WHEN THEY WANT TO UPGRADE THE SKILLS AND TALENTS OF THEIR WORKFORCE THEY ARE OFTEN AT A LOSS FOR SOURCES OF ASSISTANCE 3EARCHING FOR HELP IN THE PUBLIC SECTOR OFTEN REVEALS A CONFUSING UNCOORDINATED ARRAY OF SERVICESUNIVERSITIES ECONOMIC DEVELOPMENT GROUPS TECHNICAL SCHOOLS GOVERNMENT AGENCIESCOMPETING FOR CLIENTS )NAPPROPRIATE CHOICES CAN WASTE PRECIOUS RESOURCES AND TIME A WASTE THAT A SMALLER lRM CANNOT AFFORD /PERATING CAPITAL AND INVESTMENT FUNDS FOR MODERNIZATION ARE DIFlCULT FOR SMALL AND MEDIUM SIZED MANUFACTURING lRMS TO OBTAIN 4HE lNANCIAL COMMUNITY DOES NOT READILY UNDERSTAND MANUFACTURING AND OFTEN PERCEIVES LOANS FOR NEW EQUIPMENT AS UNATTRACTIVELY HIGH RISKS 3MALLER lRMS ARE UNLIKELY TO HAVE THE CAPABILITIES NEEDED TO PUT TOGETHER PROPOSALS FOR FUNDS IN THE FORMAT FAMILIAR TO LENDING OFlCERS 4HE CONSOLIDATION OF BANKS WITH SOME EXCEPTIONS HAS REMOVED MUCH OF THE DECISION MAKING FROM THE COMMUNITIES WHERE MANY LOAN OFlCERS HAVE TRADITIONALLY RELIED ON THE hKNOWN CHARACTERv OF MANAGEMENT AND OWNERS IN LIEU OF COLLATERAL 4HE lRST PHASE .!0! REPORT ASSERTS THAT THIS IS NOT AS LARGE A BARRIER AS IT WAS IN THE EARLY S ALTHOUGH IT IS STILL TRUE IN SOME SELECTED PARTS OF THE COUNTRY 4HE RAPIDLY INCREASING COMPETITION FROM COMPANIES LOCATED IN LOW COST COUNTRIES HAS REAL AND POTENTIALLY SERIOUS CONSEQUENCES FOR ANY COMPANY THAT IS ENGAGED IN A COMMODITY BUSINESS #OMPANIES IN THESE LOW COST COUNTRIES "RAZIL #HINA )NDIA -ALAYSIA AND 3OUTH +OREA FOR EXAMPLE HAVE BOTH LOWER COST LABOR AND EQUIVALENT TECHNOLOGY TO 53 COMPANIES WITH WHICH TO MAKE PRODUCTS #OUPLED WITH THE DECLINES IN TELECOMMUNICATIONS AND TRANSPORTATION COSTS SEEN OVER THE PAST DECADE COMPANIES IN THESE COUNTRIES CAN DELIVER COMPARABLE QUALITY PRODUCTS AT LOWER PRICES THAN CAN 53 COMPANIES
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4HE EXPLOSION IN AVAILABILITY OF INFORMATION AND INFORMATION TECHNOLOGY HAS LED TO INCREASED EFlCIENCIES AND DECREASED TRANSACTION COSTS WHEN USED INTELLIGENTLY )T HAS MADE GLOBAL MARKETS A REALITY AND PRODUCTS CAN BE SOLD OR SOURCED FROM ANYWHERE WITHIN THE BOUNDS OF LAW AND REGULATION 5SED POORLY THOUGH INFORMATION TECHNOLOGY CAN BE A DRAIN ON COMPANY ASSETS AND AN OVERABUNDANCE OF INFORMATION CAN BE JUST AS BAD FOR DECISION MAKING AS TOO LITTLE INFORMATION )NSUFlCIENT ACCESS TO KNOWLEDGE WORKERS MEANS NOT HAVING THE WORKERS WITH SKILLS YOU NEED WHEN AND WHERE YOU NEED THEM AT A PRICE YOU CAN AFFORD 4HE SHORTAGE OR LACK OF ACCESS RUNS ACROSS ALL AREAS INCLUDING MANAGEMENT INFORMATION TECHNOLOGY MARKETING SALES PRODUCT DEVELOPMENT ENGINEERING AS WELL AS PRODUCTION )T IS NOT CLEAR WHETHER THERE IS AN ABSOLUTE SHORTAGE OF SKILLED WORKERS OR WHETHER IT IS A QUESTION OF AFFORDABILITY OF THESE WORKERS ON A FULL TIME BASIS )N EITHER INSTANCE THOUGH THE RESULT IS THAT THE COMPANY DOES NOT HAVE THE PEOPLE IT NEEDS AND SO IS CONSTRAINED IN A VARIETY OF WAYS 4HE lNAL BARRIER THE HIGH COST OF PROVIDING HEALTH INSURANCE FOR EMPLOYEES DOES NOT TYPICALLY AFFECT PRODUCTIVITY DIRECTLY BUT DOES HAVE IMPLICATIONS FOR THE COMPANYS BOTTOM LINE AND ULTIMATELY ITS COMPETITIVE POSITION 4HE MORE OF A COMPANYS MONEY THAT IS DEDICATED TO HEALTH CARE COSTS THE LESS IS AVAILABLE FOR OTHER INVESTMENTS IN PEOPLE ANDOR TECHNOLOGY )F WE LOOK MORE CLOSELY AT THE BARRIERS IDENTIlED ABOVE WE NOTE THAT SOME OF THEM CAN BE AT LEAST PARTIALLY OVERCOME THROUGH THE USE OF TECHNOLOGIES AND PRACTICES REPRESENTED BY A TRULY AGILE ENTERPRISE &OR EXAMPLE THE ISSUES SURROUNDING ISOLATION AND A LACK OF AWARENESS OF NEW TECHNOLOGIES HAVE BEEN AMELIORATED IN PART BY READY ACCESS TO THE )NTERNET #OMPARED TO WHEN THE .2# REPORT WAS RESEARCHED AND WRITTEN IT IS RELATIVELY EASY TO SEARCH FOR TECHNICAL AND NON TECHNICAL INFORMATION THAT CAN HELP A SMALL BUSINESS OWNER BECOME INFORMED ABOUT NEW PROCESSES NEW TECHNOLOGIES AND NEW MARKET OPPORTUNITIES 7E WILL EXAMINE TODAYS BUSINESS ENVIRONMENT THE BUSINESS AND MANUFACTURING PROCESSES NEEDED AND SUPPORTING INFRASTRUCTURE ALONG WITH STRATEGIES YOU CAN ADOPT TO START TO MOVE TOWARD BEING AN AGILE ENTERPRISE AND STAYING COMPETITIVE IN A GLOBAL ECONOMY
4/$!93 %.6)2/.-%.4 4ODAYS BUSINESS ENVIRONMENT PLACES MANY DEMANDS ON COMPANIES OF ALL TYPES AND SIZES &OR SMALL MANUFACTURING lRMS THOUGH THE CONmUENCE OF FACTORS OUTSIDE OF THEIR CONTROL ESPECIALLY GLOBALIZATION AND TECHNOLOGY DEVELOPMENTS HAS THE POTENTIAL TO WREAK HAVOC 4HERE ARE COST DELIVERY AND QUALITY PRESSURES LIKE NEVER
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BEFORE DRIVEN IN SOME RESPECTS BY LARGE MULTI NATIONAL lRMS AND BY FOREIGN GOVERNMENTS IN OTHERS 4HERE HAS BEEN A LOT OF ATTENTION DEVOTED LATELY TO HOW LARGE MULTI NATIONAL lRMS ARE MOVING OPERATIONS AND JOBS TO LOWER COST COUNTRIES #HINA AND )NDIA PRINCIPALLY 4HIS IS PART OF AN OFFSHORING TREND THE SENDING OF PRODUCTION OF GOODS AND SERVICES TO OTHER COUNTRIES THATS BEEN GOING ON FOR YEARS )N PREVIOUS TIMES IT WAS -EXICO -ALAYSIA 3INGAPORE AND 4AIWAN 5NTIL RECENTLY WHAT IS KNOWN AS OFFSHORING WAS MOSTLY OUTSOURCING AND WENT TO DOMESTIC IN MANY CASES LOCAL PLANTS AND lRMS 4HE BASIC IDEA WAS THAT THE LARGE lRM COULD BUY ITEMS OF HIGHER QUALITY AND LOWER PRICE THAN THEY COULD MAKE THEM THEMSELVES !S COMPANIES OUTSOURCED MORE PARTS COMPONENTS AND SYSTEMS THEY CONTINUED TO LOOK FOR LOWER COST SOURCES OF SUPPLY 7ITH THE ADVENT OF THE .ORTH !MERICAN &REE 4RADE !CT .!&4! -EXICAN AND #ANADIAN COMPANIES BECAME EASIER PLACES WITH WHICH TO DO BUSINESS 4ELECOMMUNICATIONS AND TRANSPORTATION COSTS HAVE DECREASED SUBSTANTIALLY MAKING THE REST OF THE WORLD MORE ACCESSIBLEBOTH AS A MARKET TO SELL TO AND AS PLACES FROM WHICH TO SOURCE 4HESE OUTSOURCING AND OFFSHORING PHENOMENA ARE TRUE NOT JUST OF PRODUCTS BUT SERVICES AS WELL #ALL CENTERS AND COMPUTER PROGRAMMING ARE JUST TWO EXAMPLES 4ODAY YOU CAN lND REASONABLY PRICED SERVICE COMPANIES TO PROVIDE YOU WITH lRST RATE PROGRAMMING TALENT OR KNOWLEDGEABLE %NGLISH SPEAKING STAFF WHO ARE AVAILABLE 3OME COUNTRIES SHIP WORK TO THE 53 LEGAL AND lNANCIAL SERVICES FOR EXAMPLE AND THOSE SERVICES ARE PROVIDED HERE MORE FREQUENTLY THAN ELSEWHERE )TS A BRAVE NEW WORLD 7HETHER YOURE READY OR NOT YOURE A PARTICIPANT IN THE GLOBAL MARKETPLACE !S A CONSUMER ITS EASY 'ENERALLY YOU LOOK FOR THE BEST QUALITY AT THE LOWEST PRICEVALUE ,OOK AT THE LABELS 7HERE DOES IT COME FROM &REQUENTLY ITS NOT !MERICAN MADE 4HATS PART OF TODAYS GLOBAL REALITY ,ABOR COSTS IN 4AIWAN ARE ABOUT OF 53 COSTS )NDIA AND -AINLAND #HINA IS ABOUT 4HEYRE ALSO WORKING IN FACILITIES THAT ARE STATE OF THE ART OR CLOSE TO IT !ND ITS NOT JUST LOW COST LABOR 4HERE ARE LOTS OF WELL EDUCATED PEOPLE AROUND THE WORLD AND COUNTRIES LIKE #HINA AND )NDIA CONTINUE TO IMPROVE THEIR ALREADY VERY GOOD POST SECONDARY EDUCATION INSTITUTIONS )N ADDITION MANY FOREIGN SCIENTISTS ENGINEERS AND BUSINESS PEOPLE WERE TRAINED IN !MERICAS BEST UNIVERSITIES AND HAVE MOVED BACK TO THEIR NATIVE COUNTRIES 4HEY SEE OPPORTUNITIES OVERSEAS TO BUILD BUSINESSES THEY COULDNT BUILD HERE 4HE !MERICAN 7AY HAS BEEN EXPORTED TOO AND THAT MEANS COMPETITION CAN COME FROM ANYWHERE NOT JUST DOWN THE STREET 7ITH COST ADVANTAGES OF AT LEAST YOU CAN LOSE CUSTOMERS OVERNIGHT TO GLOBAL COMPETITORS (AVING SAID THAT OUTSOURCING CAN BE GOOD IF ITS TO YOU WHILE OFFSHORING PROBABLY ISNT UNLESS YOURE PREPARED TO HAVE A GLOBAL PRESENCE )N THIS KIND OF ENVIRONMENT HOW DO YOU THEN COMPETE )F YOUR BUSINESS STRATEGY IS BASED ON
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BEING THE LOWEST COST PRODUCER YOURE IN A RACE TO THE BOTTOM AND YOU MIGHT WANT TO RETHINK YOUR STRATEGY "ASICALLY THERE ARE A HANDFUL OF STRATEGIES YOU CAN CHOOSE BUT SUCCESSFUL COMPANIES ARE ADAPTING THEMSELVES AND THEIR STRATEGIES TO OFFER HIGHER VALUE TO CUSTOMERS 4HEYRE MOVING FROM BEING COMMODITY PRODUCERS OF HIGH VOLUME SIMPLE PRODUCTS TO SPECIALTY PRODUCERS OF MORE COMPLEX PRODUCTS AND THEYRE GETTING CHOOSIER ABOUT THEIR CUSTOMERS 4HE REST OF THIS CHAPTER IS DEVOTED TO WHAT YOU AS A SMALL MANUFACTURER NEED TO DO TO SURVIVE AND THRIVE IN THIS ENVIRONMENT &IGURE SHOWS HOW YOUR MANUFACTURING BUSINESS LINKS TO OTHER BUSINESSES THROUGH YOUR BUSINESS PROCESSES AND NETWORKS
&IGURE 4HIS GRAPHIC SHOWS THE LINKAGE BETWEEN YOUR MANUFACTURING BUSINESS CUSTOMERS AND SUPPLIERS THROUGH BUSINESS PROCESSES AND THE NETWORK
)N PART ITS ABOUT AGILITY !T LEAST AS LONG AGO AS AGILITY IN MANUFACTURING lRMS HAS BEEN A TOPIC OF STUDY AND DISCUSSION .EXT 'ENERATION -ANUFACTURING 2EPORT -ANY OF THE STUDIES HAVE INCLUDED SECTIONS ON THE EXTENDED ENTERPRISE AND ENTERPRISE INTEGRATION E"USINESS E#OMMERCE E3ECURITY ETC 7HILE THESE STUDIES PROVIDE THE WHAT THEY DO NOT PROVIDE THE HOW THAT IS HOW TO ACCOMPLISH THE WHAT WHILE MAINTAINING PROlTABILITY OF THE lRM 4HIS IS ESPECIALLY TRUE FOR SMALLER MANUFACTURING lRMS 4ODAYS ECONOMIC ENVIRONMENT CHALLENGES THESE lRMS MORE THAN EVER BEFORE 9OU NEED TO LEARN TO COPE AND USE THE TRENDS YOURSELF 4O TAKE FULL ADVANTAGE OF THIS ENVIRONMENT YOU NEED TO HAVE THE FUNDAMENTALS IN PLACE AND YOU NEED
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TO DISTINGUISH YOURSELF WITH A SERVICE ANDOR BUSINESS MODEL 4HE FUNDAMENTALS INCLUDE % )NFRASTRUCTURE STABLE ELECTRICITY INTERNET CONNECTIVITY TELECOMMUNI CATIONS AND TRANSPORTATION % 0ROCESSES STABLE BUSINESS AND MANUFACTURING PROCESSES THAT LINK INTERNAL AND EXTERNAL ENVIRONMENTS % 2ELATIONSHIPS CUSTOMERS SUPPLIERS AND COLLABORATORS ,ETS LOOK AT EACH OF THESE IN TURN
).&2!3425#452% 7HEN WE TALK ABOUT INFRASTRUCTURE WE INCLUDE THE BASICS ELECTRICITY TELECOM MUNICATIONS AND TRANSPORTATION !LL OF THESE THINGS WITH APPROPRIATE BACK UPS AND PLANS FOR USING THEM ARE REQUIRED OF AGILE ENTERPRISES &OR EXAMPLE ONE OF THE DRIVERS IMPOSED BY LEAN MANUFACTURING PRINCIPLES IS JUST IN TIME DELIVERY 4HAT USUALLY MEANS SMALLER MORE FREQUENT DELIVERIES TO THE CUSTOMER )N TURN THAT MEANS YOUR COMMUNICATIONS WITH YOUR CUSTOMERS AND SUPPLIERS AS WELL AS TRANSPORTATION LINKS NEED TO BE IN SYNC WITH THE DELIVERY NEEDS )F YOURE LOCATED IN A PLACE WHERE THE TRANSPORTATION INFRASTRUCTUREROADS AIRPORTS AND PORTSIS SUBSTANDARD YOULL HAVE A HARD TIME CONVINCING THE CUSTOMER YOU CAN MAKE THE DELIVERIES 3IMILAR THINGS ARE TRUE IF THE ELECTRIC GRID OR COMMUNICATIONS INFRASTRUCTURE IS SUBSTANDARD AS WELL
"USINESS 0ROCESSES 3TABLE REPEATABLE PROCESSES ARE REQUIRED 9OU MUST INTEGRATE INTERNAL AND EXTERNAL BUSINESS PROCESSES THAT TAKE ADVANTAGE OF INFORMATION TO COMPETE IN THE DIGITAL NETWORKED MARKETPLACE &OR BETTER OR WORSE AND FOR SMALLER COMPANIES ITS FREQUENTLY WORSE MANY SOFTWARE PACKAGES WHETHER THEYRE IN HOUSE APPLICATIONS OR OUTSOURCED TO VENDORS REQUIRE STABLE REPEATABLE PROCESSES 4HAT INCLUDES DATA lELDS AND STRUCTURES AND MEANS DOING THE SAME THING THE SAME WAY EVERY TIME %ARLIER PACKAGES ESPECIALLY REQUIRED THAT YOUR COMPANY ADAPT TO THE SOFTWARES PROCESS NOT THAT IT WOULD ADAPT TO YOU 4HIS IS STILL TRUE TODAY AS BIGGER CUSTOMERS DICTATE NOT ONLY RESULTS THEY WANT BUT ALSO INFORMATION mOWS THEY WANT THAT WILL INTEGRATE WITH THEIR APPLICATIONS !S YOU MIGHT GUESS DIFFERENT CUSTOMERS
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ESPECIALLY BIG /%-S WILL INSIST ON THEIR OWN INFORMATION mOWS AND STRUCTURES AND YOU CAN BE PRETTY SURE THAT THEYLL BE DIFFERENT EVEN IN THE SAME INDUSTRY !T SOME LEVEL THIS IS JUST AN EXTENSION OF THE INTENT OF VARIOUS QUALITY SYSTEMS LIKE )3/ AND ITS SUCCESSORSRELATIVES )3/ AND )3/ 5NFORTUNATELY THESE STANDARDS HAVE BALKANIZED TO SOME EXTENT AS EACH INDUSTRY HAS DECIDED THAT IT HAS TO HAVE ITS OWN VERSION 4HUS WE HAVE NOT JUST )3/ BUT !3 FOR THE AEROSPACE INDUSTRY 13 FOR THE AUTOMOTIVE INDUSTRY AND 4, FOR THE TELECOMMUNICATIONS INDUSTRY AMONG OTHERS %ACH INCLUDES THE BASIC ELEMENTS OF )3/ BUT THEN ADDS OTHER ELEMENTS SPECIlC TO THE INDUSTRY 4HATS lNE IF YOURE ONLY IN ONE INDUSTRY BUT SMALL SUPPLIERS ARE FREQUENTLY SUPPLYING MORE THAN ONE 4AKE THE EXAMPLE OF ELECTRICAL CONNECTORS !S A SUPPLIER YOUR PRODUCT MAY GO INTO ANY OF THE THREE INDUSTRIES LISTED ABOVE 4HAT MEANS YOU END UP ADDING ALL THE EXTRA STEPS REQUIRED THAT ARE SPECIAL FOR EACH INDUSTRY .OW IMAGINE YOURSELF AS A SUPPLIER IN THE SUPPLY CHAINS FOR TWO MAJOR AUTOMOTIVE MANUFACTURERS PLUS A TRUCK MANUFACTURER AND A FORKLIFT MANUFACTURER (OW MANY DIFFERENT PROCESSES AND SYSTEMS WOULD YOU BE EXPECTED TO SUPPORT )T DEPENDS ON YOUR CUSTOMER BASE AND THEIR NEEDS 7ITH ON DEMAND THATS CHANGING 4HERE IS MORE mEXIBILITY IN DATA STRUCTURES FORMATS AND LABELS TO MAKE SHARING OF DATA SIMPLER AND EASIER
-ANUFACTURING 0ROCESSES ,IKE YOUR BUSINESS PROCESSES YOUR MANUFACTURING PROCESSES MUST BE STABLE AND REPEATABLE WHILE ALLOWING YOU TO MEET COST QUALITY AND DELIVERY REQUIREMENTS ,EAN MANUFACTURING PRINCIPLES ALLOW YOU TO SIMPLIFY THE PROCESSES AND SYSTEMS MAKING THEM AS mEXIBLE AS POSSIBLE 3IX SIGMA PRINCIPLES ALLOW YOU TO CONTINUOUSLY MONITOR AND IMPROVE THE QUALITY OF ALL PROCESSES (ERE ESPECIALLY THE INCORPORATION OF A VARIETY OF SENSORS AND MONITORS INTO THE PROCESS AND PROCESS CONTROLS ALLOWS YOU TO CONTROL THE MANUFACTURING PROCESS AND CONSEQUENT QUALITY AND REPEATABILITY TO AN UNPRECEDENTED DEGREE )T ALSO REQUIRES AN INTERNAL COMPUTER NETWORKSYSTEM TO COORDINATE THE OUTPUTS OF THE VARIOUS SENSORS AND MONITORS AND STORE AND ANALYZE THE DATA
3YSTEM 2EQUIREMENTS 4HE AMOUNT OF DATA THAT COMES FROM THE VARIETY OF BUSINESS AND MANUFACTURING PROCESSES HAS BEEN INCREASING AND THE COMPUTER SYSTEM WHETHER INTERNAL OR EXTERNAL MUST BE ABLE TO PROCESS STORE AND ANALYZE IT 4HERE IS ALSO DATA THAT
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MUST BE EXCHANGED WITH YOUR SUPPLY CHAIN PARTNERS 4HAT DATA CAN INCLUDE lNANCIAL INFORMATION DESIGN DATA AND LOGISTICS INFORMATION ALL OF WHICH NEEDS TO BE AVAILABLE TO DIFFERENT MEMBERS OF THE CHAIN BUT NOT TO EVERYBODY IN EVERY COMPANY IN THE CHAIN 0ARTICIPATION IN SUPPLY CHAINS REQUIRES THAT SMALL COMPANIES PAY ATTENTION NOT ONLY TO THE DATA BUT ALSO TO ITS SECURITY 4HE DATA REQUIREMENT INCLUDES NOT JUST THE DATA ITSELF BUT THE COMPUTER SYSTEMS AND DATA STRUCTURES NEEDED TO MANIPULATE IT 3OME OF THESE REQUIREMENTS WILL BE IMPOSED BY YOUR BIGGEST CUSTOMERS 4HE SECURITY REQUIREMENT MEANS NOT ONLY THE DATAINFORMATION THEY SEND AND RECEIVE BUT ALSO THE PHYSICAL SECURITY THAT PROTECTS THE INFRASTRUCTURE AND SYSTEMS 4HAT MEANS THAT THINGS LIKE ROOMS WHERE SERVERS ARE LOCATED HAVE LIMITED ACCESS LIMITED TO ONLY THOSE WHO NEED TO BE THERE AS WELL AS MORE MUNDANE THINGS LIKE MAKING SURE YOUR COMPUTERS ARE NOT LOCATED UNDER WATER PIPES -ANY OF THESE PHYSICAL AND INFORMATION SECURITY ITEMS ARE ADDRESSED IN .)34S E"USINESS 3ECURITY TOOL AVAILABLE AT HTTPESCANNISTGOVSATINDEXNIST 3PECIlC TOPICS ADDRESSED INCLUDE % % % % % % % % % %
#OMPUTER VIRUS PROTECTION &ILE PERMISSIONS #OMPUTER SYSTEM PHYSICAL ENVIRONMENT "ACK UP POLICIES AND PROCEDURES 0OTENTIAL COMPUTER SYSTEM MECHANICAL FAILURES )4 CONTINGENCY PLANNING )NFORMATION TECHNOLOGY AND SECURITY POLICIES )NTERNATIONAL E#OMMERCE CONCERNS )NTERNET AND E#OMMERCE /PERATING SYSTEMS AND SECURITY CONCERNS
4HIS DIAGNOSTIC TOOL IS DESIGNED TO ASSESS THE ELECTRONIC SECURITY INFRASTRUCTURE OF A SMALL BUSINESS AND PROVIDE AN ACTION PLAN FOR IMPROVING IT )T WILL PROVIDE THE USER WITH A SET OF RECOMMENDATIONS TO CORRECT SECURITY PROBLEMS AND HELP DEVELOP A MORE SECURE MODEL FOR FUTURE INTERACTIVITY 4HE REQUIREMENT FOR INTEGRATION WITH CUSTOMERS AND SUPPLIERS CAN BE ACCOMPLISHED EITHER VIA YOUR OWN INTERNAL SYSTEMS OR THROUGH OUTSOURCING CONTRACTS WITH ANY OF A NUMBER OF SUPPLIERS
2%,!4)/.3()03 7ITHOUT CUSTOMERS THERE IS NO BUSINESS 4ODAYS ENVIRONMENT REQUIRES BEING CONNECTED TO CUSTOMERS MORE THAN EVER 5NDERSTANDING AND RESPONDING TO THEIR
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NEEDS AND WANTS BECOMES PARAMOUNT 7HOLE BOOKS 7IERSEMA #OLLINS HAVE BEEN WRITTEN ON HOW TO ACCOMPLISH THIS UNDERSTANDING AND RESPONSE )N THE END ITS NOT ABOUT WHAT YOU HAVE TO SELL )TS ABOUT HOW YOUR CUSTOMERS WANT TO DO BUSINESS WITH YOU -ANY OF THEM HAVE PREFERRED WAYS OF DOING BUSINESS WHETHER IT IS VIA THE 7EB WITH PREFERRED WAYS OF DELIVERY BILLING ETC !PPLICATION OF THE PROCESS SHOWN IN &IGURE CAN HELP YOU TO BETTER UNDERSTAND YOUR CUSTOMERS MARKETS AND COMPETITORS AND THE USE OF THAT KNOWLEDGE TO DRIVE YOUR SALES AND MARKETING TACTICS AND PLANS )T WILL ALSO TELL YOU WHAT YOU NEED TO ACHIEVE INSIDE THE PLANT IN YOUR MANUFACTURING PROCESSES 4HE PROCESS HAS SEVEN STEPS STARTING WITH LEARNING ABOUT AND CHOOSING THE CUSTOMERS WITH WHOM YOU WANT TO DO BUSINESS AND ENDING WITH THE AFTER SALE SERVICE !LONG THE WAY YOU MATCH THEIR NEEDS WITH YOUR PRODUCTS AND SERVICES SOLD AND DELIVERED THE WAY THEY WANT THEM 5SING THIS PROCESS IMPOSES A DISCIPLINE ON YOUR OPERATIONS AND LINKAGES TO THE OUTSIDE WORLD 7ITHIN THIS PROCESS THERE ARE NUMEROUS OPPORTUNITIES TO APPLY THE CONCEPTS OF AN AGILE ENTERPRISE FROM A CUSTOMER RELATIONSHIP MANAGEMENT SYSTEM THAT LETS YOU KEEP TRACK OF EACH CUSTOMER AND ORDER TO PROVIDING SELF SERVICE SUCH AS REPAIR MANUALS OR USAGE INSTRUCTIONS VIA YOUR 7EBSITE
&IGURE -ARKETING 0ROCESS
)TS ALSO VERY EASY TO LOSE CUSTOMERS NOW ,ET ME GIVE YOU ONE EXAMPLE !N /HIO BASED COMPANY ) KNOW AN ELECTRONIC BOARD MANUFACTURER WAS A SUPPLIER TO A NUMBER OF LARGE COMPANIES 4HEIR BUSINESS INCLUDED BOTH DESIGN AND FABRICATION 4HEYD DONE BUSINESS WITH EACH OTHER FOR YEARS 4HE LARGE COMPANIES WENT TO #HINA ABOUT A YEAR AND A HALF AGO BASED ON COST BUT DIDNT TAKE ALL THE BUSINESS
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4HEY ASKED THE /HIO COMPANY TO TROUBLESHOOT AND REWORK IMPORTED BOARDS THAT WERENT UP TO SNUFF !S YOU MIGHT EXPECT THIS IS A VERY DIFFERENT BUSINESS THAT REQUIRES FAR FEWER PEOPLE EQUIPMENT AND FACILITIES %VEN THOUGH THEYD DONE BUSINESS TOGETHER FOR A LONG TIME THOUGH THE FACT THAT THE LARGE COMPANIES SURPRISED HIM BY TAKING THE BUSINESS OVERSEAS SHOWS THAT HIS RELATIONSHIPS WITH THE CUSTOMERS WERENT AS GOOD AS HE THOUGHT ! SECOND EXAMPLE OF THIS SITUATION INVOLVES A SPECIALTY MACHINING COMPANY IN UPSTATE .EW 9ORK 4HEYD BEEN A SUPPLIER TO A 4IER AUTOMOTIVE PARTS SUPPLIER FOR A NUMBER OF YEARS 2ECENTLY THE 4IER COMPANY CAME TO THEM AND TOLD THEM A JOINT VENTURE HAD BEEN FORMED BETWEEN THE 4IER AND A #HINESE COMPANY !LL THE BUSINESS WAS BEING MOVED TO #HINA AND THERE WAS NO RECOURSE "ECAUSE THE 4IER COMPANY REPRESENTED SUCH A LARGE PERCENTAGE OF THE BUSINESS THIS COMPANY IS NOW IN SERIOUS TROUBLE AND WILL HAVE TO SCRAMBLE TO STAY IN BUSINESS !GAIN THE COMPANY OWNERS BELIEVED THEY HAD GOOD RELATIONSHIPS WITH THE 4IER AND A CAPABILITY THAT COULDNT EASILY BE REPLICATED THEY QUICKLY FOUND OUT THAT WASNT THE CASE 7HAT COULD THEY HAVE DONE DIFFERENTLY ,ETS LOOK AT WHAT COMPANIES ARE DOING SPECIlCALLY WITH INFORMATION TECHNOLOGY AND HOW YOU MIGHT DO THINGS BETTER OR DIFFERENTLY TO MOVE TOWARD BEING THAT AGILE ENTERPRISE )N AND -%0 CONDUCTED TWO STUDIES .)34 -%0 3TUDY 0HASE AND 0HASE OF SMALLER MANUFACTURERS ADOPTION AND USE OF INFORMATION TECHNOLOGY AND E"USINESS CONCEPTS 4HOSE STUDIES SHOWED THAT SMALLER MANUFACTURERS WERE BEING SLOWER TO ADOPT )4 AND E"USINESS THAN LARGER COMPANIES 7HILE THEY REALIZED THE IMPORTANCE OF USING THE )NTERNET TO SHARE AND EXCHANGE INFORMATION WITH THEIR CUSTOMERS THEY DID NOT FULLY REALIZE THE BENElTS AND REWARDS THAT CAN BE ACHIEVED BY THE USE OF THE )NTERNET FOR THEIR OVERALL BUSINESS SHARING INFORMATION WITHIN THE COMPANY AND SHARING AND EXCHANGING INFORMATION WITH SUPPLIERS !S WOULD ALSO HAVE BEEN EXPECTED COMPANIES IN DIFFERENT INDUSTRIES REACTBELIEVE DIFFERENTLY ABOUT THE USE OF THE )NTERNET (OW DO WE RECONCILE THESE DIFFERENT VIEWSONE THAT SAYS AGILITY AND INTERCONNECTEDNESS ARE CRUCIAL TO THE BUSINESS AND THE OTHER THAT INDICATES SMALL BUSINESSES AND MANUFACTURERS ARE NOT ADOPTING THE TOOLS TECHNIQUES PRACTICES AND PROCESSES REQUIRED TO BE SUCCESSFUL IN THE FUTURE ,ETS LOOK AT SOME OF THE REQUIREMENTS 9OU WILL NEED TO UNDERSTAND THE FACTORS AFFECTING THE DEVELOPMENT OF AN E"USINESS STRATEGY THE RESOURCES REQUIRED TO BUILD AN E"USINESS FOUNDATION AND THE IMPLEMENTATION OF YOUR STRATEGY )T INCLUDES THINGS AS MUNDANE AS CLAIMING A DOMAIN NAME AND AS COMPLEX AS CONDUCTING BUSINESS VIA A WELL DESIGNED WEBSITE !LONG THE WAY YOULL NEED TO MONITOR AND EVALUATE HOW WELL YOURE DOING AND BE PREPARED TO MAKE CHANGES AS THE MARKET CHANGES
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7HAT ARE THE SPECIlC RESOURCES NEEDED BY A SMALL MANUFACTURER &IRST IS THE TECHNOLOGY INFRASTRUCTURE 4HIS INCLUDES THE PERSONAL COMPUTERS LOCAL AREA NETWORK SERVER AND CLIENT SOFTWARE AND 4#0)0 CONNECTION 3ECOND IS THE MONEY TO SUPPORT THE PURCHASE AND CUSTOMIZATION OF SOFTWARE THE ACQUISITION OF HARDWARE TRAINING OF STAFF AND POSSIBLY THE OUTSOURCING OF E"USINESS SERVICES 4HIRD IS THE TIME TO REASONABLY DELIVER ON AN IMPLEMENTATION SCHEDULE &OURTH ARE THE PERSONNEL TO DEVELOP AND EXECUTE E"USINESS PLANS AS WELL AS TO SUPPORT IN HOUSE AND ON LINE USERS 4O DETERMINE WHAT LEVELS OF THE ABOVE RESOURCES YOU NEED ASK YOURSELF THE FOLLOWING QUESTIONS
$O YOU HAVE THE CAPACITY TO FULlLL ORDERS IN A TIMELY MANNER (OW WILL YOU HANDLE FOLLOW UP CUSTOMER SERVICE 7HAT HOST WILL YOU NEED AFTER CAREFULLY ASSESSING YOUR INTERACTION NEEDS AND TECHNOLOGY CAPABILITIES
4HE ANSWERS WILL TELL YOU WHAT YOU NEED AND WHETHER AND HOW MUCH YOU SHOULD OUTSOURCE 2EGARDLESS OF THE ANSWERS THOUGH THE BASIC COMPONENTS SHOULD BE THE SAME
"!3)# #/-0/.%.43 ). 4(% !'),% %.4%202)3% 4O BE AN AGILE CONNECTED SMALL ENTERPRISE YOU NEED TO HAVE SOME BASIC COMPONENTS IN PLACE 4HESE INCLUDE THE DATA ENTRY AND COMMUNICATIONS DEVICES COMPUTERS WORKSTATIONS SERVERS ANDOR TERMINALS THAT ARE CONNECTED LOCAL AREA NETWORK AND WIDE AREA )NTERNET TELECOMMUNICATIONS CONNECTIVITY 4HESE DEVICES AND CONNECTIVITY SHOULD INCLUDE MESSAGING SOFTWARE % MAIL ANDOR )NSTANT -ESSAGING )NTERNET)NTRANET%XTRANET CAPABILITIES THROUGH YOUR 7EB SITE ALONG WITH ANY NEEDED lNANCIAL APPLICATIONS KNOWLEDGE MANAGEMENT SYSTEMS HUMAN RESOURCE MANAGEMENT APPLICATIONS CUSTOMER RELATIONSHIP MANAGEMENT APPLICATIONS ENTERPRISE RESOURCE PLANNING APPLICATIONS A SECURE ELECTRONIC PAYMENT SYSTEM AND ANY OTHER SUPPORT SERVICES 4HE APPLICATIONS CAN BE RUN INTERNALLY WITH YOUR OWN STAFF OR CAN BE OUTSOURCED TO ANY OF A VARIETY OF SERVICE PROVIDERS 7HICH YOU CHOOSE DEPENDS ON YOUR BUSINESS YOUR SITUATION AND YOUR LEVEL OF COMFORT WITH OUTSOURCING &OR #%/S OF SMALL BUSINESSES THERE ARE A NUMBER OF FACTORS THAT WILL INmUENCE YOUR COMFORT LEVEL 7HEN CONSIDERING THE WHAT AND HOW TO DOS CONSIDER THE FOLLOWING
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% "E RESPONSIVE TO YOUR BUSINESS PARTNERS )NSTALL TECHNOLOGIES THAT MEET YOUR BUSINESS NEEDS % #OSTS OF SOLUTIONS VARY SIGNIlCANTLY )NVEST TIME IN EXPLORING YOUR OPTIONS % (IGH SPEED ACCESS TO THE )NTERNET IS AN ENABLER #ABLE $3, AND 4 SOLUTIONS ARE COST EFFECTIVE AND WIDELY AVAILABLE % %VEN THOUGH STANDARDS ARE STILL NOT CLEARLY DElNED AND SOFTWARE IS OFTEN lRST GENERATION THE RISKS ASSOCIATED WITH NOT STARTING TO USE E"USINESS TECHNOLOGIES IS FAR GREATER THAN THE RISKS OF GETTING STARTED AND NEEDING TO MODIFY OR UPGRADE AS STANDARDS AND TECHNOLOGIES DEVELOP
4/-/22/73 342!4%')%3 4HE ABOVE DISCUSSION OF WHATS NEEDED TO BE AGILE IS ALL WELL AND GOOD BUT HOW DOES IT lT INTO YOUR BUSINESS STRATEGY !CCORDING TO A STUDY DONE FOR -%0 3TONE THERE ARE THREE PRIMARY STRATEGIES YOU CAN ADOPT TO BE COMPETITIVE 4HE lRST IS TO FOCUS ON SPECIALIZED PRODUCT OR PROCESS CAPABILITIES )N THE CASE OF PRODUCTS THIS MEANS PRODUCING PRODUCTS THAT HAVE TIGHT TOLERANCES ARE DIFlCULT TO MANUFACTURE OR HAVE A CRITICAL RELIABILITY THAT NO OTHER COMPANY CAN ACHIEVE )N THE CASE OF PROCESS IT MEANS HAVING SPECIALIZED PROCESS CAPABILITIES OR SKILLED LABOR 4HE SECOND STRATEGY IS TO DEVELOP UNIQUE INNOVATIVE PRODUCT OR PROCESS TECHNOLOGY 4HIS MEANS RELYING ON 2$ ANDOR INNOVATION AND CONSTANTLY RENEWING YOUR PRODUCT LINES 4HE THIRD STRATEGY IS TO TARGET BUSINESS WHERE PROXIMITY TO THE CUSTOMER PROVIDES A SERVICE ADVANTAGE 4HIS MEANS RELYING ON A LOGISTICS ADVANTAGE QUICK TURN AROUND JUST IN TIME DELIVERY EG OR A DESIGN CUSTOMER INTERACTION ADVANTAGE INTENSIVE DESIGN OR ENGINEERING FASHION SENSITIVE EG %ACH OF THESE STRATEGIES CAN LEAD TO COMPETITIVE ADVANTAGE AND WHICH ONE OR COMBINATION YOU CHOOSE DEPENDS ON YOUR COMPANY AND ITS SITUATION %ACH MAY ALSO REQUIRE THE ADOPTION OF SUPPORTING STRATEGIES TO REDUCE COST AND RISK ENHANCE CAPABILITIES AND BETTER SERVE YOUR SELECTED NICHE 4HESE SUPPORTING STRATEGIES ARE DIRECTED AT TARGETING THE RIGHT CUSTOMERS WORKING TO BE MORE COST COMPETITIVE lNDING LOWER COST SUPPLIERS DEVELOPING STRATEGIC PARTNERSHIPS BECOMING A GLOBAL PLAYER OR DIVERSIFYING YOUR MARKETS ANDOR CUSTOMER BASE )F YOUR PRIMARY COMPETITIVE STRATEGY IS PRODUCT OR PROCESS BASED WHAT DO YOU NEED 9OU NEED AT LEAST THE BASICS )F YOUR STRATEGY IS BASED ON INNOVATION AND 2$ YOU NEED MORE THAN THAT 3UCCESS FACTORS FOR INNOVATIVE SMALL MANUFACTURERS HAVE RECENTLY BEEN IDENTIlED 3USMAN AND 7ARREN 4HEY ARE
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% &OCUSING ON CORE KNOWLEDGE AND MARKETS WITH THE INTENT TO DOMINATE A NICHE % !VOIDANCE OF DIVERSIlCATION % /PENNESS TO EXTERNAL IDEAS AND PARTNERSHIPS WITH PROACTIVE ACTIVITIES TO ACCESS EXTERNAL OPPORTUNITIES AND COMPLEMENTARY ENTERPRISE RESOURCES % 3TRATEGY AND EXECUTION OF A PLAN TO KEEP CLOSE EVEN INFORMATIONALLY INTIMATE WITH CUSTOMERS % (AVING CLEARLY DElNED INTELLECTUAL PROPERTY )0 AND RESEARCH AND DEVELOPMENT 2$ STRATEGIES % /PEN AND INCLUSIVE CORPORATE CULTURE WHICH EMBRACES INNOVATION % 0ROVISION OF A CUSTOMIZED SERVICE COMPONENT BUNDLED WITH PRODUCTS )T MAY ALSO DEPEND ON % % % %
)NNOVATION IN BUSINESS MODELS IN ADDITION TO PRODUCTS OR SERVICES %NABLING CUSTOMERS TO hSELF SERVEv 0RIVATE RATHER THEN PUBLIC OWNERSHIP STRUCTURE "ALANCED RISK PROlLE OF PROJECTS AND lNANCES
)F YOUR STRATEGY IS BASED ON SUPERIOR LOGISTICS OR DESIGN AND CUSTOMER INTERACTIONS YOU NEED TO BE INFORMATIONALLY INTIMATE #REATE AND LINK DESIGN TOOLS TO CUSTOMERS 4REAT THEM AS TRUE PARTNERS AND INTEGRATE AS MANY BUSINESS PROCESSES AS POSSIBLE SO ITS HARD TO TELL WHERE ONE COMPANY STOPS AND THE OTHER ONE STARTS 3HARE PEOPLE TOO #OMMIT YOURSELF TO YOUR CUSTOMERS SUCCESS (OW ARE SMALLER 53 MANUFACTURING COMPANIES CURRENTLY RESPONDING TO GLOBAL COMPETITION ! RECENT STUDY FOR .)34 -%0 BY .EXUS !SSOCIATES /LDSMAN LOOKED AT EXACTLY THAT QUESTION 4HE RANGE OF OPTIONS INCLUDES ESTABLISHING PLANTS OVERSEAS OR PURCHASING MORE INPUTS FROM OVERSEAS TO TAKE ADVANTAGE OF LOWER COSTS -OST OF THE SURVEYED COMPANIES REPORTED THAT THEY DID NOT PLAN TO OPEN PLANTS OVERSEAS 4HAT MEANS THAT THEY WILL HAVE TO BE SUCCESSFUL EXPORTERS OR DOMINATE A DOMESTIC NICHE -ORE THAN HALF OF THOSE SURVEYED REPORTED THAT AT LEAST SOME PORTION OF THEIR PURCHASED INPUTS ARE SOURCED FROM OUTSIDE THE 53 4HOSE PURCHASED INPUTS ACCOUNTED FOR ABOUT A THIRD OF ALL PURCHASED INPUTS IN THOSE COMPANIES 4HEY EXPECT THAT PERCENTAGE TO INCREASE IN THE NEXT THREE YEARS AND OF THOSE THAT DONT CURRENTLY SOURCE FROM OVERSEAS EXPECT TO BEGIN DOING SO 4HE INCREASE IN PURCHASED INPUTS INDICATES THAT 53 PRODUCERS PRICES AT LEAST FOR COMMODITY GOODS ARE NOT GOING TO BE COMPETITIVE WITHOUT lNDING WAYS TO TAKE ADVANTAGE OF LOWER OVERSEAS PRICES 4O GIVE YOU A SENSE OF HOW GREAT THE DIFFERENCE IS THE SURVEYED COMPANIES REPORTED THAT THEY WOULD NEED PRICE REDUCTIONS TO KEEP THE BUSINESS IN THE 53 THE AMOUNT BY WHICH THE 53 SUPPLIER WOULD HAVE TO
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LOWER ITS PRICES BY ANYWHERE FROM TO DEPENDING ON PRODUCT AND INDUSTRY %VEN WITH CONTINUING IMPROVEMENTS IN LABOR AND MACHINE PRODUCTIVITY THATS HARD TO DO
#/.#,53)/. "ECOMING AN AGILE ENTERPRISE WITH THE ABILITY TO RESPOND QUICKLY AND EFFECTIVELY TO CHANGES IN THE GLOBAL BUSINESS ENVIRONMENT IS A BUSINESS NECESSITY 4HAT MEANS ADDING THE TOOLS TECHNIQUES AND TECHNOLOGIES TO YOUR SMALL BUSINESS OPERATIONS 7HICH TOOLS WHICH TECHNIQUES AND WHICH TECHNOLOGIES DEPENDS ON YOUR CUSTOMERS AND MARKETS 'ET CLOSER TO YOUR CUSTOMERS &IND OUT WHAT THEIR REAL NEEDS ARE !DD SERVICES TO WHAT YOU OFFER -AKE YOURSELF INDISPENSABLE !SK YOURSELF WHAT VALUE DO ) BRING TO MY CUSTOMERS )S IT IN DESIGN SERVICE BEING CLOSE TO THE MARKET OR SOMETHING ELSE )F YOU MAKE A PRODUCT TAKE A GOOD LOOK AT THE ONES THAT REQUIRE TIGHT TOLERANCES ARE DIFlCULT TO MANUFACTURE OR HAVE CRITICAL RELIABILITY REQUIREMENTS ,OOK AT THE PROCESSES USED TO MAKE THEM !RE THEY UNIQUE PROCESSES OR DO THEY REQUIRE SPECIALIZED SKILLED LABOR THAT GIVES YOU AN ADVANTAGE !RE THE PRODUCTS THEMSELVES UNIQUE AND PROTECTED BY PATENTS !RE YOU DOING THE RESEARCH AND DEVELOPMENT NECESSARY TO STAY AHEAD OF THE GAME !RE THE PRODUCTS FASHION SENSITIVE AND CAN YOU CUSTOMIZE AND DELIVER THEM QUICKLY ENOUGH AND PROlTABLY ENOUGH TO TAKE ADVANTAGE OF RAPID CHANGES IN SUCH A MARKET (AVING ASKED YOURSELF THESE PRODUCT AND SERVICE QUESTIONS NOW ASK YOURSELF ABOUT YOUR CUSTOMERS $O YOU HAVE THE RIGHT CUSTOMERS !RE THEY LOOKING FOR JUST THE LOWEST PRICE OR CAN YOU OFFER SOMETHING MORE $O THEY WANT TO "UY !MERICAN (OW MANY DIFFERENT CUSTOMERS DO YOU HAVE AND SHOULD YOU HAVE GREATER DIVERSITY IN YOUR CUSTOMER BASE (OW MUCH OF YOUR BUSINESS AND PROlTS COMES FROM THE TOP OF YOUR CUSTOMERS .EXT ASK ABOUT YOUR COMPANYS OPERATIONS !RE YOU AS COST COMPETITIVE AS YOU CAN BE 3HOULD YOU HAVE YOUR OWN OVERSEAS SOURCES TO GET THE LOWEST COSTS POSSIBLE 3HOULD YOU BECOME A GLOBAL PLAYER AND IF SO DO YOU HAVE THE WHEREWITHALlNANCIAL AND PERSONALTO CHANGE AND GROW YOUR BUSINESS ENOUGH TO BE ONE OF THOSE PLAYERS 5SING THE ANSWERS TO THOSE QUESTIONS THEN INVEST IN AND RESTRUCTURE YOUR BUSINESS TO BECOME AS AGILE AS POSSIBLE AND BE POSITIONED TO TAKE ADVANTAGE OF OPPORTUNITIES AS THEY BECOME AVAILABLE
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2EFERENCES #OLLINS - 0 4HE -ANUFACTURERS 'UIDE TO "USINESS -ARKETING .P -0# -ANAGEMENT &AIRVIEW /2 ,EARNING TO #HANGE .ATIONAL 2ESEARCH #OUNCIL ,EHTIHET ! $ 7ILSON AND ' 3USMAN h! &RAMEWORK FOR %XAMINING AND %VALUATING &UTURE -ANUFACTURING "USINESSES IN THE 53v &INAL 2EPORT 3EPT 4HE -ANUFACTURING %XTENSION 0ARTNERSHIP 0ROGRAM 0ART !LTERNATIVE "USINESS -ODELS 0ART 2E EXAMINING THE #ORE 0REMISE OF THE -%0 0ROGRAM .ATIONAL !CADEMY OF 0UBLIC !DMINISTRATION h.EXT 'ENERATION -ANUFACTURING 2EPORT v 4HE !GILITY &ORUM .)34 -%0 3TUDY OF 53 3MALL -ANUFACTURERS E"USINESS .EEDS 0HASE AND 0HASE &INAL 2EPORT /LDSMAN % h(OW 3-%S 5NDERSTAND AND 2ESPOND TO 'LOBAL -ANUFACTURING #HALLENGESv .EXUS !SSOCIATES !UG 3TONE - h! "RIElNG ON #OMPETITION FROM ,OW COST #OUNTRIESv 3TONE AND !SSOCIATES 3USMAN ' AND ! 7ARREN h2EVIEW OF )NNOVATION 0RACTICES IN 3MALL #OMPANIESv &INAL 2EPORT 3EPT 7IERSEMA & #USTOMER )NTIMACY 0ICK 9OUR 0ARTNERS 3HAPE 9OUR #ULTURE 7IN 4OGETHER .P +NOWLEDGE %XCHANGE
)4 !.$ 4(% !'),% '/6%2.-%.4 ) 4HE 2OLE OF )NFORMATION 4ECHONOLOGY IN )MPROVING THE %FlCIENCY OF 'OVERNMENT &UNCTIONS 3!-)2 3(!( ).3425#4/2 /& ).&/2-!4)/. 3#)%.#%3 !.$ 4%#(./,/'9 4(% 0%..39,6!.)! 34!4% 5.)6%23)49 9/2+ #!-053 !24(52 34%0(%.3 $%0549 3%#2%4!29 &/2 ).&/2-!4)/. 4%#(./,/'9 #/--/.7%!,4( /& 0%..39,6!.)! 4HIS CHAPTER WILL USE 0ENNSYLVANIAS 3TATE 'OVERNMENT TO ILLUSTRATE HOW GOVERNMENTS MUST RESPOND TO THE CHALLENGE OF BECOMING AN AGILE ORGANIZATION 4HE 0! 3TATE 'OVERNMENT IS MADE UP OF SEPARATE AGENCIES SERVES OVER MILLION PEOPLE AND OVERSEES A BILLION BUDGET OF STATE AND FEDERAL EXPENDITURES 4O WORK WITH MAXIMUM EFlCIENCY AND EFFECTIVENESS THE STATE HAS TO BE ABLE TO RESPOND QUICKLY TO A CHANGING ENVIRONMENT 4HE CHALLENGE IS HOW TO ACHIEVE AGILITY GIVEN THE COMPLEX AND SOMEWHAT CUMBERSOME STRUCTURE OF GOVERNMENT
).42/$5#4)/. 4HE TOPIC OF AGILITY IN GOVERNMENT MAY SEEM AT lRST LIKE AN OXYMORON BUT THAT IS EXACTLY WHAT MUST OCCUR FOR GOVERNMENTS TO CONTINUE TO MEET THE DYNAMIC NEEDS OF ITS CITIZENS 'OVERNMENTS ARE UNIQUE IN MANY WAYS &IRST GOVERNMENTS MUST SERVE ALL CITIZENS WHILE BUSINESSES HAVE THE ABILITY TO STRATIFY ITS CUSTOMERS GOVERNMENT
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CANNOT DO THAT )N FACT GOVERNMENTS ARE ENTRUSTED TO FAIRLY AND EQUITABLY ADMINISTER THE LAWS AND RULES OF THAT JURISDICTION 3ECOND MOST GOVERNMENT DECISIONS OF ARE VERY PUBLIC 0RESS CITIZENS LEGISLATURES AND COURTS HAVE VISIBILITY INTO THE DECISION MAKING PROCESS -AJOR CORPORATIONS DO NOT HAVE THE SAME SCRUTINY AND TRANSPARENCY OF THEIR DECISIONS 4HIRD GOVERNMENT MUST CONSIDER THE NEEDS OF ALL STAKEHOLDERS IN MAKING DECISIONS AND IN FACT THESE STAKEHOLDERS OFTEN PLAY A ROLE IN INmUENCING THE DECISION ,EGISLATIVE PRIORITIES COURT DECISIONS LOBBYISTS BUSINESS NEEDS PUBLIC INTEREST CITIZENS NEEDS AND ENVIRONMENTAL IMPACT ARE A FEW EXAMPLES OF FACTORS THAT IMPACT THE DECISION MAKING PROCESS 4HIS TYPE OF INCLUSIVE PROCESS REQUIRES TIME TO UNDERSTAND THE PERSPECTIVES INVOLVED AND TO REACH A WORKABLE SOLUTION 4HEREFORE THINGS IN GOVERNMENT OFTEN MOVE SLOWER THAN PRIVATE INDUSTRY FOR A REASON TO ENSURE THE SOLUTION MEETS THE NEEDS OF THE CITIZENS &OURTH GOVERNMENT DOES NOT SELL ANYTHING ITS PRIMARY SOURCE OF REVENUE IS ITS TAX BASE 4HEREFORE GOVERNMENT FUNDING IS RELIANT ON THE SATISFACTION OF THE TAXPAYERS WHO FUND THE NUMEROUS PROGRAMS THROUGH THEIR TAX PAYMENTS 4HIS LIMITS THE ABILITY OF GOVERNMENTS TO MAKE CAPITALSTRATEGIC INVESTMENTS AS READILY AS PRIVATE INDUSTRY )N PRIVATE INDUSTRY THE ORGANIZATION IS MORE mEXIBLE AND DYNAMIC WITH FUNDING ITS STRATEGIC INITIATIVES -OST GOOD IDEAS THAT WILL INCREASE PROlT GET FUNDED 4HE SIMPLE REALITY IN GOVERNMENT IS THAT OFTEN GOOD IDEAS MUST WAIT BECAUSE THERE IS NOT ENOUGH hSEED MONEYv TO FUND THE PRODUCTIVITY ENHANCING INITIATIVES &IFTH FEW BUSINESSES EXPERIENCE THE AMOUNT OF EXECUTIVE LEVEL TURNOVER AS GOVERNMENTS EXPERIENCE EVERY FOUR TO EIGHT YEARS WHEN A NEW ADMINISTRATION TAKES OFlCE 4HIS LEADS TO CHANGING PRIORITIES AND VARYING RESOURCES ACROSS INITIATIVES )T ALSO LEADS TO UNlNISHED BUSINESS ACROSS ADMINISTRATIONS WHICH MEANS INITIATIVES ARE SUSCEPTIBLE TO CHANGING POLITICAL AGENDAS
#534/-%2 $2)6%23 /& !'),)49 $ESPITE THESE DIFFERENCES GOVERNMENTS CUSTOMERS DEMAND AGILITY FOR SEVERAL REASONS INCLUDING s 3ERVICES TO ALL ITS CITIZENS #ITIZENS DEMAND SERVICES ONLINE AND ALSO THROUGH MORE TRADITIONAL SERVICE APPROACHES SUCH AS lELD OFlCES TELEPHONE CALLS OR WAITING IN LINE 4HESE MULTIPLE EXPECTATIONS REQUIRE THE GOVERNMENT TO PROVIDE A MULTITUDE OF CUSTOMER SERVICE OPTIONS TO MEET THE EXPECTATIONS OF THE CITIZENS
)4 !.$ 4(% !'),% '/6%2.-%.4
s %FFECTIVENESS .O ONE LIKES TO PAY TAXES AND NO ONE CERTAINLY LIKES TO HEAR OF GOVERNMENT WASTE OR BLOAT #ITIZENS EXPECT THAT GOVERNMENTS WILL BE EFFECTIVE STEWARDS OF THEIR TAX DOLLARS s #HANGING DEMOGRAPHICS 9OUNGER !MERICANS HAVE GROWN UP WITH THE )NTERNET AND IT IS PART OF THEIR LIFE 4HEIR EXPECTATIONS OF SERVICE PRIVACY AND OTHER CRITICAL TOPICS ARE VERY DIFFERENT FROM MANY SENIOR CITIZENS !S THE POPULATION DEMOGRAPHICS CONTINUE TO EVOLVE THIS GENERATION OF !MERICANS WILL WANT TO SEE THE SAME LEVEL OF INTEGRATION OF GOVERNMENT SERVICES AS THEY SEE FROM TRADITIONAL BUSINESSES
!'),)49 "!22)%23 %ARLIER THIS CHAPTER OUTLINED MANY OF THE UNIQUE SITUATIONS GOVERNMENT FACES -ANY OF THESE SITUATIONS CAN BE BARRIERS TO AGILITY 3OME OF THE SPECIlC BARRIERS INCLUDE BUDGETING HUMAN RESOURCE PRACTICES TURNOVER OF LEADERSHIP LARGE SCALE PROJECTS REGULATIONS AND LAWS AND ORGANIZATION hSTOVE PIPESv s "UDGET 'OVERNMENT BUDGETS ARE OFTEN PREPARED MONTHS IN ADVANCE OF SPENDING 4HIS TYPE OF BUDGETING PROCESS CAN LEAD TO A MISMATCH OF FUNDING VS PRIORITIES AS PRIORITIES CAN CHANGE IN GOVERNMENT OVER THAT AMOUNT OF TIME !N AGILE ORGANIZATION MUST ADDRESS THIS lNANCIAL ISSUE s (UMAN 2ESOURCE 0RACTICES 'OVERNMENT HIRING PRACTICES ARE OFTEN GOVERNED BY EXTERNAL FACTORS SUCH AS LEGISLATIVE MANDATES TO #IVIL 3ERVICE PROCEDURES AND UNION CONTRACTS 4HESE PROGRAMS REQUIRE ADVANCED PLANNING OF HIRING NEEDS AND CAN LIMIT THE ORGANIZATIONS ABILITY TO BE mEXIBLE IN HOW IT DEPLOYS ITS WORK FORCE s 4URNOVER 'OVERNMENT FACES TURN OVER IN MANY WAYS )N THE NEXT YEARS AS MUCH AS OF THE EXISTING GOVERNMENT WORK FORCE COULD RETIRE 4HIS WILL HAVE A SIGNIlCANT IMPACT ON GOVERNMENT PLANNING OPERATIONS AND WORK FORCE ISSUES !DDITIONALLY EVERY YEARS THE !DMINISTRATION CHANGES WHICH CAN LEAD TO INSTABILITY IN THE MISSION AND AGENDA OF THE ORGANIZATIONS %VERY TRANSITION REQUIRES RELEARNING AND RESELLING OF EXISTING PROGRAMS AND PROJECTS s ,ARGE 3CALE 0ROJECTS 4HERE ARE VERY FEW SMALL PROJECTS IN GOVERNMENT ESPECIALLY IN A STATE LIKE 0ENNSYLVANIA WITH MILLION CITIZENS ,ARGE PROJECTS HAVE A SERIES OF UNIQUE CHALLENGES BUT MOST IMPORTANTLY KEEPING THEM ON TRACK AND WITHIN SCOPE IS A MUST ,ARGE PROJECTS CAN LIMIT AGILITY BECAUSE SO MANY RESOURCES MUST BE COMMITTED FOR YEARS TO COMPLETE
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A PROJECT THAT THE ORGANIZATION LOSES THE ABILITY TO RESPOND TO OTHER URGENT SITUATIONS WITHOUT IMPACTING THE ORIGINAL PROJECT TIME LINE s ,AWS #OURT 2ULINGS AND 2EGULATIONS n 'OVERNMENTS ARE SUBJECT TO A WIDE VARIETY AND SIGNIlCANT NUMBER OF LAWS RULES AND REGULATIONS THAT GOVERN THEIR ACTIONS /VER TIME SOME OF THESE RULES AND LAWS CAN BECOME RESTRICTIVE TO EFFECTIVELY SHARING INFORMATION ACROSS ORGANIZATIONS AND LEAD TO A LESS AGILE ORGANIZATION s /RGANIZATION 3TOVE 0IPES n 'OVERNMENTS HAVE EXISTED IN THE 5NITED 3TATES FOR HUNDREDS OF YEARS -OST GOVERNMENTS OF TODAY ARE NOT STRUCTURED STRATEGICALLY AS BUSINESSES WOULD BE )NSTEAD THEY ARE STRUCTURED BY HISTORICAL PRECEDENCE LEGISLATION REGULATIONS AND COURT DECISIONS 'OVERNMENT ORGANIZATIONS ARE EVOLVING INTO BECOMING MORE CONNECTED BUT THE SIMPLE FACT REMAINS THAT MOST GOVERNMENTS STILL HAVE ORGANIZATIONS WITH SIMILAR MISSIONS WORKING INDEPENDENTLY AND NOT SHARING RESOURCES IDEAS OR SOLUTIONS 4HESE ARE BUT A HANDFUL OF BARRIERS FACED BY GOVERNMENT IN DISPLAYING AGILITY 4HE CHALLENGES ARE MANY (OWEVER WE BELIEVE THAT BY FOLLOWING AN EFFECTIVE FRAMEWORK GOVERNMENTS CAN BEGIN TO OVERCOME THESE CHALLENGES
4(% !'),)49 &2!-%7/2+ 4HE DIAGRAM BELOW OUTLINES AN AGILITY FRAMEWORK 4HERE ARE EIGHT AREAS THAT MUST BE INTEGRATED TO FACILITATE AN AGILE ORGANIZATION
&IGURE !GILITY &RAMEWORK
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4HE !GILITY FRAMEWORK OUTLINES THE FOLLOWING KEY AREAS 'OVERNANCE 3TRATEGIC 0LANNING 0ERFORMANCE -EASUREMENT #ITIZEN &OCUS %FlCIENT AND %FFECTIVE 0ROCESSES %FFECTIVE #OMMUNICATIONS #ULTURE OF #HANGE AND $YNAMIC 4ECHNOLOGY )NFRASTRUCTURE 'OVERNANCE !N AGILE ORGANIZATION MUST HAVE AN EFFECTIVE DECISION MAKING STRUCTURE THAT OVERSEES THE PRIORITIZATION OF ACTIVITIES THE IMPLEMENTATION OF KEY PROJECTS AND PROVIDES THE APPROPRIATE SUPPORT AND RESOURCES TO THE CRITICAL NEEDS OF THE ORGANIZATION 3TRATEGIC 0LANNING $YNAMIC ORGANIZATIONS MUST KNOW WHO THEY ARE AND WHERE THEY ARE GOING OR THEY ARE CERTAIN TO HAVE ORGANIZATIONAL UNITS HEAD IN DIFFERENT DIRECTIONS !GILE ORGANIZATIONS MUST HAVE A WELL DElNED MISSION AND SENSE OF PURPOSE FOR THE ORGANIZATION 4HIS MISSION MUST GUIDE THE DECISION MAKING PROCESS AND THE DAY TO DAY OPERATIONS OF THE ORGANIZATION !DDITIONALLY A MOTIVATED WORK FORCE MUST UNDERSTAND AND HELP ESTABLISH THE PRIORITIES OF THE ORGANIZATION 4HESE PRIORITIES MUST BE CLEAR LIMITED IN NUMBER AND WELL DElNED TO ENSURE THAT THE RIGHT CHALLENGES ARE BEING ADDRESSED 0ERFORMANCE -EASUREMENT %FFECTIVE ORGANIZATIONS KNOW WHAT THEY WANT TO BE AND PROBABLY MOST IMPORTANTLY THEY KNOW HOW WELL THEY ARE DOING 3OME ONE ONCE SAID h7HAT GETS MEASURED GETS DONEv !N ORGANIZATION MUST ESTABLISH A BALANCED SET OF METRICS THAT MONITOR ALL THE KEY PRINCIPLES THAT ARE OUTLINED IN ITS MISSION AND STRATEGIC PLAN #ITIZEN#USTOMER &OCUS 'OVERNMENTS SERVE MULTIPLE ROLES BUT ONE OF THE MOST CRITICAL IS SERVING THE CITIZENS /FTEN WHAT GOVERNMENTS FAIL TO REALIZE IS THAT THE WORK THAT THEY DO IS FOR THE PEOPLE 'OVERNMENT OFlCIALS MUST TAKE THE ATTITUDE THAT GOVERNMENT EXPENDITURES MUST BE MADE PRUDENTLY BECAUSE IT IS NOT THE 'OVERNMENTS MONEY )T IS THE TAXPAYERS MONEY 4HEREFORE MOST SERVICES THAT THE GOVERNMENT PROVIDES SHOULD BE DONE WITH THE PUBLICS SERVICE IN MIND %FlCIENT AND %FFECTIVE 0ROCESSES ! SUCCESSFUL ORGANIZATION IS ALWAYS TRYING TO GET BETTER 7HETHER IT IS STREAMLINING OPERATIONS DELIVERING MORE SERVICE OR REVIEWING THE EFFECTIVENESS OF PROGRAMS UNDERSTANDING THE STRENGTHS AND WEAKNESSES OF EXISTING PROCESSES IS CRITICAL TO BECOMING AN AGILE ORGANIZATION %FFECTIVE #OMMUNICATIONS !GILE ORGANIZATIONS COMMUNICATE ! MOTIVATED WORK FORCE IS CRITICAL TO GETTING THINGS ACCOMPLISHED BUT WITHOUT COMMUNICATIONS A MOTIVATED WORK FORCE CAN CREATE REDUNDANCIES INCONSISTENT DECISIONS AND
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ANIMOSITY AMONG MEMBERS %VERY ORGANIZATION MUST REMEMBER TO COMMUNICATE COMMUNICATE AND COMMUNICATE #ULTURE OF #HANGE ! CRITICAL COMPONENT TO ACHIEVING AGILITY IS TO HAVE A HIGHLY FUNCTIONING WORK FORCE THAT EMBRACES A CULTURE OF CHANGE /FTEN GOVERNMENTS ARE PERCEIVED AS MOVING SLOWLY AND BEING A PLACE OF STABILITY )N FACT MANY GOVERNMENT CULTURES FOSTER THIS TYPE OF APPROACH (OWEVER TO BE TRULY EFFECTIVE ORGANIZATIONS MUST REWARD PEOPLE WHO LEAD AND SUPPORT CHANGE 'OVERNMENTS MUST ATTRACT EXCELLENT TALENT THAT IS MOTIVATED TO IMPROVE SERVICES TO CITIZENS AND EMBRACES CHANGE 7ITHOUT THIS TYPE OF CULTURE AND TALENT YOUR ORGANIZATION WILL NOT ACHIEVE AGILITY $YNAMIC 4ECHNOLOGY )NFRASTRUCTURE 4HE LAST COMPONENT TO ACHIEVING AN AGILE ORGANIZATION IS TO PROVIDE THE TECHNOLOGY INFRASTRUCTURE THAT ALLOWS AN ORGANIZATION TO ACCOMPLISH EACH OF THE ABOVE COMPONENTS 4ECHNOLOGY MUST BE STABLE IN THAT SERVICE MUST CONTINUE TO BE DELIVERED THROUGH CHANGE 9ET TECHNOLOGY MUST BE DYNAMIC TO EMBRACE THE CHANGING BUSINESS REQUIREMENTS AND EXPECTATIONS OF OUR CUSTOMERS 7E BELIEVE THAT THIS AGILITY FRAMEWORK IS PERTINENT TO ALL ORGANIZATIONS "UT FOR PURPOSES OF THIS CHAPTER WE ARE FOCUSING ON HOW THE AGILITY FRAMEWORK IS BEING APPLIED ACROSS THE TECHNOLOGY COMMUNITY FOR THE #OMMONWEALTH OF 0ENNSYLVANIA
4(% 0%..39,6!.)! 4%#(./,/'9 #!3% 345$9 7HEN ASKED TO WRITE THIS CHAPTER WE STRUGGLED ON HOW TO DEPICT THE CHANGE THAT IS OCCURRING ACROSS THE #OMMONWEALTH 7E ARE CERTAINLY NOT YET AN AGILE TECHNOLOGY ORGANIZATION BUT WE ARE STRIVING TO BECOME ONE )N FACT MONTHS AGO THERE WAS ONLY ONE COMPONENT OF THE AGILITY FRAMEWORK THAT WAS IN CHECK THE 4ECHNOLOGY )NFRASTRUCTURE 4HE #OMMONWEALTHS )4 INFRASTRUCTURE IS STABLE AND MEETING THE NEEDS OF AGENCIES AND CITIZENS TODAY &UNCTIONS LIKE MAINFRAME PROCESSING NETWORK SERVICES TELECOMMUNICATIONS E MAIL AND BACK OFlCE BUSINESS PROCESSES ACCOUNTING PAYROLL BUDGET PROCUREMENT HUMAN RESOURCE SYSTEMS ARE ALL STABLE (OWEVER MANY OF THE OTHER COMPONENTS OF AGILITY WERE NOT BEING ADDRESSED AT AN ENTERPRISE LEVEL &OR THE PAST MONTHS WE HAVE BEGUN WORKING ON CREATING THE #ULTURE OF #HANGE TO CONTINUE TO ALLOW THE #OMMONWEALTH TECHNOLOGY ORGANIZATIONS TO BECOME MORE AGILE
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4HE FOLLOWING PARAGRAPHS OUTLINE THE STEPS THAT THE #OMMONWEALTH )4 ORGANIZATIONS ARE TAKING TO ACCOMPLISH OUR AGILITY OBJECTIVES
)4 'OVERNANCE )4 'OVERNANCE IS THE PROCESS BY WHICH )4 INVESTMENTS ARE PRIORITIZED ACROSS AN ORGANIZATION &ULL CYCLE )4 GOVERNANCE BEGINS AT THE PLANNING STAGE AND CONTINUES DOWN TO PROJECT MANAGEMENT AND )4 OPERATIONS 7HILE MORE FAMILIAR TO BUSINESS )4 'OVERNANCE IS A RELATIVELY NEW CONCEPT FOR GOVERNMENT ORGANIZATIONS 4HE DAWN OF )4 'OVERNANCE IN GOVERNMENT MEANS A FUNDAMENTAL CHANGE TO HOW GOVERNMENT OPERATES )4 'OVERNANCE ENABLES GOVERNMENT TO ENACT AGILE DECISION MAKING PROCESSES TO ALIGN TECHNOLOGY INVESTMENTS WITH %NTERPRISE GOALS AND MISSIONS 0REVIOUSLY THE #OMMONWEALTH OF 0ENNSYLVANIAS POLICY FOR THE GOVERNANCE OF )4 INITIATIVES WAS PRIMARILY DECENTRALIZED )T BECAME APPARENT THAT THIS WAS NOT AN EFlCIENT OR AGILE WAY TO MANAGE )4 INVESTMENTS AND THINGS NEEDED TO CHANGE )N !PRIL %XECUTIVE /RDER WAS ISSUED AND ESTABLISHED AN %NTERPRISE )NFORMATION 4ECHNOLOGY 'OVERNANCE "OARD TO OVERSEE THE INVESTMENT AND PERFORMANCE OF INFORMATION SOLUTIONS ACROSS THE #OMMONWEALTHS AGENCIES 4HE 'OVERNANCE "OARD WAS TASKED WITH ADVISING THE 'OVERNOR ON THE DEVELOPMENT OPERATION AND MANAGEMENT OF THE #OMMONWEALTHS )4 INVESTMENTS AND RESOURCES )N ADDITION THE 'OVERNORS /FlCE OF !DMINISTRATION/FlCE FOR )NFORMATION 4ECHNOLOGY /!/)4 WAS TASKED WITH IMPLEMENTING THE POLICIES PLANNING INITIATIVES AND BUDGET DIRECTIVES ADOPTED BY THE 'OVERNANCE "OARD 4HE /!/)4 WAS ALSO DIRECTED TO s %STABLISH AN %NTERPRISE !RCHITECTURE %! AND DEPLOY ENTERPRISE WIDE TECHNOLOGY s %STABLISH PRODUCT STANDARDS AND CONDUCT TECHNICAL REVIEWS OF AGENCY SYSTEMS s %STABLISH ENTERPRISE WIDE SECURITY PROCEDURES AND PROTOCOLS s $EVELOP AND DEPLOY 'EOGRAPHIC )NFORMATION 3YSTEM ')3 AND 'EOSPATIAL 4ECHNOLOGY '4 INVESTMENTS s 2EVIEW ALL AGENCY )4 BUDGET REQUESTS EXCEEDING AND OTHER PROCUREMENT DOCUMENTATION AND s %STABLISH A #OMMUNITY OF 0RACTICE #O0 ENTERPRISE WIDE PLANNING PROCESS
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#OMMUNITIES OF 0RACTICE AND 'OVERNANCE 4HE #O0 PLANNING PROCESS IS AN INTEGRAL PART OF THE #OMMONWEALTHS )4 'OVERNANCE STRUCTURE #O0 BRINGS TOGETHER AGENCIES WITH SIMILAR PROGRAM AND POLICY OBJECTIVES SERVE COMMON POPULATIONS OR HAVE COMPATIBLE DATA COLLECTION AND MANAGEMENT NEEDS 3PECIlCALLY THE #OMMONWEALTHS AGENCIES HAVE BEEN INTEGRATED INTO COMMUNITIES OF PRACTICE (EALTH AND (UMAN 3ERVICES %NVIRONMENT 0UBLIC 3AFETY AND 'OVERNMENT /PERATIONS 4HE DIAGRAM BELOW OUTLINES THE #O0 APPROACH
&IGURE #OMMUNITY OF 0RACTICE !PPROACH
4HESE COMMUNITIES OF PRACTICE WERE DERIVED FROM THE PREMISE THAT 'OVERNMENT SERVES SEVERAL BASIC NEEDS FOR THEIR CITIZENS TO PROTECT THEIR PUBLIC SAFETY TO PROTECT THEIR HEALTH TO PROTECT THE ENVIRONMENT AND TO EDUCATE STUDENTS !GENCIES HAVE BEEN ALIGNED WITH THOSE BASIC PRINCIPLES TO ENSURE THAT TECHNOLOGY INITIATIVES IN AGENCIES WITH COMMON MISSIONS ARE INTEGRATED AS BEST AS POSSIBLE 0ER %XECUTIVE /RDER THE #O0 PROCESS FOCUSES ON ENTERPRISE )4 PLANNING AND PROJECT PRIORITIZATION TO
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s %NSURE THAT THE )4 PROJECTS FUNDED IN THE 'OVERNORS BUDGET ARE THE MOST CRITICAL AND ARE ALIGNED WITH ENTERPRISE GOALS 0ROJECTS ARE PRIORITIZED WITHIN EACH COMMUNITY OF PRACTICE FOR BUDGETING AND PLANNING PURPOSES AND s )DENTIFY SIMILAR PROJECTS BEING ADDRESSED ACROSS MULTIPLE AGENCIES AND PLAN FOR THE DEVELOPMENT OF THESE INITIATIVES IN A COLLABORATIVE NON REDUNDANT MANNER 4HIS ANALYSIS CAN IDENTIFY WHERE SOLUTIONS CAN BE REUSED OR WHERE AGENCIES CAN WORK TOGETHER TO SOLVE A BUSINESS NEED RATHER THAN WORKING IN THEIR STOVE PIPES )N THE END 0ENNSYLVANIAS DEVELOPMENT OF AN AGILE )4 'OVERNANCE STRUCTURE WILL GREATLY IMPROVE ORGANIZATIONAL EFlCIENCY RESULT IN COST SAVINGS AND BETTER SERVE ITS CITIZENRY
3TRATEGIC 0LANNING 7ITH AN EFFECTIVE GOVERNANCE MODEL IN PLACE THE #OMMONWEALTH CREATED THE +EYSTONE 4ECHNOLOGY 0LAN THE STRATEGIC TECHNOLOGY PLAN FOR THE #OMMONWEALTH 4HIS PLAN OUTLINES OUR )4 MISSION AND GUIDING PRINCIPLES EXPLAINS THE GOVERNANCE MODEL EXPLAINS THE ROLE AND FUNCTION OF THE CENTRAL )4 ORGANIZATION DISCUSSES ENTERPRISE ARCHITECTURE AND OUTLINES YEAR PRIORITIES FOR EACH COMMUNITY OF PRACTICE 4HE +EYSTONE 4ECHNOLOGY 0LAN PROVIDES THE BASIS FOR BROADER PLANNING ACROSS THE AGENCY TECHNOLOGY ORGANIZATIONS %ACH TECHNOLOGY ORGANIZATION IS TO REVIEW THE CENTRAL PLAN AND PRIORITIES DEVELOP THEIR AGENCY SPECIlC PRIORITIES AND DEVELOP A STRATEGIC PLAN THAT INTEGRATES INTO THE +EYSTONE 4ECHNOLOGY 0LAN 4HIS TYPE OF COORDINATED )4 PLANNING HAS NOT EXISTED BEFORE ACROSS THE #OMMONWEALTH AND RESULTS THUS FAR HAVE BEEN MIXED 3EVERAL AGENCIES HAVE EMBRACED THE CONCEPT AND DELIVERED EXCELLENT PLANS WHILE OTHER AGENCIES ARE STILL SORTING OUT THEIR SPECIlC PRIORITIES WITH THEIR BUSINESS AREAS 4HIS TYPE OF DIALOGUE HAS OFTEN NOT EXISTED PREVIOUSLY IN SOME AGENCIES WHERE TECHNOLOGY IS CONSIDERED A BACK OFlCE ADMINISTRATIVE FUNCTION !GENCY 0LANS REQUIRE APPROVAL BY THE CENTRAL )4 OFlCE TO ENSURE THAT ALL AGENCIES ARE ROWING TOGETHER WITH THE SAME SET OF PRIORITIES !DDITIONALLY THESE PLANS OFTEN HIGHLIGHT ISSUES THAT NEED TO BE ADDRESSED BY THE CENTRAL )4 OFlCE AS BEING COMMON TO MULTIPLE AGENCIES (AVING A TECHNOLOGY STRATEGIC PLAN EMPHASIZING CUSTOMER SERVICE EFlCIENCY AND )4 PRIORITIZATION IS A CRITICAL STEP IN HELPING A MOTIVATED ORGANIZATION ATTAIN ITS GOALS
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)4 0ROJECTS -UST -EASURE 5P 4HE MOST IMPORTANT THING THAT ANY ORGANIZATION AGILE OR NOT CAN DO IS TO DELIVER ON ITS PROMISES 7HILE )4 HELPS IMPROVE THE FUNCTIONS OF GOVERNMENT BY MAKING IT MORE AGILE IT IS IMPORTANT THAT TOOLS ARE AVAILABLE FOR EVALUATING THE )4 PROJECTS 0ERFORMANCE MEASURES ARE CUSTOMER FOCUSED QUANTIlABLE INDICATORS THAT PROVIDE GOVERNMENT AGENCIES WITH INFORMATION ON WHETHER OR NOT THEY ARE MEETING THEIR GOALS AND OBJECTIVES AND ESSENTIALLY DELIVERING ON THEIR PROMISES 0ERFORMANCE MEASURES ALSO GIVE AGENCY MANAGERS A GREATER CAPABILITY TO PLAN BUDGET AND STRUCTURE ORGANIZATIONAL ACTIVITIES AND TO CONTROL RESULTS )N ESTABLISHING THE #OMMONWEALTHS ENTERPRISE WIDE )4 POLICIES STANDARDS AND SOLUTIONS TIMELY DELIVERY OF EFlCIENT PROJECTS HAS BECOME INCREASINGLY CRITICAL 4HE )4 COMMUNITY IS FOCUSING ON DELIVERING PROVEN MEASURABLE BENElTS TO REESTABLISH AND MAINTAIN CREDIBILITY IN THE VALUE OF )4 WITHIN STATE GOVERNMENT ! COMMITMENT TO ACCOUNTABILITY IS NECESSARY TO RECEIVE )4 PROJECT FUNDING APPROVAL AND OVERALL TO ACHIEVE REAL RESULTS "EFORE ANY NEW )4 PROJECT CAN BEGIN A BUSINESS CASE MUST BE ESTABLISHED !S )4 PROJECTS ARE COMPLETED THEY MUST BE MEASURED AGAINST THE ORIGINAL BUSINESS CASE THAT WAS PROJECTED )T IS THE RESPONSIBILITY OF STATE AGENCIES TO ENSURE THAT PROCUREMENT OF )4 RESOURCES n HARDWARE SOFTWARE PERSONNEL AND SERVICES n IS DONE IN ALIGNMENT WITH AGENCY OBJECTIVES !ND FURTHERMORE IT IS THE CENTRAL TECHNOLOGY OFlCES RESPONSIBILITY TO ENSURE THESE )4 PROJECTS ARE IN ALIGNMENT WITH MEETING THE OVERARCHING OBLIGATIONS OF STATE GOVERNMENT
&OCUSING ON #USTOMER 3ERVICE IS +EY TO 3UCCESS 4HE FOCUS OF SUCCESSFUL )4 EFFORTS IN STATE GOVERNMENT IS THE CONTINUOUS IMPROVEMENT IN PROVIDING CRITICAL SERVICES TO CUSTOMERS )N THIS CASE THAT WOULD BE THE CITIZENS OF THE #OMMONWEALTH )T IS IMPERATIVE THAT AGENCIES RECOGNIZE THIS AND ORGANIZE THEMSELVES IN A MANNER THAT MAKES THE NEEDS OF THE CITIZENS CENTRAL TO THEIR FUNCTIONS ! CITIZEN CENTRIC GOVERNMENT DOES NOT ACT AS hBIG BROTHERv BUT RATHER AS AN EASILY ACCESSIBLE SERVICE PROVIDER "Y TAKING ADVANTAGE OF )NTERNET TECHNOLOGY IN DELIVERING INFORMATION AND SERVICES GOVERNMENT HAS MADE GREAT STRIDES IN IMPROVING ITS ACCESS AND SERVICES 0ENNSYLVANIA HAS QUITE AN IMPRESSIVE LIST OF ONLINE SERVICES INCLUDING lLING TAX RETURNS REGISTERING MOTOR VEHICLES OBTAINING NEW BUSINESS LICENSES SHARING CRIMINAL JUSTICE DATA AND APPLYING FOR VARIOUS HUMAN SERVICES /NE GOOD AND FREQUENTLY USED EXAMPLE OF THIS IS PROVIDED BY THE 0ENNSYLVANIA $EPARTMENT OF 4RANSPORTATION 0ENN$OT WHERE CITIZENS CAN GO ONLINE TO OBTAIN
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ALL THE INFORMATION PERTINENT TO DRIVERS LICENSING AND VEHICLE REGISTRATION !S A RESULT OF THIS 0ENN$OT HAS PROGRESSED FROM BEING AN AGENCY THAT CITIZENS WERE HISTORICALLY UNHAPPY WITH TO ONE FOR WHICH CITIZENS EXPRESS MUCH SATISFACTION 4HE 0! 0OWER0ORT THE #OMMONWEALTH WEB SITE IS ANOTHER EXAMPLE OF HOW )4 HAS ENABLED GOVERNMENT TO BE MORE RESPONSIVE AND THEREFORE MORE AGILE TO CITIZEN NEEDS 4HE 0! 0OWER0ORT IS THE MAIN WEB PORTAL THROUGH WHICH CITIZENS CAN OBTAIN ACCESS TO INFORMATION AND SERVICES FROM ANY STATE GOVERNMENT AGENCY )NSTEAD OF HAVING TO GO TO THE WEB SITES OF VARIOUS AGENCIES THIS PORTAL PROVIDES hONE STOP SHOPPINGv )NFORMATION FROM ALL STATE AGENCIES IS AVAILABLE THROUGH SIMPLE NAVIGATION PROCESSES AND THE USE OF KEY WORD SEARCHES !S MORE AND MORE INFORMATION GOES ONLINE ELECTRONIC GOVERNMENT SERVICES CONTINUE TO EVOLVE AND ARE MORE READILY AVAILABLE AROUND THE CLOCK FOR CONVENIENCE 4ECHNOLOGY HAS CERTAINLY HELPED TO CREATE A BETTER DELIVERY OF CUSTOMER SERVICE FUNCTIONS AND ESSENTIALLY HAS PROVIDED MORE CITIZEN SATISFACTION (OWEVER TO TRULY TRANSFORM GOVERNMENT AGENCIES MUST VIEW GOVERNMENT AS CITIZENS VIEW GOVERNMENT 4HE NEXT BIG )4 CHALLENGE IS TO CREATE A TRULY INTERACTIVE EXPERIENCE BY ESTABLISHING ELECTRONIC CITIZEN ACCOUNTS 4HIS WOULD ENABLE CITIZENS TO SIGN ON TO THE 0OWER0ORT UNDER A SPECIlED IDENTITY JUST AS THEY WOULD TO DO THEIR ONLINE BANKING OR SHOPPING /NCE AN IDENTITY IS VERIlED INDIVIDUALS WOULD HAVE ACCESS TO A MENU OF ALL GOVERNMENT ONLINE SERVICES THROUGH ONE SINGLE VIEW 7ITH THE CLICK OF THE MOUSE CITIZENS COULD TAKE CARE OF ALL THEIR GOVERNMENT RELATED BUSINESS IN ONE EASILY ACCESSIBLE LOCATION 4HIS TYPE OF STREAMLINED INTERACTIVE CUSTOMER SERVICE IS CERTAINLY THE WAVE OF THE FUTURE FOR AGILE GOVERNMENTS
"EING %FlCIENT AND %FFECTIVE IS !LWAYS A 0ROCESS 'IVEN TODAYS ENVIRONMENT OF BUDGET LIMITATIONS IT IS IMPERATIVE THAT GOVERNMENT SHOULD ORGANIZE ITS FUNCTIONS IN THE MOST EFlCIENT MANNER 4HE FOCUS SHOULD MOVE FROM BEING AGENCY CENTRIC TO A MORE CENTRALIZED ENTERPRISE WIDE MANAGEMENT SYSTEM 4HIS REQUIRES CONSTANT COLLABORATION AND COORDINATION BETWEEN THE VARIOUS AGENCIES WHICH IS ALWAYS A CHALLENGE 0ENNSYLVANIA RECENTLY MET ONE OF ITS BIGGEST CHALLENGES IN CENTRALIZING ITS BUSINESS FUNCTIONS ACROSS STATE GOVERNMENT $URING THE PAST FEW YEARS A NUMBER OF STATE ADMINISTRATIVE OFlCES REQUESTED UPGRADES TO THEIR COMPUTER SYSTEMS USED FOR MANAGING THEIR MAIN BUSINESS FUNCTIONS 2ATHER THAN ADDRESS THESE REQUESTS INDIVIDUALLY IT WAS DETERMINED THAT SIGNIlCANT ADVANTAGES AND COST SAVINGS COULD BE GAINED BY RESPONDING IN A MORE COORDINATED FASHION WITH A VIEW TO LONG RANGE BENElTS 4HIS IDEA EVENTUALLY BECAME THE )NTEGRATED %NTERPRISE 3YSTEM )%3 4HE PURPOSE OF THIS SYSTEM IS TO STREAMLINE AND STANDARDIZE BUSINESS PROCESSES
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IN ACCOUNTING BUDGETING PAYROLL HUMAN RESOURCES AND PROCUREMENT "ELOW IS AN ILLUSTRATION SHOWING HOW THIS SYSTEM IS ORGANIZED
&IGURE )%3 &UNCTIONS
4HE #OMMONWEALTH CHOSE MY3!0COM %NTERPRISE 2ESOURCE 0LANNING %20 SOFTWARE WHICH INCORPORATES BEST BUSINESS PRACTICES FROM AROUND THE WORLD TO IMPROVE ITS INTERNAL BUSINESS OPERATIONS -Y3!0COM IS THE %20 SOFTWARE PACKAGE THE #OMMONWEALTH IS USING TO INTEGRATE THESE BUSINESS PROCESSES ONTO A SINGLE COMPUTER SYSTEM )N EACH AGENCY THERE IS AN )%3 #OORDINATION 4EAM WHOSE TASK IS TO LEAD AND MANAGE )4 PROJECT IMPLEMENTATION WITHIN THEIR AGENCY WHILE COORDINATING WITH )%3 TEAMS FROM OTHER AGENCIES 4HIS HELPS TO ENSURE THAT THERE IS CONSTANT AGENCY COMMUNICATION AND COLLABORATION WHICH IS CRITICAL WHEN IMPLEMENTING SUCH A LARGE ENTERPRISE WIDE PROJECT !NOTHER KEY ACTIVITY OF EFlCIENT GOVERNMENT IS A PROGRAM ENTITLED 3TRATEGIC 3OURCING 0UT SIMPLY STRATEGIC SOURCING LOOKS AT WHAT WE BUY AND DETERMINES IF WE CAN BUY IT MORE ECONOMICALLY 4HE CONCEPT IS SIMILAR TO THE CONSUMER CONCEPT OF 3AMS #LUB )F YOU USE A LOT OF PAPER TOWELS YOU GO TO 3AMS #LUB AND BUY THEM IN BULK AND SAVE A LOT OF MONEY 4HE #OMMONWEALTH IS DOING THE SAME THING WITH HOW IT PURCHASES GOODS AND SERVICES 0REVIOUSLY EACH AGENCY MAY HAVE HAD SEPARATE CONTRACTS TO BUY COMMODITIES OR SERVICES THUS NOT LEADING TO BEST PRICING FOR WHAT WE BUY 4HE #OMMONWEALTH HAS BEEN REVIEWING THESE CONTRACTS AND OVER THE PAST YEARS AND HAS SAVED OVER M 4HIS TYPE OF PROGRAM CONTINUES TO IMPROVE HOW EFFECTIVE GOVERNMENT IS WHEN IT COMES TO USING THE TAXPAYERS MONEY
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$EVELOPING A #OMMITTED )4 7ORKFORCE 4AKES -ANAGERIAL #OMMITMENTS 4O DEVELOP EFlCIENT )4 BASED SYSTEMS GOVERNMENTS FACE MANY CHALLENGES /NE OF THE BIGGEST CHALLENGES IS HOW TO ATTRACT AND RETAIN A SKILLED )4 LABOR FORCE IN THE FACE OF STIFF COMPETITION WITH THE PRIVATE SECTOR (IRING IN THE PUBLIC SECTOR IS CUMBERSOME BECAUSE GOVERNMENT OFTEN LACKS THE mEXIBILITY TO COMPETE EFFECTIVELY WHEN ATTEMPTING TO ATTRACT HIRE AND RETAIN QUALIlED )4 PERSONNEL 4HROUGH AGGRESSIVE RECRUITING PRACTICES IMPROVED SALARIES AND THE REVISION OF )4 POSITION CLASSIlCATIONS 0ENNSYLVANIA HAS BEGUN TO ADDRESS THIS PROBLEM )N STATES SUCH AS $ELAWARE AND 'EORGIA CIVIL SERVICE REQUIREMENTS HAVE BEEN WAIVED FOR CERTAIN )4 JOB CLASSIlCATIONS 4HE #OMMONWEALTH OF 0! IS STUDYING MODELS TO INCREASE FUTURE EFFECTIVENESS !LSO THE #OMMONWEALTH HAS BEGUN TO PLACE GREATER EMPHASIS ON PROFESSIONAL DEVELOPMENT BY PROVIDING WORKSHOPS AND ON LINE TRAINING COURSES FOR )4 PROFESSIONALS %MPLOYEES WORKING IN )4 NEED TO KEEP THEIR SKILLS UP TO DATE AND TO WORK ON CHALLENGING PROJECTS THEREFORE WE NEED TO INVEST IN THEM "UT IN ORDER TO ACHIEVE A RETURN ON THIS TRAINING INVESTMENT AND INVESTMENTS IN INFRASTRUCTURE AND SYSTEMS WELL TRAINED EMPLOYEES MUST BE RETAINED WITHIN THE #OMMONWEALTHS COMPLEMENT AND THEIR TRAINING NEEDS TO BE ALIGNED WITH THE 3TATES EVOLVING )4 %NTERPRISE !RCHITECTURE STANDARDS
#ONSISTENT #OMMUNICATIONS IS #RITICAL -OST ORGANIZATIONS HAVE GREAT GOALS AND OBJECTIVES AND EVEN EXCELLENT STRATEGIC PLANS FOR MEETING THEM "UT WITHOUT A STRATEGY FOR CLEARLY COMMUNICATING GOALS AND PLANS IT IS DOUBTFUL ORGANIZATIONS WILL GET VERY FAR #ONSISTENT COMMUNICATIONS WITH ALL KEY STAKEHOLDERS IS CRITICAL TO BEING AN EFFECTIVE GOVERNMENT ORGANIZATION 0ENNSYLVANIAS CENTRAL )4 OFlCE BEST KNOWN AS THE /FlCE FOR )NFORMATION 4ECHNOLOGY /)4 TOOK THE TIME TO CREATE AN ORGANIZATIONAL COMMUNICATION PLAN AND CONSTANTLY WORKS AT EXECUTING THAT PLAN )NCLUDED IN THE PLAN ARE KEY MESSAGES THAT WERE DERIVED FROM THE ORGANIZATIONS OVERALL GUIDING PRINCIPLES 4HESE MESSAGES ARE TAILORED TO EACH AUDIENCE WITHIN THE ORGANIZATION )N ADDITION TO HAVING CLEAR AND CONSISTENT MESSAGES IT IS IMPORTANT TO COMMUNICATE THEM OFTEN 0ENNSYLVANIA IS ACHIEVING THIS THROUGH MANY VEHICLES INCLUDING WEBSITES A QUARTERLY NEWSLETTER QUARTERLY STAFF MEETINGS MONTHLY MEETINGS WITH AGENCY #HIEF )NFORMATION /FlCERS AND )4 -ANAGERS AND REGULAR EMAIL NOTIlCATIONS WITH TIMELY UPDATES .OT ONLY ARE MESSAGES GOING OUT BUT
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FEEDBACK IS ENCOURAGED ,ISTENING TO THE COMMENTSWHICH CAN SOMETIMES BE CRITICISMAND ACTUALLY ACTING ON THAT ADVICE IS WHAT TRULY MAKES 0ENNSYLVANIA AGILE
#/.#,53)/. 4HE PROCESS OF SETTING UP GOVERNMENT )4 SYSTEMS AND ORGANIZATIONS TO ACHIEVE AGILITY IS AN ARDUOUS PROCESS ! LONG LIST OF CHALLENGES SUCH AS LIMITED BUDGETS LEADERSHIP TURNOVER RESTRICTIVE REGULATIONS AND RETENTION OF MANPOWER CONTINUE TO MAKE THE PROCESS A CHALLENGING ONE 4O EFFECTIVELY USE )4 TO ACHIEVE THE LONG TERM GOAL OF AGILITY GOVERNMENT ORGANIZATIONS NEED TO BE AWARE OF THESE BARRIERS AND BE WILLING TO MEET THESE CHALLENGES 4HE EXAMPLE OF 0ENNSYLVANIAS 3TATE 'OVERNMENT STRUCTURE DEMONSTRATES HOW GOVERNMENT CAN USE )4 TO IMPROVE THE EFlCIENCIES OF ITS FUNCTIONS "Y EMBARKING ON A SYSTEMATIC PROCESS TO INTEGRATE AGENCY FUNCTIONS AND TO ENCOURAGE INTER AND INTRA AGENCY COLLABORATION AND COMMUNICATION THE STATE HAS IMPROVED SERVICE DELIVERY TO ITS CITIZENS 4HIS IS A ROUTE THAT OTHER GOVERNMENTSLOCAL STATE AND FEDERALARE TAKING TOWARDS A MORE AGILE FUTURE
2EFERENCES /! %NTERPRISE )NFORMATION 4ECHNOLOGY 'OVERNANCE "OARD *UNE .OV HTTPWWWOASTATEPAUSOACCWPVIEWASP ! 1 /)4 +EYSTONE 4ECHNOLOGY 0LAN !N )NFORMATION "LUEPRINT FOR THE #OMMONWEALTH OF 0ENNSYLVANIA 3EPT KWWS ZZZRLWVWDWHSDXVRDRLWFZSYLHZDVS"4 $ RD RLW1DY _
!BOUT THE #ONTRIBUTORS .IRMAL 0AL IS %XECUTIVE $IRECTOR OF THE E"USINESS 2ESEARCH #ENTER AT 4HE 0ENNSYLVANIA 3TATE 5NIVERSITY WHICH FOSTERS RESEARCH IN E BUSINESS STRATEGY MANAGEMENT AND MARKETING TO IMPROVE BUSINESS OPERATIONS (E ASSUMED THIS ROLE IN &EBRUARY OF "EFORE JOINING THE 5NIVERSITY HE WAS $IRECTOR )"- 'LOBAL 3ERVICES #ONSULTING 'ROUP 7HITE 0LAINS .9 !S A PART OF A DISTINGUISHED YEAR CAREER AT )"- HE DIRECTED )"-S E BUSINESS CONSULTING PRACTICE WORLDWIDE AND WORKED CLOSELY WITH &ORTUNE CLIENTS ON E BUSINESS STRATEGIES (IS )"- NETWORK OF E BUSINESS CONSULTANTS WORLDWIDE WERE ENGAGED IN MANY CONSULTING ENGAGEMENTS WITH MAJOR ORGANIZATIONS TO HELP THEM WITH E BUSINESS E COMMERCE )NTRANET%XTRANET AND OTHER )NTERNET RELATED ACTIVITIES !S ONE OF THE LEADERS OF )"-S E BUSINESS CONSULTING ACTIVITIES HE WAS RESPONSIBLE FOR BUSINESS DEVELOPMENT IN THIS SPACE AS WELL AS DEVELOPMENT OF SUPPORTING ANALYTICSMETHODSTOOLS AND OTHER INTELLECTUAL ASSETS FOR THIS NEW AREA OF CONSULTING AND SERVICES (E HAS BEEN A MEMBER OF )"- #ONSULTING 'ROUPS MANAGEMENT TEAM SINCE ITS INCEPTION IN WHICH HELPED GROW THE BUSINESS FOR THIS UNIT FROM ZERO TO OVER ONE BILLION 53 DOLLARS AND FROM ZERO TO OVER CONSULTANTS IN JUST SEVEN YEARS (E HOLDS DEGREES IN %LECTRICAL %NGINEERING AND #OMPUTER 3CIENCE $ANIEL # 0ANTALEO STARTED HIS CAREER WITH YEARS IN HIGHER EDUCATION AS A FACULTY MEMBER &ULBRIGHT 3CHOLAR $EAN ACADEMIC VICE PRESIDENT AND 0ROVOST AND WAS FOLLOWED BY FOUR YEARS AS 6ICE 0RESIDENT FOR 0RODUCT $EVELOPMENT WITH AN INTERACTIVE MULTIMEDIA EDUCATION AND TRAINING DEVELOPER $AN LEFT THAT POST IN TO ASSUME THE RESPONSIBILITIES OF 0ROGRAM -ANAGER FOR 3!0 !MERICAS 5NIVERSITY !LLIANCE 0ROGRAM WHERE HE HAS BEEN ABLE TO APPLY HIS KNOWLEDGE OF HIGHER EDUCATION AND INTERACTIVE SOFTWARE TO SIGNIlCANTLY DEVELOP THE 0ROGRAM %XPANDING HIS RESPONSIBILITIES HE WAS THEN APPOINTED AS $IRECTOR OF (IGHER ,EARNING )NITIATIVES FOR 3!0 !MERICA WITH RESPONSIBILITY FOR SEVERAL HIGHER LEARNING PROJECTS INCLUDING THE 5NIVERSITY !LLIANCE 0ROGRAM THROUGHOUT ALL THE !MERICAS $AN WAS THEN APPOINTED TO LEAD THE 3!0 )NSTITUTE FOR )NNOVATION AND $EVELOPMENT AS 6ICE 0RESIDENT 4HE )NSTITUTE HAS RESPONSIBILITY FOR RESEARCH AND APPLICATION PROJECTS AN %XECUTIVE %DUCATION PROGRAM AND THE 5NIVERSITY !LLIANCE PROGRAM $AN HAS RECENTLY BEEN APPOINTED TO LEAD THE 3TRATEGIC )SSUES GROUP FOR 3!0 !'
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*ANET #ALDOW IS THE FOUNDING $IRECTOR OF )"-S )NSTITUTE FOR %LECTRONIC 'OVERNMENT HOSTING OVER TWENTY THOUSAND HIGH LEVEL GOVERNMENT LEADERS SINCE ITS INCEPTION 3HE DIRECTS A ROBUST RESEARCH AGENDA WITH RENOWNED ACADEMIC AND PRACTITIONER PARTNERS AND HAS PRODUCED OVER 7EB CASTS FEATURING TALK SHOWS MINI SERIES AND INTERVIEWS WITH PROMINENT GUESTS 3HE SERVES ON THE (ARVARD 0OLICY 'ROUP !DVISORY 0ANEL FOR THE #ONGRESSIONAL -ANAGEMENT &OUNDATION !DVISORY "OARD FOR THE 7ORLD "ANK 'LOBAL $EVELOPMENT 'ATEWAY AND IS A MEMBER OF THE %DITORIAL "OARD FOR THE *OURNAL OF % 'OVERNMENT 3HE IS AN ACTIVE PRINCIPAL WITH THE #OUNCIL FOR %XCELLENCE IN 'OVERNMENT 3HE HAS PUBLISHED NUMEROUS PAPERS AND CO AUTHORED SEVERAL BOOKS %ARLIER IN -S #ALDOWS )"- CAREER SHE AUTHORED THE CONSULTING METHODOLOGY AND CASE STUDIES FOR CHANGE MANAGEMENT CONSULTANTS AND DEPLOYED EDUCATION TO "RUSSELS .EW 9ORK AND (ONG +ONG 0RIOR TO JOINING )"- -S #ALDOW WAS THE $IRECTOR OF 3TRATEGIC -ANAGEMENT AT THE #OUNTY OF &AIRFAX 6! (ER APPROACH TO COUNTY WIDE CHANGE WON NATIONAL RECOGNITION AT (ARVARD 5NIVERSITY THE *OHN & +ENNEDY 3CHOOL OF 'OVERNMENTS 3TRATEGIC #OMPUTING AND 4ELECOMMUNICATIONS IN THE 0UBLIC 3ECTOR -S #ALDOW HOLDS AN -"! AND A "! IN SOCIOLOGY $AVE #RANMER IS A SENIOR RESEARCHER IN THE -ANUFACTURING %XTENSION 0ARTNERSHIPS -%0 -ANUFACTURING &UTURES 'ROUP AT THE .ATIONAL )NSTITUTE OF 3TANDARDS AND 4ECHNOLOGY .)34 7ITH -%0 SINCE HE HAS CONDUCTED RESEARCH ON INNOVATION SUPPLY CHAINS TECHNOLOGY ROAD MAPPING E BUSINESS AND EXPORTING BUILT A BUSINESS TO BUSINESS MARKETING CONSULTING PRACTICE FOR SMALLER MANUFACTURERS AND ESTABLISHED SPECIALTY CONSULTING PRACTICES IN lNANCIAL ACCESS AND E BUSINESS )N ADDITION HE HAS DEVELOPED A SET OF TECHNOLOGYPRODUCT DEVELOPMENT SERVICES FOR SMALLER MANUFACTURERS (E IS ALSO THE 0RESIDENT AND #%/ OF 0HASE #ONSULTING ,,# 0HASE FOUNDED IN PROVIDES "" MARKETING MARKETING AND TECHNOLOGY MANAGEMENT AND TECHNOLOGY EVALUATION SERVICES TO SMALL AND MID SIZE COMPANIES 0RIOR TO JOINING .)34 HE HAS BEEN A MEMBER OF THE TECHNICAL STAFF AT THE !EROSPACE #ORPORATION AS WELL AS THE "ENDIX #ORPORATIONS !DVANCED 4ECHNOLOGY #ENTER CONDUCTING 2$ ON CERAMICS FOR A VARIETY OF APPLICATIONS $AVE HOLDS A 0H$ AND 3- BOTH IN CERAMICS FROM -)4 A "3 IN CERAMIC SCIENCE FROM 0ENN 3TATE CUM LAUDE AND AN -"! FROM (ERIOT 7ATT 5NIVERSITY (E IS A &ELLOW OF THE !MERICAN #ERAMIC 3OCIETY AND A MEMBER OF +ERAMOS AND 3IGMA 8I (E IS A CO HOLDER OF TWO 53 PATENTS AND HAS PUBLISHED OVER PAPERS AND EDITED ONE BOOK "RIAN 'EFFERT IS A 0RINCIPAL WITH $ELOITTES 3ECURITY 3ERVICES 'ROUP IN 3AN &RANCISCO #! WITH OVER YEARS OF EXPERIENCE WITH INFORMATION SECURITY AND PRIVACY ASSESSMENT DESIGN AND IMPLEMENTATION ACROSS VARIOUS INDUSTRIES "RIAN
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PRIMARILY FOCUSES ON THE DEVELOPMENT OF DATA PROTECTION PROGRAMS TO ADDRESS REGULATORY REQUIREMENTS SUCH AS 3ARBANES /XLEY AND ()0!! WHICH INCLUDES THE IMPLEMENTATION OF IDENTITY AND RISK MANAGEMENT SOLUTIONS "RIAN IS A #ERTIlED )NFORMATION 3YSTEMS 3ECURITY 0ROFESSIONAL #)330 WITH ADVANCED CERTIlCATION AS AN )NFORMATION 3YSTEMS 3ECURITY -ANAGEMENT 0ROFESSIONAL )33-0 )N ADDITION "RIAN HOLDS THE #ERTIlED )NFORMATION 3ECURITY -ANAGER #)3- DESIGNATION &INALLY "RIAN HOLDS A "3 FROM 0ENN 3TATE 5NIVERSITY AND A -"! FROM 5NIVERSITY OF 0ITTSBURGH &RED (ELLER IS VICE PRESIDENT AND GENERAL MANAGER 8EROXCOM FOR 8EROX #ORPORATION 3TAMFORD #4 (E WAS APPOINTED TO THIS POSITION IN *ULY OF 4HE 8EROXCOM ORGANIZATION IS RESPONSIBLE FOR THE STRATEGY DEVELOPMENT AND OPERATIONS OF 8EROXS GLOBAL CUSTOMER SITE WWWXEROXCOM 4HE PRIMARY OBJECTIVES OF THIS GROUP ARE TO DRIVE REVENUE THROUGH ALL CHANNELS WITH PERSUASIVE ONLINE EXPERIENCES AND TO SIMPLIFY CUSTOMER ACCESS TO ACCOUNT INFORMATION 4HE GROUP PROVIDES ONLINE CAPABILITIES TO MANY COUNTRIES IN LANGUAGES (ELLER JOINED 8EROX IN IN #ORPORATE "USINESS 3TRATEGY IN 3TAMFORD #4 0RIOR TO JOINING 8EROX HE WORKED IN MANAGEMENT CONSULTING PRODUCT MANAGEMENT AND MARKETING FOR MOSTLY SMALLER COMPANIES IN THE 3ILICON 6ALLEY AND THE .EW 9ORK AREAS (ELLER RECEIVED HIS "3 IN #OMPUTER %NGINEERING FROM THE 5NIVERSITY OF -ICHIGAN IN AND AN -"! FROM (ARVARD IN (E IS A BOARD MEMBER OF THE 3OUNDWATERS AN ENVIRONMENTAL EDUCATION NON PROlT ORGANIZATION BASED IN 3TAMFORD #4 AND A MEMBER OF THE ADVISORY BOARD OF THE E"USINESS 2ESEARCH #ENTER 0ENNSYLVANIA 3TATE 5NIVERSITY 2AVI +ALAKOTA IS THE #%/ OF % "USINESS 3TRATEGIES AN )4 RESEARCH AND STRATEGY lRM ! LEADING AUTHORITY ON BUSINESS TECHNOLOGY TRENDS AND STRATEGY HE HAS CONSULTED WITH START UPS AND &ORTUNE COMPANIES AND WRITTEN NINE PIONEERING BOOKS ON E COMMERCE E BUSINESS M BUSINESS AND OFFSHORE OUTSOURCING 4WO OF HIS BOOKS ARE CONSIDERED BY !MAZONCOM TO BE hE COMMERCE CLASSICSv (IS MOST RECENT BOOK IS /FFSHORE /UTSOURCING"USINESS -ODELS 2/) AND "EST 0RACTICES ;-IVAR 0RESS = 0REVIOUSLY $R +ALAKOTA SERVED AS THE 'EORGIA 2ESEARCH !LLIANCE '2! #HAIR 0ROFESSOR AT 'EORGIA 3TATE 5NIVERSITY (E ALSO HELD THE 8EROX #HAIR IN INFORMATION SYSTEMS AT THE 3IMON 'RADUATE 3CHOOL OF "USINESS 5NIVERSITY OF 2OCHESTER AND HAS TAUGHT AT THE 5NIVERSITY OF 4EXAS AT !USTIN 6INCE +ASTEN IS A -ANAGING 0ARTNER LEADING 5NISYS 'LOBAL 4RANSFORMATION (IS YEAR CAREER INCLUDES BUSINESS AND )4 STRATEGY OPERATIONS BUSINESS PROCESS IMPROVEMENT COMMERCIAL SOFTWARE PRODUCT DEVELOPMENT AND RESEARCH DEVELOPMENT (IS FORMER AFlLIATIONS INCLUDE
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3TARTING WITH "ELL ,ABS WHERE HE SPECIALIZED IN OPERATION SYSTEMS AND 5.)8 DEVELOPMENT HE EVENTUALLY BECAME THE $IRECTOR OF THE (IGH 0ERFORMANCE 4RANSACTION 4ECHNOLOGY 'ROUP WHERE THEY LEVERAGED NEW TECHNOLOGIES FOR USE IN SCALABLE BUSINESS AND NETWORK OPERATIONS SYSTEMS (E CONTINUED ON TO ,UCENT 4ECHNOLOGIES SPECIALIZING IN LARGE SCALE SYSTEM INTEGRATION 0RIOR TO HIS CURRENT POSITION 6INCE WAS A -ANAGING $IRECTOR AT "EARING0OINT FORMERLY +0-' #ONSULTING WHERE HE WAS RESPONSIBLE FOR AN ECLECTIC SERVICES MIX INCLUDING BUSINESS STRATEGY LARGE SCALE SYSTEMS DEVELOPMENT AND INTEGRATION AND APPLICATION ARCHITECTURE (E ALSO DROVE KEY INTERNAL PROJECTS INCLUDING CONSOLIDATION OF "EARING0OINTS GLOBAL SOLUTION DEVELOPMENT 6INCE HOLDS THREE 53 0ATENTS AND HAS AUTHORED OR CO AUTHORED SEVERAL BOOKS AND OVER PAPERS AND ARTICLES ON THE SUBJECTS OF ENTERPRISE ALIGNMENT BUSINESS AND )4 PARTNERSHIP ENTERPRISE PROJECT MANAGEMENT SERVICE LEVEL ENGINEERING NETWORK AND SYSTEMS MANAGEMENT AND PERFORMANCE ANALYSIS AND CAPACITY PLANNING 6INCE RECEIVED HIS -3 IN #OMPUTER 3CIENCE FROM #OLUMBIA 5NIVERSITY .9 -ATHIAS +IRCHMER IS #%/ OF )$3 3CHEER .ORTH !MERICA THE LEADING PROVIDER OF BUSINESS PROCESS EXCELLENCE SOLUTIONS $R +IRCHMER IS A MEMBER OF THE %XTENDED %XECUTIVE "OARD OF )$3 3CHEER !' AND ALSO HEADS UP THE *APANESE OPERATIONS OF )$3 3CHEER (E IS AN AFlLIATED FACULTY MEMBER OF THE #ENTER FOR /RGANIZATIONAL $YNAMICS OF THE 5NIVERSITY OF 0ENNSYLVANIA (E IS ALSO MEMBER OF THE CURRICULUM ADVISORY BOARD OF 7IDENER 5NIVERSITY AND 3T *OSEPHS 5NIVERSITY IN 0HILADELPHIA $R +IRCHMER HAS BEEN INSTRUMENTAL IN DESIGNING AND IMPLEMENTING BUSINESS PROCESSES AS WELL AS DIRECTING NUMEROUS BUSINESS PROCESS IMPROVEMENT INITIATIVES INCLUDING MULTIPLE PROCESS ORIENTATED SOFTWARE IMPLEMENTATIONS !FTER JOINING )$3 3CHEER IN AS A CONSULTANT HE SUCCESSFULLY EXECUTED MULTIPLE BUSINESS PROCESS MANAGEMENT PROJECTS INCLUDING MULTIPLE 3!0 SOFTWARE IMPLEMENTATIONS 3INCE HE HAD BEEN RESPONSIBLE FOR STANDARD SOFTWARE IMPLEMENTATION CONSULTING ACTIVITIES WITH A FOCUS ON 3!0 3INCE $R +IRCHMER HAS SERVED AS 0RESIDENT OF )$3 3CHEER .ORTH !MERICA PLAYING A PIVOTAL ROLE IN BUILDING THE COMPANYS .ORTH !MERICAN OPERATIONS INTO A LEADING CENTER FOR BUSINESS PROCESS EXCELLENCE $R +IRCHMER GRADUATED FROM THE +ARLSRUHE 4ECHNICAL 5NIVERSITY IN 'ERMANY WITH AN -! IN #OMPUTER 3CIENCE AND "USINESS !DMINISTRATION (E ALSO HOLDS AN -! IN %CONOMICS FROM THE 0ARIS $AUPHINE 5NIVERSITY IN &RANCE $R +IRCHMER OBTAINED A 0H$ FROM THE 3AARBRUCKEN 5NIVERSITY IN 'ERMANY FOR HIS RESEARCH CONCERNING THE BUSINESS PROCESS ORIENTATED IMPLEMENTATION OF STANDARD SOFTWARE PACKAGES -ICHAEL ,IM IS THE MANAGING DIRECTOR OF 'REY )NSIGHTS A lRM SPECIALIZING IN )NTERNET STRATEGY AND CONSULTING SERVICES (E IS ALSO THE MARKETING DIRECTOR IN
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RESIDENT AT 6IRTUAL3TORAGE#ENTER A TECHNOLOGY COMPANY FOCUSING ON RESEARCH DEVELOPMENT AND COMMERCIALIZATION OF WEB BASED AND NEXT GENERATION MOBILE STORAGE TECHNOLOGY 0REVIOUSLY HE WORKED AS THE BUSINESS DEVELOPMENT MANAGER AT )CFOX WHERE HIS RESPONSIBILITIES INCLUDED MARKETING AND IMPLEMENTATION OF )NTERNET BASED TENDERING SYSTEM AND #ITADONS 0ROJECT.ET SOLUTION IN COMMERCIAL CONSTRUCTION COMPANIES "EFORE THAT HE GAINED RESEARCH EXPERIENCES IN E COMMERCE POLICY DEVELOPMENT lELD AT THE -ULTIMEDIA $EVELOPMENT #ORPORATION THE LEAD AGENCY OVERSEEING THE DEVELOPMENT OF THE -ULTIMEDIA 3UPER #ORRIDOR IN -ALAYSIA AND THE E 5NIVERSITY INITIATIVE AT 5NIVERSITI 0UTRA -ALAYSIA 50- (E HAS CONTRIBUTED TO THE 4ECHNOPRENEURS !SSOCIATION OF -ALAYSIA -ANAGEMENT 3CIENCE/PERATIONS 2ESEARCH 3OCIETY OF -ALAYSIA AND THE #ENTER FOR )NFORMATION -ANAGEMENT AND 0OLICY !CTION AT 50- (IS COAUTHORED ARTICLE APPEARED IN THE !NNUAL 2EVIEW OF -ANAGEMENT 3CIENCE AND /PERATION 2ESEARCH (E RECEIVED HIS BACHELOR SCIENCE DEGREE IN AGRIBUSINESS FROM THE 5NIVERSITI 0UTRA -ALAYSIA -ALAYSIA -UNIR -ANDVIWALLA IS CURRENTLY THE &OUNDING #HAIR AND !SSOCIATE 0ROFESSOR AS WELL AS THE %XECUTIVE $IRECTOR OF 4HE )RWIN , 'ROSS E"USINESS )NSTITUTE AT THE &OX 3CHOOL OF "USINESS AND -ANAGEMENT 4EMPLE 5NIVERSITY (E HAS ALSO BEEN GIVEN THE PRESTIGIOUS POSITION OF A #)'.! 2ESEARCH &ELLOW (IS RESEARCH INTERESTS INCLUDE COLLABORATIVE SYSTEMS AND COMMUNICATION TECHNOLOGIES THE ROLE OF TECHNOLOGY IN LARGE SCALE PROFESSIONAL MEETINGS ELECTRONIC COMMERCE STRATEGY AND THE USE OF PROTOTYPING FOR THEORY DEVELOPMENT $R -ANDVIWALLA ALSO CONSULTS ON ELECTRONIC COMMERCE AND BUSINESS STRATEGIES AND IMPLEMENTATION -UNIR HAS PUBLISHED MORE THAN ARTICLES IN SCHOLARLY JOURNALS AND INTERNATIONAL CONFERENCES (E IS ALSO ON THE EDITORIAL BOARD OF SEVERAL INTERNATIONAL JOURNALS AND RECENTLY SERVED AS THE PROGRAM CHAIR OF AN INTERNATIONAL CONFERENCE ON THE INFORMATION TECHNOLOGY WORKFORCE $R -ANDVIWALLAS WORK HAS BEEN SUPPORTED BY GRANTS TOTALING APPROXIMATELY -ILLION FROM MANY &ORTUNE COMPANIES )N )"- SELECTED HIM FOR THEIR &ACULTY 0ARTNERSHIP !WARD A PRIZE OF IN RECOGNITION FOR CONTRIBUTIONS TO E BUSINESS TEACHING AND RESEARCH )N 4HE #LAREMONT 'RADUATE 5NIVERSITY RECOGNIZED HIM WITH THEIR !LUMNI (ALL OF &AME AWARD $R -ANDVIWALLA HOLDS A "3 IN 3YSTEMS %NGINEERING FROM "OSTON 5NIVERSITY AN -"! FROM THE 0ETER & $RUCKER 3CHOOL OF -ANAGEMENT AT #LAREMONT 'RADUATE 5NIVERSITY AND A 0H$ IN -ANAGEMENT )NFORMATION 3YSTEMS FROM THE 0ROGRAMS IN )NFORMATION 3CIENCE AT #LAREMONT 'RADUATE 5NIVERSITY $IANE -C'ARRY IS #HIEF -ARKETING /FlCER 8EROX #ORPORATION 3HE WAS NAMED TO THIS POSITION IN /CTOBER 3HE IS ALSO A CORPORATE VICE PRESIDENT APPOINTED
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IN &EBRUARY OF 3HE IS RESPONSIBLE FOR WORLDWIDE INTEGRATED MARKETING AND COMMUNICATIONS ACTIVITIES AND PROFESSIONAL GUIDANCE AND SUPPORT THROUGHOUT 8EROX FOR SPECIlC AREAS OF EXPERTISE IN PUBLIC RELATIONS MARKETING ADVERTISING AND COMMUNICATIONS 0RIOR TO HER CURRENT POSITION -C'ARRY LED OPERATIONS SUPPORT FOR THE /FlCE OF THE 0RESIDENT AND #%/ AND WAS VICE PRESIDENT FOR THE 'LOBAL 4ELE7EB /PERATIONS GROUP WHICH MANAGES 8EROXS WORLDWIDE TELEPHONE CONTACT CENTERS -C'ARRY JOINED 8EROX IN AS A SALES REPRESENTATIVE 3HE HAS HELD SEVERAL SALES MARKETING AND EXECUTIVE MANAGEMENT POSITIONS IN THE 5NITED 3TATES THE 5NITED +INGDOM AND #ANADA INCLUDING SERVING AS 8EROX #ANADAS PRESIDENT AND #%/ FROM 3HE ALSO WAS THE HEAD OF THE .ORTH !MERICAN 'ENERAL -ARKETS 'ROUP WHICH INCLUDED 8EROXS AGENT PROGRAM AND THE EMERGING TELEBUSINESS CHANNEL -C'ARRY IS A DIRECTOR ON THE BOARD OF #ANADA ,IFE &INANCIAL )NC IN 4ORONTO #ANADA AND A DIRECTOR ON THE BOARD OF /MNOVA 3OLUTIONS IN &AIRLAWN /( AS WELL AS A MEMBER OF THE ADVISORY BOARD FOR THE E"USINESS 2ESEARCH #ENTER 3-%!, #OLLEGE OF "USINESS 0ENNSYLVANIA 3TATE 5NIVERSITY )RFAN 3AIF IS A 3ENIOR -ANAGER WITH $ELOITTES 3ECURITY 3ERVICES 'ROUP BASED IN 3AN &RANCISCO #! (E HAS MORE THAN YEARS OF PROFESSIONAL EXPERIENCE COMBINING A BROAD MIX OF TECHNICAL BUSINESS AND PROJECT MANAGEMENT SKILLS )RFANS PRIMARY AREAS OF FOCUS ARE SOFTWARE VULNERABILITY ASSESSMENTS ENTERPRISE SYSTEM AND INFRASTRUCTURE SECURITY ARCHITECTURES AND DATA PRIVACY (E ALSO FOCUSES ON EMERGING TECHNOLOGIES IN SEVERAL AREAS INCLUDING MOBILE COMPUTING DATA ENCRYPTION AND WEB SERVICES (E HAS RECENTLY DELIVERED OR PROVIDED SUBJECT MATTER EXPERTISE FOR SEVERAL LARGE GLOBAL SECURITY AND PRIVACY ENGAGEMENTS SPANNING THE HOSPITALITY PHARMACEUTICAL AND SOFTWARE AND TECHNOLOGY INDUSTRIES )RFAN HAS A "ACHELORS DEGREE IN #OMPUTER 3CIENCE FROM "OSTON 5NIVERSITY AND HOLDS BOTH THE #)330 AND #)3- PROFESSIONAL SECURITY DESIGNATIONS $AVID 3CHUFF HOLDS A "! IN %CONOMICS FROM THE 5NIVERSITY OF 0ITTSBURGH AN -"! FROM 6ILLANOVA 5NIVERSITY AN -3 IN )NFORMATION -ANAGEMENT FROM !RIZONA 3TATE 5NIVERSITY AND A 0H$ IN "USINESS !DMINISTRATION FROM !RIZONA 3TATE 5NIVERSITY $AVIDS TEACHING INTERESTS INCLUDE *AVA PROGRAMMING OBJECT ORIENTED MODELING AND DEVELOPMENT AND NETWORKING $AVID HAS RECEIVED THE -)3 DEPARTMENT TEACHER OF THE SEMESTER AWARD SEVERAL TIMES AND WAS ALSO RECENTLY RECOGNIZED FOR HIS LEADERSHIP (IS RESEARCH INTERESTS INCLUDE MANAGEMENT OF COMPUTER SUPPORT IN LARGE NETWORKED ORGANIZATIONS ISSUES SURROUNDING )4 VALUATION AND ASSESSMENT OF TOTAL COST OF OWNERSHIP AND DATA WAREHOUSING $AVID HAS PUBLISHED IN A VARIETY OF PRESTIGIOUS JOURNALS IN THE -)3 lELD
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$R 3CHUFF ALSO HAS MORE THAN lVE YEARS OF EXPERIENCE IN SUPPORTING MANAGING AND DEVELOPING CORPORATE NETWORKS INCLUDING ,!. AND )NTERNET BASED SOLUTIONS FOR SEVERAL LARGE COMPANIES IN THE 0HILADELPHIA AREA 3AMIR 3HAH HAS BEEN APPOINTED AS AN INSTRUCTOR IN )NFORMATION 3CIENCES AND 4ECHNOLOGY )34 AT 0ENN 3TATE 5NIVERSITY 9ORK AND 3CHUYLKILL BRANCHES SINCE 3HAH IS TEACHING UNDERGRADUATE )34 COURSES SUCH AS )4 0ROJECT -ANAGEMENT )34 )NTEGRATION AND 0ROBLEM 3OLVING $ISTRIBUTED 4EAM 0ROJECTS 7EB 0ROGRAMMING AND $ATABASE -ANAGEMENT (IS CURRENT RESEARCH INTEREST IS IN THE AREAS OF )4 PROJECT MANAGEMENT 0RIOR TO HIS 0ENN 3TATE APPOINTMENTS 3HAH SPENT A NUMBER OF YEARS WORKING FOR VARIOUS AGENCIES OF THE #OMMONWEALTH OF 0ENNSYLVANIA -OST RECENTLY HE SERVED AS A #HIEF OF )NFORMATION 3YSTEMS WITH THE $EPARTMENT OF #ONSERVATION AND .ATURAL 2ESOURCES 0RIOR TO THAT HE HELD #OMPUTER 3YSTEMS !NALYST POSITIONS WITH THE DEPARTMENT OF ,ABOR )NDUSTRY AND THE 0ENNSYLVANIA ,IQUOR #ONTROL "OARD )T WAS THROUGH THESE POSITIONS THAT HE GARNERED EXPERTISE IN A VARIETY OF SKILLS INCLUDING )4 PROJECT MANAGEMENT )4 STRATEGIC PLANNING )4 TRAINING AND LARGE )4 APPLICATION DEVELOPMENT PROJECTS (E RECEIVED HIS -ASTER OF %NGINEERING IN %NGINEERING 3CIENCE DEGREE FROM 0ENNSYLVANIA 3TATE 5NIVERSITY (ARRISBURG 6ENKATESH 3HANKAR 6ENKY IS 0ROFESSOR OF -ARKETING AND #OLEMAN #HAIR IN -ARKETING AT THE -AYS "USINESS 3CHOOL 4EXAS !- 5NIVERSITY (E HAS BEEN A VISITING SCHOLAR AT THE 3LOAN 3CHOOL OF -ANAGEMENT -)4 AND IS A &ELLOW OF THE E"USINESS 2ESEARCH #ENTER AT 0ENN 3TATE 5NIVERSITY (IS AREAS OF SPECIALIZATION INCLUDE $IGITAL "USINESS #OMPETITIVE 3TRATEGY .EW 0RODUCT $EVELOPMENT AND "IOTECHNOLOGY 3HANKAR HAS A 0H$ IN MARKETING FROM THE +ELLOGG 'RADUATE 3CHOOL OF -ANAGEMENT .ORTHWESTERN 5NIVERSITY AND HAS CORPORATE EXPERIENCE IN THE AREAS OF PRODUCT MARKETING AND INTERNATIONAL BUSINESS DEVELOPMENT (E HAS PUBLISHED IN MANY OF THE MOST PRESTIGIOUS ACADEMIC JOURNALS IN HIS lELD AS WELL AS THE 7ALL 3TREET *OURNAL AND &INANCIAL 4IMES (E IS #O %DITOR OF THE *OURNAL OF )NTERACTIVE -ARKETING AND AN !SSOCIATE %DITOR OF -ANAGEMENT 3CIENCE IN )NNOVATION 0RODUCT $EVELOPMENT AND %NTREPRENEURSHIP (E IS ALSO ON THE EDITORIAL BOARDS OF -ARKETING 3CIENCE *OURNAL OF -ARKETING THE )NTERNATIONAL *OURNAL OF 2ESEARCH IN -ARKETING *OURNAL OF 2ETAILING AND THE *OURNAL OF THE !CADEMY OF -ARKETING 3CIENCE 3HANKAR HAS CONSULTING OR EXECUTIVE TRAINING EXPERIENCE WITH A VARIETY OF &ORTUNE COMPANIES AND ORGANIZATIONS (E HAS BEEN ON ADVISORY BOARDS INCLUDING )"-S E"USINESS #ONFERENCE !DVISORY #OMMITTEE 4ECHNOLOGY %NTREPRENEUR #OMMUNITY #ENTER %UROPEAN E"USINESS #ENTER %33%# &RANCE AND )NGENIUM #ORPORATION
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*ELENA 3PANJOL IS ASSISTANT PROFESSOR OF MARKETING AT 4EXAS !- 5NIVERSITY 3HE RECEIVED HER 0H$ IN "USINESS !DMINISTRATION FROM THE 5NIVERSITY OF )LLINOIS AT 5RBANA #HAMPAIGN 3PANJOLS RESEARCH INTERESTS INCLUDE PRODUCT MARKETS DYNAMICS INNOVATION AND PRODUCT PORTFOLIO MANAGEMENT AS WELL AS ORGANIZATIONAL AND MANAGERIAL COGNITION IN MARKETING STRATEGY (ER RESEARCH HAS BEEN PRESENTED AT VARIOUS INTERNATIONAL CONFERENCES AND PUBLISHED IN MARKETING AND MANAGEMENT PUBLICATIONS INCLUDING THE *OURNAL OF -ARKETING *OURNAL OF THE !CADEMY OF -ARKETING 3CIENCE AND VARIOUS BOOK CHAPTERS "EFORE ENTERING ACADEMIA 3PANJOL WORKED IN THE SCIENTIlC SOFTWARE INDUSTRY IN INTERNATIONAL MARKETING AND BUSINESS DEVELOPMENT BOTH IN THE 53 AND %UROPE !RTHUR # 3TEPHENS WAS APPOINTED $EPUTY 3ECRETARY FOR )NFORMATION 4ECHNOLOGY FOR THE 'OVERNORS /FlCE OF !DMINISTRATION IN THE #OMMONWEALTH OF 0ENNSYLVANIA IN -ARCH (E HAS OVER YEARS OF EXPERIENCE IN WORKING WITH STATE GOVERNMENT AGENCIES AND PRIVATE SECTOR lNANCIAL INSTITUTIONS (E HAS SKILLS IN ALL PHASES OF THE SYSTEMS DEVELOPMENT LIFE CYCLE AND SPECIALIZES IN )4 STRATEGIC PLANNING BUSINESS PROCESS REENGINEERING LARGE SYSTEMS DEVELOPMENT AND ORGANIZATIONAL DESIGN PROJECTS -R 3TEPHENS WORKED WITH $ELOITTE #ONSULTING FROM *ULY n&EBRUARY AS A SENIOR MANAGER AND PRINCIPAL !S A PRINCIPAL WITH $ELOITTES PUBLIC SECTOR INFORMATION TECHNOLOGY PRACTICE HE WAS RESPONSIBLE FOR THE ENTIRE BUSINESS SALES PROJECT DELIVERY HUMAN RESOURCES PUBLIC RELATIONS AND COMMUNITY SERVICE (E LED $ELOITTES HEALTH AND HUMAN SERVICES PRACTICE FOCUSING ON THE DEPARTMENTS OF 0UBLIC 7ELFARE (EALTH ,ABOR )NDUSTRY )NSURANCE AND !GING 0RIOR TO HIS $ELOITTE APPOINTMENT HE WAS A PROJECT MANAGER FOR !NDERSEN #ONSULTING NOW !CCENTURE FROM *ULY n*ULY WHERE HE FOCUSED ON 2EVENUE AND )NSURANCE SYSTEMS (E ALSO MANAGED PROJECTS FOCUSING ON PERSONAL AND COMMERCIAL INSURANCE (E HOLDS A "3 IN &INANCE FROM THE 0ENNSYLVANIA 3TATE 5NIVERSITY "ILL 3TEPHENSON IS A MEMBER OF (EWLETT 0ACKARDS )4 3TRATEGIC 3ERVICES PRACTICE WHERE HE ADVISES AND ASSISTS CLIENTS ON BUSINESS AND TECHNOLOGY PRACTICES TO DESIGN AND IMPLEMENT AN ADAPTIVE ENTERPRISE "ILL IS A BUSINESS ORIENTED TECHNOLOGIST WITH OVER THIRTY YEARS OF EXPERIENCE FOCUSED ON DEVELOPING THE "USINESS)4 !RCHITECTURE TO ADDRESS THE CHANGING BUSINESS ENVIRONMENT AND ALIGNING THE )4 STRATEGY WITH THE BUSINESS STRATEGY 0RIOR TO JOINING (EWLETT 0ACKARD "ILL SERVED AS THE REGIONAL )4 PARTNER IN CHARGE FOR %RNST 7HINNEY .ATIONAL )4 $IRECTOR FOR 'RANT 4HORNTON AND THE 3ENIOR 6ICE 0RESIDENT#)/ FOR AN INTERNATIONAL SOFTWARE COMPANY "ILL HOLDS AN -"! FROM -ICHIGAN 3TATE 5NIVERSITY AND A "! FROM 9OUNGSTOWN 3TATE 5NIVERSITY
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-ARK 4URRELL IS THE #%/ OF )MAGINATIK THE LEADER IN )NNOVATION AND )DEA -ANAGEMENT SOFTWARE (E HAS WORKED WITH OVER COMPANIES ON INNOVATION MANAGEMENT RELATED TOPICS OF KNOWLEDGE MANAGEMENT AND COLLABORATIVE TECHNOLOGIES MANY OF THEM &ORTUNE BUSINESSES 0RIOR TO CO FOUNDING )MAGINATIK IN -ARK WORKED AT )NTEL AND 'ENERAL -OTORS !T )MAGINATIK HE HAS BEEN INVOLVED IN ALL OF THE MAJOR PRODUCTS AND PROCESSES DEVELOPED BY THE lRM INCLUDING )DEA #ENTRAL® THE AWARD WINNING )DEA -ANAGEMENT SOFTWARE AND PROCESS IN USE BY OVER ORGANIZATIONS WORLDWIDE )N HE OPENED THE 53 HEADQUARTERS OFlCE IN "OSTON AND INITIATED THE )MAGINATIK 2ESEARCH GROUP WHICH IS DEDICATED TO FUNDAMENTAL RESEARCH IN CORPORATE INNOVATION (E IS A FREQUENT SPEAKER ON )NNOVATION AND )DEA -ANAGEMENT AND IS WIDELY RECOGNIZED AS THE LEADING AUTHORITY IN THE lELD OF )DEA -ANAGEMENT WITH NUMEROUS MAGAZINE ARTICLES AND WHITE PAPERS ON TOPICS SUCH AS IDEA EVALUATION REWARD AND RECOGNITION COLLABORATION AND INTELLECTUAL PROPERTY PROTECTION -ARK IS A 2ESEARCH &ELLOW AT 0ENN 3TATE 5NIVERSITY AND LECTURES AT SEVERAL BUSINESS SCHOOLS INCLUDING #ASS 3CHOOL OF "USINESS 5+ ).3%!$ &RANCE 6ANDERBILT 5NIVERSITY /WEN 'RADUATE 3CHOOL OF -ANAGEMENT AND (ARVARD "USINESS 3CHOOL -ICHAEL 5RAM IS AN !DAPTIVE %NTERPRISE 0ROGRAM $IRECTOR AT (EWLETT 0ACKARD (0S !DAPTIVE %NTERPRISE PROGRAM IS FOCUSED ON HELPING CLIENTS IMPROVE BUSINESS AGILITY BY SYNCHRONIZING BUSINESS AND )4 TO CAPITALIZE ON CHANGE -ICHAEL LEADS THE !DAPTIVE %NTERPRISE PROGRAM IN THE CENTRAL 53 WORKING CROSS DIVISION WITHIN (0 WITH CORPORATE AND ENTERPRISE CLIENTS AND THEIR (0 ACCOUNT TEAMS TO STRUCTURE STRATEGIC )4 IMPROVEMENT INITIATIVES (E IS CO DEVELOPER OF THE !DAPTIVE %NTERPRISE -ATURITY -ODEL USED TO HELP CLIENTS DEVELOP CUSTOMIZED !DAPTIVE %NTERPRISE ROADMAPS SPECIlC TO THEIR BUSINESS 0RIOR TO THE !DAPTIVE %NTERPRISE ROLE -ICHAEL WAS (0S LEAD 3OLUTION !RCHITECT FOR A MAJOR 53 AIRLINE "EFORE JOINING (0 IN HE WAS A DATA CENTER MANAGER AND SYSTEMS ADMINISTRATOR AT -C$ONNELL $OUGLAS 2ESEARCH ,ABS IN 3T ,OUIS -/ )N ADDITION TO HIS DATA CENTER DUTIES HE SPECIALIZED IN PORTING AND OPTIMIZING COMPUTATIONAL mUID DYNAMICS SIMULATIONS FOR THE COMPANYS SUPERCOMPUTING ENVIRONMENT -ICHAEL WAS A MEMBER OF THE .ATIONAL 5NIX PRACTICE AT 0RIME #OMPUTER AND 2EGIONAL 5NIX LEAD AT 5NISYS )N -ICHAEL SERVED A GRADUATE INTERNSHIP AT )"- "OCA 2ATON IN THE #USTOM 0ROGRAMMING $IVISION (E STARTED HIS )4 CAREER AS A #OMPUTER 3CIENCE )NSTRUCTOR IN +UALA ,UMPUR -ALAYSIA -ICHAEL HOLDS A -3 IN #OMPUTER 3CIENCE FROM 3OUTHERN )LLINOIS 5NIVERSITY AND A "3 IN %LEMENTARY %DUCATION !NTHONY 7ARREN 4ONY BEGAN HIS CAREER WITH THREE YEARS AS THE HEAD OF A MULTI NATIONAL PROGRAM IN MAGNETO HYDRODYNAMIC POWER GENERATION (E JOINED A START
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UP THAT CREATED AND EXECUTED NEW PRODUCT STRATEGIES FOR MAJOR CORPORATIONS BASED ON A BROAD RANGE OF TECHNOLOGIES !S THIS COMPANY 0! 4ECHNOLOGY GREW RAPIDLY 4ONY WAS RESPONSIBLE FOR THE INTERNATIONAL OPERATIONS SETTING UP DIVISIONS AROUND THE WORLD )N 4ONY CO FOUNDED AND RAISED THE CAPITAL FOR A YEAR ,IMITED 0ARTNERSHIP TO CREATE AND DEVELOP EARLY STAGE TECHNOLOGY BASED COMPANIES THAT HELPED OVER COMPANIES COMMERCIALIZE PROPRIETARY TECHNOLOGY )N HE CO FOUNDED 3TRATEGIC 4ECHNOLOGIES ,,# A BOUTIQUE INVESTMENT BANK UNDERTAKING TRANSACTIONS FOR CORPORATIONS WITH SIGNIlCANT INTELLECTUAL PROPERTY ASSETS (E IS ALSO A VENTURE PARTNER IN !DAMS #APITAL -ANAGEMENT A NATIONWIDE 6# lRM HEADQUARTERED IN 0ITTSBURGH WITH OVER MILLION UNDER MANAGEMENT $R 7ARREN JOINED THE 3-%!, #OLLEGE OF "USINESS !DMINISTRATION AT 0ENN 3TATE AS $IRECTOR OF THE &ARRELL #ENTER FOR #ORPORATE )NNOVATION AND %NTREPRENEURSHIP AND THE &ARRELL #LINICAL 0ROFESSOR FOR %NTREPRENEURSHIP IN (E WAS RECENTLY INVITED TO JOIN THE .ATIONAL )NNOVATION )NITIATIVE A JOINT PROGRAM BETWEEN INDUSTRY AND GOVERNMENT TO CREATE AN AGENDA FOR THE 53 TO CONTINUE TO PROSPER THROUGH INNOVATION IN THE ST #ENTURY (E RECEIVED HIS "3 ST #L (ONS AND 0H$ AT THE 5NIVERSITY OF "IRMINGHAM 5+ FOLLOWED BY POST DOCTORAL RESEARCH AT THE 5NIVERSITIES OF 4ORONTO AND )LLINOIS 2ALPH 7ELBORN HAS POSITIONED HIMSELF AS THE TIP OF THE SPEARIDENTIFYING AND DRIVING STRATEGIC INITIATIVES AND TRANSFORMATIONWHETHER THIS INCLUDES EXPLOITING MARKETS AND INNOVATION DISRUPTIONS CREATING NEW REVENUE AND GROWTH OPPORTUNITIES CREATING LARGE SCALE CLIENT TRANSFORMATION PROGRAMS FACILITATING MARKET POSITIONING ANDOR SOLUTION DEVELOPMENT AND DEPLOYMENT INTO NEW MARKETS 4HOUGH FOCUSED ON lNANCIAL SERVICES HIS EXPERIENCE OVER THE LAST YEARS HAS BEEN ACROSS INDUSTRIES SEEKING PATTERNS ACROSS THESE INDUSTRIES TO EXPLOIT THE IMPLICATIONS WITHIN THEM 2ALPH BEGAN HIS CAREER AS A RESEARCH FELLOW AT "OSTON 5NIVERSITY IN THEIR 5NIVERSITY 0ROFESSORS 0ROGRAM AND THE #ENTER FOR 4ECHNOLOGY 0OLICY WHERE HE FOCUSED HIS RESEARCH ANALYZING ISSUES CONCERNING REGULATORY IMPACTS ON ECONOMIC DEVELOPMENT PUBLIC POLICY AND DEVELOPMENTAL ECONOMICS 0ART OF THIS POSITION INVOLVED CONSULTING WITH THE )NTERNATIONAL ,ABOR /FlCE WHICH LED INTO A CAREER WITH POSITIONS AT A VARIETY OF CONSULTING GROUPS BEGINNING WITH #OOPERS ,YBRANDS ADVANCED TECHNOLOGY GROUP THROUGH #HARLES 3CHWAB #O )NC #ORNERSTONE #ONSULTING GROUP AND THEN "EARING0OINT FORMERLY +0-' #ONSULTING !T "EARING0OINT HE STARTED AS THE $IRECTOR OF %LECTRONIC #OMMERCE IN AND BY BECAME THE 3ENIOR 6ICE 0RESIDENT OF 'LOBAL 3OLUTIONS WHERE HE WAS RESPONSIBLE FOR THEIR SOLUTIONS BOTH GLOBALLY AND ACROSS INDUSTRIES 2ALPH WAS MOST RECENTLY APPOINTED TO BE THE -ANAGING 0ARTNER AND 6ICE 0RESIDENT OF THE 'LOBAL 4RANSFORMATION 4EAM AT THE 5NISYS #ORPORATION 4HERE HE IS
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RESPONSIBLE FOR STRATEGIC INITIATIVES THOUGHT LEADERSHIP AND DEVELOPMENT OF NEW REVENUE STREAMS FROM CLIENTS (E HAS PUBLISHED NUMEROUS PAPERS AND CO AUTHORED SEVERAL BOOKS AND HAS BEEN FREQUENTLY INVITED AS A SPEAKER AT CONFERENCES AROUND THE WORLD (E RECEIVED HIS "! AND -! IN #OMPARATIVE 0UBLIC 0OLICY SUMMA CUM LAUDE WITH DISTINCTION 0HI "ETA +APPA AS WELL AS HIS 0H$ IN 0HILOSOPHY OF 3CIENCE AND 4ECHNOLOGY FROM "OSTON 5NIVERSITY *ACQUELINE :INN IS A PROFESSOR IN (EALTHCARE -ANAGEMENT $EPARTMENT OF 2ISK )NSURANCE AND (EALTHCARE -ANAGEMENT &OX 3CHOOL OF "USINESS AND -ANAGEMENT AT 4EMPLE 5NIVERSITY 0HILADELPHIA 0! 3HE TEACHES STRATEGIC MANAGEMENT AND HEALTH CARE ADMINISTRATION (ER RESEARCH HAS EXAMINED THE INmUENCE OF MARKET COMPETITION ON QUALITY AND ACCESS IN HOSPITALS NURSING HOMES AND HOME HEALTH AGENCIES 3HE HAS INVESTIGATED THE ASSOCIATION BETWEEN ORGANIZATIONAL CHARACTERISTICS AND QUALITY IN HEALTH CARE SETTINGS COMPARING SEVERITY ADJUSTED OUTCOMES OF CARE )N THE lELD OF LABORATORY MEDICINE SHE HAS EXPLORED THE APPLICATION OF VARIOUS CONSENSUS DEVELOPMENT TECHNIQUES TO EVALUATE LABORATORY PERFORMANCE 3HE IS THE RECIPIENT OF THE *OHN $ 4HOMPSON 0RIZE FOR RESEARCH ACHIEVEMENT AND IS A CO RECIPIENT OF A 2OBERT 7OOD *OHNSON #LINICAL )NVESTIGATOR !WARD $R :INN IS AN ADJUNCT FELLOW OF THE ,EONARD $AVIS )NSTITUTE FOR (EALTH %CONOMICS AND A &ELLOW AT THE )NSTITUTE ON !GING 5NIVERSITY OF 0ENNSYLVANIA 3HE IS A PAST CHAIR OF THE (EALTHCARE -ANAGEMENT $IVISION OF THE !CADEMY OF -ANAGEMENT
INDEX Accounting, offshore outsourcing of, 135 Action cycle time latencies, 51–52 Adaption, defined, 27 Adaption-Innovation Theory, 27–28 Adaptive enterprise maturity model, 81 Adaptive Enterprises Creating and Leading Sense-And-Respond Organizations, 200 Adaptive infrastructure, 28–30 Adaptive innovation management, 151–166. See also Innovation management barriers to, 158–159 capabilities, 161 Conjoint Adaptive Ranking Database System, 155 conventional, contrasted, 157 cross-divisional synergies, harnessing of, 164–165 customer problem sets, 161 decision-making, 158 defined, 154–155 departmental silos, 159 divisional silos, 159 embedded innovation, 163–164 functional silos, 159 implementation, steps in, 160 implications of, 162–165 information, cost of, 158–159 infrastructure, supportive, 161 intellectual resources, 161 move to, 159–162 progressive insurance, 153 results, measuring, 162 risk of acquisition, 158 scorecard, 163 solutions-based nature of, 152–154 streams of innovation, integration of, 164–165 trust, 158 Adaptive/innovative team, 27–28. See also Team mobilization AEMM. See Adaptive enterprise maturity model The Agile Corporation, 190 Agile enterprise, defined, 50–52
Agility assessment report, 51 A-I Theory. See Adaption-Innovation Theory Amazon customer service offshore outsourcing, 130 process innovation, 35–36 American Airlines, 123 American Express, 129, 137, 139, 142, 147, 156–157 America Online, 142 Apple, iTunes online music store, 16 Application processes in information technology, offshore outsourcing of, 133 Architectural change, 67–74 ARIS Business Process Platform, integration with SAP NetWeaver, 43–44 ARIS House of Business Process Excellence model, 37–39 specification layer, 45–47 Arizona Motor Vehicle Division, 91–93 ATMs, 63–65, 68 AT&T, 143 Attributes of breakthrough culture, 26 Audit of risk, of security/privacy breakdown, 269–270 Automation. See Business process automation Back-office offshore outsourcing, HSBC holdings, 129–130 Barriers to adaptive innovation management, 158–159 Barriers to entry, e-business technologies, reduction of, 233–234 Benefits management, offshore outsourcing of, 136 Best business practices, 36–37 Big-bang transformation, 80 Blueprint, business, 181–184, 270–271, 273, 275 Boeing, 15 BPEL. See Business Process Execution Language BPML. See Business Process Modeling Language BPO. See Business process outsourcing
322
THE AGILE ENTERPRISE
Brand equity, 224 Breakthrough culture, 26–27 attributes of, 26 British Airways, 139, 142 Build-operate-transfer model, offshore outsourcing, 148–149 Built to Adapt, 14 Business blueprint, 65, 84, 181–184, 270–271, 273, 275 Business-centrism, 73 Business-information technology alignment, 57 Business process automation, 33–48 Amazon.com, process innovation, 35–36 ARIS House of Business Process Excellence model, 37–39 specification layer, 45–47 automation engines, 41 best business practices, 36–37 business process execution language, 41 business process modeling language, 41 Chesbrough, Henry, 35 collaboration innovation, 35 components of next generation process automation, 42 composite applications, 44–45 customer relationship management, 37–40 Dell, process innovation, 35–36 ebay, process innovation, 35–36 enterprise application integration, 41–42 Enterprise Resource Planning software, 39–40 Enterprise Service Architectures, 42 enterprise specific models, 47 existing applications, new processes based on, 45 factory-critical link, 45–47 General Motors, 35 implementation of next practices, 38 key performance indicators, 39 legal regulations, processes influenced by, 36 lifecycle management, 38–39 NetWeaver, SAP, integration with ARIS Business Process Platform, 43–44 next business practices, 34–36 next generation process automation, 41–44 “On Star” services, 35 process definition inclusion of, 40 software technology integration, 40 process description, 43 process factory, physical realization of, 47 process of process management, 38–39 process reference models, 46–47
process warehouse, process models stored in, 47 product innovation, 34–35 SCOR reference model, 36–37 software reference models, 40 standard applications, process automation based on, 40–41 standard application software solutions, 37–38 Supply Chain Council, 36 types of innovation, 35 web service, 42 workflow engine, 41–42 Business Process Execution Language, 41, 180 Business Process Modeling Language, 41, 180 Business process outsourcing, 144–145 offshore outsourcing, distinguished, 128 Business relationship model, 69–74 business skills, 70 soft skills, 70 strategic skills, 70 Cadence Design Systems, information technology offshore outsourcing, 130–131 Cantwell, Linda, 24 Capital, access to, 104–106 Capital commitment for acquisition, perspective of corporate financial officer, 50 Cardinal Health, Inc., 164–165 Castells, Manuel, 14 Catalyst, technology as, in innovation management, 122–124 Cellular-debit-card solution, mapping to Darwin Architecture, 65 Center for Information Systems Research, MIT, 78 Central information technology office, 307–308 Challenges to organizational agility, 169–171 Change architectural, 67–74 culture of, information technology and, 300 in demographics, information technology and, 297 management of, 75–81 open-mindedness about, as attribute of breakthrough culture, 26 in real-time, ability to adapt to, 20 resistance to, overcoming, 27 Charles Schwab, 15 Chesbrough, Henry, 35
INDEX Cisco Systems, 15, 137 CISR. See MIT’s Center for Information Systems Research Citibank, 139 Citigroup, 142 Coca Cola, 14 Collaboration innovation, 35 Collapse of protective barriers, 103–109 Collective behavioral tendency of organization, 26 Collective intelligence, networked, 27 Common risk language, need for, 256–257 Communication in information technology, 299–300, 307–308 in innovative enterprise, 118 Community of practice approach, 302 Compaq, 18, 79 Compensation services, offshore outsourcing of, 136 Competitive marketplace, survival traits, 19 Components of next generation process automation, 42 Concept management, 120 Conjoint Adaptive Ranking Database System, 155 Contracting in offshore outsourcing, 144 Convergys, global outsourcing, 146 Copyrighted music files, illegitimate downloading, 15–16 Corporate culture, in innovation management, 116–118 Corporate executives, Lines of Business, partnership with, 73–74 Cosourcing, 142–143 Cost of information, 158–159 Court rulings, information technology and, 298 Court system, 186–187 CRM. See Customer relationship management Cross-boundary processes, 89–90 Cross-divisional synergies, harnessing of, 164–165 Crossing the Chasm, 171 CSLC model, 224 Cultural attributes, innovative enterprises, 117–118 Culture, breakthrough, 26–27 Culture of change, information technology and, 300 Customer external, internal, feedback loop, 53 importance of, 56, 74 value judged by, 61–62
323
Customer analytics, offshore outsourcing of, 134 Customer care processes, offshore outsourcing of, 134 customer analytics, 134 marketing, 134 sales, 134 support, 134 technical support, 134 Customer-centrism, 73–74 Customer closeness, 112 Customer focus, single-minded, as attribute of breakthrough culture, 26 Customer information, capturing/utilization of, 28 Customer relationship management, 37–40 Customer satisfaction assurance system, 195–218. See also Sentinel customer satisfaction assurance system Customer satisfaction information technology strategy, 73 Customer service, offshore outsourcing of, 130 Customized agile enterprise, creation of, 82–84 Darwin Architecture, 58–60, 65, 67–68, 73–74 Decision-making, adverse, adaptive innovation management and, 158 Deliverables, defining, 61 Dell, Inc., 15, 18, 35–36, 139, 142 Demographics, changing, information technology and, 297 Department of Justice, Western Australia, 188 Digital age, transition to agility in, 23 Digital economy, market forces in, 12 Digitization of processes, 30 Divisional silos, 159 Document business model, 97 DuPont, 145 EAI. See Enterprise application integration Eastman Kodak, 144 ebay, 15, 35–36 E-Business Opportunity Index, 219–254 barriers to entry, reducing, 233–234 challenges across industries, 235–236 contextual opportunity factors, 222–223 executive overview, 219–220 factors, assigning weights to, 228–229 life insurance industry, 229–231, 239–247 low sensory impact products, 236 model of, 221–224 lessons, 236–238 operationalization, 226–228
324
THE AGILE ENTERPRISE
opportunities across industries, 233–235 pharmaceutical manufacturing industry, 229, 231–233, 248–254 contextual factors, 230, 232 product factors, 230–232 transactional factors, 231–233 value chain for, 235 potential of e-business technologies, 220–221 product opportunity factors, 223 regulatory issues, across geopolitical boundaries, 235–236 spreadsheet tool for, 228 transactional opportunity factors, 225–226 transfer of information, efficiency in, 234–235 e-business XML, 179 EBXML. See e-business XML e-culture, 26 as emerging culture in organizations, 26 EDI. See Electronic Data Interchange Electronic Data Interchange, 272–273 Emergence of agile enterprise, 11–32 Adaption-Innovation Theory, 27–28 adaptive infrastructure, 28–30 governance, 29 inclusion, 28–29 process innovation, 30 technology infrastructure, 29–30 adaptive/innovative team, 27–28 breakthrough culture, 26–27 attributes of, 26 collective behavioral tendency of organization, 26 e-culture, emerging culture in organizations, 26 financial pressures, 13 Five Force Model, of Porter, 222 global, digital economy, market forces in, 12 Global CEO Study 2004, 12 growth strategy, determined by value propositions, 25 information technology, 14 integrated value networks, 14 leaders, instillation of breakthrough culture, 24 organizational activity, 22–30 outsourcing, 13–14 performance-value leaders, 25 price-value leaders, 25 regulation, 13 relational-value leaders, 25 resistance to change, overcoming, 27
revenue generation, Internet technologies for, 15 Sarbanes-Oxley Act, 13 strategic discovery, open-ended process of, 14–15 transition to agility in global, digital age, 23 value chains, to value networks, 13 value proposition, re-examining, redefining, 25 values, 24–25 Employee relations, offshore outsourcing of, 136 Empowerment, in innovative enterprise, 118 Encyclopedia Britannica, 17 End-user support, switching resources to, 72 Engagement, in innovative enterprise, 118 Enterprise application integration, 41–42 Enterprise architecture, 78 Enterprise architecture office, 84 Enterprise Information Technology Governance Board, establishment of, 301 Enterprise Resource Planning software, 37–40, 273–275 Enterprise Service Architectures, 42 Enterprise specific models, 47 EOI. See E-Business Opportunity Index ERP software. See Enterprise Resource Planning software European Union Data Protection Directive, 256 Evolutionary architectural strategy, adaptive enterprise, 67 Evolutionary transformation, 80–81 Example, management by, as attribute of breakthrough culture, 26 Execution, collective, intensive focus on, as attribute of breakthrough culture, 26 Executive level turnover, effect of, 296 Existing applications, new processes based on, 45 eXtensible Markup Language, 179 External customers, internal customers, feedback loop, 53 Federal Trade Commission, security, privacy actions, 262–264 Finance/accounting processes offshore outsourcing, 131, 135 financial management, 135 financial reporting, 135 general accounting, 135 tax related processing, 135 transaction processing, 135
INDEX Financial management, offshore outsourcing of, 135 Financial reporting, offshore outsourcing of, 135 First-generation business models of offshore outsourcing, 141–145 Five Force Model, of Porter, 222–223 Flux doctrine of Heraclitus, 20 Ford Motor Company, 15 Formalized service interface between, business, information technology strategies, 57 lifecycle of, 57 Formalized services, 74 Framing, in innovation management, 119 Freedom, in innovative enterprise, 118 GameBoy, 20 General accounting, offshore outsourcing of, 135 General Electric, 15, 30, 129, 143–144 Capital International Services, 142, 147–148 General Electric/Satyam Company, 139 General Motors, 14, 35, 131, 145 finance/accounting offshore outsourcing, 131 Geographic location of work in offshore outsourcing, 137, 139–141 nearshore/offshore, 140–141 offsite, 140 onsite, 140 Geopolitical boundaries, regulatory issues across, 235–236 Gerstner, Lou, 24, 27 Ghosn, Carlos, 24 Glaxo Wellcome, 229 Global, digital economy, market forces in, 12 Global age, transition to agility in, 23 Global CEO Study 2004, 12, 19, 25 Global delivery model, offshore outsourcing, 146 Global knowledge sharing, with information technology revolution, 102–103 Global shared services model, offshore outsourcing, 147–148 Goals, collective, intensive focus on, as attribute of breakthrough culture, 26 Google, 133 Gore, W. L., 114 Governance issues, infrastructure adaptation and, 29 Government, modular view, process view, distinguished, 89–90
325
Government genome, 88–90 on demand, 95–98 human genomes, compared, 87–90 integrated, 95 interactive, 94–95 online, 94 Governor’s Office of Administration, Office for Information Technology, 301 Grinder, John, 202 Growth strategy, determination by value propositions, 25 Guardian Life Insurance Company, 149 Haeckel, Stephan, 200, 217 Health insurance, cost of providing, 281 Hear Music Coffeehouse, 16 Heraclitus’s flux doctrine, 20 Hewlett-Packard, 15, 52, 55, 58–59, 79, 106, 142 Darwin Architecture, 58–60, 65, 67–68, 73–74 Information Technology Service Management model, 75–77 Holistic attributes, 111 in innovation management, 110 Honesty, in innovative enterprise, 117 HSBC, 139, 142, 147 back-office offshore outsourcing, holdings, 129–130 HTML. See HyperText Markup Language Hub-and-spoke model, multisourcing, offshore, 149–150 Human Genome Project, 87, 99 Human genomes, government genome, compared, 87–90 Human resources processes, offshore outsourcing of, 136–137 benefits management, 136 compensation services, 136 employee relations, 136 workforce management, 136–137 Hybrid delivery model (onsite and offshore), offshore outsourcing, 146–147 HyperText Markup Language, 179 Hyundai Motor Company, 55 IBM, 15, 18, 24–25, 27, 29, 91–93, 146. See also Global CEO Study 2004; Integrated Supply Chain initiative IBRC. See International Business Research Center, Inc. IES. See Integrated Enterprise System IMB, 154
326
THE AGILE ENTERPRISE
Inclusion issues, infrastructure adaptation and, 28–29 Industrial revolution, 102 Information, cost of, 158–159 Information technology, 14, 295–308 barriers to agility, 297–298 budgetary considerations, 297 business, relationship between, 55–57 case study, Pennsylvania, 300–308 central information technology office, 307–308 change, culture of, 300 communications, 299–300, 307–308 community of practice approach, 302 coordination teams, 306 court rulings, 298 customer focus, 299 demographics, changing, 297 Enterprise Information Technology Governance Board, establishment of, 301 executive level turnover, effect of, 296 framework, 298–300 governance, 77, 299 Governor’s Office of Administration, Office for Information Technology, 301 human resource practices, 297 industry, ecologies in, 20 Integrated Enterprise System, centralization of business functions statewide, 305–306 Keystone Technology Plan, creation of, 303 large-scale projects, 297–298 legislation, 298 Lines of Business trust in, 69 operational, 75–77 organization stove pipes, 298 outsourcing of processes, 130–134, 144–145 application development, 133 application maintenance, 133 application testing, 133 implementation services, 133 new product engineering services, 133 support services, 133 Pennsylvania Department of Transportation, 304–305 performance measurement, 299 regulations, 298 strategic planning, 299 technology infrastructure, 300 turnover, effect of, 296–297
Information technology Infrastructure Library, 75 Information technology revolution, 102–103 Information technology service management model, 75–77 Information technology service maturity model, 66–67 Infosys, global outsourcing, 146 Infrastructure adaptive, 28–30 governance, 29 inclusion, 28–29 process innovation, 30 technology infrastructure, 29–30 Infrastructure Library, information technology, 75 Innovation. See also Innovation management as attribute of breakthrough culture, 26 defined, 28, 109–110 Innovation foundations, 120 Innovation management, 101–126 adaptive, 151–166 (See also Adaptive innovation management) attributes, holistic, 110 barriers, protective, collapse of, 103–109 capital, access to, 104–106 catalyst, technology as, 122–124 concept management, 120 conventional, adaptive, contrasted, 157 corporate culture, 116–118 cultural attributes, 117–118 customer closeness, 112 externalization, 111–112 factors for innovative-supportive culture, 117 focus of, 115 framing, 119 holistic attributes, 111 idea management process, 120 inclusivity, 113–114 information technology revolution, 102–103 innovation, defined, 109–110 innovation foundations, 120 innovation pipeline, 119–121 intellectual property, management of, 108 international currencies, 107 international securities ownership, 106 knowledge, access to, 103–104 launch phase, 120 metrics of, 114–115, 123–124 models, 109–116 Moore’s Law, 102, 106 obsolescence, technological, 106–108
INDEX pipeline, 119–121 portfolio, 120–121 product development times, reduction in, 108 product lifecycles changes, acceleration of, 108 project management, 120 servicer, 112–113 strategic context, 119 teamwork, 123 technology of, 121 trade agreements, growth in number of, 105 trade-barriers, 104 web-based idea management, 121–122 Innovative team, 27–28 Integrated Enterprise System, centralization of business functions statewide, 305–306 Integrated Supply Chain initiative, 24–25 Integrated value networks, 14 Intel, 15, 25 Intellectual assets identification, leverage of, 169–171 stratification of, 177 Intellectual property, management of, 108 Internal customers, external customers, feedback loop, 53 Internal delivery (department-based model), offshore outsourcing, 141–142 International Business Research Center, Inc., 204 International currencies, 107 International securities ownership, 106 International Standards Organization, 271 Internet technologies for revenue generation, 15 ISC. See Integrated Supply Chain initiative IT. See Information Technology ITIL. See Information Technology Infrastructure Library ITSM. See Information Technology Service Management model iTunes online music store, Apple’s, 16 The Jericho Principle, 189 Joint venture offshore outsourcing, 139 J.P. Morgan Chase, 142 Kanter, Rosabeth Moss, 26 Key performance indicators, 39 Keystone Technology Plan, creation of, 303 Kirton, Michael, Dr., 27 K-Mart, 25
327
The Knowing-Doing Gap How Smart Companies Turn Knowledge Into Action, 202 Knowledge access, in innovation management, 103–104 KPIs. See Key performance indicators Lafley, A.G., 24 Language, risk, for security/privacy, 256–257 Large-scale projects, 297–298 Leaders, instillation of breakthrough culture, 24 Legal regulations, processes influenced by, 36 Legislation, information technology, 298 Lifecycle management, 38–39 Life insurance industry, E-Business Opportunity Index analysis, 229–231, 239–247 Lines of Business, 60 corporate executives, partnership with, 73–74 information technology relationship, 68–69, 75 Living on the Fault Line, 171 Loan processing, offshore outsourcing of, 137 LOBs. See Lines of Business Low sensory impact products, 236 Lutron, 114 Management by example, as attribute of breakthrough culture, 26 Management of change, 75–81 Manufacturers, small, 277–294 business processes, 284–285 competition, increase in, 280 future of, framework, 278 future strategies, 290–292 health insurance, cost of providing, 281 information, availability of, 281 information technology, explosion in, 281 infrastructure, 284–286 internet, 290 investment funds, sources of, 280 knowledge workers, insufficient access to, 281 linkage between business, customers, suppliers, 283 manufacturing processes, 285 marketing process, 287 National Academy of Public Administrators report, 279–281 National Institute of Standards and Technology, Manufacturing Extension Partnership Study, 277–278
328
THE AGILE ENTERPRISE
National Research Council study, 279 North American Free Trade Act, 282 offshoring, 282 operating capital, sources of, 280 outsourcing, 282 present environment, 281–284 proximity to customer, 290–291 regulatory environment, 279 relationships, 286–289 responsiveness, 290 specialized product, 290–291 supply chains, participation in, 286 system requirements, 285–286 use of eBusiness technologies, 290 Manufacturing Extension Partnership Study, National Institute of Standards and Technology, 277–278 Marketing, offshore outsourcing of, 134 Marriott International, 156–157 Maturity, agility, 66 Medical record administration, offshore outsourcing of, 137 Medical transcription, offshore outsourcing of, 137 MEP Study. See Manufacturing Extension Partnership Study Metrics, 26, 114–115, 123–124, 270 Microsoft, 17, 20 MIT’s Center for Information Systems Research, 78 Modular view of government, process view, distinguished, 89–90 Moffat, Bob, 24 Moore, Geoffrey, 171 Moore’s Law, 102, 106 MP3 technology, 15–16 Mulcahy, Anne, 195 Multisourcing hub-and-spoke model, offshore, 149–150 Music player market, 16 NAFTA. See North American Free Trade Act NAPA report. See National Academy of Public Administrators report Napier, Bob, 55 Napster reconfiguration of, 16 shut down of, 16 technology of, 15–16 Nathan, Krishna, 151 National Academy of Public Administrators report, 279–281
National Institute of Standards and Technology, Manufacturing Extension Partnership Study, 277–278 National Research Council study, 279 Nearshore outsourcing, 140–141 NetWeaver, SAP, integration with ARIS Business Process Platform, 43 Networked, collective intelligence, 27 New product engineering services, offshore outsourcing of, 133 Next business practices, implementation of, 34–36, 38 Nintendo’s GameBoy, 20 Nissan Motors Co., 24 NIST. See National Institute of Standards and Technology; U.S. National Institute of Standards and Technology Nokia, 17–18, 25 North American Free Trade Act, 282 NRC study. See National Research Council study NTT DoCoMo, 15 Object Oriented Design, 178 Obsolescence, technological, 106–108 Offshore outsourcing, 13–14, 127–150, 282 back-office offshore outsourcing, HSBC holdings, 129–130 build-operate-transfer model, 148–149 business process outsourcing, distinguished, 128 Cadence Design Systems, 130–131 cosourcing, 142–143 customer care processes, 134 customer analytics, 134 marketing, 134 sales, 134 support, 134 technical support, 134 defined, 128–131 effect on small manufacturer, 282 examples of, 129–131 execution of, 137 finance/accounting processes, 131, 135 financial management, 135 financial reporting, 135 general accounting, 135 tax related processing, 135 transaction processing, 135 first-generation business models, 141–145 General Motors, 131 geographic location of work, 137 global delivery model, 146
INDEX global shared services model, 147–148 human resources processes, 136–137 benefits management, 136 compensation services, 136 employee relations, 136 workforce management, 136–137 hybrid delivery model (onsite and offshore), 146–147 information technology processes, 130–134 application development, 133 application maintenance, 133 application testing, 133 implementation services, 133 new product engineering services, 133 support services, 133 internal delivery (department-based model), 141–142 joint venture, 139 location of work, 139–141 nearshore/offshore, 140–141 offsite, 140 onsite, 140 offshore captive shared services, 142 offshore development centers, 143–144 offshore multisourcing hub-and-spoke model, 149–150 offsite onshore shared services, 142 ownership, 137 structure, external vendor, 138–139 pure contract offshore outsourcing, 138–139 pure information technology or business process outsourcing, 144–145 second-generation models, 145–150 selective outsourcing, 138 shared services centers, 129 staff augmentation, contracting, or temporary services, 144 subsidiary, 139 transaction processing, 137 claims processing, 137 loan processing, 137 medical record administration, 137 medical transcription, 137 policy administration, 137 transitional outsourcing, 138 Offsite outsourcing, 140. See also Offshore outsourcing On demand information technology infrastructures, 90–93 On-line therapeutic communities, 235 Onsite outsourcing, 140 “On Star” services, 35
329
OOD. See Object Oriented Design Open Innovation-The New Imperative for Creating and Profiting from Technology, 35 Open-mindedness about change, as attribute of breakthrough culture, 26 Open standards, use of, 90 Open system/environmental model, 20 Oracle, 15 Organizational bounded rationality, 23 Organizational culture, reshaping, 96–97 Organizational wisdom, 170 Outsourcing, 13–14, 282. See also Offshore outsourcing; Offsite outsourcing Owens Corning, 79 Palmisano, Sam, 27, 88 Palm OS, 20 PennDot. See Pennsylvania Department of Transportation Pennsylvania Department of Transportation, 304–305 Penrose, Edith, 21–22 PepsiCo, 156–157 Performance-value leaders, 25 Pfeffer, Jeffery, 202 Pharmaceutical manufacturing industry E-Business Opportunity Index analysis, 229, 231–233, 248–254 contextual factors, 230, 232 product factors, 232 transactional factors, 232–233 value chain for, 235 Pixar Animation Studios, 18 PlayStation, Sony’s, 20 Porter, Michael, 104. See also Five Force Model Portfolio, in innovation management, 80–81, 83, 120–121 Price, defined, 62 Price-value leaders, 25 Prioritization issues, in security/privacy, 271–272 Prioritization of projects, 181–190 Privacy See also security/privacy, 255–276 Process definition inclusion of, 40 software technology integration, 40 Processes, services, distinguished, 62–65 Process factory, physical realization of, 47 Process innovation, infrastructure adaptation and, 30 Process reference models, 46–47
330
THE AGILE ENTERPRISE
Process warehouse, process models stored in, 47 Procter & Gamble, 135 Product development times, reduction in, 108 Product innovation, 34–35 Product lifecycles changes, acceleration of, 108 Protective barriers, collapse of, 103–109 Pure contract offshore outsourcing, 138–139 Quality. See also under specific measurement tool measured, reported, 61–62 Quality of service, information technology strategy, 72–73 Real-time changes in ability to adapt to, 20 Recording Industry Association of America, 15–16 Regulatory environment, 13, 279, 298 geopolitical boundaries and, 235–236 Reinhardt, Erich, 164 Relational-value leaders, 25 Reporting, financial, offshore outsourcing of, 135 Resistance to change, overcoming, 27 Revenue generation, Internet technologies for, 15 RIAA. See Recording Industry Association of America Risk assessment, of security/privacy breakdown, 269–270 Risk language, for security/privacy, 256–257 Risk of acquisition, adaptive innovation management and, 158 Sales, offshore outsourcing of, 134 SAML. See Security assertion markup language Sanmina Corporation, 29 SAP NetWeaver, integration with ARIS Business Process Platform, 43–44 Sarbanes-Oxley Act, 13, 256 Satisfaction measurement masking customer problems, 198–199 sentinel customer satisfaction assurance system, 195–218 Schwab, 30 SCM, 39–40 SCOR reference model-best practice model for supply chain, 36–37 Second-generation models, offshore outsourcing, 145–150 Security assertion markup language, 179 Security/privacy, 255–276
agile enterprise approach, 262–264 audit of risk, 269–270 awareness issues, 269 blueprint, 270–271, 273 business requirements, 271–273 business units, 271 common risk language, need for, 256–257 communications, 269 core process design, 272–273 current initiatives, impact on, 264–265 definitions, 268–269 enabling foundation, 265–276 Enterprise Resource Planning software, 273–275 factors affecting breakdown, 258–259 framework, 268–269 governance, 267 impact of breakdown on organization, 259–261 infrastructure, 267–270 metrics, effectiveness, 270 opportunities, business initiative, 266 organization, 267–268 policies, 268–269 prioritization issues, 271–272 process breakdown, 255–256 reporting, 270 resource use, 259 risk analysis, 271–272 risk assessment, 269–270 risks, business initiative, 260–261 Sarbanes-Oxley Act, 256 security and privacy foundation, 268 silo security, 259 strategic approach, 264 technical requirements, 271–273 training, 269 Selective outsourcing, 138 Semantic disconnect, 172–173, 188 Semantic stack, 176–181 Sentinel customer satisfaction assurance system, 195–218 compliments, 209 customer experiences with, 212–216 customer results, 211 deployment of, 206–207 end-user satisfaction level, 209 future development of, 216–217 learning, experience-based, 208–209 nature of solutions, 209 problems found, 209 reaction of customers, 209 success measurement, 210–211
INDEX surveys, compared, 207–208 unique characteristics of, 207 Service, defined, 60–62 ServiceArizona, 92–93 Service centrism, transition to, 72–73 Service maturity model, 74 Service orientation, as attribute of breakthrough culture, 26 Services, processes, distinguished, 62 Services Blueprint Roadmap for Execution, 65. See also Business blueprint Services maturity model, 66 defined, 65 Services of agile enterprise, 49–86 Service transformation order, 76 Siemens Medical Solutions, 164 Siloed business process, 55 Silo security, 259. See also Security/privacy Silos to services, 75–84 SITEL, global outsourcing, 146 Small manufacturers, 277–294 business processes, 284–285 competition, increase in, 280 future of, framework, 278 future strategies, 290–292 health insurance, cost of providing, 281 information, availability of, 281 infrastructure, 284–286 internet, 290 knowledge workers, insufficient access to, 281 linkage between business, customers, suppliers, 283 manufacturing processes, 285 marketing process, 287 National Academy of Public Administrators report, 279–281 National Institute of Standards and Technology, Manufacturing Extension Partnership Study, 277–278 National Research Council study, 279 North American Free Trade Act, 282 operating capital, sources of, 280 outsourcing, 282 present environment, 281–284 proximity to customer, 290–291 regulatory environment, 279 relationships, 286–289 responsiveness, 290 specialized product, 290–291 supply chains, participation in, 286 system requirements, 285–286 use of eBusiness technologies, 290
331
SmithKline Beecham, 229 Social disruptions, technology driven, accelerating waves of, 103 Soft skills in business relationship model, 70 Software reference models, 40 Solutions-based nature of adaptive innovation management, 152–154 Sony’s PlayStation, 20 Spreadsheet tool for E-Business Opportunity Index, 228 Staff augmentation, offshore outsourcing, 144 Standard applications, process automation based on, 40–41 Standard application software solutions, 37–38 Starbucks, 16 Strategic alignment model of Venkatraman, 57 Strategic context, of innovation management, 119 Strategic discovery, open-ended process of, 14–15 Streams of innovation, integration of, 164–165 Subsidiary offshore outsourcing, 139 Sufficiency response, changing market conditions, 169 Summers, Lawrence, 87 Supply Chain Council, 36 Support, in innovative enterprise, 118 Supportive culture, factors in, 117 Support services in information technology, offshore outsourcing of, 133 Sutton, Robert, 202 Sykes, global outsourcing, 146 Tacit idea, codification of, 174–181 Tacit knowledge, 170, 174 Tax related processing, offshore outsourcing of, 135 Team mobilization, 27–28, 118, 123, 171, 210, 306 Technical support, offshore outsourcing of, 134 Techno-centrism, 72 Technologists, perspective of automation, 50 Technology-driven social disruptions, accelerating waves of, 103 Technology infrastructure, 29–30 Temporary services, offshore outsourcing, 144 Three-dimensional business blueprint, 181–184. See also Business blueprint 3M, 114 Tightly coupled processes, 63 loosely coupled services, 63
332
THE AGILE ENTERPRISE
Tower Records, filing for Chapter 11 bankruptcy, 16 Toy Story, 18 Traceability, requirements of, 183–184 Trade agreements, growth in number of, 105 Trade-barriers, collapse of, 104 Transactional opportunity factors, in e-business technologies, 225–226 Transaction processing, offshore outsourcing, 135, 137 claims processing, 137 loan processing, 137 medical record administration, 137 medical transcription, 137 policy administration, 137 Transcription, medical, offshore outsourcing of, 137 Transfer of information, with e-business technologies, 234–235 Transitional outsourcing, 138 Trust, importance of, 69, 158 Turnover, effect of, 296–297 Types of architecture, 79 Types of innovation, 35 Unisys, 146 United Technologies, 145 U.S. Human Genome Project, 87, 99 U.S. National Institute of Standards and Technology, 271 Vaccarelli, Vince, 196, 200, 207 Value customer as judge of, 52 delivery of, 52–58
Value chain analysis, 225 Value chains, to value networks, 13 Value delivery boundary, 63 Value propositions growth strategy determination by, 25 re-examination of, 25 Values in emergence of agile enterprise, 24–25 Vendors, perspective of components, 50 Venkatraman, strategic alignment model of, 57 Venture capital, 105 Virtualized services, capabilities of, 91 “Virtual knowledge networks, 104 Visibility, requirements of, 183 Vision statement, 24 von Bergman, Barbara, 207 Wal-Mart, 11, 25 Watson, Tom, Sr., 27 Web-based customer relationship management system, 203–204 Web-based idea management, 121–122 Webvan, 30 Welch, Jack, 30 Western Australia, Department of Justice, 188 Whirlpool, 163 Whitwam, David, 163 Windows, 20 Wipro, global outsourcing, 146 Workflow engine, 41–42 Workforce management, offshore outsourcing of, 136–137 Xerox, 145, 196–211 failure to capitalize on innovations, 17 XML. See EXtensible Markup Language
