Competition/Collaboration in the Business Value Network

Transcription

1 Strategic Planning, C. Dreyfuss Research Note 2 January 2003 Competition/Collaboration in the Business Value Network Four new paradigms are shaping the business environment into a giant network of interconnected and shared business processes. IT managers must understand this new environment to support the enterprise effectively. Core Topics Business Management of IT: Business/IT Strategy Development and Planning Sourcing: Sourcing Issues, Trends and Events Key Issues What forecast major new business and technology changes must be planned for? What are the trends and directions in sourcing? Strategic Planning Assumptions By 2005, large enterprises will share the ownership of steps in their core business processes with external agents (such as suppliers, partners, service providers and clients) in 80 percent of the processes, reducing the degree of command they have over business rules in those processes in favor of those external agents (0.7 probability). By 2005, external variables such as geography, degree of change, and the presence or absence of competitors or allies in the business environment will have as much influence as internal characteristics in defining an enterprise's core competency (0.6 probability). By 2005, enterprises that fail to prepare themselves to participate in the new business environment (network of interconnected, near-real-time business processes that are shared among global players) will not be able to answer effectively to market shifts (0.7 probability) and, by 2008, will be acquired or driven to become niche players (0.6 probability). The business environment is being gradually, yet radically, changed. Several forces are driving four new business paradigms that will reshape enterprises and the way in which they conduct business. Business Strategy: The Rise of the Sourcing Paradigm Classic principles prescribed that enterprises should do everything that they could do more inexpensively than an external source. Over time, competitive pressures forced enterprises to abandon that paradigm in favor of a new one in which enterprises do only what increases their competitive advantage. As a result, enterprises have become lean and agile, concentrating on their core competencies. They now search the market for suppliers, partners and external service providers (ESPs) that will complement their business processes. The pressures of today's competitive business environment restate this paradigm. Enterprises increasingly recognize that the external market offers resources and services that cannot be fostered internally. The new business paradigm prescribes that each enterprise do only those things that provide more value to the process value chain than any external source could provide. For instance, enterprises that were once capable of competently developing and managing their telecom infrastructure are increasingly outsourcing their networks to ESPs that can offer broader reach, more services and better service levels, generally at lower costs. Enterprises need to conduct their business through a dynamically changing combination of internal and external sources and services. The aim is to harness external sources that are capable of adding the most value to the business process network. Enterprises will retain only those roles where they excel over any Gartner Entire contents 2003 Gartner, Inc. All rights reserved. Reproduction of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice.

2 external source and the roles that are necessary to steer external resources toward supporting business objectives (a new essential competency), and they will source everything else from the external market. On the other side, there will be external sources whose core business is to excel at those activities, and they will participate in the process in some partnership arrangement, or simply offer those services as an ESP (see "It's Time to Move Sourcing Up the Management Agenda"). Business Operations: The Rise of the Value Network Paradigm Enterprises in many industries are increasingly interconnecting their business processes, creating process networks with complex, shared ownership patterns. For example, car manufacturers already operate that way, with suppliers, dealerships and even customers participating in the process value chain. In the future, enterprises in all industries will follow this pattern, at least to some extent. The business environment will be composed of a network of business processes, where four new concepts will become important (see "Sharing Power and IT Architecture in Business Processes"): Locality of business rules: Establishes a domain (a section or steps of a business process) where the rules apply. Distributed knowledge sources: Identifies the enterprises that are capable of defining the business rules that add the most value for a domain. Domain ownership: Defines which enterprises have the power to establish the business rules for a domain. Ownership pattern: Establishes the different ownership patterns (for example, alliance, joint venture and partnership) of the different domains. This value network paradigm is an extension of and reinforces the sourcing paradigm. Enterprises will search the market not only for services, but for other enterprises that can add business intelligence to a domain in a business process, thus sharing its ownership. Ownership patterns are reasonably straightforward when there is a channel master, as in the case of a car manufacturer. However, as more enterprises in different industries move toward this model, ownership becomes a complex issue regarding the design and management of business process. 2 January

3 Business Speed: The Rise of the "Real-Time Enterprise" (RTE) Paradigm Although they may never achieve the goal of becoming RTEs, enterprises in all industries are progressively reducing their time frames (see "Start Planning Now for the Real-Time Enterprise"). If enterprises are moving in the direction of sharing their business processes in a value network, becoming an RTE will be a common goal for them. That will lead enterprises to develop a new strategic vision that is based on well-orchestrated and timely collaboration by multiple participants in the value network, which will lead to precise and timely action (see "Real-Time Process Management: Rules Before Actions"). An important consequence of that new strategic vision is that a critical part of process design is establishing the shared governance rules (who will do what and when). The RTE requires immediate reaction to each event, without having to decide who is accountable. A good example is clearing processes in real-time financial systems (processes in other industries are moving in that direction). It is necessary for enterprises to adapt collaborative approaches and methodologies to process design and process management. Business Deployment: The Rise of the Global Service Marketplace Paradigm Note 1 A Cautionary Note Governments that are seeking to advance their economic development and the welfare of their population will use legislation applying to a geographically bounded territory to attract businesses and work, or to protect businesses and work from going away. Global businesses will react accordingly to those opportunities and threats. In their ongoing and generally "geography-unbiased" quest to maximize revenue and profits, enterprises will switch work from one geography to the next, enabled by IT and the Internet. The recent rise in attention to the offshore sourcing issue, with positive and negative consequences for various constituencies and very emotional reactions is only the early "call to arms." It will be a three-sided war, where governments, enterprises and workers will eventually be friends and foes, depending on specific circumstances. Enterprises with effective operations in many countries have been around for nearly 200 years. However, only since the advent of universal communications and the Internet have businesses really become global and continuously connected. Although manufacturing plants can only be physically in one place, the data manipulation, information analysis and knowledge creation parts of business processes can be performed anywhere. Knowledge-based work can effectively be obtained from different locations flexibly and fast by adding a partner to the process network or sourcing from an ESP. Enterprises will look at alternative geographies as a source for the knowledge-based steps of their business processes, depending on three factors (see Note 1): The maturity of resources in different geographies, which can have their maturity cycles influenced by local variables and can show specific singularities and occur at different speeds (see "Hype Cycle Variations: A Case Study of Latin America"). The economics of resources and their short-term to midterm outlook. 2 January

4 The perceived threats and opportunities (for example, socioeconomic variables and legislation) in the different geographies. Along with the three paradigms already mentioned, the fourth paradigm stresses that enterprises will seek resources flexibly and anywhere, going after those partners or ESPs that can add the most value. Competitive pressures will increasingly drive them in that direction. The Consequences for Enterprises As the scenario sketched above gradually materializes, enterprises will realize that it means a significant departure from what they are today and how they conduct business. By 2005, enterprises that fail to prepare themselves to participate in the new business environment (network of interconnected, near-realtime business processes, that are shared among global players) will not be able to answer effectively to market shifts (0.7 probability) and, by 2008, they will be acquired or driven to become niche players (0.6 probability). Major changes will be seen in several key areas: Business Strategy: The pair of opposites collaborator and competitor will be at the core of any strategy development process. An able external source (partner, supplier or ESP) that can add the most value in a process network can just as easily participate in the competing network. As a result, in the context of developing a business strategy, these sources will be considered as potential collaborators and competitors. Those two categories will not be addressed separately, as in traditional strategies. Enterprise Architecture: The architecture will face stronger requirements for becoming shared, flexible and responsive to RTE objectives. The architecture will be more complex to design, develop and evolve, because this combination of drivers will have to be addressed collaboratively by participating enterprises. Sourcing: Sourcing will dynamically deal with external sources (knowledge that can add the most value to the network) from different geographies, allowing for varying degrees of ownership over the processes, from simple service provisioning to true risk- and profit-sharing partnerships. The degree of the desired participation and consequently of involvement and of ownership will be a key sourcing decision, based on business strategy and market analysis. As a result, sourcing management becomes a strategic enterprise competency. 2 January

5 Workforce: The new business paradigms will weaken the permanence characteristics of the workforce. Workforces will present a wider diversity of characteristics, from cultural traits to compensation practices. This will deeply change human resources management principles and best practices. Organizational Culture: The strongest force against this new reality will probably be organizational culture (or cultures, because multiple sources are involved), reacting to the complete upheaval of characteristics that have survived since the Industrial Revolution. The bond between the enterprise and its employee will have to be redefined. Management: In this environment, management will be a new discipline. It will center its attention in three critical, dynamic resource flows knowledge, people and money. It will be heavily influenced by the need to support RTE requirements. And it will embrace collaborative methodologies for process design and management. Bottom Line: As enterprises adapt to take advantage of this new business environment, there will be deep business implications, and IT will be one of the most-affected areas. It is hardly disputed that IT is inextricably tied to critical business processes in almost all industries. In the new environment, IT must become an instrument to foster collaboration, leverage people's talents, manage knowledge and control processes in real time. IT will have to gradually reinvent itself to be able to continuously support from today's reality to tomorrow's vision the enterprise's business processes. All managers in the IT area must be perceptive and receptive of those business changes to be able to fulfill their expected roles. 2 January