When looking for opportunities to produce ever more impressive results, we know that a CIO is presented with two categories of opportunity areas: (1) projects that you initiate proactively and (2) projects that must be completed to respond to an external catalyst for change. Unfortunately, the typical CIO rarely has the luxury of choosing proactive initiatives over those that are required by external influencers. As such, a major conundrum for CIOs is how to find a way to best position the organization to respond to external requirements quickly, efficiently, and cost-effectively enough to still have resources, funds, etc. left over to work on those proactive initiatives that can best benefit the organization-and bolster the CIO's image.
With this in mind, we begin our series by discussing the latest trends in technology utilization-not what technology is new, but rather, how companies are newly leveraging technology for strategic or tactical advantage. "Why not start with other issues facing CIOs?" you ask. The answer boils down to impact and survival. The more prepared you-and your organization-can be to respond to external demands, the more you'll be able to begin tackling the proactive initiatives you believe will best benefit your company and solidify your personal competitive differentiation. After all, we all know that the CIO credo
is "Deliver or die!"
In subsequent articles in this series, we'll look at unearthing significant internal proactive opportunities for delivering worth, creating leaders within your staff, the real role of the CIO in today's organization, defining non-disposable evolutionary paths for continuous improvement, effectively molding/managing the organization's perception of IT, practicing newspeak with the executive team, avoiding the five most treacherous IT mistakes, the risks and rewards of information sharing, the information overload potential of RFID, and many other CIO issues.
For decades, organizations have been leveraging information technology (IT) to reduce costs, improve performance, create competitive advantage, etc. Words like automation, integration, process improvement, re-engineering, and others have become a part of our daily business vernacular. But, the incremental benefits organizations can expect to realize from their future IT investments will depend on the extent to which they embark upon the next frontier of IT utilization, becoming a visible business.
In this multi-part series, we’ll look first at where most companies are today and how they got there; the gaps that remain between your current capabilities and what is possible with visible business; the penalties of not addressing those gaps; and what you will need to move forward.
How We Got Here
Technology is used in nearly every industry. But, one of the most voracious and cutting edge users of technology as a process change tool is the retail supply chain. As a result, analyzing what is happening in that aggressive industry has often provided a valuable bellwether for predicting coming technology trends elsewhere.
The retail community has always been highly competitive. Driven by the influence of fickle consumers and miniscule margins, this maniacal world operates in a state of perpetual flux. Regular adjustments to improve product positioning, brand equity, customer loyalty, service levels, speed to market, support, and, of course, the top and bottom line have long been the norm. No surprise, then, that this community has shown an ongoing propensity toward creative change to gain or sustain competitive advantage.
Of course, technology has played an integral role in much of that change. Over the years, the use of technology has been pivotal in helping organizations leapfrog competitors by achieving efficiency gains, cost reductions, quality increases, etc. In fact, retail giant, Wal-Mart, has made a science out of optimally applying technology to further its incredible record of progress and innovation. It’s what Wal-Mart’s Randy Salley, VP of Merchandising Systems, calls competing “at the speed of information”.
When we look back on the evolution of technology use, in general, we see the following phases:
Phase I: Department-Centric Automation
The evolution began decades ago with companies realizing that humans were not able to manually process business information as quickly, accurately, and/or cost-effectively as computers. These organizations focused technology on individual departments where the daily processing tasks were taking place. Of course, automation was typically focused on those document types that created the greatest amount of work in a particular department (e.g., purchase orders in Customer Service; invoices in Accounts Payable). And so, the beginning of the evolution saw silos of automation popping up in various departments within companies with little thought to whether those department-centric applications might ever need to interact with other departments or other companies.
Phase II: Electronic Document Exchange
Shortly thereafter, however, organizations began to notice that the information whose processing they were trying to automate wasn’t arriving in forms that could be processed by their newly installed computer applications. It became clear that as long as the information to be processed was arriving via mail, fax, printed on a box, coming in over the phone, etc., manual intervention would be required to prepare (i.e., key-enter) the information for processing by the application. This begat the next major phase in business automation, the electronic capture of business information for processing by applications.
Because the preponderance of the automated processing being done by those applications was on business documents (e.g., purchase orders and invoices), focus centered on the electronic exchange of business documents. The most significant of these efforts was called electronic data interchange (EDI). During this period, we saw other initiatives for capturing data for input to the computer such as: bar codes, voice response systems, magnetic strips on credit cards, etc. It was all about getting the information you had in hand into the computer, so you could process that information using automation.
Phase III: Enterprise-Centric Automation
As companies reaped the benefits of integrated documents and automated processing (albeit department-centric), they began to realize the potential worth of being able to share and use information across departmental boundaries. Certainly, there were common pieces of information (as opposed to full documents) that were used in many departments. And, much of the analysis and decision-making that was done on that information could be automated or facilitated using technology.
So, they turned their attention to integrating the enterprise in order to enable cross-departmental collaboration. This included the exchange, analysis, and utilization of information from a variety of locations within the enterprise. This initiative was generally called enterprise application integration (EAI).
Shift in Focus
The evolution—from departmental islands of automation, to the electronic exchange of documents, to enterprise-centric computing—was largely motivated by and focused on expense control/reduction and incremental gains in efficiency. After all, if process steps could be executed faster, with fewer errors, and with less human intervention, there was money to be saved. And, the most proactive companies reaped rich rewards from their efforts in these areas.
But, there’s a point of diminishing return where the benefits to be had from automating the next internal process or integrating the next document type begin to pale in comparison to what else one might consider doing. Furthermore, true process improvement has very finite limits if the only portion of the process that’s being improved is within the four walls of your organization. Increasingly, the leading companies in the most proactive business communities have been initiating efforts to work more collaboratively with partners in their supply chain to innovate processes and generate mutual worth.
Not surprisingly, there’s a shift in CEO priorities in conjunction with these efforts that's signaling the next great frontier in the evolution of technology utilization in the retail supply chain. Separate surveys from Gartner, Forbes, and AMR have independently arrived at the same conclusion: CEOs are turning their attention from expense control/reduction as their major focus to one of generating growth. In a survey by CIO Magazine*1 on CEOs’ view of IT impact on the enterprise, six out of top 10 areas cited were growth oriented.
But, as a 2004 Forbes Global 2000 survey indicated, the majority of growth initiatives require interaction with entities outside the four walls of the enterprise. Unlike the department-centric or enterprise-centric “siloed” initiatives of the past, the next phase in the evolution will focus on multi-enterprise collaboration (MEC), the integrated and automated interaction between multiple entities in the supply chain.
Unlike prior phases—that focused on document exchange and processing—MEC is focused on the availability, analysis, and application of business knowledge to generate worth. Said differently, where one enterprise knows something that could be made available to and analyzed and applied by another enterprise in such a way that it would create value for all concerned, there is an MEC opportunity.
Rather than just focusing on making the information available when, where, and in the form needed, MEC also seeks to convert that business knowledge into intelligence and, then, into a corporate asset. Simply having the information doesn’t generate the value. Even after you’ve analyzed it, there’s still no value until you apply the results of that analysis in such a way that it generates value for one or more entities. It’s then and only then that information can be converted into a corporate asset. So, MEC is all about focusing on the availability, analysis, and application of business knowledge in such a way that it generates value for those involved.
To better understand the roles of availability, analysis, and application in MEC, consider the following:
Availability – Making information available for use*2 implies several events must take place. The information must be obtained from its source (e.g., human or technology). It must be moved to the location where it will be acted upon. And, it must be presented in the appropriate form/format for the person or technology that will use it.
Analysis – This is one of the two forms of information used in MEC. It includes the questions that will be asked of the information that is being made available. It also includes the comparisons, evaluations, calculations, validations, etc. that are performed on the data to determine what—if any—action is necessary. This analysis determines whether there are conditions that require action.
Application – Ultimately, the benefits that accrue from MEC are realized because one or more actions are initiated to generate worth. The role of this MEC component is to apply the results of the analysis to trigger the actions necessary to create value. These actions could include additional analysis or they could be specific tasks or events to be triggered in order for the results of the analysis to be applied in such a way that they generate worth.
Historically, the retail supply chain has been out in front with its use of technology to improve business performance and create competitive edge. That community has evolved from department-centric automation to electronic document exchange to enterprise-centric integration. It is now turning its attention to multi-enterprise collaboration which leverages information availability, analysis, and application between enterprises to progress along a path toward achieving visible business.
In Part II, we’ll look at the conditions driving companies to practice MEC. In subsequent articles we’ll explore the meaning of visible business, provide examples of MEC, and emphasize how organizations are employing creativity in how they apply the information to generate worth for their company and for others in their trading community.
*1 October, 2004
*2 Information “use” means to either analyze the information that’s been made available or to apply the results of that analysis by triggering one or more actions to address a particular business situation. These business actions could include additional analysis at a different point of use.
About the Author
John Stelzer is Director of Industry Development for Sterling Commerce. Since 1984, he has been providing education and consulting on electronic commerce—to date, educating more than 27,000 professionals from over 16,000 companies. For more information on electronic commerce in the retail industry or data synchronization specifically, John can be reached at 614.793.7046 or firstname.lastname@example.orgMore by John Stelzer
About Sterling Commerce
Sterling Commerce is one of the world’s largest providers of business integration solutions. For more than 25 years, thousands of companies have depended on Sterling Commerce expertise to optimize collaborative relationships through the integration of applications, external partners, suppliers and customers. With more than 25,000 customers worldwide, Sterling Commerce is the dominant business integration solutions provider in retail, consumer packaged goods, manufacturing, financial services and telecommunications.