November 12, 2001

Fast, Focused, and Flexible

Focusing on core competencies and leveraging partner abilities can drive business success

By Frank Diana

Continued from Page 1

The transformation to vertical dis-integration based on the extended enterprise model follows three phases:

• Phase 1: Intraenterprise. Initially, the key to success is a strong internal focus. The enterprise must take a top-down, process-centric approach to enterprise integration. This approach enables many benefits, including cost savings, enhanced efficiencies, and the ability to react to rapid change. Exposing suboptimal processes and applications to an external community will not make an enterprise a valued member of a value chain - so the ability to optimize internal operations is absolutely critical to future success.
• Phase 2: Interenterprise. The next step is the externalization of processes, data, and applications. Again, the approach is top down, process-centric, and driven by an end-to-end view of business processes. This end-to-end approach includes a view of all the value chain participants, as well as the services required to satisfy the needs of the process. Both a standard vocabulary and a standard view of public business processes are required to enable interaction with trading partners. The benefits now reach into previously untapped areas of the value chain including cross-sell and up-sell opportunities that involve third-party offerings. Ultimately, enterprises will begin to gain a "trusted" position within the value chain.
• Phase 3: Market transformation. In this final phase, tightly integrated value chains will be able to leverage new distribution channels, create new product and service bundles that include offerings from value chain participants, and then tap into new markets through their enhanced value proposition.

Progress through these phases will be accelerated by the maturation of Web services technology, the development of standards, and the evolution of business process management (BPM) solutions.

BUSINESS PROCESS MANAGEMENT

The vertically dis-integrated environment is based on the idea that disparate entities can work together toward common goals. In other words, partners must be an integrated part of shared business processes - the series of manual or automated activities that are driven by defined rules and executed in support of a common business purpose. However, the adoption of virtual enterprise business models, using strategic partnerships and outsourcing, will present significant challenges.

As the world moves toward a dis-integrated business model, the traditional focus on internal optimization will shift to the external optimization of business processes. This task is extremely complex and requires strong collaboration between industry-specific partners. The fact that most industries are hampered by a highly inefficient set of public processes lies at the heart of the problem. Dis-integrated business models are based on the premise that enterprise information can be seamlessly shared among multiple partners in a timely manner. This is only possible if industry-specific vocabularies and process standards are established. RosettaNet is an example of such a standard. The RosettaNet Consortium has developed open e-business standards for the high-tech manufacturing industry. These standards (which encompass data dictionaries, implementation frameworks, business message schemas, and process specifications) form a common e-business language, aligning processes between trading partners on a global basis. Standards such as these will help organizations begin to operate in a new paradigm. Once these business processes are established, a mechanism to manage them and an infrastructure or platform to support them must also be adopted.

BPM is that mechanism. It is the overall control over the end-to-end processes that exist throughout the multiple applications, systems, and individuals both within an organization and across the extended enterprise environment. BPM must then be supported by an underlying platform or infrastructure that lets companies effectively model, design, and execute processes. With this approach, the enterprise leverages a supervisory application, which orchestrates the execution of end-to-end business processes. This supervisory application uses a set of internal and external business services to satisfy the needs of the business process. As the technology and approach to Web services (simple object access protocol; Web services definition language; universal description, discovery, and integration; ebXML; and so forth) matures, the discovery and usage of external services will become an integral part of enterprise architectures. Ultimately, BPM will give organizations the ability to effectively manage their entire value chain. It will enable the optimization of business processes through automation, realtime analysis, and measurement of business value - all based on true business intelligence.

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BPM is the only way in which organizations will be able to truly optimize external operations and become interconnected with partners to allow efficient information flow. BPM is a critical necessity for evolving to the vertically dis-integrated model.

THE BOTTOM LINE

Today's market forces are driving a business transformation across all industry sectors. Everything is now faster and more transparent, forcing companies to be focused, fast, and "best-of-breed." Business models are changing to meet the demands of the new economy, altering the nature of interactions with business partners. Organizations are moving away from the traditional approach of owning all facets of a supply chain and are instead focusing on only those competencies that are their true strengths. In order to do so, a true extended enterprise strategy that is supported by a set of shared business processes and leverages the strengths of partners is the key to developing collaborative solutions that enable efficiencies, cost reduction, enhanced service levels, and revenue creation. This virtual organization of interconnected partners based on the vertically dis-integrated model will be one of the best ways for enterprises to differentiate themselves and gain a trusted position in years to come.

Frank Diana [frank_diana@dmr.com] joined DMR Consulting in 1998 and currently serves as a senior vice president and CTO for the U.S. Commercial Division where he is primarily responsible for establishing the division's overall strategic direction. Prior to DMR Consulting, he spent 15 years at AT&T as a CIO, where he led various assignments, including International and decision support programs.

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