Optimizing the Enterprise
The complexity of managing a business in the 21st century could not have been
imagined 20 or 30 years ago. Technology innovation. Always-available self-service.
Global competition. New business threats lurk around every curve. In todays
dynamic business environment, its not just a race with a predetermined finish,
its an unending marathon, and winning requires companies be constantly attuned
to the road ahead.
The race began in the 1980s, when American industry began to experience intense competition as a result of globalization, and companies found themselves struggling to compete against better, faster, cheaper competitors.
In light of these new threats, many U.S. companies ran straight to management gurus for answers. In many cases, the answer was re-engineering — the major focus of which was making drastic changes, including downsizing, outsourcing, and restructuring. By the 1990s, organizations were responding heavily with a rip-and-replace technology investment approach, deploying more IT systems and applications to support and manage data — at no small cost. Worldwide information and communication technology spending nearly doubled between 1993 and 2001, reaching $2.42 trillion.1
The devastating legacy of the technology binge is that today, supporting even the most basic business processes (which now encompass data housed in different platforms and applications spread throughout the company in multiple formats, locations, and even time zones) is a management nightmare.
Companies that have survived this somewhat painful management era and are still running (literally and figuratively), have emerged stronger and wiser, and are now pursuing a more enlightened path.
Todays Competitive Landscape
In Creative Destruction, authors Richard Foster and Sarah Kaplan demonstrate just how competitive the business environment has become. In the 1920s and 30s, the turnover rate for the Standard and Poors (S&P) index was approximately 1.5 percent per year. A company at that time could expect to retain its S&P status for approximately 65 years. By 1998, the turnover rate in the S&P 500 was nearly 10 percent, implying a shelf life of just 10 years.
Indeed many of those companies have seen their market capitalization decline as a result of a failure to plan, a failure to adapt, or a catastrophic mistake. Now more than ever, companies need to look within to fine-tune operations to not only cut the fat, but to ensure the continued growth, overall health, and market share of the company by executing flawlessly, anticipating and responding to change, and mitigating risk.
Above all else, to succeed in todays competitive business environment requires dynamic and informed decision-making. Across industries and around the world, critical business decisions that define an organizations very existence are made hundreds of thousands of times every day. Loan applicants are being accepted (or denied), credit lines are issued (or declined), insurance is granted (or denied). The methods of arriving at decisions and the outcomes of these decisions have a significant impact on the financial health and reputation of a company — as well as its ability to meet return-on-investment, response-time, and cycle-time goals.
To this end, its vital that the right content is aggregated and that this content is delivered to the right people at the critical moment when a decision must be executed, so they have all the information necessary to make real-time decisions. By providing employees with timely access to the full context of content available, the likelihood that employees will make poor decisions is greatly reduced. This, in turn, helps the company manage its exposure to risk.
While improved business agility, improved response and cycle times, and lower transaction costs are often easily measured, its difficult to capture the cost of poor decisions within the enterprise. However, youll probably agree its quite easy to appreciate their cumulative effect. One wrong decision can subject your business to potential shutdowns, noncompliance fines — even devastating legal action. However, many wrong decisions can put your company out of business.
The Process Era
As many industrialized nations have shifted from product-based to service-based economies, there is a greater emphasis being placed on the processes that guide how companies deliver goods and services.
According to research from the Brookings Institute, the market capitalization of firms shifted from a ratio of 62 percent tangible assets and 38 percent intangible assets in 1983 to 15 percent tangible assets and 85 percent intangible assets in 2000. This means, essentially, that the majority of the value of a business today can be found in its human capital — and their collective knowledge and expertise — its customers and its partners, and in the processes that link them all together.
In Process Innovation, author Thomas Davenport defines a process as a structured, measured set of activities designed to produce a specified output for a particular customer or market. It implies a strong emphasis upon how work is done within an enterprise. A process is thus a specific ordering of work activities across time and place, with a beginning, an end, and clearly identified inputs and outputs — a structure for action.
Apart from this textbook definition of business processes, its important to understand that business processes also are paths of decision-making. They involve people, business systems, and content and weave through your business every day. They are fundamental to how a business operates and, more importantly, represent an opportunity for operational improvement.
Processes are not new, but until now the IT industry has failed to develop an effective platform for their deployment, optimization, and analysis, Howard Smith, co-chair of the Business Process Management Initiative, said recently in a presentation.
What Smith refers to is a concept known as the process-managed enterprise, or the real-time enterprise. The real-time enterprise (RTE) refers to the use of real-time information to streamline the management and execution of a business critical business processes.
It is important to note that the RTE is not associated with a specific technology per se. According to analyst firm Gartner, it is a competency that enables transformation and can significantly improve the execution of existing strategies. The particular value of RTE principles is that the benefits gained from exploiting technology to reduce redundant and unprofitable time gaps can be applied to a diverse range of strategies.
Benefits of the Real-Time Enterprise
Companies that move toward the real-time enterprise can expect the following benefits:
- Automatic vs. Manual. When companies automate processes, they reduce the
need for human intervention in routine or low-risk decisions. This eliminates
both the cost and potential for errors associated with human-based workflow,
and it allows companies to apply expert human resources when and where they
add the most value to the decision-making process. Whats more, this allows
companies to realign their resources to focus on higher revenue-generating
activities.
- Better, Faster, Cheaper. Automating processes reduces cycle time. The faster
you can process a business transaction, the more transactions you process.
The more transactions you can process, the more business you service and
the more revenue you generate. Faster decision-making not only shortens cycle
time, but it also reduces handling costs and ultimately increases profitability.
- Streamlined Exceptions Handling. No matter how well-designed a process
may be, there will always be exceptions to the norm. How organizations handle
exceptions is a major determinant of overall service. If an exception is
handled expediently, it can present an opportunity to win customer loyalty.
By being exceptional at handling exceptions, companies can further differentiate
themselves from their competition.
- 20/20 Operational Visibility. The real-time enterprise delivers operational
visibility and metrics on how the business is performing — key to both
business agility and continuous process improvement. This visibility enables
businesses to track, monitor, measure and optimize processes in real-time
to quickly identify operational bottlenecks and fine-tune processes on the
fly for optimal results. In the real-time enterprise, processes supporting
millions of transactions and thousands of users can be quickly deployed or
modified as needs warrant.
- Power to the People. In the real-time enterprise, people are not slave to technology; technology serves the peoples (and the business) best interest. While the technology may be powerful, it is engineered to be easy to use, administer, and deploy. The technology is designed so that business analysts and line-of-business users who know the process best are in charge of mapping and modifying business processes, as opposed to IT professionals. Taking the onus for support off of IT also effectively reduces total cost of ownership.
Additionally, the real-time enterprise has no boundaries — enabling businesses to extend processes to link customers, suppliers, and other third-party entities. This enables global collaboration, allowing companies to partner to address new business opportunities.
Activating Content
As stated earlier, processes take center-stage in the real-time enterprise; technology is merely the enabler. However, ECM leverages the unification of business content, processes, and connectivity to speed critical business decision-making, which is at the heart of the real-time enterprise.
The basic premise of ECM technology is that content and processes must work together to facilitate and accelerate information exchange, and respond to business or transaction events. Events trigger the use, creation, and management of content and associated processes. To be more responsive to customer or market demands, companies must be able to react directly to these events as they occur — if they are to truly deliver competitive advantage. Along with content and process, connectivity is key — as many organizations have stove-piped applications, creating obstacles for data and content exchange.
By harnessing the power of content, process, and connectivity, companies can activate content and business processes by creating relationships between documents, Web pages, folders, and so on, and the processes and business systems that are critical to the operation.
Content becomes part of the business process: when it is proactively delivered when and where it is needed to accelerate decisions; when it is enabled to react to business or transactional events; and when its context can launch business processes or updates to enterprise business applications. Activated content reacts directly to changes or events and is put to work to solve business problems in real time.
In a research report titled The Case for Active Content, the Patricia Seybold Group writes: Customers, employees, and partners no longer have the time to wallow through information and then decide what actions to take. They need to be able to activate that information — to place orders, replenish supplies, administer benefits, approve proposals, authorize expenditures, and execute a variety of actions that are supported by enterprise content.
Triggering Event
The value of activating content via ECM can be observed even in the simplest of examples, such as updating an online loan application. Suppose you were applying for a home equity loan and needed to increase the cash-out amount midway through the process to pay for unexpected home repairs. Your query effectively creates a new request to the lender that may or may not invoke automated or human review and approval. In this instance, your query represents an event to the lender or broker that creates the need to use, create, and manage content related to your application.
Specifically, this event triggers a requirement to identify, locate, and extract specific content related to the status of the loan, which now requires another business decision.
The data and content related to the loan process may be located in various systems and applications. Therefore, connectivity is necessary to aggregate, integrate, and update this broad range of content that exists in different locations across the enterprise.
As a result of this convergence of content, process, and connectivity, customer queries can be serviced more quickly, accurately, and cost effectively than ever before. Additionally, any new or updated information — i.e., a change in a customers address or phone number — can be immediately captured and shared with the rest of the organization.
While content, process, and connectivity tools have been in existence for more than 20 years, it is the integration of these technologies that promises even more powerful results. Today, companies can leverage this convergence of technologies via ECM to achieve even greater ROI by linking their business processes with the creation, management, and delivery of business content.
The value of integrated content, processes, and connectivity cannot be underestimated in enabling companies to respond to changing market conditions, leverage windows of opportunity, minimize competitive threats and improve return on investment, says Mark Gilbert, research director at Gartner.
Summary
Today, companies need every advantage to differentiate themselves, to maximize competitive edge and shareholder value. Competition is intense, and in the race for market share, companies must think and act globally. Astute businesspeople who learned the lessons of the 80s and 90s know that a lean and mean workforce is only part of the solution, and that technology alone is not necessarily the answer.
The real-time enterprise provides companies with a strong platform to improve critical business decision-making, increase operational efficiency, and effectively manage change through enhanced operational visibility and improved agility. The ability to make better business decisions, with fewer errors, is all about the integration and management of critical business content and processes.
