Process Digitization
Digitization: Moving From
Continuous Change
Vision to Execution
Ravi Kalakota
CEO
E-Business Strategies
November 2002
Interconnectedness
E-Business Strategies


Research and Process Consulting
E-Business

Fast-Cycle, Practical and Focused Research

Process Design and ROI Modeling

Executive Education and Consulting Firm
C-Business
M-Business
Publish Research in the form of Books
1995
1996
1999
2001
Scanning + Thinking + Doing = Expertise
© E-Business Strategies (www.ebstrategy.com)
2002
EBS Research Perspective…




In the 1950s, they said TVs would make movies go
out of business, they were wrong.
In the 1970s, they said VCRs would put movie
theatres out of business, they were wrong
In the 1990s, they said Online Shopping would put the
stores out of business, they were wrong
In the 2000s, they are saying that e-marketplaces are
going to put suppliers and procurement managers
out of business, they were wrong!!
Change is Evolutionary
Not Revolutionary
© E-Business Strategies (www.ebstrategy.com)
The Big Picture
Reality Check - Where Are We?
Technology Economics
The E-business Landscape –
Inside The Firm
The E-business Landscape –
Outside The Firm
B2B -- Business Process
Design Challenges
Management, Not Technology
is the Problem
Key Takeaways
© E-Business Strategies (www.ebstrategy.com)
Macro-Level Structural Change is a Constant…
Technology Models
MATURITY
% Adoption
Cascading S-Curves
GROWTH
Mainframe
Minicomputer
(30 years)
PC
Client-Server
(15 years)
E-commerce
E-business
(7 years)
INNOVATION
80’s
90’s
Mobile Solutions
Web Services
Grid Computing
(?)
00’s
The Technology Cycles are Cascading – The
pressure on Execution and ROI is/will be incredible
© E-Business Strategies (www.ebstrategy.com)
Time
Technology Economics
The Macro-Level: Phases of Innovation
Hype
Peak
Demand /
Visibility
Boom
Consolidation
Slope of
Hype
Slope
of
Despair
Slope
of Profit
Bust
Tech
Trigger
Time
© E-Business Strategies (www.ebstrategy.com)
Technology Economics
Following the Innovation Curve
Hype
Peak
Demand /
Visibility
A
Boom
B
C
Consolidation
Slope of
Hype
Slope
of
Despair
Slope
of Profit
D
Bust
Tech
Trigger
Where are these on this curve?
A) E-commerce (e.g., Amazon.com)
B) E-procurement – Digital Markets
C) Wireless Technology
© E-Business Strategies (www.ebstrategy.com)
Time
Technology Economics
E-Business is about Change Management
+
Commitment
Idealism
Usage
Attitude
Frustration
Value
Awareness
Anger
Despair
_
Time
Managing Change -- Requires recognition of
the attitude likely during the life cycle
© E-Business Strategies (www.ebstrategy.com)
Technology Economics
B2B Diffusion: Consider the following Pattern
Demand /
Visibility
B2B
Adoption Curve
Technology
Investment Curve
Tech
Trigger
Innovators
Early
Adopter
Early
Majority
Late
Majority
Laggards
'97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11
Time
As a CEO, at what point do you become serious?
© E-Business Strategies (www.ebstrategy.com)
Diffusion: Technology <-> Business Alignment
Demand /
Visibility
Technology
Hype Curve
Process & Application
Infrastructure build out
Tech
Trigger
'97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11
Time
Key Alignment Question: How to time Process and IT
investments?
© E-Business Strategies (www.ebstrategy.com)
The Perfect Storm: Continuous Innovation
Innovation Fatigue
ERP
B2C
Mobile
B2B
Wireless
Portals
1994
1997
2000
2001
Web Services
2002
SMB Challenge: How to Time Technology Investments and
Prioritize Execution
© E-Business Strategies (www.ebstrategy.com)
The Big Picture
Reality Check - Where Are We?
Technology Economics
The E-business Landscape –
Inside The Firm
The E-business Landscape –
Outside The Firm
B2B -- Business Process
Design Challenges
Management, Not Technology
is the Problem
Key Takeaways
© E-Business Strategies (www.ebstrategy.com)
E-business Target Market
High-end Global 3000
Customer Revenues > USD 2 Bln
Large Firms
Customer Revenues USD 750 – 2 Bln
Mid-market
Customer Revenues USD 50 - 750m
Small-business
Customer Revenues < USD 50m
Small-Office Home Office
Customer Revenues < USD 5m
E-business Priority #1 -- Small and Mid-Size Business
(SMB) Market Segment
© E-Business Strategies (www.ebstrategy.com)
Why are We Interested in Process Digitization?
Performance
C- Business
Efficiency inside
the Firm
X-Apps & Web Services
CRM
E-commerce – B2C & B2B
BPR
Efficiency outside
the Firm
MRP
Quality
1990
1995
2000
2005
Time
Widely Believed Hypothesis: We Are in Between
Two Productivity “S” Curves
© E-Business Strategies (www.ebstrategy.com)
Where Are We Today?
Efficiency outside
the Firm
Efficiency inside
the Firm
Increasing
Customer &
Business
Value
InterEnterprise
Integration
Value
Networks
E-business
Transactions
Web
Publishing
Features
• Web Site
• Marketing
information
• Brochures
•
PHASE 1
Features
• Sales
Efficiency
• Web commerce
• Interactivity &
Fulfillment
• Personalization
• Mobile
Commerce
PHASE 2
Internal
Integration
Features
• Web Enabling
applications
• Integration with
existing
processes
and systems
• Customer
self-service
PHASE 3
Features
Features
• B2B
Transactions
• Optimized
Procurement
• Supply chain
optimization
• Advanced
personalization
• Mobile
Enterprise
PHASE 4
• XML-based
Industry-specific
process models
• Collaborative
Business
Solutions
• Build to Order
Supply Chains
• Advanced Mobile
Enterprise
PHASE 5
Phases of e-business
E-commerce
© E-Business Strategies (www.ebstrategy.com)
E-business
C-Business
E-commerce Requires Back-office Integration
Suppliers, Distributors, Partners
S
T
A
K
E
H
O
L
D
E
R
S
E
M
P
L
O
Y
E
E
S
Customers, Resellers
© E-Business Strategies (www.ebstrategy.com)
© E-Business Strategies (www.ebstrategy.com)
Distribution
Logistics
Enterprise Resource Planning
Customers, Resellers
Customer
Service
Field Sales
Customer Relationship Management
Marketing
E
M
P
L
O
Y
E
E
S
Production
Suppliers, Distributors, Partners
S
T
A
K
E
H
O
L
D
E
R
S
Suppliers, Distributors, Partners
Customers, Resellers
Customer
Service
Field Sales
Customer Relationship Management
Portals
© E-Business Strategies (www.ebstrategy.com)
Distribution
Logistics
Enterprise Resource Planning
Marketing
E
M
P
L
O
Y
E
E
S
Production
Supply Chain Management
S
T
A
K
E
H
O
L
D
E
R
S
Suppliers, Distributors, Partners
Enterprise Resource Planning
Enterprise
Application
Integration
Business
Intelligence
Portals
© E-Business Strategies (www.ebstrategy.com)
Customers, Resellers
Customer
Service
Customer Relationship Management
Sales
Marketing
E
M
P
L
O
Y
E
E
S
Distribution
Logistic
s
Productio
n
Supply Chain Management
S
T
A
K
E
H
O
L
D
E
R
S
Suppliers, Distributors, Partners
Customers, Resellers
Customer
Service
Sales
Customer Relationship Management
Finance/Accounting/Auditing
Management Control
Enterprise
Application
Integration
Business
Intelligence
Portals
© E-Business Strategies (www.ebstrategy.com)
Distribution
Production
Logistic
s
Enterprise Resource Planning
Marketing
E
M
P
L
O
Y
E
E
S
Administrative Control
HRMS / BMS / ORMS
Supply Chain Management
S
S
Tt
k
A
e
K
h
E
o
H
l
O
d
L
e
D
r
E
s
R
S
The Big Picture
Reality Check - Where Are We?
Technology Economics
The E-business Landscape –
Inside The Firm
The E-business Landscape –
Outside The Firm
B2B -- Business Process
Design Challenges
Management, Not Technology
is the Problem
Key Takeaways
© E-Business Strategies (www.ebstrategy.com)
Integration of Inter-Enterprise Processes
Market
Processes
Company
Processes
C-Business
Processes
InterEnterprise
Apps
Portals
Private Exchanges/Hubs
Public Marketplaces
Consortiums
© E-Business Strategies (www.ebstrategy.com)
Inter-Enterprise Framework
Labor &
Benefits
Markets
Suppliers &
Logistics
Markets
Employee
Channel
Integration
© E-Business Strategies (www.ebstrategy.com)
Customers, Resellers
Customer
Service
Sales
Customer Relationship Management
Finance/Accounting/Auditing
Management Control
Enterprise
Application
Integration
Business
Intelligence
Portals
Consumer &
Reseller
Markets
Distribution
Production
Logistic
s
Enterprise Resource Planning
Marketing
Administrative Control
HRMS / BMS / ORMS
Supply Chain Management
E
M
P
L
O
Y
E
E
S
Multi-Channel
Integration
B2B - Supply
Chain
Integration
Suppliers, Distributors, Partners
SS
Tt t
kk
A
ee
K
hh
E
oo
H
ll
O
d
Ld
ee
D
rr
E
ss
R
S
Financial
Channel
Integration
Financial &
Investor
Markets
Inter-Enterprise Framework
Consumer &
Reseller
Markets
Labor &
Benefits
Markets
Employee
Channel
Integration
EmployeeCustomer
CRM
Multi-Channel
Integration
Organization
Financial
Channel
Integration
Financial &
Investor
Markets
© E-Business Strategies (www.ebstrategy.com)
SCM
Financial Supplier
B2B - Supply
Chain
Integration
Suppliers
& Logistics
Markets
Inter-Enterprise Framework
Consumer &
Reseller
Markets
Labor &
Benefits
Markets
Employee Channel
Integration
Employee
Customer
CRM
E-sales
Organization
Financial Channel
Integration
Financial &
Investor
Markets
© E-Business Strategies (www.ebstrategy.com)
SCM
Financial Supplier
B2B - Supply Chain
Integration
Suppliers &
Logistics
Markets
The Integration of Customer-Facing Channels
Customer Market
Distributor
OEM
Corporation
With
Multiple
Sales
Channels
&
Customer
Touch-Points
Reseller
Direct Sales Force
OEM/
Reseller
Distributors
Credit Card
Institutions
Marketing
Partners
Field, Branch Offices
Call Center/VRU
E-mail, Web, Mobile
Catalog
ATM/Kiosk
© E-Business Strategies (www.ebstrategy.com)
End User
Branding
Partners
Inter-Enterprise Framework
Labor &
Benefits
Markets
Employee Channel
Integration
Consumer &
Reseller
Markets
Employee
Customer
CRM
Multi-Channel
Integration
Organization
Financial Channel
Integration
Financial &
Investor
Markets
Financial
ERP
SCM
PLM
Supplier
Suppliers &
Logistics
Markets
© E-Business Strategies (www.ebstrategy.com)
Integrating Multiple B2B Supply Chains
Supply Market
Collaborative Design
Sourcing and Contracts
Planning and Scheduling
Company
Information
&
Applications
Indirect
Materials
Suppliers
Order and Transaction Management
Auctions Management
Auctions
In-bound Logistics
Warehousing
Manufacturing or Configuration
Finished Goods Delivery
© E-Business Strategies (www.ebstrategy.com)
Direct
Materials
Suppliers
Outsourced
Manufacturing
Logistics
Partners
Organizing a B2B Application Infrastructure
Bunch of Fragmented Applications -Increasing complexity ($$$)
© E-Business Strategies (www.ebstrategy.com)
Organizing a B2B Infrastructure –
Categorize Apps
Increasing Integration and Process Focus
© E-Business Strategies (www.ebstrategy.com)
Organizing a B2B App Infrastructure –
Group by Core Processes
Partner Facing
Employee Facing
Supply Chain Facing
Supplier Relation Facing
© E-Business Strategies (www.ebstrategy.com)
VALUE-ADD
Order-to-Cash
Management
Order
Fulfillment
E-MARKETPLACE
FUNCTIONALITY
Organizing a B2B App Infrastructure –
Supplier Facing Platforms
Transaction
Management
Services
Logistics
Management
Pricing
Catalog
Management
Strategic
Sourcing
Multi-Contract
Management
Business
Intelligence
Help-Desk
Off-Line Support
Adoption
Call Center
Supplier Facing Service Platform
Content Services
Process
Catalog Services
E-MARKETPLACE
SERVICES
Financial Services
Applications
Operations
Web Services
Integration
ERP
© E-Business Strategies (www.ebstrategy.com)
CRM
Fulfillment and
Logistics Services
Customer Support
Integration Support
Hosting Support
Financials
SCM
The Big Picture
Reality Check - Where Are We?
Technology Economics
The E-business Landscape –
Inside The Firm
The E-business Landscape –
Outside The Firm
B2B -- Business Process
Design Challenges
Management, Not Technology
is the Problem
Key Takeaways
© E-Business Strategies (www.ebstrategy.com)
Historical Perspective:
Changing Process Priorities
Focus
1970s
Quality
1980s
Lean Manufacturing
Early 1990s
Process Improvement
Mid to Late
1990s
Process ReEngineering
Late 1990s to
2000s
© E-Business Strategies (www.ebstrategy.com)
Digitization of
Business Processes
Method
TQM, Zero Defects,
Statistical Process Control
(SPC)
Just-in-Time, Zero
Inventory, Kanbans and
CIM
VMI, System Outsourcing,
Customer Satisfaction,
ERP
Business Process Reengineering, SCM, Six
Sigma
C-commerce, e-business,
Business Outsourcing,
SCM, CRM
Types of B2B Process Integration
Wave 5:
Supply Chain Visibility
Asset Tracking & Management
Wave 4:
Streamline Supply Chain
(Process Optimization)
Wave 3:
Enable Commodity Management
(Strategic Sourcing)
Wave 2:
Automate Transactions
(Enable Processes)
Wave 1:
Automate Communication
(EDI Connectivity)
© E-Business Strategies (www.ebstrategy.com)
Strategic Issue: What is the focus
of the B2B digitization effort?
Key Processes in B2B
Order Flow
Search &
Select
RFQ &
Availability
Customer
Service
Purchase
Workflow
Order
Authorization
Backward
Integration
Supplier Fulfillment Flow
Order
Tracking
Receiving
Logistics
Ship
Warehouse
Pick, Pack
Payment Flow
Billing
Invoicing
Payment
(Net 30)
Financial
Reporting
Returns and Auctions
© E-Business Strategies (www.ebstrategy.com)
Integrating Order Management
Customer
Private process
(Company-specific)
Process
PO
Receive PO
Login
Request
PO
ERP
Supplier
Send PO
Customer
Public
process
Send PO
Supplier
Send PO
Receive PO
Public process
Select
Supplier
Generate
Select
from
Contract
RFQ
Send
Generate PO
RFQ
Select RFQ
Approve PO
Response
Send
PO
Fulfillment
Close
© E-Business Strategies (www.ebstrategy.com)
Private process
(Company-specific)
Process
Sales Order
Receive PO
Check
Customer
Receive
PO
Receive PO
Acknowledge
Acknowledge
Send
PO
Send PO
Acknowledge
Acknowledge
Receive
PO
Receive PO
Response
Response
Send PO
Response
Send
PO
Send PO
Response
Response
Acknowledge
Acknowledge
Receive
PO
Receive PO
Response
Response
Acknowledge
Acknowledge
CRM
Check
Credit
Check
Availability
SCM
Create Sales
Order
Send PO
Response
ERP
Fulfillment
Close
Where we are going…
Hybrid Process Digitization
To successfully control a B2B process, you need to DIGITIZE the process
Brick & Mortar
• Slow paper based
processes
• Legacy Investments
• Bureaucratic Processes
• Fragmented Service
payments, fulfillment, returns
• Changes & modifications)
Web
•
•
•
•
Immediacy
Customization
Content
Personalized
Transactions
• One Stop Service
Click -n- Brick Processes
Multi-Channel Infrastructure
Integration of Click and Brick
Process Synchronization is Work-In-Progress
© E-Business Strategies (www.ebstrategy.com)
Hybrid Process Digitization…
“Brick, Click and Flicks”
To successfully control a B2B process, you need to DIGITIZE the process
Web
Brick & Mortar
• Paper based
• IVR/Call Center
Invested
• Tradition and
Jurisdiction
• Employee Centric
Constant changes
•
•
•
•
Speed
Customization
Content
Personalized
Transactions
• One Stop
Service
Mobile
• Real-time
• Process
optimized to
device
• Personalized
Transactions
Click -n- Brick n- Flicks
Multi-Channel Infrastructure
Introducing a new process variable is confusing
Cross-cutter Process are very hard to design and build
© E-Business Strategies (www.ebstrategy.com)
The Big Picture
Reality Check - Where Are We?
Technology Economics
The E-business Landscape –
Inside The Firm
The E-business Landscape –
Outside The Firm
B2B -- Business Process
Design Challenges
Management, Not Technology
is the Problem
Key Takeaways
© E-Business Strategies (www.ebstrategy.com)
Few Organizations Execute Strategy Well
 “Strategy has never been more important”
Business Week
 “Less than 10% of
strategies effectively
formulated are effectively
executed”
Fortune Magazine
 “In the majority of failures –
we estimate 70% – the real
problem isn’t (bad strategy)….
It’s bad execution.”
“Why CEO’s Fail”,
Fortune Magazine
E-Business Execution is not very effective!
Well-Known Fact
Execution is the Problem, Not Technology!
© E-Business Strategies (www.ebstrategy.com)
Focus, Focus, Focus
Facing Reality – Focus on Execution
Objective
Description
• Reducing costs
Reality
Process
Improvement
• Decreasing rework
• Shortening processing time
• Fixing specific errors
• Enhancing supply chain efficiencies
Strategic
Improvement
• Web enabling strategic operations
• Decreasing time to market
• Improving customer satisfaction
• Changing the rules of the game
Rhetoric
Business
Transformation
• Creating a customer focus
• Abandoning old ways of doing business
• Major culture change
What is your Focus?
© E-Business Strategies (www.ebstrategy.com)
The Trade-Off: Innovation vs. Efficiency
Revolutionary
(Best of Breed)
Innovation
New Services
Technology
Process
Management
Efficiency
• Eliminate
Risk
• Efficiency Focus
Evolutionary
(Integrated)
Listen to
Existing Users
Customers
Lead Users
Early Adopters
Innovation and Growth were the Drivers of B2B
© E-Business Strategies (www.ebstrategy.com)
Innovation AND Efficiency
Does Your Operating Model Enable Both?
Revolutionary
(Best of Breed)
Leadership
-- Take Risk - Strategic
-- Innovation Focus
Operating
Model
Technology
Management
• Eliminate Risk
• Efficiency Focus
Evolutionary
(Integrated)
Listen to
Existing Users
Customers
Innovation
Diffusion
Model
Lead Users
Early Adopters
Linking Innovation and Efficiency is Tricky
© E-Business Strategies (www.ebstrategy.com)
Old B2B Model:
Before the Bubble Burst (1998 – 2001)
Strategy
Speed
Execution
• E-Business
• Branding
• SRM
• Prototype
• SCM
• Implementation
• ERP
• Market Share
• Mobile
One Initiative at a time – Very little Integration
© E-Business Strategies (www.ebstrategy.com)
New B2B Model:
After the Bubble Burst (2002 - ?)
Strategy
E-Business
Execution
Management
Execution
• E-Business
• ROI and Profitability
• Prototype
• Multi-Channel
• Change Management
• Implementation
• Supply Chain
• Blueprint Planning
• Integration
• E-Procurement
• Process Design
• Project
Management
• Performance Metrics
Multiple Initiatives consolidating – Need Coordination
© E-Business Strategies (www.ebstrategy.com)
Versioning… As the target shifts so the aim
Management goal:
Manage
Uncertainty
The Changing
Environment makes it
almost impossible to
execute
© E-Business Strategies (www.ebstrategy.com)
New Workforce Competencies
An e-Marketplace Example
Sales Person
+
Distributor
Model
(Brick)



Commodity
Products
Full
Customer
Self-Service
(Click)


Complex
Products
High Touch

Prior to “E”
© E-Business Strategies (www.ebstrategy.com)
Digitization
Web Enabling
the key
business
processes
(Catalog
Search ->
Order)
Ideal State
Partial
Customer
Self-Service
(click+Call)


Digitize a part
of the
relationship
(Order only)
Fulfilment
needed CallCenter contact
Real World
Combination
of
Web+call+
Sales Person



Low-Touch
commodity
products
High-Touch
Complex products
Need to Build a
new portfolio of
workforce
competencies
The Big Picture
Reality Check - Where Are We?
Technology Economics
The E-business Landscape –
Inside The Firm
The E-business Landscape –
Outside The Firm
B2B -- Business Process
Design Challenges
Management, Not Technology
is the Problem
Key Takeaways
© E-Business Strategies (www.ebstrategy.com)
B2B Mega-Trends
Relentless
Time
Compression
• Business cycles are shorter
• Real-time
• Customers demand patterns
are unpredictable
New
Solutions
Continuous
Change
•Org. Structure
•Business Model
•Technological
© E-Business Strategies (www.ebstrategy.com)
Continuous
Space
Compression
• Global is local is personal
• No supply chain
boundaries -- visibility
B2B is Constantly Evolving




Structural changes will not go
away -- Big Changes take 10+
years
Incumbents will be an
important part of the market’s
evolution – Laws of economics
still apply
Process Focus is emerging –
Infrastructure is the means to
the End
Internet connectivity does not
equal Integration
Are you ready for digitization?
© E-Business Strategies (www.ebstrategy.com)
Sky and Water
I, M. C. Escher
EBS Long-term Vision
Technology
Continuously
Transforms Business
Processes
Cheaper
E-Business Strategies
www.ebstrategy.com
E-mail: ravi@ebstrategy.com
Phone: 678-339-1236 x 203
© E-Business Strategies (www.ebstrategy.com)
Better
Faster