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Digitization: Moving

From Vision to Execution

Ravi KalakotaCEOE-Business Strategies

November 2002

Continuous Change

Process Digitization

Interconnectedness

© E-Business Strategies (www.ebstrategy.com)

E-Business Strategies

Research and Process Consulting

Fast-Cycle, Practical and Focused Research

Process Design and ROI Modeling

Executive Education and Consulting Firm

Publish Research in the form of Books

1995 1996 1999 2001 2002

Scanning + Thinking + Doing = Expertise

E-Business

M-Business

C-Business


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


The Big Picture

Management, Not Technology is the Problem

The E-business Landscape – Outside The Firm

Reality Check - Where Are We? Technology Economics

B2B -- Business Process Design Challenges

Key Takeaways

The E-business Landscape – Inside The Firm


Cascading S-Curves

80’s 90’s 00’s

MainframeMinicomputer

(30 years)

E-commerceE-business

(7 years)

Time

% Adoption

PCClient-Server

(15 years)

GROWTH

MATURITY

INNOVATION

Mobile SolutionsWeb Services

Grid Computing(?)

Macro-Level Structural Change is a Constant…Technology Models

The Technology Cycles are Cascading – The pressure on Execution and ROI is/will be incredible


Time

Demand /Visibility

Tech Trigger

Slope of Profit

Slope of

Despair

Slope of Hype

ConsolidationBoom

Bust

HypePeak

Technology EconomicsThe Macro-Level: Phases of Innovation


Where are these on this curve? A) E-commerce (e.g., Amazon.com)B) E-procurement – Digital Markets

C) Wireless Technology

Technology Economics Following the Innovation Curve

Time

Demand /Visibility

Tech Trigger

Slope of Profit

Slope of

Despair

Slope of Hype

ConsolidationBoom

Bust

HypePeak

A

B

C

D


Technology Economics E-Business is about Change Management

Managing Change -- Requires recognition of the attitude likely during the life cycle

Time

Attitude

+

_

Idealism

Commitment

Despair

Usage

Value Awareness

Anger

Frustration


'97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11Time

Demand /Visibility

Tech Trigger

Technology Investment Curve

B2B Adoption Curve

InnovatorsEarly Adopter

Early Majority

Late Majority Laggards

As a CEO, at what point do you become serious?

Technology Economics B2B Diffusion: Consider the following Pattern


'97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11Time

Demand /Visibility

Tech Trigger

Technology Hype Curve Process & Application

Infrastructure build out

Key Alignment Question: How to time Process and IT investments?

Diffusion: Technology <-> Business Alignment


Portals

19941994 19971997 20002000

ERP B2C B2B

SMB Challenge: How to Time Technology Investments and Prioritize Execution

The Perfect Storm: Continuous Innovation Innovation Fatigue

Mobile

Wireless

Web Services

20012001 20022002


The Big Picture





Key Takeaways



E-business Priority #1 -- Small and Mid-Size Business (SMB) Market Segment

E-business Target Market

Small-Office Home OfficeCustomer Revenues < USD 5m

High-end Global 3000Customer Revenues > USD 2 Bln

Mid-marketCustomer Revenues USD 50 - 750m

Small-businessCustomer Revenues < USD 50m

Large FirmsCustomer Revenues USD 750 – 2 Bln


Why are We Interested in Process Digitization?

Widely Believed Hypothesis: We Are in Between Two Productivity “S” Curves

Quality

BPR

MRP

CRM

Performance

X-Apps & Web Services

C- Business

E-commerce – B2C & B2B

1990 1995 2000 2005

Efficiency outside the Firm

Time

Efficiency inside the Firm


Where Are We Today?

Phases of e-business

IncreasingCustomer &

BusinessValue

InternalIntegration

Features

• Web Enabling applications• Integration with existing processes and systems • Customer self-service

PHASE 3PHASE 3

Features

• B2B Transactions

• Optimized Procurement

• Supply chain optimization

• Advanced personalization

• Mobile Enterprise

Value Networks

PHASE 4PHASE 4

WebPublishing

Features

• Web Site• Marketing information• Brochures•

PHASE 1

E-businessTransactions

Features• Sales Efficiency • Web commerce • Interactivity & Fulfillment• Personalization• Mobile Commerce

PHASE 2PHASE 2 PHASE 5PHASE 5

Inter-Enterprise

Integration

Features

• XML-based Industry-specificprocess models

• Collaborative Business Solutions

• Build to Order Supply Chains

• Advanced Mobile Enterprise

E-commerce E-business C-Business

Efficiency inside the Firm

Efficiency outside the Firm


STAKEHOLDERS

STAKEHOLDERS

EEMMPPLLOOYYEEEESS

EEMMPPLLOOYYEEEESS

Customers, ResellersCustomers, Resellers

Suppliers, Distributors, PartnersSuppliers, Distributors, Partners

E-commerce Requires Back-office Integration


Enterprise Resource PlanningEnterprise Resource Planning

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Customer Relationship ManagementCustomer Relationship Management

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keti

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keti

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ales

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ales

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Enterprise Resource Planning Enterprise Resource Planning

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Supply Chain ManagementSupply Chain ManagementSupply Chain ManagementSupply Chain Management

PortalsPortalsPortalsPortals


Customer Relationship Management

Mar

keti

ng

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es

Cu

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mer

Ser

vice

PortalsPortals

Supply Chain ManagementSupply Chain Management

Enterprise Resource PlanningL

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cs Pro

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on

Business Business IntelligenceIntelligenceBusiness Business

IntelligenceIntelligence

Enterprise Enterprise Application Application IntegrationIntegration




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Stkeholders

Stkeholders


Mar

keti

ng

Sal

es

Cu

sto

mer

Ser

vice

PortalsPortals

Supply Chain ManagementSupply Chain Management

Enterprise Resource PlanningL

og

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cs

Pro

du

ctio

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Dis

trib

uti

on

Business Business IntelligenceIntelligenceBusiness Business

IntelligenceIntelligence



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ive

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The Big Picture





Key Takeaways



CompanyProcesses

MarketProcesses

PortalsPrivate Exchanges/Hubs

Public MarketplacesConsortiums

Integration of Inter-Enterprise Processes

Inter-Enterprise

Apps

C-BusinessProcesses


Employee Channel

Integration

Financial Channel

IntegrationMulti-Channel

Integration

B2B - Supply Chain

Integration

Financial &Investor Markets

Consumer & Reseller Markets

Suppliers & Logistics Markets

Labor & BenefitsMarkets

Stkeholders

Stkeholders


Mar

keti

ng

Sal

es

Cu

sto

mer

Ser

vice

Portals

Supply Chain Management

Enterprise Resource Planning

Lo

gis

tic

s

Pro

du

ctio

n

Dis

trib

uti

on

Business Business IntelligenceIntelligence


Ad

min

istr

ativ

e C

ontr

olH

RM

S /

BM

S /

OR

MS

Fin

ance

/Acc

oun

tin

g/A

ud

itin

gM

anag

emen

t C

ontr

ol


EEMMPPLLOOYYEEEESS



Stkeholders

Stkeholders


Mar

keti

ng

Sal

es

Cu

sto

mer

Ser

vice

Portals

Supply Chain Management

Enterprise Resource Planning

Lo

gis

tic

s

Pro

du

ctio

n

Dis

trib

uti

on

Business Business IntelligenceIntelligence


Ad

min

istr

ativ

e C

ontr

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RM

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ance

/Acc

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Inter-Enterprise Framework


EmployeeCustomerCRM

FinancialSCM

Supplier

Organization


Suppliers & Logistics

Markets


Employee Channel

Integration

Financial Channel

Integration

Multi-Channel Integration

B2B - Supply Chain

Integration




Employee

FinancialSCM

Supplier

Organization



Employee Channel Integration

Financial Channel Integration

B2B - Supply Chain Integration

CustomerCRM

E-sales


Multi-Channel

Integratio

nLabor & BenefitsMarkets



CorporationWith

MultipleSales

Channels&

Customer Touch-Points

Distributor

Field, Branch Offices

OEM Reseller

Direct Sales Force

Call Center/VRU

E-mail, Web, Mobile

Catalog

ATM/Kiosk

Customer Market

End User

BrandingPartners

OEM/Reseller Distributors

Credit CardInstitutions

MarketingPartners

The Integration of Customer-Facing Channels


EmployeeCustomer

CRM

Financial

Organization



Employee Channel Integration

Financial Channel Integration

Multi-Channel Integration

ERPSCMPLM

Supplier


B2B - Supply Chain

Channel

Integration




CompanyInformation

&Applications

Finished Goods Delivery

Manufacturing or Configuration

Warehousing

In-bound Logistics

Auctions Management

Order and Transaction Management

Planning and Scheduling

Sourcing and Contracts

Collaborative Design

Supply Market

Auctions

OutsourcedManu-

facturingLogisticsPartners

IndirectMaterialsSuppliers

DirectMaterialsSuppliers

Integrating Multiple B2B Supply Chains


Organizing a B2B Application Infrastructure

Bunch of Fragmented Applications -- Increasing complexity ($$$)


Organizing a B2B Infrastructure – Categorize Apps

Increasing Integration and Process Focus


Organizing a B2B App Infrastructure – Group by Core Processes

Partner Facing

Employee Facing

Supply Chain Facing

Supplier Relation Facing


Organizing a B2B App Infrastructure – Supplier Facing Platforms

VA

LU

E-A

DD

E-M

AR

KE

TP

LA

CE

SE

RV

ICE

S Applications

E-M

AR

KE

TP

LA

CE

FU

NC

TIO

NA

LIT

Y

Supplier Facing Service Platform

Operations

Web Services Integration

Process

Integration Support

Customer Support

Financial Services

Fulfillment and Logistics Services

Hosting Support

Catalog Services

Content Services

Order-to-Cash Management

Order-to-Cash Management

PricingCatalog

Management

PricingCatalog

Management

Strategic SourcingStrategic Sourcing

Transaction Management

Services

Multi-Contract Management

Business Intelligence Call Center

Help-DeskOff-Line Support

Adoption

Help-DeskOff-Line Support

Adoption

OrderFulfillment

OrderFulfillment

Logistics

Management

ERP CRM Financials SCM


The Big Picture





Key Takeaways



Historical Perspective: Changing Process Priorities

Focus Method1970s Quality TQM, Zero Defects,

Statistical Process Control (SPC)

1980s Lean Manufacturing

Just-in-Time, Zero Inventory, Kanbans and CIM

Early 1990s Process Improvement

VMI, System Outsourcing, Customer Satisfaction, ERP

Mid to Late 1990s

Process Re-Engineering

Business Process Re-engineering, SCM, Six Sigma

Late 1990s to 2000s

Digitization of Business Processes

C-commerce, e-business, Business Outsourcing, SCM, CRM


Wave 4: Wave 4:

Wave Wave 3:3:

Wave 2:Wave 2:

Enable Commodity Management (Strategic

Sourcing)

Automate Transactions (Enable Processes)

Streamline Supply Chain (Process Optimization)

Wave Wave 5:5:Supply Chain Visibility

Asset Tracking & Management

Types of B2B Process Integration

Strategic Issue: What is the focus of the B2B digitization effort?

Wave 1:Wave 1:Automate

Communication (EDI Connectivity)


Search &Select

Search &Select

RFQ &Availability

RFQ &Availability

WorkflowAuthorization

WorkflowAuthorization

Order Flow

ReceivingReceiving OrderTracking

OrderTracking

WarehousePick, Pack

WarehousePick, Pack

Supplier Fulfillment Flow

BillingInvoicing

BillingInvoicing

Payment(Net 30)

Payment(Net 30)

FinancialReporting

FinancialReporting

Payment Flow

Logistics Ship

Logistics Ship

Purchase Order

Purchase Order

CustomerService

Backward IntegrationBackward Integration

Key Processes in B2B

Returns and Auctions


Integrating Order Management

PO

CRM

SCM

ERP

ProcessPO

Send POCustomer

Send POSupplier

ProcessSales Order

Public processPublic

processPrivate process

(Company-specific)

Private process(Company-specific)

Customer Supplier

Receive POAcknowledge

Send POAcknowledge

Send POResponse

Close

Receive PORequest

SelectSupplier

GenerateRFQ

SendRFQ

Select RFQResponse

SendPO

Close

Send PO

Receive POResponse

Send POResponse

Acknowledge

Receive PO

Send POResponse

Receive POResponse

Acknowledge

Receive PO

CheckCustomer

CheckCredit

CheckAvailability

Create SalesOrder

Receive POAcknowledge

Send POAcknowledge

Send POResponse

Fulfillment

Login

SelectSupplier

Select fromContract

Generate PO

Approve PO

SendPO

Fulfillment

Send PO

Receive POResponse

Send POResponse

Acknowledge

Receive PO

Send POResponse

Receive POResponse

Acknowledge

Receive PO

CheckCustomer

CheckCredit

CheckAvailability

Create SalesOrder

ERP


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 ProcessesMulti-Channel Infrastructure

Where we are going…Hybrid Process Digitization

Integration of Click and Brick Process Synchronization is Work-In-Progress

To successfully control a B2B process, you need to DIGITIZE the process


Brick & Mortar

• Paper based• IVR/Call Center

Invested• Tradition and

Jurisdiction • Employee Centric

Constant changes

Web

• Speed• Customization• Content• Personalized

Transactions• One Stop

Service

Web

• Speed• Customization• Content• Personalized

Transactions• One Stop

Service

Click -n- Brick n- Flicks Multi-Channel Infrastructure

Hybrid Process Digitization… “Brick, Click and Flicks”

Introducing a new process variable is confusingCross-cutter Process are very hard to design and build

Mobile

• Real-time• Process

optimized to device

• Personalized Transactions

Mobile

• Real-time• Process

optimized to device

• Personalized Transactions

To successfully control a B2B process, you need to DIGITIZE the process


The Big Picture





Key Takeaways



Few Organizations Execute Strategy Well

“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

“Strategy has never been more important”

Business Week

“Less than 10% of strategies effectively formulated are effectively executed”

Fortune Magazine

Execution is the Problem, Not Technology!

E-Business Execution is not very effective!Well-Known Fact


Objective Description• Reducing costs

• Decreasing rework

• Shortening processing time

• Fixing specific errors

Strategic Improvement

• Enhancing supply chain efficiencies

• Web enabling strategic operations

• Decreasing time to market

• Improving customer satisfaction

Process Improvement

• Changing the rules of the game

• Creating a customer focus

• Abandoning old ways of doing business

• Major culture change

Business TransformationRhetoric

Reality

Focus, Focus, FocusFacing Reality – Focus on Execution

What is your Focus?


The Trade-Off: Innovation vs. Efficiency

Technology

Customers

Revolutionary(Best of Breed)

Evolutionary(Integrated)

Listen toExisting Users

Lead UsersEarly Adopters

Management• Eliminate Risk• Efficiency Focus

InnovationNew Services

ProcessEfficiency

Innovation and Growth were the Drivers of B2B


Innovation AND Efficiency Does Your Operating Model Enable Both?

Technology

Customers

Revolutionary(Best of Breed)

Evolutionary(Integrated)

Listen toExisting Users

Lead UsersEarly Adopters

Leadership-- Take Risk - Strategic-- Innovation Focus

Management• Eliminate Risk• Efficiency Focus

OperatingModel

Innovation Diffusion

Model

Linking Innovation and Efficiency is Tricky


Old B2B Model:Before the Bubble Burst (1998 – 2001)

StrategyStrategy ExecutionExecutionSpeedSpeed

• E-Business

• SRM

• SCM

• ERP

• Mobile

• E-Business

• SRM

• SCM

• ERP

• Mobile

• Branding

• Prototype

• Implementation

• Market Share

• Branding

• Prototype

• Implementation

• Market Share

One Initiative at a time – Very little Integration


New B2B Model:

After the Bubble Burst (2002 - ?)

StrategyStrategyE-BusinessExecution

Management

E-BusinessExecution

Management

• E-Business

• Multi-Channel

• Supply Chain

• E-Procurement

• E-Business

• Multi-Channel

• Supply Chain

• E-Procurement

• ROI and Profitability

• Change Management

• Blueprint Planning

• Process Design

• Performance Metrics

• ROI and Profitability

• Change Management

• Blueprint Planning

• Process Design

• Performance Metrics

ExecutionExecution

• Prototype

• Implementation

• Integration

• Project Management

• Prototype

• Implementation

• Integration

• Project Management

Multiple Initiatives consolidating – Need Coordination


Versioning… As the target shifts so the aim

Management goal: Manage

Uncertainty

The Changing Environment makes it almost impossible to

execute


New Workforce CompetenciesNew Workforce CompetenciesAn e-Marketplace ExampleAn e-Marketplace Example

Digitization

Web Enabling the key business processes

(Catalog Search -> Order)

Low-Touch commodity products

High-Touch Complex products

Need to Build a new portfolio of workforce competencies

Digitize a part of the relationship (Order only)

Fulfilment needed Call-Center contact

Full Customer

Self-Service(Click)

Partial Customer

Self-Service

(click+Call)

Combination of

Web+call+ Sales

Person

Sales Person

+Distributor

Model(Brick)

Commodity Products

Complex Products

High Touch

Ideal State Real WorldPrior to “E”


The Big Picture





Key Takeaways



Relentless Time

Compression

ContinuousSpace

Compression

ContinuousChange

New Solutions

•Org. Structure•Business Model•Technological

• Business cycles are shorter• Real-time • Customers demand patterns are unpredictable

• Global is local is personal• No supply chain boundaries -- visibility

B2B Mega-Trends


Sky and Water I, M. C. Escher

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?


EBS Long-term Vision

Technology Continuously Transforms Business

Processes

E-Business Strategies www.ebstrategy.com

E-mail: [email protected] Phone: 678-339-1236 x 203

Better

FasterCheaper

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