El poder de la información

Consolidación, análisis y uso de la información para obtener una ventaja competitiva y alcanzar la excelencia administrativa.

El que tiene la información tiene el poder. Pero en un entorno altamente competitivo, en medio de una economía llena de altibajos y cambios radicales en el mercado, tener la información no es suficiente. Las organizaciones de hoy las cuales deben ser de categoría mundial, deben también analizarla, interpretarla y compartirla para poder tomar decisiones estratégicas oportunamente y ganar una ventaja competitiva. Por lo tanto, quien tiene la información y sabe cómo utilizarla, realmente tiene el poder.

Al mismo tiempo, es imperativo que la información no quede en manos de unos cuantos. Es cierto que a algunas personas no le gusta compartirla, pero hacerlo es vital. Se requiere cambiar la percepción del valor que se le da en todos los niveles de las organizaciones - desde el director general, hasta los gerentes de los distintos departamentos que las integran.

Las empresas que lo han hecho tienen un acceso más amplio a los datos bajo la premisa de que la gente indicada tenga acceso a la información adecuada. Actualmente existe la tecnología avanzada para asegurar y controlar dicho acceso, así como ofrecer control y seguridad. Por lo tanto, la tecnología no es un inhibidor para lograr esto; sin embargo, aún existen organizaciones que se muestran renuentes, en particular en América Latina, donde la resistencia al cambio – operativo y cultural – ha sido un distintivo durante varios años.

¿Quién tiene acceso a la información en su empresa? ¿Se toman las decisiones adecuadas? ¿Son sus procesos de negocio efectivos para tomar mejores decisiones y obtener mejores resultados? ¿Su sistema de planeación de recursos empresariales (ERP) ofrece una visión amplia de sus operaciones y ayuda a obtener una ventaja competitiva? Sin duda, son preguntas que se hacen a diario en todo el mundo. Las respuestas no siempre están alineadas con sus planes estratégicos, y es cuando se dan cuenta de la importancia de utilizar tecnologías que les pueden ayudar a alcanzar la excelencia administrativa y enfrentar los embates económicos y de la competencia.

Es en este punto donde debemos tener la cadena de suministro balanceada y comunicada en nuestro ERP y para lograrlo debemos medirla de principio a fin con indicadores como:

- Indicadores de utilización, rendimiento y productividad
- Indicadores de costos operativos y financieros
- Indicadores de cumplimiento (tiempo)
- Indicadores de calidad de los procesos logísticos
- Indicadores de productividad y rendimiento
- Indicadores de compras, inventarios, almacenamiento
- Indicadores de transporte de carga y distribución
- Indicadores de servicio al cliente y logística inversa

La medición de desempeño es una preocupación fundamental de la alta gerencia. cuando satisfacen las expectativas de los grupos de interés (efectividad) y cuando maximizan la utilización de losRecursos disponibles (eficiencia), entonces la medición del desempeño es realmente la medición del éxito actual y la probabilidad de continuar produciendo resultados exitosos.

Tipos de Indicadores:
Expertos en sistemas de indicadores balanceados como Norton y Kaplan (The Balanced Scorecard) y en ventajas competitivas (M. Porter) enfatizan 4 factores críticos de competitividad:
Las empresas compiten con base en:

sus costos, eficiencia en uso de sus recursos, velocidad de acceso a los mercados, y en la calidad de sus productos, servicios y procesos.Estos elementos de competitividad determinan los tipos de indicadores y las actividades a considerar en la medición de desempeño.
Es así como consideramos 4 dimensiones de la medición del desempeño:

•Indicadores Financieros (costo de los recursos)
•Indicadores de productividad (eficiencia en el uso de los recursos)
•Indicadores de Tiempo (velocidad en el proceso)
•Indicadores de Calidad (errores cometidos en el proceso)

Estos tipos de indicadores determinan el grado de balance de la medición de desempeño de la cadena de suministro.

Los indicadores de desempeño tienen que considerar los contextos en los cuales se desarrollan las actividades y procesos a medir. No existen indicadores generales que funcionen para toda la organización. Deben adaptarse a diferentes contextos de operación de acuerdo con las decisiones que se pretendan tomar en cada uno de ellos.

Estos indicadores deben considerarse como un todo y para cada uno de los 3 procesos que la componen: gerencia de demanda, gerencia de abastecimientos, gerencia del fulfillment, Gerencia financiera .

Esto es una visión de contexto de los indicadores de Desempeño
Otras alternativas mediciones en diferentes contextos como:

• Individuo, Equipo, Departamento Funcional, Proyecto, División Geográfica, cadena de suministro Etc.


Mauricio Urrea Ospina.

Evolución de la cadena de suministro

Una empresa competitiva requiere herramientas que le permitan incrementar su productividad. El manejo de la cadena de suministros es una de estas herramientas, que conjuntamente con otros sistemas y una base sólida de principios y metas, permiten a la empresa llegar a verdaderos ahorros económicos y a prestar servicios sin precedentes. Las tecnologías de información existentes hoy en día y la globalización de los mercados, permiten que dichos procesos puedan ser instaurados más fácil y económicamente en la empresa. La base de la cadena de suministros se fundamenta también en principios relacionales; es imprescindible conocer a todos quienes conforman nuestro círculo de negocios, y a partir de ello y conjuntamente con una planeación estratégica, implantar los distintos sistemas de manejo de información y procesos, entre ellos la cadena de suministros.


Hoy en día la globalización es parte del diario vivir de las empresas, muchos son los retos y dificultades pero también las oportunidades para establecer nuevos negocios y entrar a nuevos mercados. El avance tecnológico, especialmente en la comunicación, ha generado un nuevo tipo de cliente mucho más informado y por ende más exigente y perspicaz. Ya no es necesario recorrer grandes caminos o emprender grandes búsquedas para encontrar cierto producto y sus oferentes, basta con entrar a un computador, para tener a nuestro alcance una oferta casi infinita de bienes y servicios, en todos lugar del mundo, las veinticuatro horas al día y a todos los precios imaginables.


Igualmente la proliferación de sistemas de información, nos ha llevado a un mercado más competitivo, donde las empresas han establecido la eficiencia como el objetivo principal, y la estrategia: “brindar el mejor producto y/o servicio, al mejor precio posible y con los costos más bajos”


TECNOLOGÍAS EN EL MANEJO DE LA CADENA DE SUMINISTROS

La cadena de suministros forman parte de un todo en la compañía, y requieren de una infraestructura conjunta que permita el intercambio de información entre todas las áreas de la empresa.Un sistema efectivo de manejo de cadena de suministros generalmente esta integrado a un sistema ERP (Enterprise Resource Planning), que a la vez conecta todas las áreas de la empresa.
De esta forma es posible lograr un flujo correcto y veraz de datos e información tanto para los proveedores, clientes y la compañía en sí.


La evolución de la cadena de suministros:

Los niveles evolutivos de la cadena de suministros se mueven metódicamente hacia el modelo óptimo de negocios que tiene sentido para la compañía y sus circunstancias. Estos niveles, junto con sus principales características, se detallan a continuación.


Nivel 1: Interno/Funcional

- Se enfoca en la obtención de los suministros y/o materias primas y en la logística.

- Concentrado en necesidades internas y en la eficiencia de las unidades de negocios.

- No existe sinergia organizacional.

- Existe casi nula cooperación entre las distintas unidades internas.

- El ahorro proviene al reducir costos de logística, transporte y bodegaje.

- Presencia de Sistemas de Gestión de Transporte (TMS) y Sistemas de Gestión de
Almacenamiento (WMS).

- Una empresa que se mueve en este nivel puede aumentar su porcentaje de ganancias de 1 a 1.5 %.


Nivel 2: Interno/Funcional-Cruzado

- Se enfoca en la excelencia interna.

- Se rompen las murallas y comienza la integración intra-empresarial.

- La empresa se mantiene concentrada en su interior.

- Las distintas unidades de negocios empiezan a comunicarse entre sí para dar paso a la
colaboración.

- Utilización de software para mejorar la planificación y programación de ventas y operaciones.

- La empresa segmenta sus clientes según su importancia para ésta.

- Comienzan a aparecer métricas relativas a la satisfacción de los clientes.- Utilización de una intranet destinada a compartir información dentro de la organización.

- Presencia de sistemas ERP.

- El porcentaje de ganancias puede aumentar nuevamente de 1 a 1.5% en este nivel.


Nivel 3: Formación de la Red Externa

- Se enfoca en el cliente mediante la colaboración de partners seleccionados, aunque aún se
realizan esfuerzos para mejorar la parte interna.

- Se comienza a utilizar una extranet para comunicarse con los partners.

- La perspectiva de la empresa cambia al percatarse de que es solo una parte de la red de
empresas que componen el mercado.

- Surgen conexiones ERP-to-ERP.

- Presencia de sistemas VMI y CRP.

- El porcentaje de ganancias puede aumentar en un 2 %.


Nivel 4: Cadena de Valor Externa

- Se enfoca en el cliente con los partners y se establece sincronización inter-empresarial.

- Tecnología usada como una pieza clave para el mejoramiento.

- La empreza comienza a moverse a una posición de liderazgo dentro de la industria donde se
empieza a formar una "constelación" de cadenas de valor.

- La compañía es ahora una parte de una red de compañías que representan la cadena de valor
de principio a fin.

- Se busca la externalización de las etapas de la cadena de suministros, a través de los
componentes más capaces.

- La empresa centra sus esfuerzos en el grupo de consumidores finales.

- La cadena de suministros se transforma en una cadena de valor.

- En este nivel las empresas trabajan colaborativamente con proveedores, distribuidores y
clientes para construir nuevos modelos de negocios orientados al consumo final.

- Nuevamente se logra un aumento de un 2% en las ganancias al alcanzar este nivel.


Nivel 5: Conectividad Completa de la Red

- Se enfoca en la ciber-tecnología como el facilitador de la cadena de valor para lograr la
optimización de la red.

- Este nivel de progreso es más teórico debido a que son muy pocas las empresas que alcanzan
tal nivel de desarrollo.

- Se logra un nivel tal de conectividad que todas las transacciones más importantes son visibles
en forma online.

- La información vital entre los partners se comparte electrónicamente.

- Se logra la total visibilidad de la cadena de suministros, los inventarios se pueden consultar en
tiempo real y los errores se reducen a niveles mínimos.

- La oportunidad de crear ahorros mientras se generan nuevos ingresos es posible para todas las
partes en la cadena de valor.

- El aumento en el porcentaje de ganancias puede alcanzar hasta un 8 %.


Mauricio Urrea O.

Que es APICS?

• Fundada en 1957 como la Asociación Americana de Controlde Producción e Inventarios (American Production and InventoryControl Society)

• APICS ha expandido desde entonces su enfoque paraofrecer una gama de programas de educación para individuosy organizaciones, estándares de excelencia, y administraciónintegral de recursos.

• Para reflejar esta nueva dirección, ahora es conocido comoAPICS – La Asociación para la Gestión de OperacionesAPICS-The Association for Operations Management.
APICS es una organización internacional no lucrativa respetada anivel mundial por sus programas de educación y certificaciónprofesional.

• CPIM (Certified in Production and Inventory Management)• CSCP (Certified Supply Chain Professional)• CIRM (Certified in Integrated Resources Management)
Con mas de 60,000 miembros entre individuales y corporativos en20,000 compañías a nivel mundial. APICS esta dedicada al uso de laeducación para mejorar las organizaciones desde su base.

APICS es reconocida globalmente como:

La fuente de conocimiento por excelencia en el campo de

•Administración de Inventarios
•Administración de la Producción
•ERP’s (Enterprise Resources Planning)
•Compras•Administración de Materiales
•Logística
•Administración de Almacenes
•Administración de Cadena de Suministro
•Planeación Maestra
•Administración de la Capacidad
•Tecnología de Información

Beneficios de la Membresía APICS

• Un promedio de 20% de descuento en libros APICS,cursos, videos y ayudas de entrenamiento.

• La Conferencia y Exposición Internacional APICS ala cual han asistido un promedio de 5000 asistentesaño con año desde 1957.

• Reconocimiento, crecimiento de la carrera,incrementar la administración de proyectos, yhabilidades de trabajo en equipo, adquiridas en laparticipación del “Programa de
ReconocimientosAPICS”.

• Desarrollar habilidades en la carrera adquirida con los programasde certificación.

• Acceso total a la mejor bolsa de trabajo en internet sobreadministración de recursos. (en U.S.A)

• Las últimas técnicas y estrategias discutidas en publicaciones devanguardia (disponibles en revistas mensuales y en la página deinternet).

• Oportunidad de relaciones en el área industrial y entrenamiento através de sus más de 270
capítulos profesionales.


Mauricio Urrea O.

The Collaboration Advantage: Customer-focused Partnerships in a Global Market

About the survey
Of the 516 executives responding to the survey, 33% came from Europe, 32% from Asia-Pacific, 28% from North America and 6% from the rest of the world. Participants represented 19 different industries, of which the top three were manufacturing, financial services and professional services. Forty-three percent of respondents' organisations had annual revenue greater than US$1bn and 44% had less than US$500m in revenue. Board members and chief executive officers (CEOs) comprised 43% of respondents. Chief financial officers (CFOs), chief technology officers (CTOs) and other C-level executives made up the remainder of the respondent panel.
Preface
The collaboration advantage: customer-focused partnerships in a global market is an Economist Intelligence Unit white paper sponsored by SAP. The Economist Intelligence Unit's editorial team conducted the survey and wrote the report, and the findings and views expressed do not necessarily reflect the views of the sponsor. Shaun Young and Alan M. Brooke contributed to the report, and Debra D'Agostino and Nigel Holloway were the editors. Danielle Noble was responsible for layout and design. Our research was based on a survey conducted in March 2008 of more than 500 business executives worldwide, as well as desk research and in-depth interviews with executives from around the world about the changing nature of business relationships, and the associated challenges and opportunities. Our thanks are due to all the survey respondents and interviewees for their time and insights.
Executive summary
In the global economy, the nature of business relationships is changing rapidly. Executives at companies of all sizes are beginning to realise the need to collaborate and partner more frequently with suppliers, customers and alliance groups and even competitors to launch new products, innovate more quickly, lower costs and improve overall customer service. The goal is to develop a network of suppliers and corporate partners that is mutually rewarding and transcends traditional business agreements, which were based largely on price negotiation.
As companies collaborate with one another the old transactional arrangements have become more complex and, in some ways, more risky. Firms now share more information with their partners than before, opening up the possibility of sensitive business data ending up in the wrong hands and creating significant issues around trust. In addition, corporate cultures may clash, as companies extend their business networks across different regions, management styles and languages. As a result, companies must think very carefully about the types of partnerships that make the most business sense, and how best to manage the development of these relationships to ensure success.
In order to better understand the opportunities, challenges, risks and rewards companies have seen from these types of agreements, the Economist Intelligence Unit conducted a survey in March 2008, sponsored by SAP, which asked 51 6 senior executives how their business relationships are evolving. The poll focused on the factors of success, the difficulties in creating closer partnerships, the terms of engagement and the relevance of technology. We also conducted interviews with senior executives, academics and industry experts. The study revealed the following key points:
Collaboration among business partners is, among other things, intended to help companies get closer to the customer. Forty-four percent of respondents say that their collaborative relationships allow them to share business processes and information with partners to better serve their customers. Only 22% of respondents whose top relationship is transactional in nature can claim the same benefit.
Two-thirds of respondents whose most vital business relationship is collaborative say their firms created or strengthened partnerships with customers in the past five years. These partnerships were not only designed to meet specific needs as they arise, but were also based on a long-term strategy to assess potential future business opportunities. Seventy-one percent of respondents whose most important business relationship is collaborative say that their business relationships are moderately or very successful in achieving expected results.
Companies are embracing collaboration both to reduce costs and to enhance revenue growth. Among the 302 respondents (59% of the total) who said their most important business relationship was collaborative (rather than transactional), one-half are focusing on using their business ties to improve their sales and distribution channels for their products and services.
Over the next five years, 31% of all survey respondents say that a cut in production costs will be the main reason for improving business relationships. In addition, 27% believe that achieving a higher sales volume will be the primary goal in improving their business partnerships.
The biggest challenge in collaborating with business partners is building trust. One-half of all respondents say that trusting corporate partners enough to share information is the toughest aspect of a new business relationship, and 64% of executives agree that strengthening personal relationships is essential in establishing trust with their business partners. The lack of trust is a particularly thorny issue in the area of information technology (IT): less than 20% of respondents are prepared to share security systems, process technology or software applications.
Technology is regarded as a key enabler of business relationships. Sixty-nine percent of survey respondents agreed that the adoption of new technologies has benefited their most important business relationships. But only 34% of respondents have upgraded their data network, and 32% have invested in new security systems to support their most important business relationships. This indicates that more work needs to be done in working with IT to make systems more open to partnerships.
Transact and collaborate
The Economist Intelligence Unit survey defines transactional relationships as agreements meant to fulfil specific, immediate needs. Collaborative relationships, meanwhile, are defined as partnerships created to meet mutually beneficial goals, and share the risks and rewards of future business opportunities. Both types of relationships serve valuable purposes for companies: the goal of transactional relationships tends to be the continued (and sometimes automated) execution of specific functions, such as order replenishment or ongoing maintenance of, say, the help desk. Collaborative relationships, meanwhile, aim to connect companies to bring about faster innovation and create future growth opportunities. They can evolve from transactional relationships, particularly when companies seek ways to gain a competitive advantage in reaching the end customer. In order to contrast the characteristics of the two types of business relationships, the survey asked senior executives to classify the nature of their most important business relationship as transactional or collaborative. Fifty-nine percent (302 in all) of the respondents describe their most important business relationship as collaborative (called the "collaboration" group in the paper) and 41% of the surveyed executives define their most important business relationships as transactional (the "transaction" group).
Introduction
It was June 2000 and AG Lafley, the newly appointed chief executive officer (CEO) of US-based consumer goods giant, Procter & Gamble (P&G), had come to a realisation: the company could not achieve its growth objectives by focusing on its internal capabilities and resources alone. Investments in research and development were yielding diminishing payoffs, and the company's stock price had plummeted from roughly US$58 in January to US$28 in June as a result of a failed restructuring initiative that cost the company US$1.9bn. Consequently, the US$76.5bn firm decided to abandon its "invent it ourselves" philosophy and shifted to a more collaborative approach a strategy corporate executives coined "Connect + Develop". The new model aimed to bring the capabilities and ideas of a variety of partners suppliers, entrepreneurs, universities, competitors and others together to innovate and improve products.
The strategy was a success. Today, over 50% of P&G's products and innovation pipeline involve external partners, according to Jeff LeRoy, the firm's external relations manager.
For example, ConAgra, a US-based packaged foods manufacturer, recently entered into a partnership to license P&G packaging solutions, such as wrappings and non-splatter valves on product bottles. This agreement was one of more than a thousand deals that P&G has struck since embarking on its Connect + Develop strategy. "P&G views a business deal as a success if both we and our collaborator are creating value", says Mr LeRoy. He estimates that about US$3bn in sales for P&G's partners is thanks in part to intellectual property created by P&G.
For P&G these collaborative relationships go beyond short-term deals and develop into long-term partnerships even with competitors. For example, P&G developed an innovative plastic wrap product, now known as Glad Press'n Seal, that became the basis of a partnership with US-based Clorox struck in late 2002. Two years later, P&G's contributions to the venture, including the technology behind Glad ForceFlex trash bags, released in 2004, have helped double Glad product sales and make it Clorox's second billion-dollar brand.
Most companies may not be ready to collaborate with their competitors as P&G has, but they do need to become more agile in order to take advantage of changes in the market. But this is easier said than done. Because few companies today work entirely on their own to develop and sell their products, they have to make their entire business network more nimble a significant re-engineering process.
Corporate executives are beginning to realise that they need to collaborate with their suppliers, alliance partners and customers in ways they would rarely have dreamt of ten years ago. For example, with respect to suppliers, most companies were intent on whittling down their supplier costs in order to save every last dime and renminbi. The supply chain was a food chain in which the strongest and fiercest emerged on top.
Although competition is certainly tougher today, many firms have realised that the old type of supply chain merely commoditises goods and services. When companies compete solely on cost, profit margins are cut to the bone. To avoid this fate, firms are partnering with their customers and suppliers in ways that create lasting value for all sides. Collaboration has become the watchword, both among and within companies. This paper focuses on external forms of collaboration.
As companies collaborate with one another, these formerly simple, transactional arrangements have become more intricate, complex and flexible. Firms work together now to develop new goods, services and innovative processes. To do this, they must share information that was once held in secret, known only to a select few employees in the company.
The benefits of this type of partnering are many and varied, but the main aim is to husband resources more powerfully "to help each other get better faster", in the words of John Hagel, co-chairman of the Deloitte LLP Center for Edge Innovation. No company has a monopoly on great ideas; each must go outside its own four walls in search of the most highly skilled partners, enabling all to focus on what they do best. By involving other companies in research and development, production and distribution, the relationship becomes richer and more strategic. It enables both sides to share the gains. What was a zerosum game then becomes a positive-sum relationship that may deepen and last for decades.
There are great rewards to be gained from this kind of collaborative network, but there are also considerable risks. Business secrets may leak out, or vital customer data may end up in the hands of a competitor. A network of business partnerships is highly complex, requiring an alignment of objectives among companies. Corporate cultures may be very different, as partners are likely to be located in several parts of the world. All of these issues serve to undermine the success of collaborative partnerships.
One way of overcoming these challenges is to make full use of a wide range of technological tools designed to enable companies to get closer to their alliance partners, suppliers and customers. Of course, identifying which technologies are best suited to individual cases is part of the challenge, as is determining how partners split the cost of implementation.
Forming mutually enriching partnerships with other companies is the current task for most companies. But it is not the end of the story. The next stage in the evolution of business networks is to include the final consumer, along with suppliers and corporate customers, in the development of new products and services. This will require even more sophisticated methods of collaboration that corporate planners have only just begun to imagine.
The benefits gained from collaborative networks
As one of the earliest adopters of collaborative partnering, Toyota Motors Corporation (Japan) has become the leading global car manufacturer thanks to the support of a network of loyal suppliers, built up over decades. Toyota understands suppliers' costs and defines a target price that discourages unreasonable cost estimates, but also allows the supplier to enjoy reasonable returns.
Toyota demands a great deal from its component makers. Not only will Toyota thoroughly investigate potential partners for operational strengths and weaknesses a process that can take as long as five years from start to finish it also requests design inputs from each of its suppliers to integrate into detailed master production plans. This helps the manufacturer ensure quality and monitor any problems with its process or products. Suppliers that enter into the rigorous, long-term relationship are viewed as trusted partners and see significant benefits as a result. For example, the company gave large up-front payments and price increases to its suppliers in Thailand to help them during that country's 1997 financial crisis. Those suppliers made similar requests to other original equipment manufacturers (OEMs), but did not receive the same level of support.
The Toyota message has been heard in corporate boardrooms around the world. Although other firms have been slower to act upon Toyota's best practices, more and more companies now understand the value of enhanced relationships with their suppliers.
The benefits of collaboration extend beyond the supply chain. Survey data reveal that firms prioritising collaborative relationships are more likely to partner directly with corporate customers. Two-thirds of respondents that identified their most important business relationship as collaborative created or enhanced partnerships with their corporate customers over the last five years, compared with only 56% of executives whose relationships are largely transactional.
Coca-Cola (US) is an example of a company that collaborates with its corporate customers. Anthony van der Hoek, Coca-Cola's director of strategy and business solutions, says that it partners with retailers.
like Wal-Mart (US) and other food service customers around the world in what he calls a "demand-driven value network". The network helps its partners "make sure that the right product is in the right place, at the right time and at the right price".
For example, Wal-Mart analyses transaction-level data of its shoppers collected at the point of sale to predict purchase trends for specific shopper segments, organised by retail location, product quantity and product type. The data from the analysis are shared with suppliers over a common software platform. In turn, Coca-Cola shares with Wal-Mart the data it collects and analyses. "We all have information sources where we and our retail partners get knowledge and develop insights", says Mr van der Hoek. "Taken together, it all contributes to the flavouring of the insights that we share."
Coca-Cola's collaboration with Wal-Mart demonstrates how such partnerships can improve a company's ability to understand the end-customer's behaviour and improve service. This is a key step toward creating a more customer-centric organisation, the top goal of business relationships in the future, according to surveyed executives. Specifically, when respondents were asked to share their firm's main objective in improving their business relationships over the next five years, 41% said the goal was to tighten their focus on the customer.
"There's a growing awareness that success hinges on anticipating and serving unmet needs in the marketplace", says Mr Hagel. "The best way to do that is to get very close to the customers that are driving the edge of performance of the products with which you're dealing." One way of achieving this kind of close proximity is to form a network of relationships with companies that can open up new distribution channels or provide market intelligence. Some companies are not only using the capabilities of the companies in their business network to serve their customers better, but are also working directly with their partners' customers. This trend is still emerging, but collaborative relationships are more likely to explore this opportunity to get closer to customers. According to the survey, 18% of the "collaboration" respondents enable the business partners in their network to have direct contact with their customers, compared with 8% of the "transaction" respondents.
One industry that relies on flexible supply chains is apparel, where tastes are fickle and producers must react quickly to changes in demand. An exponent of close collaboration in fashion wear is Li & Fung, a US$11 .9bn Hong Kong-based consumer goods exporter that supplies customers such as Calvin Klein and Anne Taylor. Li & Fung has assembled a network of over 10,000 companies around the world, many of which are in the textile industry. For a given project, Li & Fung matches specialised providers, from sources of yarn to processors of raw materials and fabrics. Every step of the process is co-ordinated, Mr Hagel says, "to get the product of the right quality to the right distribution centres at the right time and the right price".
Li & Fung has larger operating profit margins (3.4% in 2007) than most of its competitors in part because the company has built a network of partnerships, according to Mr Hagel. "The more participants they can mobilise and continue to add to their network, the more value they can provide to their customers through a broader range of best-in-class capabilities", he says.
Time Warner and Brightcove
Collaborative relationships work best when they benefit all partners in a business network and, as such, are certainly not limited to likeminded firms, or even companies of similar sizes. Large enterprises often benefit from the expertise and agility of smaller companies, while mid-market firms can take advantage of their larger partner's customer base, brand reputation and operational efficiencies. Such is the case for US-based Time Inc., the largest magazine publisher in the US, and US-based Brightcove, a smaller, privately-owned Internet TV services company.
Time relies on many business partnerships to deliver a good customer experience at its news, lifestyle and celebrity-oriented Web sites, according to Aiden Colie, senior vice-president, Web technology. In order to ensure that sites such as time.com and people.com meet consumers' rising expectations, Time Inc. has assembled a network of partners who contribute to their online user experience. For example, the company partners with DoubleClick, a US-based digital marketing solutions provider, to serve all its online advertisements, Brightcove to provide video content management and US-based TypePad and USbased WordPress for blog capabilities. "They provide us with technology that would be very difficult for us to build and maintain ourselves at a good price", Mr Colie says. "By being able to tap into these various partners, we're able to provide a much richer end-user experience."
In return, the partners benefit from the experience of working with a leading brand, and Time Inc., which had annual revenue of about US$5bn in 2007, helped its partners develop new products and services for its customers. For example, Brightcove builds customised solutions for Time but is also able to develop its core products as a result of the partnership.
"Time comes to us with a variety of requests and requirements from its different properties. What we develop as a result of those requests we will roll back into our product and build offerings that will also benefit us, because our other customers will want those things as well", says Eric Elia, vice-president for creative services at Brightcove. For Time's Mr Colie, Brightcove fits the profile of a partner in a collaborative relationship: "What I'm looking for in any partner is the willingness to invest time to understand our business, and meet our management team. The partner must not only understand the types of technical skills we're looking for but the kinds of individuals that will fit in very well with our organisation."
Overcoming the challenges of partnering
The most significant obstacle in creating a collaborative partnership is building trust among the companies involved. One-half of the respondents to the survey the largest proportion said that having enough trust to be able to share information is the most challenging part of the development of new business relationships. A lack of trust is felt particularly strongly in the area of IT. Only a small proportion of respondents are prepared to share the following with a partner: security technology (11%), process technology (11%) and software applications (17%).
In order to develop trust, a collaborative relationship must be an investment between partners committed to growing the network. "The real power and value in collaborative networks is not so much connecting to existing resources as finding ways we can push each other and help each other get better faster", Mr Hagel says. "To do that, I have to have real respect for the partners I'm dealing with and I have to build genuine long-term, trust-based relationships, because if we're going to learn, we have to trust each other enough to share what we know."
The simplest and most direct way of building trust is to develop a close rapport between business partners two-thirds of respondents said this but it is something that cannot be hurried. "The personal element is critical, and is always built up over time", says Coca-Cola's Mr van der Hoek. In the case of larger suppliers and customers, those relationships need to be constantly renewed, thanks to a high turnover rate in several important functions, such as vendor sales, customer analytics and procurement.
New entrants to such fields as these often want to make an impression on their bosses by trying to score points at their counterparts' expense. But wiser counsel must prevail. "Having the institutions behind them, with long-standing relationships and a degree of calmness, helps the companies' relationships over time and helps them to continue to partner collaboratively", Mr van der Hoek says.
To accelerate building trust, Mr Hagel suggests focusing on the future (rather than current) capabilities of the company, and creating a structured plan by which companies can demonstrate their contribution to the partnership. This involves scheduling meetings to determine how each partner can contribute to future opportunities and creating incentives to encourage partners to achieve the objectives. For example, Mr Hagel notes that US sports equipment company, Nike, has established regular tutelage programmes designed to help its production partners more rapidly reach and demonstrate their capabilities in the relationship, thus building trust across the network.
Of course, trust (or the lack of it) is not the only challenge. Conflicting corporate cultures is a key obstacle highlighted by 38% of survey respondents. To move beyond conflicting cultures to establish trust, almost one-half of the respondents said gaining an understanding of each other's business is critical for the venture.
"A key success factor in establishing a relationship with a customer is to only listen and not speak at the first meetings in order to understand what he needs. If you have a foundation of trust you are a step ahead", says Michael Kirchsteiger, managing director at voestalpine Anarbeitung GmbH, a member of the voestalpine Group, a leading Austrian steel maker with US$7.4bn in annual revenue. Mr Kirchsteiger's unit provides custom processing solutions for steel makers.
When voestalpine Anarbeitung approaches a potential customer, the first response of the sales target tends to be wariness: the fear that if it hands over processing tasks to a supplier and a subsidiary of another steel maker no less the operating risks will increase. With such would-be customers Mr Kirchsteiger seeks to establish trust through personal interaction with the client and by demonstrating his company's record of success with other steel makers.
If he succeeds in establishing a business relationship, the initial foundation of trust is then strengthened by close collaboration with the customer and by providing technology-supported planning and inventory control. In order to understand the needs of voestalpine Anarbeitung's customers, his firm not only talks to the procurement officers, but also to the managers on the production line. "We are very open with our customers as well as our suppliers, bringing them into our planning process in order to secure an optimised process, whether for buying, producing or selling."
By developing trusting relationships with a range of fellow partners, including raw materials suppliers, consultants, IT companies and universities, voestalpine Anarbeitung has increased its opportunities to reach more customers and provide services that it may not have offered in the past. "Our partners enable us to be faster, more flexible and to employ processes that are leaner and therefore more market-driven", Mr Kirchsteiger says. "Our company was founded to serve customers who are willing to pay a better price for more flexible services than a classic steel mill can provide."
Trust is more important for collaborative relationships than transactional ones, as they require companies to share information and processes to operate effectively. One way to establish trust in collaborative relationships is to share in the risks and rewards of the partnership, a point borne out by the survey. The "collaboration" group tends to shape business agreements in order to enable partners to share in the rewards (59% of the group) and the risks (45%). For "transaction" executives, only 38% enable their partners to share in the rewards and only 33% make them share in the risks. By contrast, the "transaction" group of respondents tended to resort more often to penalties if services levels were not met.
If the risks and rewards are shared among corporate partners, even competitors can sometimes work together to serve the customer. According to the survey, "collaboration" executives were more likely to partner with peers or competitors than were the "transaction" respondents. Co-operation with competitors is particularly common in the high-tech industries. UK-based Innovation Group has partnered directly with US-based IT giant, IBM, since 2003 to provide software solutions to insurance carriers. The partnership has yielded more than US$250m in revenue for the participants.
In 2006 the two companies started working with other vendors to deliver customised solutions for insurers. "We believe the next step is composite business services", Andrew Labrot, chief technology officer (CTO) of Innovation Group, says. "Our customers need business services that are choreographed to support business processes, such as issuing new policies."
The partner network consists of IBM, Innovation Group and three other competing software companies, Kana, Chordiant and SEEC. Other vendors are called upon as needed. The partners evaluate customer needs and then provide solutions by building software applications in co-ordination with IBM.
"No single vendor provides the needed depth in any given stage of the process, so we are assembling them according to each customer's specific needs," Mr Labrot adds. Innovation Group, a firm with US$220m in annual revenue, has enjoyed a seven-fold increase in operating profit between 2003 and 2007.
However deep the level of trust, companies will insist that their partners install strong security systems and processes to prevent information leaking out. K. Dinesh, a co-founder of India-based Infosys and head of its Quality, Information Systems and Communication Design Group, stresses the importance of security at his company which has US$4.2bn in annual sales: "We have a close relationship [with our partners], but each one of us has to protect our intellectual property", he says. "It is very important and we honour that. One of the ways you build trust is by honouring the rights of each of the partners in their own territory, which includes the intellectual property of each of them."
Tapping into new talent through collaboration
When it comes to building strong business relationships, the survey results reveal a clear, universal challenge: overcoming a shortage of qualified staff. Regardless of company size, region or industry and irrespective of how well respondents think their companies partner with third-party businesses the struggle to find talented workers has had the most significant detrimental effect on business partnerships. In fact, more than one-half of all respondents say that the shortage of qualified workers has affected their company's most important business relationships in a damaging or very damaging way.
It's true that demand for skilled workers rises in a competitive market, and that finding qualified workers will become more and more challenging over the next few years. But the shortage is just as much an opportunity as an obstacle. One of the greatest benefits of partnering with outside firms, for example, is to tap the expertise of a third party. When carefully planned, partnerships can be a valuable way to gain capabilities that could not otherwise be found in-house. As US-based Sun Microsystems founder Bill Joy once noted, "there are always more smart people outside your company than within it".
Naturally, small companies have a harder time gaining access to expertise than big ones. "We don't have the luxury of larger companies that can hire expertise if they need it", says Dick Dell, executive director of the Advanced Vehicle Research Center (AVRC), a firm based in North Carolina that develops alternative fuels and other advanced technologies for the automotive industry. Instead, "we look for other organisations to partner with, not just companies but also academic institutions".
For example, the AVRC recently completed a design-and-build document with plans to construct a small portable hydrogen refuelling station, Mr Dell says. Funded by the US Department of Energy, AVRC brought together US-based Air Products in Pennsylvania, US-based Ford Motor Company and the North Carolina State University (NCSU) Solar Center. "In this case, the AVRC and NCSU Solar Center were paid researchers under the federal contract, and we gained a lot of knowledge that will be put to use in future projects", Mr Dell says. Ford and Air Products donated their consulting time to the project, and "gained some positive public relations", he says."Increasingly, companies are realising that while they need to try to attract talent to their own firm, that's not always possible", says Mr Hagel. And it may not even be advisable: with unexpected fluctuations in demand, shifting economic stability and everincreasing market pressure from competitors, "there is an increasing premium on flexibility, being able to connect quickly to the resources that are most advantageous at that point in time. It's hard to do that if all you're relying on are the resources within your own enterprise".
In this way, partnering with outside firms not only provides access to expertise, but creates greater business agility as well. "The challenge is how to connect to those people and take advantage of the capabilities, intelligence and skills they offer."
Regional differences and similarities
A review of the survey results by region reveals differences and similarities in how geographically dispersed companies approach the establishment of business partnerships. Most notable among the similarities is that all regions place tremendous strategic importance on building relationships with customers. When asked with which entities their companies formed new or significantly enhanced business relationships over the past five years, "customers (for example, forming customer communities or direct-to-consumer channels)" was the top response in North America (61%) and Asia- Pacific (67%) and, at 60%, ranked only slightly behind "suppliers" (63%) in Europe. To exploit these business relationships, companies across the board will focus primarily on sales and distribution channels (46%), followed by marketing (34%) and research and development (R&D; 33%). The top goal, agree all companies, is to enhance customer centricity (41%).
The differences lay in how these companies are focusing their efforts to achieve a more customer-oriented business approach. In Europe and Asia-Pacific, respondents are more likely than their North American-based counterparts to report that their companies are changing their organisational structure (71% and 70%, respectively) to improve their most important business relationships. Although this was also the top response among North American respondents, the response was much lower, at only 43%, indicating that North American firms are undertaking a wider variety of approaches to strengthen their customer relationships, including elevating the role of the relationship manager (35%) and creating new distribution channels (33%). Meanwhile, European and Asia-Pacific firms are more likely to consider outsourcing non-core functions as a solution than companies in North America. However, this could merely indicate that North American firms have already outsourced many activities, compared with firms in other regions.
Another key difference across the regions is the approach companies take to sharing data and processes with business partners. In Asia-Pacific, a region that is already highly regarded for delivering quality customer service, respondents report a higher tendency to regard their relationships with third-party stakeholders as partnerships (67%, compared with 57% in Europe and 52% in North America) rather than transaction-based agreements. Asian and European firms are also more likely to share processes and data with partners (41% for Asia, 39% for Europe and 24% for North America) than other regions. Finally, when asked what respondents would emphasise in forming new relationships over the next five years, respondents in Asia-Pacific were more likely to cite visibility and transparency on data and processes (53%) than companies in Europe (38%) and North America (30%).
The task of technology: a common platform for people and systems
One would be hard-pressed to find a company today that successfully partners with outside vendors without the aid of some kind of collaborative tool. Indeed, nearly 70% of survey respondents agree that the adoption of new technologies has positively affected their most important business relationships. When it comes to creating stronger partnerships, technology is perhaps the greatest enabler. This has certainly been the case at Locher Evers International, a Vancouver-based freight forwarding company. Locher Evers exports and imports goods to nearly every country across the globe, and has branch offices in London, Germany and South Korea. But its inward-facing systems made connecting with third parties a challenge. "In response to a customer inquiry", says Peter
Broerken, director and chief financial officer (CFO) of the US$254m firm, "we would say, 'Let me send an email or fax to my overseas agent and get back to you tomorrow'". Because of time differences, it could take several days to find answers. Company officials knew there had to be a better way to get customer queries answered quickly.
In the past, Locher Evers managed its data through a private network that could only be seen by company employees. But in January 2008 the firm launched a new platform using extensible markup language (XML). That made it possible for Locher Evers and its partners to set basic standards and nomenclatures for data, allowing for secure data sharing with other shipping partners over the Web. "Every time there is a shipment milestone, we will send an XML file to our partner, and they will do something similar", Mr Broerken says. Most importantly, the data are updated regularly and made accessible to customers through a Web portal. The customer response has been very positive, says Mr Broerken. Getting business partners to change their business processes was not an easy task, Mr Broerken admits.
In the future, when considering new partners, Locher Evers will require a certain level of technological sophistication, according to Mr Broerken. "Five years ago in some developing countries, we were just happy if they had reliable email", he says. "Today they now have to have better data exchange capabilities." Locher Evers is not the only firm to recognise the value of the Internet in co-ordinating business operations and facilitating greater communication between business partners. When asked which IT changes their company has made to facilitate its most important business relationships, respondents cited a move to Web-based systems as their top response. Furthermore, 40% of surveyed executives believe that Web portals will be essential to their most important business relationships. Not surprisingly, email is expected to remain a critical communications tool for connecting with business partners over the next five years, according to 63% of respondents. Web conferencing (36%) and telephone conferencing (35%) are also expected to be key communication methods.
"Clearly, communications technologies have been the enabler of the business process outsourcing on a global scale", asserts Scott McKay, senior vice-president of operations and quality, and CTO of Genworth Financial, a US-based financial services company with annual revenue over US$10bn. "Better communications technologies help deepen relationships and make people more effective. On an infrastructure level, as processes and tools become easier to share and integrate, the speed at which we can improve and build global processes is getting faster."
How fast is fast? In the rapidly evolving field of Internet television and video publishing, US-based Brightcove has created a network of content creators and publishers to deliver plug-and-play solutions to meet the demands of specific online audiences, says Eric Elia, vice-president for creative services. To do this, Brightcove has developed tightly-woven relationships with its own business partners, such as Visible Measures, a US-based provider of Internet video usage analytics, and DoubleClick, a US-based digital marketing solutions provider. "If a customer wants to add analytics tools to Brightcove, or make use of DoubleClick's ad serving system, it takes us just a few minutes to have that up and running", Mr Elia says.
Unfortunately, few companies have reached this point. Although the survey's findings indicate that companies are investing in technology to drive more sophisticated and intimate partnerships, the relevant technology is rarely shared across corporate boundaries. For example, when asked how application ownership has been handled with respect to their firm's most important business relationships, 61% of respondents said "we each use our own applications". Only 17% said they use their partner's applications. Similarly, only 38% of respondents share business processes.
This is particularly interesting considering the importance survey respondents place on transparency. When asked which areas they would place the greatest emphasis on when forming new relationships over the next five years, "visibility and transparency of data and processes" was surpassed only by "personal relationships and expectation setting" as the most critical effort. It seems clear that companies recognise the need to be more open with their partners, but have not yet taken action.
The challenge is to share enough to optimise collaboration without undermining privacy, security and competitive intelligence, and this is where technology can help. To address this issue, Qualcomm, a US-based manufacturer of wireless chipsets for mobile phones and provider of wireless data services, has created an open yet secure environment to help developers and publishers of content more easily build applications for use on a range of mobile devices. The development programme stands at the centre of a network of thousands of developers, from leading content publisher/developers such as Disney, Major League Baseball and Electronic Arts to small companies and individual developers.
The company provides developers with a software platform that includes the blueprint of the microchip technology that Qualcomm sells to 45 different mobile phone manufacturers, including US-based
Motorola and South Korea-based Samsung. Through the software, content developers have access only to their specific initiative, so that mobile phone manufacturers' competitive advantages are protected. Qualcomm serves as a gateway for these developers to submit applications to work within telephone networks, such as US-based Verizon or US-based Alltel, and pays each developer 80% of the revenue it collects from network operators.
In the five years since the platform was launched, Qualcomm has paid developers over US$1bn, and now supports approximately 80m transactions per month. Benefits are seen by all parties involved: Qualcomm earns revenue by distributing developers' content and applications, developers benefit from Qualcomm's extensive distribution network, and telephony operators satisfy consumer demand with the applications and content they receive through the network.
Unfortunately for most companies, there is still considerable work to be done with regard to internal IT systems before they can begin to think about connecting with external partners. When asked which capabilities need the greatest enhancement to improve firms' most important business relationships, customer relationship management ranked at the top of the list, indicating a clearly understood lack of sophistication when it comes to sharing, interpreting and acting on customer information across the corporate landscape and between business partners. Business process management and business intelligence also rank high, further underscoring the need for companies to think more holistically about sharing data and processes with third-party vendors.
At the other end of the spectrum, when asked which communications technologies will be most essential to support companies' most important business relationships in the future, respondents were least likely to cite instant messaging (21%), social networks (12%) and wikis (8%), indicating that most companies have yet to understand the value of these interactive tools. Although Mr Hagel of the Deloitte LLP Center for Edge Innovation agrees that adoption of these technologies is still at a very early stage, he believes that many of these tools are particularly appropriate for the challenges of supporting and enhancing collaboration, and will be formally adopted in the future. "One of the key values of business networks is not just co-ordinating routine activity", he says, "it is connecting the right people to each other across not just distributed geographies but also distributed entities to address the problem that needs to be solved".
Some companies are beginning to see the light. In July 2008, as a result of a meeting between Sun Microsystems executives including Sun CEO Jonathan Schwartz and roughly 15 0 of Sun's partners from 27 countries, the computer manufacturing company launched an invitation-only social networking platform called ExecConnect. The forum, an extension of the company's Partner Advantage Program for third-party software vendors, provides a secure venue where Sun's business partners can meet to discuss new ideas and opportunities to work with one another.But technology alone cannot strengthen corporate partnerships, bring companies closer to their customers, or re-engineer business processes. Ultimately, IT systems will fail unless they are fully supported and adopted by employees and cross-functional teams. "There will never be a computer system in the world that comes out with what the next innovative product, process or strategy needs to be", says Mr van der Hoek of Coca-Cola. "It will always be a human being."
the approach of small to medium-sized enterprises
Small to medium-sized enterprises (SMEs), like their large enterprise counterparts, are increasingly adopting collaborative relationships with business partners. While larger businesses have worked collaboratively with partners for many years, smaller companies, based on the survey findings, are increasingly forming collaborative relationships in a network of large and small companies. Here are some key approaches of SMEs as they join these partnerships:
Focus of collaboration. Smaller companies are more focused on product and service differentiation (42%) than big companies (30%), whereas large firms are slightly more focused on customer centricity (44%) than smaller firms (37%).
Nature of collaboration. Smaller companies are more likely to share ownership of business processes with partners. By contrast, large companies tend to take a more formal approach to managing relationships with business partners, holding regularly scheduled meetings and more frequently turning to service level agreements than their smaller counterparts.
Adoption of new technology. Small companies see greater opportunities arising from the adoption of new technologies: 76% see it as beneficial or very beneficial, compared with 63% for large companies.
Strategic change for improving collaboration. Big and small companies are focusing primarily on changes to their organisational structure in order to improve relations with their most important stakeholders. Smaller firms are more likely to seek new distribution channels, whereas large companies are more likely to outsource noncore functions and elevate the role of the relationship manager.
Conclusion
It seems clear from the survey data that companies want to improve their strategic business partnerships. When asked to reflect on the lessons learned from past business relationships, twothirds of survey respondents say that in future they will place greater emphasis on developing personal relationships and setting expectations with business partners. Strengthening these ties is a much higher priority than setting service level agreements (36%) or managing intellectual property rights (23%), indicating that companies are becoming more willing to be open and collaborative with other firms.
The aim, however, is to create a collaborative network that not only includes business partners but end-consumers as well. In doing so, companies can gain insights from all points along the value chain, and think more creatively about how to improve products, make processes more efficient, and conceive innovative new business approaches to deliver greater value to end-consumers.
Many forward-thinking companies, such as Disney, Apple, Nike, P&G and others, have seen great competitive success by adopting this mode of thinking. But for most companies, this goal is still beyond the horizon. When asked what main objectives their companies will seek in improving business relationships over the next five years, "enhanced customer centricity" ranked highest, at 41%, followed by product and service differentiation (35%) and improved speed to market (34%). Again, the thinking is on the right track, but there is much work to be done before companies can reap the benefits of a truly integrated business network.
Companies of all sizes around the world looking to re-engineer their relationships with suppliers, customers, alliance groups, competitors and other third-party stakeholders should consider the following action points:
Look beyond cost control. For critical business relationships, companies must think of ways to enhance revenue and foster innovation with their partners while simultaneously controlling costs. By sharing the rewards and the risks of collaboration, business relationships are likely to last longer and be more valuable to both sides.
Find ways to build trust. As the adage goes, trust takes a lifetime to build and just one moment to destroy. True partnership entails a high degree of visibility and transparency between companies. To build confidence more quickly, partners should create a plan to reveal small amounts of key information, progressively offering more and more insights to the point where each side fully understands the others' strengths and weaknesses.
Build a skills network. Select partners that can provide expertise in areas that are lacking at your company, or significantly enhance existing capabilities. At the same time, look for partners that need your know-how, and encourage employees to assist partners in achieving mutually shared business goals. Doing this will reinforce mutual dependency, as well as enable corporate partners to act smarter than if they were on their own.
Share technology. Use technology to connect people and systems to share information quickly and securely in a more collaborative business environment. The more that technology facilitates communication between partners, strengthening personal relationships and trust, the more valuable it will become for business networks in delivering superior products and services to customers.
Invest and invite. A collaborative network is a long-term process, built on investing in personal relationships, trust and technology. The best networks are the ones that continually grow by attracting additional business partners that have access to more markets.

Mauricio Urrea Ospina

Business Network Transformation: Rethinking Relationships in a Global Economy

The global economy is reshaping relationships among companies in new and not always comfortable ways. Leveraging unprecedented opportunities in communication and collaboration, companies are gaining competitive advantage through networked business models, tapping into talent across the globe to defend themselves against commoditization and disruptive innovation. Such rapidly changing market dynamics are stressing established companies' investment in rigid "built-to-last" systems and processes.The new era instead calls for fluid,"builtto- adapt" networks in which each company focuses on its differentiation and relies increasingly on its partners, suppliers, and customers to supply the rest. Such business networks have come to the fore in the past decade or so as the power of customers and consumers has increased relative to the manufacturers and retailers that serve them.These networks enable these companies to deliver faster innovation to customers at lower costs by sharing investment, assets, and ideas. New market opportunities are unlocked by combining the products and services of the business network participants in creative ways and leveraging each other's market access and infrastructure on a global basis.Table 1 shows the nature of transformation that businesses are undergoing today.
Under the pressure of this ongoing transformation, business leaders are being forced to reexamine long-held assumptions about strategy, structure, systems, and style. Among the questions raised are the following:
What is the right context in which to view this change in business climate? Is it a cyclical change or a secular one? Is it fad or fate?
Do business network dynamics evolve as markets emerge, scale, mature, and decline, or does one size fit all?
What core principles or practices can be used as guideposts as we foray out into this new territory?
What implications do these networked business models have for managing investment in information and communication technologies (ICT) systems?
In our view, the forces at play here are tectonic. For the most part, they will move businesses slowly but inexorably out of their comfort zones.That suggests there is time to plan and make considered moves. But occasionally the business landscape is shaken by quakes of great magnitude, out of which new power structures emerge in remarkably short order as we have seen in the current century in financial services, telecommunications, and media. Overall, we believe a planned approach is best for most businesses, but we do not think it wise to use planning as an excuse for stalling.
The great disaggregation: A secular change
In the past 30 years or so, sector after sector of the global economy has migrated away from the vertically integrated enterprise toward an increasingly disaggregated model of specialized enterprises interoperating to create end-to-end deliverables.The clearest example of this has been in the computer industry, where in the 1960s and 1970s all the great computer companies IBM, Hitachi, Fujitsu, ICL, and Siemens, as well as the "BUNCH" (Burroughs, Univac, NCR, Control Data, and Honeywell) supplied a complete array of hardware, software, and services built atop proprietary and closely held technology. The model was carried over into the first generation of minicomputers Wang, Digital Equipment Corporation, Data General, Prime, and the like all proprietary systems, albeit ones increasingly struggling to shoulder the enormous research and development (R&D) expense of going it alone.
Two technologies radically changed this landscape: the relational database and the personal computer.They led a disaggregation of enterprise computing into a host of specialized companies in microprocessors, operating systems, databases, storage, networks, computers, and application software, all linked by a set of standardized interfaces.This, in turn, allowed innovation to evolve independently at each layer, the sum of which vastly exceeded the progress that any one company could have made.The net outcome of all this process is the massive amounts of wealth creation that has taken place across the globe, not to mention the fact that the mobile phone you carry with you outperforms the most expensive supercomputer available a scant two decades prior. Clearly this is a fundamental change.
At various times, the disaggregation model has played out in many other industries as well, albeit not always quite so dramatically.The vertically integrated film studios of the 1930s and 1940s have long since disaggregated into a collaborative network of producers, directors, writers, actors, artisans, distributors, and agents, all bound by a raft of lawyers (and a market with an insatiable appetite for digital fantasies).The semiconductor industry went "fabless" 20 years ago, separating chip designers from chip producers, while at the same time spinning out specialized roles for wafer suppliers, mask makers, equipment providers, and CAD software vendors. The automotive industry has migrated to a tiered system of suppliers, out-tasking virtually every subsystem that makes up a car except for the engine (and that will be next, given the enormous R&D expenses entailed by hybrid and all-electric drive systems).The aerospace industry is following in similar fashion, and even pharmaceuticals one of the last bastions of the closely held end-to-end enterprise has been driven to disaggregate the roles of upstream R&D, now increasingly outsourced, from downstream sales and marketing, still closely held.
Four forces have driven all these acts of disaggregation:
ICT proliferation, which enables work to be rapidly transferred back and forth at scale between geographically separated specialists;
deregulation, which leads to the opening up of previously protected markets;
globalization, which leads to the entry of low-cost competitors into these markets; and
commoditization, which leads to market expansion and increased consumption but at the same time to heavily challenged profit margins.
We can summarize the impact of these forces in the following single observation: specialization to create sustainable competitive advantage is the force driving business network transformation in the current era. Such specialization, in turn, raises new challenges and critical questions for companies engaged in these business network transformations:
How to orchestrate one's business network partners as "one company" to deliver reliably on business commitments?
How to manage risk and compliance exposure across the entire business network?
Who will own the customer relationship, and how to capture value in a distributed ownership?
These are the questions we seek to address in this article.
Business network transformation: An evolutionary model
Business networks arise at two stages in the evolution of a market or a product. In the emergent stage, collaborative business networks enable companies to explore and develop an emerging opportunity. Such a challenge is highly complex and largely undefined, so the emphasis is on communication, interaction, iteration, fast failure, and faster recovery, all trending toward delivering a complete solution to an end customer. In these networks there is typically a ringleader who has a vision for what is possible and rallies the other parties to pursue it.We call such entities the orchestrators because they must lead through influence rather than enforce their will through power. The other members of the network are included not only for their specialized expertise but also for their ability to team well with others in relationships that are not explicitly defined.This in turn implies relationships of trust built on a spirit of joint venturing to create new products and markets, the unifying principle being that the new market will reward all in reasonable terms.
Examples of collaborative business networks in emergent markets abound in the high-tech sector, because each new technology requires communal support if it is to proliferate.Whether it be the developer ecosystem needed to support a software platform, the co-design efforts that unite handset manufacturers with mobile operators, the chip design efforts that go into a new game machine, or the standards efforts that lead to a new network protocol, the requirement is always the same: potential rivals must overcome their natural defensiveness to collaborate toward creating a future market in which they will subsequently compete with one another.
In other sectors, where technologies come and go at a more steadied pace, the driver for next-generation collaborations can be the desire to adapt global products to developing economies, the opportunity to introduce new financial mechanisms such as mobile banking or micro-loans, or the political intent to develop a new industry.Whatever the driver, success depends on an orchestrator with a vision being able to recruit an ecosystem of once-and-future competitors to lay down their arms and work together for a common good.
Those arms will be taken up once more as the market's evolutionary state transitions from emergent to scaling. In order for any process or offer to scale, it must be transformed from custom creation to repeatable production.This is true whether the end product be a consumer packaged good or a transcontinental airliner, although the higher the volume of the output, the more important standardization becomes. Now the network must operate under a new social contract, one which puts a high value on efficiency.
We call these efficiency-focused networks coordinated business networks, and they are driven not by personal relationships of trust but rather by transactions specified by contract. As such networks ramp to maturity, their operations become increasingly driven by a concentrator, a member of the network who has gained greater bargaining power than the others and who drives the performance of the whole to its own greater benefit. In a sector that is supply-constrained, this will be the resource owner or the manufacturer. In a sector that is demand-constrained, it will be the end customers or consumers, or the sales channel that controls access to them. In either case, the network as a whole has become highly transactional in its relationships and becomes increasingly dependent on information technologies (IT) to manage and monitor its end-to-end operations.
As product and service categories pass through their life cycles, the relative role of the business network oscillates between collaboration and coordination, the former focused on enabling new and emerging markets, the latter on scaling mature ones. At the same time, however, the more complex the offering, the greater the affinity will be to extend the collaborative model indefinitely, and the need to master complexity trumping the need for transactional efficiency. Conversely, the more mass-market the offering, the greater the attraction will be toward the profit-generating coordinated model, and the greater the impatience to exit the money-losing collaborative phase that must precede it.
Note that the values of coordinated business networks are essentially identical to those of a traditional vertically integrated enterprise operating in a mature market. In today's outsourcing-oriented economy, however, the lowest transaction costs are many times found outside the firm.The goal of participating in a coordinated network is to avail oneself of these economies while meeting or exceeding the reliability of a single end-to-end provider. We are taking a familiar model and simply disaggregating it, letting each company leave behind non-core tasks to focus on its own core, the goal being for all to generate greater differentiation and therefore higher returns on invested capital.
By contrast, collaborative business networks are driven by a different imperative.They seek to bring about something never before accomplished: either the completion of a program or project that transcends the capabilities of established offerings, or the incubation of a market that requires orchestrating the involvement of many different participants. In both cases, the goal is to tap into sources of funds that are not available to coordinated networks.The prize is gross margins that are much higher, since there are as yet no more efficient alternatives in the market. Over time, however, if the need is sufficiently broad and perennial, the transactional model will find its way into the market, and the balance of power will shift back to the coordinated network. In light of these interactions, it behooves us all to understand how each network operates, what practices will enable companies to be most successful, and, in particular, what investment in IT and communications systems will yield the most benefit.That is the focus of the rest of this chapter.
Coordinated business networks: Competing in a commoditizing world
Coordinated networks are the norm for virtually all of the consumer sector and much of the enterprise sector as well.The rise of contract manufacturing be it in retail, consumer electronics, home furnishings, industrial components, or the like has disaggregated the value chain in industry after industry, creating separate vendor roles for design, sourcing and assembly, transportation and logistics, marketing, retail distribution, and post-sales customer support.The extraordinary success of this model, in turn, has given rise to a second follow-on wave of outsourcing to offload non-core service processes, including in-house business processes such as accounts payable, claims processing, benefits administration, and compliance reporting.
The net impact of these changes has been the radical commoditization of an enormous number of work processes.This in turn has destabilized long-standing business models by eliminating the market inefficiencies upon which their traditional value-creating roles depended.The resulting social turmoil has been great. While public policy can, and in our view should, modulate the onset of this onslaught of commoditization, no one believes it can stop it. And indeed, in the long term its benefits outweigh its pains, for it enables greater and greater value creation from a given level of asset deployment. But what about right now? What can leaders of businesses in higher-cost developed economies do to sustain the margins needed for life in their societies?
The response most ready to hand is to consolidate a large number of competing enterprises into a few major ones in order to gain bargaining power over the other members in a commoditizing value chain.This leads to a business network structure driven largely by a handful of concentrators who do their best to dictate terms to the other participants.The market shares of these companies give them the power to drive pricing discounts and special terms that add extra points of margin to their bottom line. Everyone else in the chain must hustle to keep their place in line, continuously innovating to meet the next "unreasonable" demand from the concentrator, the alternative being to lose out on so much volume they cannot sustain the total overhead of their operation. They have, in effect, become commoditized.
To get out from under this burden of commoditization one must reengineer one's role in the business network, or, if necessary, reengineer the network itself, in order to get access to more lucrative opportunities. This has been exemplified by the evolution of both the contract manufacturing industry in China and the contract services industry in India. Both began by taking whatever work the developed economies wanted to shed typically low-margin, highly standardized laborintensive tasks where the wage rate arbitrage made for a good deal on both ends. Under the pressure of success, both nations' economies then began to migrate upstream in the value chain, to seek to perform more complex higher-value work, taking non-core but resourceconsuming tasks off their outsourcing customers' plates. There is still considerable more headroom to exploit on this journey, and thus the economies of Asia are booming.
Where does that leave those living and working in Europe, Japan, and the United States? These regions enjoy high-wealth populations with strong traditions of domestic consumption, and developed economy enterprises have a natural customer-intimacy advantage when marketing into their home base. Moreover, many of the latter's established brands are highly attractive to emerging markets in Asia, Central Europe, Latin America, and Africa.The global supply chain can flow in both directions, in other words, provided developed-economy enterprises are able to clear the productivity hurdles necessary to operate at very different price points. Toward this end, one of the traditional competitive advantages many developed economy enterprises continue to enjoy by comparison with their developingeconomy counterparts is experience and sophistication in the use and deployment of IT systems.To date, developed-economy enterprises' investment in IT has focused primarily on improving internal productivity, but as the consumer becomes more empowered, and suppliers become more distributed, future returns are increasingly going to come from getting better visibility, control, and process productivity across the business network. To compete going forward they must radically improve their ability to manage processes end to end, orchestrating not just the upstream supply chains, where considerable progress has been made in the past decade, but also the downstream demand chains, which even to this day typically operate largely in the dark.
In an era where brand was king and supply was scarce, such downstream opacity mattered little. Customers would wait for what enterprises had. But that is hardly the case in today's consumer-driven world. Fashion and other trend-driven businesses, in particular, demand faster and faster response times to hits, ensuring that stock-outs do not truncate the ability to capitalize on big winners when they come. Detecting these hits transmitting accurate demand signals with shorter forecasting time frames requires more extensive use of IT analytics fed by more up-to-date information and integration of processes across a business network. Moreover, to achieve the necessary productivity gains in inventory turns and reduced returns, execution-oriented transaction- processing systems must be reconfigured to act directly upon the insights of these analytics, adjusting commitments in near real time.
Key to the success of this model is the ability to have a lingua franca for the business network, an open but common vocabulary that all business network participants share on process and data definitions. Companies operating in coordinated business networks must deploy an end-to-end business process platform and a layer of next-generation applications designed from the ground up as inter-enterprise applications on top of that platform. These "composite applications," as they are sometimes called, provide visibility, control, and productivity improvements at key junctures in the business network. They focus on the edge, keeping things from falling through the cracks, just as the underlying internal enterprise resource planning (ERP) systems focus on the core, keeping mainstream operations moving.
Investments such as these are incremental to the massive IT upgrades driven by the Year 2000 effect.They tap directly into these existing systems of record no rip and replace, no rewriting of that which is already written to extract and re-contextualize the data those systems already hold.They are not disruptive.
Nonetheless, two things are still holding back this much-needed transition to next-generation capability:
At the line-of-business level, leaders are taking the limitations of their current IT systems for granted. Instead of driving for next-generation investment to address inter-enterprise issues at the wellhead, they consume their budgets using people and spreadsheets to firefight the downstream problems.
At the IT level, architects and systems owners continue to take the enterprise boundary for granted. Instead of embracing the challenges of operating across a global business network, they continue to push internal productivity projects whose return on investment is demonstrable but, sadly, increasingly irrelevant.
To move forward in this area of coordinated business networks, both the line-of-business leaders and the IT function must carve out a new space for interenterprise space collaboration and populate it with a new generation of composite applications. But unlike previous times, they must do so in collaboration with the other major players in their network. Collaboration does not come naturally to these networks, and progress is easily stalled. But stalling equates to continued deterioration of profit margins the advance of commoditization is inexorable, there are no time-outs. So it behooves all such leaders to brush up their understanding of how best to operate in a collaborative business network.
Collaborative business networks: Tapping into new sources of wealth
In contrast to the high-volume orientation of coordinated business networks and their corresponding investment in transaction management, collaborative networks focus on high-complexity challenges that require investing in relationship management.Their focus is wide ranging, from the making of a movie to the development of a next-generation airliner, the initial private offering (IPO) of a new company, the commercialization of a novel therapy, or the industrialization of an entire country. Whether it be the capital markets, the public works sector, industrial manufacturing, the energy industry, enterprise software, or consulting services, the focus is on leveraging a wide range of technologies and expertise to tackle a novel set of challenges, collaboratively creating not only new products or services but also whole new systems and categories that simply did not exist before.
The range of these projects the risks they entail, the capital they require, and the talent they must access cannot be encompassed by the efforts of any single enterprise. In effect, the need to operate as a collaborative business network is built into the very structure of the problems these companies must address. And such collaborative networks have been in existence for centuries, typically brokered by a handful of highly respected enterprises and a remarkably small number of wellconnected, highly effective individuals.The personal relationships these individuals develop and maintain are the backbone of the collaborative network, creating a fabric of mutual understanding, respect, and trust that enables extraordinary risks to be assessed and absorbed. The challenge is how this model can be reengineered to operate more effectively and efficiently at a global scale. As we have already noted, the forcing function that drives enterprises to reframe their established practices is the deregulation, globalization, and commoditization of the world economy. As these forces continue to put pressure on the price margins of developed economies, enterprises are forced more and more to push beyond the boundaries of existing categories to develop new venues for wealth creation.
Consider three areas that are the focus of much reengineering at present:
Research and development: Traditionally treated as a closely held function, today more and more corporations are sharing R&D efforts across enterprise boundaries, be it the collaborative "connect and develop" R&D practices of a Procter & Gamble and BASF, the shared R&D ecosystem of biotech and the pharmaceutical industry, the joint ventures in the automotive industry to develop hybrid engine technology, or the next-generation military systems development in the defense arena.
New market development: Inherent in the capitalist economic model is the perennial need and expectation to develop new markets.Whether it is redesigning an existing product to go into a new market (as many consumer packaged goods firms are doing today to tap into the "bottom of the pyramid" opportunities in developing economies), or creating a new customer base for an unprecedented technology (as Apple and others are doing for digital music and media), or spawning an ecosystem of partners to expand demand for an existing platform (as SAP AG and others seek to do in enterprise software), the need everywhere is to collaborate in order to succeed. In the world of complex systems, what markets need is never what any single company can supply.
Business model innovation: As industries, sectors, and economies continue to mutate and evolve, legacy business models eventually lose ground in the competition to create value. At the same time, new market inefficiencies create opportunities for alternative business models to capitalize on latent demand.Whether it be the trading ecosystem of eBay, the rise of micro-credit in developing economies, the innovative use of mobile phones as pay-per-use business terminals in these same economies, enterprises are continually discovering and deploying novel mechanisms to capitalize on next-generation opportunities.
Given these examples of efforts already under way, what is the real challenge here? Simply put, we need more much more of this kind of collaborative innovation to fend off the commoditizing forces of globalization. The bottleneck is that the collaborative business networks needed to discover and capitalize on emerging market opportunities take too long to form, are too hard to scale, and are too susceptible to atrophy and decay. The choke point lies at the very heart of the model: its inherent reliance on personal relationships and close communication to iterate through cycle after cycle of approximation until a viable solution is found.Who has not experienced the joys of this process in a conference room at a whiteboard with a small group of engaged colleagues? Who has not experienced the frustrations of trying to operate that same process on a global scale? Once again it behooves enterprises in developed economies to better leverage their existing investments in IT infrastructure. In this instance, however, the focus should not be on computing but rather communications systems.The rise of the Internet has led to a global restructuring of communications infrastructure such that all forms of communication voice, video, data, or mobile now run (or will do so shortly) over the Internet Protocol.This may be the single greatest technologically led transformation in human history. Not surprisingly, it is taking us all a bit of time to get our heads around it. But the sooner we reorient our thinking, the sooner we can leverage the new media to dramatically rescale our collaborative business networks.
The opportunities to supplement the current infrastructure of telephony and email are manifold.They include Unified Communications, telepresence,Web conferencing, instant messaging, chat, webcams, wikis, portals, dashboards, online workspaces, and social networking. All these technologies extend the reach of collaborative business networks, putting a company's best and brightest in touch with their peers in other companies and on other continents. Kids are using most of these tools already. Employees have them at home as well.Why do companies persist in making them less productive when they come to work?
Simply put, investing in upgrading communications infrastructure is thus the number one opportunity to improve and scale collaborative business networks in the current era.That said, we must heed the thinking of the American philosopher, Henry David Thoreau, who once observed the following about a communications revolution in his century:
Our inventions are wont to be . . . improved means to an unimproved end. . . . We are in great haste to construct a magnetic telegraph from Maine to Texas; but Maine and Texas, it may be, have nothing important to communicate.
To yield attractive returns, collaborations must be focused on the critical opportunities that truly matter. That does require some help from computing. Human beings are good at recognizing patterns once they are brought into view, but seeing them in the first place, particularly across a vast range of data, can be an enormous challenge.We are all familiar with the data overload of modern life, but that pales when compared with the data overload of modern businesses or governments, particularly when those data span multiple enterprises within a global network.
At such scale, only IT systems can operate with sufficient scope and precision to address the patterndetection problem.The good news is that the cost of the required supercomputing has plummeted so fast and so far that now data mining across literally trillions of data records is a practical undertaking for any major enterprise. And the data warehouses and analytic software necessary to ferret out the signals amidst all this noise are also ready to hand.The need now is simply to invest. But what are we investing in? The answer is metadata. And that is something that we are going to have to get a lot smarter about.
The rise of metadata and what it means
Metadata are data about data.They are the material of pattern detection, whether that be in the operations of a supply chain, the management of a data network, the movement of a ticker tape, or the behavior of a set of consumers. In coordinated networks, metadata are critical to maintain the visibility and control needed for process management and optimization.They are fundamentally an operational tool focused on productivity improvement. In collaborative networks, metadata are more of a discovery tool that helps direct future investment, whether that be in R&D, marketing, or mergers and acquisitions. In both cases metadata represent a powerful lens through which businesses can reevaluate their current resource deployment and reengineer their future asset allocation.
However, it is this very power that also makes metadata problematic.The risk of constructing or publishing metadata is that it exposes inefficiencies that can be exploited by others, especially in absence of proper security or relationships of trust. Often in such cases, the party exploited is the one that helped supply the data in the first place.Thus there is widespread fear that sharing metadata is likely to have unintended consequences, as the following examples will illustrate:
patient sensitivity about insurers getting their personal health data,
retailers not wanting to report out point-of-sale purchase data to product vendors,
mobile operators wanting to control access to user location data,
intelligence agencies classifying their metadata as "Top Secret,"
algorithmic traders seeking to disguise their operations to evade metadata detection,
consumers wanting to control access to their purchase histories, and
Internet users' desire to periodically delete their browsing histories.
Now no one denies that metadata are needed to create next-generation innovations.The issue is, under what rules of engagement? This is a work in progress, to be sure, but there are some provisional rules emerging from successful collaborations, of which the following are a sample:
Governance of metadata needs to be explicit and transparent to all parties involved.
Private use of companies' own metadata for the purposes of improving their own performance, or those of their partners, has always been and continues to be acceptable. (Arguably that is what the proponents of Sarbanes Oxley the US federal law of 2002 intended to ensure access to appropriate financial and accounting disclosure information thought they were about.)
Public-service uses of metadata are provisionally acceptable provided they are monitored and controlled.This includes fraud detection, traffic management, epidemic disease control, antiterrorist surveillance, and the like.
Patented metadata are legal but socially concerning, particularly around information on the human genome and comparable global information sources. One can expect legislative controls in this arena at some point in the future.
Consumer privacy is a deep-seated right, and metadata must not be collected without permission. The gray line here is between opt-in and opt-out methods of securing that permission, with the latter clearly being the high ground.
Institutionalized sources of metadata are highly valued.This includes financial metadata providers such as Reuters, retail metadata providers such as Nielsens and IRI, and World Wide Web metadata providers such as Google. Positioning as a metadata hub is highly desirable but also jealously guarded against, as it confers enormous economic power to the enterprise in question.
One of the most difficult aspects of metadata is that it exposes inefficiencies, a situation in which someone's ox is all too likely to get gored.This challenge can be overcome to some extent through collaboration toward a common goal as opposed to exploiting the information on a win-lose basis. In coordinated business networks with strong concentrators, however, it is far more common to use metadata to exploit weaker members in the ecosystem to extract greater and greater concessions from them.This results in dysfunctional dynamics that undermine the effectiveness, efficiency, and ultimately the security and reliability of these networks.
In collaborative networks, a similar selfish behavior also generates a backlash.This was a lesson first learned by innumerable dot-coms whose business plans had them setting up digital fronts to reengineer any number of inefficient supply chains.They were shocked to learn that the members of the current community did not want to collaborate in their own demise. Similarly, pharmaceutical companies resist the deployment of diagnostics that may limit the prescription of their drugs, health-care providers resist being measured by patient outcomes, and school systems resist publicized test results.Why would we think they would not?
Metadata, nonetheless, are far too valuable to neglect simply because their politics and governance are so hard to navigate.We need instead to develop a set of ethics and norms to guide their collection and deployment so that we can use them to continue to drive global economic expansion.We believe that task is best left to industry, but we have no doubt that if industry fails to step up, governments will fill the vacuum. Unfortunately, legislation in areas such as this has typically proven inflexible, obstructive, and riddled with unintended consequences. It would be far better if industry were to take this matter in hand itself, and now.

Mauricio Urrea Ospina