Working in collaborative ecosystems

For years companies have struggled to understand their end customer. Even with the most sophisticated technologies, they are at best able to get a dump of sales data at the end of the business day. Smarter companies like Wal-Mart may be able to dice and slice the data in ways that enable it to make meaningful predictions in a reasonable time frame. Its nearest competitor would take 12 days even to consolidate such data.

The inability to get accurate information results because someone has to feed data about the product or service by way of sale or movement. Secondly, when information crosses boundaries of different value chain entities, quality is lost due to compatibility issues or other limitations. What if the consumer action is able to trigger the information transmission automatically? The possibilities then are immense, the benefits real.

Consider this. When I pick up my favourite shaving cream at a Wal-Mart, it’s exciting to know that somewhere up the chain someone is moving a pallet of cans to be loaded onto a truck in anticipation of the need to replenish the stock I just emptied by one unit. I, the customer, am becoming part of the value chain of several companies as often as I buy goods and services. I am also triggering value chain events for several value chain entities, all involved in what I call automated business partnerships and interested in what I buy and how I like things bought.

Now, if you think of enterprises as entities working in an ecosystem of partners, suppliers, employees, regulators, customers, shareholders and others who have a stake in the enterprise’s running, the ecosystem dynamics become interesting and important because the challenge would be to manage constant change.

And technology is just about beginning to live up to such challenges. In mid-2002, when European retailer Metro showcased RFID technology to consumers, suppliers, and Metro internally, as it opened its “Future Store” in Rheinberg, Germany, it was demonstrating one of the possibilities of next generation enterprise capabilities that run on digital business models. Metro exemplifies what futurists call smart spaces, where sensors decipher time and space co-ordinates of objects in predefined three-dimensional spaces and transmit these for useful purposes.

The capability to sense the environment is a critical functionality that collaborative enterprises need to relate with entities in their value chains. By 2005, Wal-Mart will require its top 100 suppliers to attach tags to each forklift pallet of products they deliver to the retailer. Today, Gillette uses the tags to track cartons through a packaging and distribution centre in Massachusetts, and may buy as many as half a billion tags over the next two or three years.

The capability to tag every product enables the store to track what’s shipping, when it’s reaching and how much is shipping with a degree of precision previously unavailable. Eliminating manual counting, it tracks product movement within a defined space and triggers the company’s SAP back-office system to initiate automatic restocking when required. Realistically, innovative organisations can then work with value chain partners to pool their understanding to learn about the complex end-customer.

Much more than inherent benefits that accrue to specific supply chains, the dynamics of business itself demands value chain actions. Disruptive technologies are destroying the sense of value across industries and flexible networked enterprises are replacing vertical businesses. Prices and terms of engagement reflect market conditions because companies are able analyse consumer demand real time. Competition is not between big and small companies. It is between fast and slow supply chains of competing firms.

Time and space based competition infer that supply chains must get the right product and information to the right place at the right time. So logistics, replenishment and forecasting will have to be event managed; in other words, move away from mere synchronisation to real time configuration of value networks. It then becomes a grand orchestration of actors (value chain partners) and objects (products, services, information), that get co-ordinated with help of automation in a collaborative ecosystem.

Automated business partnerships (ABPs) are an extension of enterprise evolution where value chain capabilities extend to conferring single-minded focus on the end customer. IT provides a platform for human-business-technology confluence facilitating active engagement with customers. IT provides real time communication and synchronisation such that a trigger at any point in the value chain should invoke multiple appropriate responses from value chain players.

Dynamic value chain action is impossible without IT. But to expect everyone in the value chain to invest in expensive IT is one issue that needs resolution. The other issue is to ensure what they have invested works with what others have.

In recent years, there is an awakening from industry consortiums and some well-meaning vendor bodies. As a result there are interesting opportunities that emerge in the form of business process management technologies (BPM) and Web Services. What is driving interest in these realms is the ability to build systems without discarding older implementations and the ability to integrate even processes top down. While Web Services offers an opportunity to abstracting complex technical interfaces to the business layer, BPM holds out a promise to codify processes itself.

From the perspective of real-time value chain action it is also a business readiness issue as much as a technology catch-up issue. While one of the threats to such digital business models is from risk of technology itself, the other factor is trust. Trust between organisations has been a human dependant factor in the old economy. Today it makes sense to re-deploy the same skills in relationship building rather than processing transactions. But how would you trust other organisations whose credentials appear as ones and zeros? Given these fundamental challenges, it is realistic to assume slow adoption for business models like ABPs. But for innovators, some of these ideas are definitely worth experimenting on early, at least on a small scale.

George Eby Mathew has been analysing global IT for about a decade. Currently he is a Principal Researcher with Software Engineering & Technology Labs at Infosys Technologies, where his research interest covers the business value of IT amongst other topics. George can be reached at george_mathew@infosys.com. The opinions expressed here may not reflect the views of Infosys.