An organization is composed of people, resources other than people, and commitments
that are acquireGoals are desired results expressed in qualitative terms. For example, a typical
goal of profit-oriented firms is to maximize shareholder wealth. Goals are also likely
to be formulated for other major stakeholders, such as customers, employees, and
suppliers. In contrast, objectives are quantitatively expressed results that can be
achieved during a pre-established period or by a specified date. Objectives should
logically be used to measure progress in achieving goals. For example, one of ABN
AMRO�s goals is to become a leading bank in the euro. In pursuit of that goal, the
bank established an objective of having all of its systems euro-compatible by January
1, 1999, when the euro was introduced. The objective was achieved at tremendous
cost, but management believes that ABN AMRO�s new ability to offer harmonized
banking services throughout Euroland will be worth the investment.14
An organization�s structure normally evolves from its mission, goals, and managerial
personalities. Organizational structure reflects the way in which authority
and responsibility for making decisions is distributed in an organization. Authority
refers to the right (usually by virtue of position or rank) to use resources to accomplish
a task or achieve an objective. Responsibility is the obligation to accomplish
a task or achieve an objective.
A continuum of feasible structures reflects the extent of authority and responsibility
of managers and employees. At one end of the continuum is centralization,
where top management retains all authority for making decisions. Centralized firms
often have difficulty diversifying operations because top management might lack
the necessary and critical industry-specific knowledge. The people who deal directly
with the issues (whether problems or opportunities), have the most relevant
information, and can best foresee the decision consequences are not making the
decisions.
At the other end of the continuum is decentralization, in which the authority
for making decisions is distributed to many organizational personnel, including
lower-level managers and, possibly, line employees. In today�s fast-changing and
competitive operating environment, implementation of a decentralized organizational
structure in a large firm is almost imperative and typically cost-beneficial.
However, for decentralization to work effectively, there must be employee empowerment,
which means that people are given the authority and responsibility to make
their own decisions about their work. A decision to decentralize is also a decision
to use responsibility accounting, which is discussed in Chapter 18.
Most organizations operate at some point on the continuum other than at either
of the ends. Thus, a top management decision might be the location of a new
division, while the ongoing operating decisions of that division might lie with the
new division manager. Long-term strategic decisions for the division might be made
by the division manager in conjunction with top management.d and arranged to achieve specified goals and objectives.
Friday, August 6, 2010
ORGANIZATIONAL STRATEGY
In responding to the challenges of e-commerce and globalization, managers must
consider the organization�s mission and, correspondingly, the underlying strategy
that links its mission to actual activities. An organization�s mission statement
should (1) clearly state what the organization wants to accomplish and (2) express
how that organization uniquely meets its targeted customers� needs with its products
and services. As indicated in the following News Note, a mission statement
should be an organizational road map.
The mission statement may, and most likely should, be modified over time.
Not adapting the mission statement probably means the organization is stagnating
and not facing the ever-changing business environment. For instance, Hibernia Corporation�s
mission statement in 1994 was �to be recognized by 1996 as the best
provider of financial services throughout Louisiana.� By 1997, the mission statement
was �By 1999, we will be recognized by our customers, employees, and
shareholders as the best financial services company in each of our markets.�11 Only
three years yet a dramatic difference: the corporation had engaged in multiple bank
merger opportunities outside Louisiana and was looking for more.
Translating the organization�s mission into the specific activities and resources
needed for achievemedicates how the organizational goals and objectives will be fulfilled through satisfaction
of customer needs or wants reflects strategy. Strategy can also be defined as:
the art of creating value. It provides the intellectual frameworks, conceptual
models, and governing ideas that allow a company�s managers to identify
opportunities for bringing value to customers and for delivering value at a profit.
In this respect, strategy is the way a company defines its business and links together
the only two resources that really matter in today�s economy: knowledge
and relationships or an organization�s competencies and its customers.12
An organization�s strategy tries to match its internal skills and resources to the
opportunities found in the external environment.13 Small organizations may have
a single strategy, while large organizations often have an overall entity strategy as
well as individual strategies for each business unit (such as a division). The business
units� strategies should flow from the overall strategy to ensure that effective
and efficient resource allocations are made, an overriding corporate culture is developed,
and organizational direction is enhanced. For instance, at ABN AMRO,
the Netherlands Division strategy is to position the bank as a provider of integrated
banking and insurance products; the strategy for Central/Eastern Europe is strong
internal growth and selective acquisition; and the strategy for Asia/Pacific is to raise
the profitability of core corporate banking activities.
Exhibit 1�7 provides a checklist of questions that help indicate whether an organization
has a comprehensive strategy in place. Small businesses may need to
substitute �product lines� for �business segments� in answering the questionsnt is called planning. The long-term, dynamic plan that
consider the organization�s mission and, correspondingly, the underlying strategy
that links its mission to actual activities. An organization�s mission statement
should (1) clearly state what the organization wants to accomplish and (2) express
how that organization uniquely meets its targeted customers� needs with its products
and services. As indicated in the following News Note, a mission statement
should be an organizational road map.
The mission statement may, and most likely should, be modified over time.
Not adapting the mission statement probably means the organization is stagnating
and not facing the ever-changing business environment. For instance, Hibernia Corporation�s
mission statement in 1994 was �to be recognized by 1996 as the best
provider of financial services throughout Louisiana.� By 1997, the mission statement
was �By 1999, we will be recognized by our customers, employees, and
shareholders as the best financial services company in each of our markets.�11 Only
three years yet a dramatic difference: the corporation had engaged in multiple bank
merger opportunities outside Louisiana and was looking for more.
Translating the organization�s mission into the specific activities and resources
needed for achievemedicates how the organizational goals and objectives will be fulfilled through satisfaction
of customer needs or wants reflects strategy. Strategy can also be defined as:
the art of creating value. It provides the intellectual frameworks, conceptual
models, and governing ideas that allow a company�s managers to identify
opportunities for bringing value to customers and for delivering value at a profit.
In this respect, strategy is the way a company defines its business and links together
the only two resources that really matter in today�s economy: knowledge
and relationships or an organization�s competencies and its customers.12
An organization�s strategy tries to match its internal skills and resources to the
opportunities found in the external environment.13 Small organizations may have
a single strategy, while large organizations often have an overall entity strategy as
well as individual strategies for each business unit (such as a division). The business
units� strategies should flow from the overall strategy to ensure that effective
and efficient resource allocations are made, an overriding corporate culture is developed,
and organizational direction is enhanced. For instance, at ABN AMRO,
the Netherlands Division strategy is to position the bank as a provider of integrated
banking and insurance products; the strategy for Central/Eastern Europe is strong
internal growth and selective acquisition; and the strategy for Asia/Pacific is to raise
the profitability of core corporate banking activities.
Exhibit 1�7 provides a checklist of questions that help indicate whether an organization
has a comprehensive strategy in place. Small businesses may need to
substitute �product lines� for �business segments� in answering the questionsnt is called planning. The long-term, dynamic plan that
Business Planning with SAP NetWeaver BI
High End-User Productivity in
Planning
?? Common and uniform user-interface for
planning and analytics
?? Common and uniform processing logic for
both planning and analysis
Design of Planning Applications
?? User-centric and consistent design tools for
planning and analysis ( e.g. query design
and Web application design follow the same
approach)
?? Web-based and guided modeling and
administration environment for planning
applications
?? Shared persistency and integrated met � SAP AG 2005, SAP Business Intelligence and Analytics Conference / C2_Hagen / 8
�Planning-aware� BEx Tools
BEx Query Designer
?? Use query features in planning
applications
?? Set key figures in a query ready for
input
BEx Web Application Designer &
Excel application design
?? Combine editable grids for data entry
with other items
?? Buttons/ menu items for planning
functions and other commands
?? Charts & formatted reports
?? Navigation elements
?? Excel Application Designer for design
of workbooks
Planning
?? Common and uniform user-interface for
planning and analytics
?? Common and uniform processing logic for
both planning and analysis
Design of Planning Applications
?? User-centric and consistent design tools for
planning and analysis ( e.g. query design
and Web application design follow the same
approach)
?? Web-based and guided modeling and
administration environment for planning
applications
?? Shared persistency and integrated met � SAP AG 2005, SAP Business Intelligence and Analytics Conference / C2_Hagen / 8
�Planning-aware� BEx Tools
BEx Query Designer
?? Use query features in planning
applications
?? Set key figures in a query ready for
input
BEx Web Application Designer &
Excel application design
?? Combine editable grids for data entry
with other items
?? Buttons/ menu items for planning
functions and other commands
?? Charts & formatted reports
?? Navigation elements
?? Excel Application Designer for design
of workbooks
Standalone Components
The Content Server is a separate server instance that is used to store documents or other type of
content related to SAP applications. If your company operates on several locations, content can be
cached with the accompanying cache server. This reduces load on the wide area network when
working with documents.
You can store your document content either in SAP Content Server or in a database. If you have a
large amount of content to be stored, you can take the load off the database if you use SAP Content
Server. Depending on the CRM business object types, you can configure which documents you want
to store in SAP Content Server and which documents should be stored in the database. These business
object types are, for example product catalog, product, business partner, marketing campaigns,
and the solution database.
Search and Classification (TREX)
SAP NetWeaver Search and Classification (TREX) offers an integrated set of services. TREX services
include search and retrieval in large document collections, text mining, automatic document
classification, and search and aggregation over structured data in SAP applications. TREX can handle
text from documents in numerous formats, including Microsoft Office and Adobe formats (PDF),
and more than 30 languages. TREX search options, such as exact, boolean, fuzzy or linguistic search,
and classification options such as query-based or example-based classification, offer great power
and flexibility to end users.
Recommendation
For performance reasons, we recommend that you install TREX on a separate host.
Check carefully the hardware requirements. They depend largely on your individual needs. The
size and number of indexes, number of updates and inserts per day, number of parallel search
activities, your back up, and high availability strategy and other factors strongly influence the
hardware requirements.
SAP Groupware Connector
SAP CRM Groupware Connector provides access to important business information created in SAP
CRM in the most widely used groupware systems: Microsoft Exchange Server and Lotus Domino.
This version of SAP CRM Groupware Connector allows a server-based, two-way replication of CRM
business partners, contact persons and activities with the groupware contacts, appointments and
tasks. After an item is created, changed, or deleted in the SAP CRM system, the changes are sent to
the Groupware Connector that forwards them to the users' mailboxes. Users can immediately see
changes in their mailboxes, by using their favorite Groupware Client application, such as Microsoft
Outlook or Lotus Notes. This is an important step for increasing the employee productivity, because
now it is possible to see calendar entries received from colleagues via the Groupware server, and
business meetings with a customer, created in the SAP CRM system. Users can view contacts, mapped
from CRM business partners in their groupware client, or can quickly find a customer telephone
number without starting the CRM client.MapBox
This component is an XML-based mapping framework that is used by the SyncPoint (synchronization
technology, especially used for groupware integration). It uses a set of predefined rules to process data
that enters it. This type of predefined rule is known as a MapScenario.
content related to SAP applications. If your company operates on several locations, content can be
cached with the accompanying cache server. This reduces load on the wide area network when
working with documents.
You can store your document content either in SAP Content Server or in a database. If you have a
large amount of content to be stored, you can take the load off the database if you use SAP Content
Server. Depending on the CRM business object types, you can configure which documents you want
to store in SAP Content Server and which documents should be stored in the database. These business
object types are, for example product catalog, product, business partner, marketing campaigns,
and the solution database.
Search and Classification (TREX)
SAP NetWeaver Search and Classification (TREX) offers an integrated set of services. TREX services
include search and retrieval in large document collections, text mining, automatic document
classification, and search and aggregation over structured data in SAP applications. TREX can handle
text from documents in numerous formats, including Microsoft Office and Adobe formats (PDF),
and more than 30 languages. TREX search options, such as exact, boolean, fuzzy or linguistic search,
and classification options such as query-based or example-based classification, offer great power
and flexibility to end users.
Recommendation
For performance reasons, we recommend that you install TREX on a separate host.
Check carefully the hardware requirements. They depend largely on your individual needs. The
size and number of indexes, number of updates and inserts per day, number of parallel search
activities, your back up, and high availability strategy and other factors strongly influence the
hardware requirements.
SAP Groupware Connector
SAP CRM Groupware Connector provides access to important business information created in SAP
CRM in the most widely used groupware systems: Microsoft Exchange Server and Lotus Domino.
This version of SAP CRM Groupware Connector allows a server-based, two-way replication of CRM
business partners, contact persons and activities with the groupware contacts, appointments and
tasks. After an item is created, changed, or deleted in the SAP CRM system, the changes are sent to
the Groupware Connector that forwards them to the users' mailboxes. Users can immediately see
changes in their mailboxes, by using their favorite Groupware Client application, such as Microsoft
Outlook or Lotus Notes. This is an important step for increasing the employee productivity, because
now it is possible to see calendar entries received from colleagues via the Groupware server, and
business meetings with a customer, created in the SAP CRM system. Users can view contacts, mapped
from CRM business partners in their groupware client, or can quickly find a customer telephone
number without starting the CRM client.MapBox
This component is an XML-based mapping framework that is used by the SyncPoint (synchronization
technology, especially used for groupware integration). It uses a set of predefined rules to process data
that enters it. This type of predefined rule is known as a MapScenario.
Business Packages
Business Packages contain predefined portal content suitable for a variety of industries and for dozens of
user roles. The portal content includes everything users see and interact with in the Enterprise Portal,
for example real-time data from SAP applications and analyzed reports from the Business Intelligence
solution. These resources are displayed within the portal interface as iViews (portlets).
The roles are categorized on the highest level into content suitable for every user, for line managers,
and for specialists. A role provides access to a number of specific Worksets, which are clusters of related
tasks. iViews are the smallest units of information. Each workset contains those iViews that provide
access to applications, reports, services, and information required to complete the task.
The CRM User role is a generic role, that cannot be assigned to a specific scenario. It enables the
central access to all activities for CRM users.
It provides the following functions:
n CRM user homepage: Single point of entry for activities, tasks, and news
n Universal Worklist
n Employee directory
n E-mail transfer to CRM system
You cannot implement the CRM User role alone. You always have to combine it with other roles. To
implement the CRM User role, you have to install the following software units:
n CRM 5.0 Server (ABAP)
n SAP NetWeaver 2004s Enterprise Portal
n Business Package CRM 5.0
n SAP NetWeaver 2004s Search and Classification (TREX) (required for Knowledge Management
document search and the Top News iViews)
user roles. The portal content includes everything users see and interact with in the Enterprise Portal,
for example real-time data from SAP applications and analyzed reports from the Business Intelligence
solution. These resources are displayed within the portal interface as iViews (portlets).
The roles are categorized on the highest level into content suitable for every user, for line managers,
and for specialists. A role provides access to a number of specific Worksets, which are clusters of related
tasks. iViews are the smallest units of information. Each workset contains those iViews that provide
access to applications, reports, services, and information required to complete the task.
The CRM User role is a generic role, that cannot be assigned to a specific scenario. It enables the
central access to all activities for CRM users.
It provides the following functions:
n CRM user homepage: Single point of entry for activities, tasks, and news
n Universal Worklist
n Employee directory
n E-mail transfer to CRM system
You cannot implement the CRM User role alone. You always have to combine it with other roles. To
implement the CRM User role, you have to install the following software units:
n CRM 5.0 Server (ABAP)
n SAP NetWeaver 2004s Enterprise Portal
n Business Package CRM 5.0
n SAP NetWeaver 2004s Search and Classification (TREX) (required for Knowledge Management
document search and the Top News iViews)
Workforce Deployment
From a technical perspective, different software units are involved in Workforce Deployment. The
scenarios that include Workforce Deployment do not always require all of these software units: Some
are only optional and some are not required at all for certain process variants. For more information,
see the scenario-specific sections of this documentation. The following software units are used in
the area of Workforce Deployment:
n WFM Core 200 Add-On: You have to install this add-on on the CRM Server ABAP server by using
the SAP Add-On Installation Tool (SAINT). For more information, see SAP Note 830595
A prerequisite for the installation of WFM Core 200 is the LCAPPS_2005_700 add-on. For more
information, see SAP Note 836414.
n SAP NetWeaver 2004s liveCache (SAP LC/LCAPPS 50)
SAP liveCache is a database engine for managing complex objects in scenarios where large volumes
of data must be permanently available and modifiable. SAP liveCache is installed by using SAPinst.
Figure 6: Workforce Deployment in CRM scenarios, for example Channel Management and Case Management. For the other scenarios it is an
installation option. For more information, see the scenario-specific sections. The People-Centric User
Interface offers an easy, task and process-oriented access to CRM functionality. To ensure this, it has a
tailored range of possible interactions with the applications. Using SAP GUI, you can access the full
scope of functionality of an SAP transaction.
To set up the People-Centric UI, the following software units are required:
n SAP NetWeaver 2004s Enterprise Portal which includes Knowledge Management
n Business Package for SAP CRM 5.0
SAP NW Enterprise Portal and the Business Package for SAP CRM 5.0 are installed by SAPinst in a
common installation run. To install further, industry-specific Business Packages, use the Java Support
Package Manager (JSPM).
n Portal: Offers a single point of access in a Web-based interface to SAP and non-SAP information
sources, enterprise applications, information repositories, databases and services across
organizational and technical boundaries ? all integrated into a single user experience.
n Knowledge Management (KM): Enables portal users to distribute, access, and manage unstructured
information within an organization through a heterogeneous repository landscape.
n Collaboration: Brings users, information, and applications together to ensure successful cooperation
and interaction in the portal
n Guided Procedures (GP): A framework for modeling and managing processes that involve access to
multiple backend systems.
scenarios that include Workforce Deployment do not always require all of these software units: Some
are only optional and some are not required at all for certain process variants. For more information,
see the scenario-specific sections of this documentation. The following software units are used in
the area of Workforce Deployment:
n WFM Core 200 Add-On: You have to install this add-on on the CRM Server ABAP server by using
the SAP Add-On Installation Tool (SAINT). For more information, see SAP Note 830595
A prerequisite for the installation of WFM Core 200 is the LCAPPS_2005_700 add-on. For more
information, see SAP Note 836414.
n SAP NetWeaver 2004s liveCache (SAP LC/LCAPPS 50)
SAP liveCache is a database engine for managing complex objects in scenarios where large volumes
of data must be permanently available and modifiable. SAP liveCache is installed by using SAPinst.
Figure 6: Workforce Deployment in CRM scenarios, for example Channel Management and Case Management. For the other scenarios it is an
installation option. For more information, see the scenario-specific sections. The People-Centric User
Interface offers an easy, task and process-oriented access to CRM functionality. To ensure this, it has a
tailored range of possible interactions with the applications. Using SAP GUI, you can access the full
scope of functionality of an SAP transaction.
To set up the People-Centric UI, the following software units are required:
n SAP NetWeaver 2004s Enterprise Portal which includes Knowledge Management
n Business Package for SAP CRM 5.0
SAP NW Enterprise Portal and the Business Package for SAP CRM 5.0 are installed by SAPinst in a
common installation run. To install further, industry-specific Business Packages, use the Java Support
Package Manager (JSPM).
n Portal: Offers a single point of access in a Web-based interface to SAP and non-SAP information
sources, enterprise applications, information repositories, databases and services across
organizational and technical boundaries ? all integrated into a single user experience.
n Knowledge Management (KM): Enables portal users to distribute, access, and manage unstructured
information within an organization through a heterogeneous repository landscape.
n Collaboration: Brings users, information, and applications together to ensure successful cooperation
and interaction in the portal
n Guided Procedures (GP): A framework for modeling and managing processes that involve access to
multiple backend systems.
CRM Handheld Integration
You can integrate different handheld devices with mySAP CRM, such as PDAs (Personal Digital
Assistant), PocketPCs and RIM Blackberry.
CRM Mobile Sales for Handheld (MSA for HH)
CRM handheld scenarios provide sales employees with the ability to keep track of their assignments
better as well as tackle sales related situations proficiently by using handheld devices. It allows
them to work outside the office and grants them wireless access to the application either by online
connection or by using synchronization when in the offline mode. Additionally, users' saved data
becomes available to the entire CRM. The CRM handheld scenarios utilize the business logic that
resides at the CRM server side. All read and written assignments and time specifications are consistent
with the CRM system and hence there is no risk of discrepancies between behavior and end results of
such operations.
The CRM handheld scenarios support PDA (Personal Digital Assistant)-type devices, including
devices such as the PocketPC.
The Mobile Infrastructure enables field personnel to participate in a business process in an occasionally
connected mode. "Occasionally connected" means that a direct connection (via WLAN, GPRS)
between mobile device and backend is only established at certain times - at synchronization, when
the Mobile Infrastructure Server (as part of the NetWeaver Server) and the Mobile Infrastructure
Client exchanges data in order to keep server and client updated.
18/
Assistant), PocketPCs and RIM Blackberry.
CRM Mobile Sales for Handheld (MSA for HH)
CRM handheld scenarios provide sales employees with the ability to keep track of their assignments
better as well as tackle sales related situations proficiently by using handheld devices. It allows
them to work outside the office and grants them wireless access to the application either by online
connection or by using synchronization when in the offline mode. Additionally, users' saved data
becomes available to the entire CRM. The CRM handheld scenarios utilize the business logic that
resides at the CRM server side. All read and written assignments and time specifications are consistent
with the CRM system and hence there is no risk of discrepancies between behavior and end results of
such operations.
The CRM handheld scenarios support PDA (Personal Digital Assistant)-type devices, including
devices such as the PocketPC.
The Mobile Infrastructure enables field personnel to participate in a business process in an occasionally
connected mode. "Occasionally connected" means that a direct connection (via WLAN, GPRS)
between mobile device and backend is only established at certain times - at synchronization, when
the Mobile Infrastructure Server (as part of the NetWeaver Server) and the Mobile Infrastructure
Client exchanges data in order to keep server and client updated.
18/
CRM Mobile Client Component
This group consists of a range of components that enable you to use marketing, sales, and service
functionality in an offline environment. Most of the components are based on Microsoft .NET
technology, some use Microsoft Component Object Model (COM) technology. Microsoft Installers
are used for the installation.
The installation of Mobile Client Components requires certain .NET installations. For more
information, see SAP Note 879643.
You must install the software described below to different machines that make up the mobile system
landscape. There are the following machines:
n Mobile Repository Server
Server designated for the central Mobile Application Repository and test application database.
n Mobile Development Workstation
Server, PC, or laptop designated for customizing and designing the Mobile Client Component:
Applications and for assigning user access definitions and templates, if required, for using the Mobile
Client Component: Application(s).
n Mobile Client
Server, PC, or laptop that sales and service people use for their work.
n Workgroup Server
Server designated for storing the central database to which the Workgroup Clients connect. The
server is connected to the CRM Server via the Communication Station.
n Workgroup Client
PC or laptop that connects to the Workgroup Server to use the same database concurrently.
For a complete landscape, a Communication Station, a backend server (for example, a SAP ECC
system) and a CRM Server are also required.
The following figure provides an overview of the machines in a mobile system landscape:
Mobile Client
Field Sales users have special mobile client software and an Internet Pricing and Configurator (IPC )
on their laptops, which enables them to work offline. CRM IPC Sales Pricing Engine (IPC-SPE) and
CRM IPC Sales Configuration Engine (IPC-SCE) are Java applications that are integrated with each
other and installed on the laptop. IPC-SCE and IPC-SPE have their own MS SQL Server database. They
are automatically installed during the CRM Mobile Client setup.
The Mobile Client applications run on an MS SQL database or MS Data Engine. They comprise Mobile
Sales High Tech (standard), Mobile Sales Consumer Goods, Mobile Sales Pharma and Mobile Service.
Note
Due to synchronization issues you cannot use groupware integration between the CRM Server and
the groupware server, at the same time as using client synchronization between CRM Mobile and
groupware. You can only choose one of these integration possibilities.
Mobile Application Studio
The Mobile Application Studio (MAS) must be installed on the Mobile Development Workstation. It
is an object-oriented, visual development tool that is tailored to the architecture of SAP mobile client
applications. It allows you to customize mobile client applications, delivered by SAP, according to
your specific business requirements, or develop your own applications.
Mobile Application Repository
The metadata of a mobile client application is delivered as the Mobile Application Repository (MAR).
This repository must be installed on the Mobile Repository Server (MRS) for each environment.
functionality in an offline environment. Most of the components are based on Microsoft .NET
technology, some use Microsoft Component Object Model (COM) technology. Microsoft Installers
are used for the installation.
The installation of Mobile Client Components requires certain .NET installations. For more
information, see SAP Note 879643.
You must install the software described below to different machines that make up the mobile system
landscape. There are the following machines:
n Mobile Repository Server
Server designated for the central Mobile Application Repository and test application database.
n Mobile Development Workstation
Server, PC, or laptop designated for customizing and designing the Mobile Client Component:
Applications and for assigning user access definitions and templates, if required, for using the Mobile
Client Component: Application(s).
n Mobile Client
Server, PC, or laptop that sales and service people use for their work.
n Workgroup Server
Server designated for storing the central database to which the Workgroup Clients connect. The
server is connected to the CRM Server via the Communication Station.
n Workgroup Client
PC or laptop that connects to the Workgroup Server to use the same database concurrently.
For a complete landscape, a Communication Station, a backend server (for example, a SAP ECC
system) and a CRM Server are also required.
The following figure provides an overview of the machines in a mobile system landscape:
Mobile Client
Field Sales users have special mobile client software and an Internet Pricing and Configurator (IPC )
on their laptops, which enables them to work offline. CRM IPC Sales Pricing Engine (IPC-SPE) and
CRM IPC Sales Configuration Engine (IPC-SCE) are Java applications that are integrated with each
other and installed on the laptop. IPC-SCE and IPC-SPE have their own MS SQL Server database. They
are automatically installed during the CRM Mobile Client setup.
The Mobile Client applications run on an MS SQL database or MS Data Engine. They comprise Mobile
Sales High Tech (standard), Mobile Sales Consumer Goods, Mobile Sales Pharma and Mobile Service.
Note
Due to synchronization issues you cannot use groupware integration between the CRM Server and
the groupware server, at the same time as using client synchronization between CRM Mobile and
groupware. You can only choose one of these integration possibilities.
Mobile Application Studio
The Mobile Application Studio (MAS) must be installed on the Mobile Development Workstation. It
is an object-oriented, visual development tool that is tailored to the architecture of SAP mobile client
applications. It allows you to customize mobile client applications, delivered by SAP, according to
your specific business requirements, or develop your own applications.
Mobile Application Repository
The metadata of a mobile client application is delivered as the Mobile Application Repository (MAR).
This repository must be installed on the Mobile Repository Server (MRS) for each environment.
Installable Software Units of mySAP CRM 2005
The software unit CRM Java Components (short form JCRM) consists of several Java applications,
for example used in E-Commerce. After JCRM installation you have to perform configuration steps
for those processes that you want to use in your CRM landscape.
As of SAP CRM 5.0, the CRM Server ABAP includes the software layer SAP Application Platform
(SAP_AP). In SAP_AP the previously separate Internet Pricing and Configurator (IPC) server
functionality has been integrated. That is, for example for pricing, you no longer have to install an
IPC server separately, because it is processed on normal application servers. In order to use product
configuration, you need to install the JCRM software unit. To be able to use the IPC functions, you
have to perform the necessary configuration steps.
The installation program SAPinst can install the CRM Server ABAP, CRM Java Components and the
underlying SAP NetWeaver Application Server in a single installation run. CRM Server ABAP and
JCRM can run in one system using the same database. You can also install the CRM Server ABAP
and CRM Java CompThis version of SAP GUI runs on PCs with Windows 2000, XP and 2003. SAP GUI for windows is
an implementation especially designed for the Windows operating system, providing a Windows
like user experience and integration with other applications, based on OLE interfaces or ActiveX
controls. In addition to the standard functionalities delivered with SAP GUI, it also provides tight
integration with Microsoft Office and application-specific extensions.
n SAP GUI for the Java Environment (SAP GUI for Java)
This version is a unified SAP frontend for multiple platforms (Mac OS X, Windows, Linux and
various other Unixes). It is installed as an application on the desktop computer (or browser based
installation) and communicates directly with the SAP NetWeaver Application Server.
We recommend that you use:
n SAP GUI for Windows 6.40 (or higher) with the latest patch level
SAP GUI for Windows 6.20 (as of patchlevel 57) is compatible with SAP CRM 5.0 as well.
n SAP GUI for Java 6.40 (or higher) with the latest revision
If you require BI Add-On or KW Add-On comprised by SAP GUI, you need SAP GUI for Windows
6.40 Compilation 4 (or higher), since the new BI and KW add-on components are only available
as of this compilation CDonents in separate systems.
Frontend
for example used in E-Commerce. After JCRM installation you have to perform configuration steps
for those processes that you want to use in your CRM landscape.
As of SAP CRM 5.0, the CRM Server ABAP includes the software layer SAP Application Platform
(SAP_AP). In SAP_AP the previously separate Internet Pricing and Configurator (IPC) server
functionality has been integrated. That is, for example for pricing, you no longer have to install an
IPC server separately, because it is processed on normal application servers. In order to use product
configuration, you need to install the JCRM software unit. To be able to use the IPC functions, you
have to perform the necessary configuration steps.
The installation program SAPinst can install the CRM Server ABAP, CRM Java Components and the
underlying SAP NetWeaver Application Server in a single installation run. CRM Server ABAP and
JCRM can run in one system using the same database. You can also install the CRM Server ABAP
and CRM Java CompThis version of SAP GUI runs on PCs with Windows 2000, XP and 2003. SAP GUI for windows is
an implementation especially designed for the Windows operating system, providing a Windows
like user experience and integration with other applications, based on OLE interfaces or ActiveX
controls. In addition to the standard functionalities delivered with SAP GUI, it also provides tight
integration with Microsoft Office and application-specific extensions.
n SAP GUI for the Java Environment (SAP GUI for Java)
This version is a unified SAP frontend for multiple platforms (Mac OS X, Windows, Linux and
various other Unixes). It is installed as an application on the desktop computer (or browser based
installation) and communicates directly with the SAP NetWeaver Application Server.
We recommend that you use:
n SAP GUI for Windows 6.40 (or higher) with the latest patch level
SAP GUI for Windows 6.20 (as of patchlevel 57) is compatible with SAP CRM 5.0 as well.
n SAP GUI for Java 6.40 (or higher) with the latest revision
If you require BI Add-On or KW Add-On comprised by SAP GUI, you need SAP GUI for Windows
6.40 Compilation 4 (or higher), since the new BI and KW add-on components are only available
as of this compilation CDonents in separate systems.
Frontend
Introduction to mySAP CRM
mySAP Customer Relationship Management (mySAP CRM) is a complete multi-channel suite
supporting all customer-facing lines of business across marketing, sales, and service, as well as
customer interaction channels such as the Interaction Center, the Internet, and mobile clients.
It provides you with:
n Cross-industry and industry-specific end-to-end Business Processes
n Flexible and process-based deployment options
n An open, adaptable technology platform, powered by SAP NetWeaver
At the center of mySAP CRM is the SAP CRM server, which consists of CRM Enterprise functions,
CRM Middleware, and various adapters. mySAP CRM enables communication channels between the
CRM system and Mobile Clients, Handhelds, the Internet, and telephones or E-mail. SAP ECC or R/3
systems can be used as backend systems, whereas Business Intelligence (BI) in SAP NetWeaver and SAP
Supply Chain Management enhance the spectrum of functions.
The business scenarios that are presented here serve as examples of how you can use SAP software
in your company. The business scenarios are only intended as models and do not necessarily run
the way they are described here in your customer-specific system landscape. Ensure to check your
requirements and systems to determine whether these scenarios can be used productively at your
site. Furthermore, we recommend that you test these scenarios thoroughly in your test systems to
ensure they are complete and free of errors before going live.
n This document does not contain information about industry scenarios. For information about
industry scenarios, see the corresponding Industry Solution Master Guide. You can find a list of Industry
Solution Master Guides in Appendix
supporting all customer-facing lines of business across marketing, sales, and service, as well as
customer interaction channels such as the Interaction Center, the Internet, and mobile clients.
It provides you with:
n Cross-industry and industry-specific end-to-end Business Processes
n Flexible and process-based deployment options
n An open, adaptable technology platform, powered by SAP NetWeaver
At the center of mySAP CRM is the SAP CRM server, which consists of CRM Enterprise functions,
CRM Middleware, and various adapters. mySAP CRM enables communication channels between the
CRM system and Mobile Clients, Handhelds, the Internet, and telephones or E-mail. SAP ECC or R/3
systems can be used as backend systems, whereas Business Intelligence (BI) in SAP NetWeaver and SAP
Supply Chain Management enhance the spectrum of functions.
The business scenarios that are presented here serve as examples of how you can use SAP software
in your company. The business scenarios are only intended as models and do not necessarily run
the way they are described here in your customer-specific system landscape. Ensure to check your
requirements and systems to determine whether these scenarios can be used productively at your
site. Furthermore, we recommend that you test these scenarios thoroughly in your test systems to
ensure they are complete and free of errors before going live.
n This document does not contain information about industry scenarios. For information about
industry scenarios, see the corresponding Industry Solution Master Guide. You can find a list of Industry
Solution Master Guides in Appendix
Resources,.Strategic.Alliances,.and.Value.Networks
Resources have been considered in a range of different literatures, and they play a particularly
central role in the resource-based view (RBV) of the firm and in the resource-dependence
literature. More recently, links have been established between the RBV literature and the role
of resources in strategic alliances (Erasmus, 2004; Das & Teng, 2000). We consult these to
arrive at a definition (classification scheme) of resources for our analysis of interdependencies
in value networks of mobile information and entertainment services.
The focus of the resource-based view (RBV) is the resources possessed by the firm. The
RBV stresses value maximisation through the integration of resources. Successful firms
are those firms that are able to acquire and maintain valuable idiosyncratic resources for
competitive advantages (Oliver, 1997).
The resource-based view has been applied mainly to the individual firm to analyse various
resources possessed by the firm but increasingly also in strategy research. Recently, the resource-
based view has also been linked to a network perspective, specifically by considering
the resource-based view in the context of strategic alliances (see, for example, a review of
studies by Das & Teng, 2000):
The application of the resource-based view to research on strategic alliances provides the
link with value network research in focus here. Strategic alliances can be regarded as a
category of inter-organisational relations and networks. The common premise is that it is
precisely the complementarity of resources that necessitates the formation and evolution
of both, strategic alliances and value networks, and that none of the actors can make all theA resource-based perspective of the actors therefore provides a relevant basis to examine
interdependence in the value network. From a resource-based perspective, paraphrasing
Das and Teng (1998) on strategic alliances, value networks are about combining resources
that an individual firm cannot provide all on its own, yet are critical for the provision of a
mobile service
necessary components available for product development or service provis
central role in the resource-based view (RBV) of the firm and in the resource-dependence
literature. More recently, links have been established between the RBV literature and the role
of resources in strategic alliances (Erasmus, 2004; Das & Teng, 2000). We consult these to
arrive at a definition (classification scheme) of resources for our analysis of interdependencies
in value networks of mobile information and entertainment services.
The focus of the resource-based view (RBV) is the resources possessed by the firm. The
RBV stresses value maximisation through the integration of resources. Successful firms
are those firms that are able to acquire and maintain valuable idiosyncratic resources for
competitive advantages (Oliver, 1997).
The resource-based view has been applied mainly to the individual firm to analyse various
resources possessed by the firm but increasingly also in strategy research. Recently, the resource-
based view has also been linked to a network perspective, specifically by considering
the resource-based view in the context of strategic alliances (see, for example, a review of
studies by Das & Teng, 2000):
The application of the resource-based view to research on strategic alliances provides the
link with value network research in focus here. Strategic alliances can be regarded as a
category of inter-organisational relations and networks. The common premise is that it is
precisely the complementarity of resources that necessitates the formation and evolution
of both, strategic alliances and value networks, and that none of the actors can make all theA resource-based perspective of the actors therefore provides a relevant basis to examine
interdependence in the value network. From a resource-based perspective, paraphrasing
Das and Teng (1998) on strategic alliances, value networks are about combining resources
that an individual firm cannot provide all on its own, yet are critical for the provision of a
mobile service
necessary components available for product development or service provis
Mobile.Information.and.Entertainment.Services
The mobile services discussed in this research are limited to mobile information and entertainment
services. As depicted in Figure 1, mobile information and entertainment services
(category 2) are a subset of the broader category of mobile services (category 1), which are
simply services made available to mobile users independent of the type of network (GPS,
public switched mobile network, etc.). As defined here, mobile information and entertainment
services require a connection to a network, which is in turn connected to the Internet.
Currently, the dominant mode of access is through the mobile telecommunications network
infrastructure connected to the fixed public switched network.
We define �mobile information and entertainment services� as the delivery of information
and entertainment from specially formatted content sources (e.g., Internet sites, SMS, MMS)
via the mobile telecommunication network to a mobile user. The terms �value added services
in mobile commerce� and �mobile information and entertainment services� are often used synonymously. What is important is that parties other than the network operator are involved
to make the service available to customers.
In this research we also consider information and entertainment services that are based on
location information. The use of location information has the potential to enable a whole
range of new services and requires the involvement of a new kind of actor such as geographical
information system (GIS) suppliers. In general location-based services can be offered
through the mobile telecommunications network (category 3), independent of this network
(4), and also in a fixed environment (5). Of interest to this research are services offered in
the domain of category 2 (mobile information and entertainment services) and category 3
(location-based mobile services) offered over the mobile telecommunications network
services. As depicted in Figure 1, mobile information and entertainment services
(category 2) are a subset of the broader category of mobile services (category 1), which are
simply services made available to mobile users independent of the type of network (GPS,
public switched mobile network, etc.). As defined here, mobile information and entertainment
services require a connection to a network, which is in turn connected to the Internet.
Currently, the dominant mode of access is through the mobile telecommunications network
infrastructure connected to the fixed public switched network.
We define �mobile information and entertainment services� as the delivery of information
and entertainment from specially formatted content sources (e.g., Internet sites, SMS, MMS)
via the mobile telecommunication network to a mobile user. The terms �value added services
in mobile commerce� and �mobile information and entertainment services� are often used synonymously. What is important is that parties other than the network operator are involved
to make the service available to customers.
In this research we also consider information and entertainment services that are based on
location information. The use of location information has the potential to enable a whole
range of new services and requires the involvement of a new kind of actor such as geographical
information system (GIS) suppliers. In general location-based services can be offered
through the mobile telecommunications network (category 3), independent of this network
(4), and also in a fixed environment (5). Of interest to this research are services offered in
the domain of category 2 (mobile information and entertainment services) and category 3
(location-based mobile services) offered over the mobile telecommunications network
Interdependencies.in.Value Networks.for.Mobile.Services
The advent of new electronic platforms is forcing firms from a range of industries to come
together in so-called �value networks� for the provision of innovative mobile services. Yet
the rapid evolution of mobile services has left many issues unresolved. The problems of
interest to us include uncertainty with respect to the complex networks that are involved in
delivering these services. In environments of increasing electronic interaction, the value chain
concept, where materials are moved sequentially down a supply chain, has been replaced
by the value network, which is a dynamic network of partnerships and information flows
(Bovel & Martha, 2000), changing as customer preferences change. This phenomenon is also
taking place in the telecommunications industry (Li & Whalley, 2002; Maitland, Bauer, &
Westerveld, 2002; Sabat, 2002). We aim to understand the interdependencies among actors
involved in delivering mobile services in general, and mobile information and entertainment
services and location-based services in particular in terms of their contribution to value
creation. To this end, we adopt a resource-based perspective.
We consider a number of innovative cases of mobile information and entertainment services.
Such services involve the delivery of information and entertainment content to a
mobile user. Since these services typically require collaboration of a range of actors across
different sectors, our analysis encompasses the entire �value network� of firms involved in
making the service available. Whilst research on value networks for mobile services could
be approached from several angles, including network formation, strategic management,
and so forth, here we focus on resources and interdependencies. We investigate the actual
constellation of actors: what are their resources, how are they interdependent, and what do
they contribute to the value network? Is content really king?
The chapter is structured as follows. We begin with a brief review of relevant literature to
provide a basis for our analysis of several mobile information and entertainment services. In
particular, we examine the interdependencies among actors in the value networks and how
their contribution to value creation determines their strategic position within the network.
These tools are then used to analyse each of the five case studies of specific services. In the
cross-case analysis, we collate and discuss the findings from the cases, paying particular
attention to the role of content and the position of content providers. We conclude with the
implications of our research for the literature on value networks and point to further areas
of research.
together in so-called �value networks� for the provision of innovative mobile services. Yet
the rapid evolution of mobile services has left many issues unresolved. The problems of
interest to us include uncertainty with respect to the complex networks that are involved in
delivering these services. In environments of increasing electronic interaction, the value chain
concept, where materials are moved sequentially down a supply chain, has been replaced
by the value network, which is a dynamic network of partnerships and information flows
(Bovel & Martha, 2000), changing as customer preferences change. This phenomenon is also
taking place in the telecommunications industry (Li & Whalley, 2002; Maitland, Bauer, &
Westerveld, 2002; Sabat, 2002). We aim to understand the interdependencies among actors
involved in delivering mobile services in general, and mobile information and entertainment
services and location-based services in particular in terms of their contribution to value
creation. To this end, we adopt a resource-based perspective.
We consider a number of innovative cases of mobile information and entertainment services.
Such services involve the delivery of information and entertainment content to a
mobile user. Since these services typically require collaboration of a range of actors across
different sectors, our analysis encompasses the entire �value network� of firms involved in
making the service available. Whilst research on value networks for mobile services could
be approached from several angles, including network formation, strategic management,
and so forth, here we focus on resources and interdependencies. We investigate the actual
constellation of actors: what are their resources, how are they interdependent, and what do
they contribute to the value network? Is content really king?
The chapter is structured as follows. We begin with a brief review of relevant literature to
provide a basis for our analysis of several mobile information and entertainment services. In
particular, we examine the interdependencies among actors in the value networks and how
their contribution to value creation determines their strategic position within the network.
These tools are then used to analyse each of the five case studies of specific services. In the
cross-case analysis, we collate and discuss the findings from the cases, paying particular
attention to the role of content and the position of content providers. We conclude with the
implications of our research for the literature on value networks and point to further areas
of research.
Path.to.Successful.Implementation.in.Small.and Large.Firms
There may be a giant step from initiation and adoption of innovations to successful implementation
of them. In particular, an Internet-based marketing channel may imply difficult
changes in internaThus, we were interested in the characteristics of those organizations reporting successful
implementation of interactive technology.
The correlations found in this explorative part of the analysis indicate that the explanations
for success or failure in implementation differ from the explanations for success or failure in
initiation and adoption. Willingness to cannibalize seems to be a less-important driverl procedures before interactive features make it useful to customer
These findings as well as findings from a related study of Internet banking indicate that
the adoption and implementation of Web technologies are complex processes that can be
understood as both technology push and demand pull processes, and they are subject to
disagreement (Flohr Nielsen, 2006). Conflicts grow out of structural differentiation or specialization
and are found at the inter-organizational, inter-departmental, and interpersonal
levels. Differences in the willingness to cannibalize do not necessarily develop into manifest
conflict, but opinions often differ between key people such as IT and marketing managers.
Thus, when identifying a firm�s willingness to cannibalize as an important antecedent
to early adoption and implementation of Internet-based marketing channels and Internet
banking, it must be understood that such willingness reflects an overall attitude that results
either from compromise between key actors� different attitudes or from the defeat of one
or more actors.
From an organizational change view this seems to have important implications for practitioners.
In planned change processes it has to be taken into account how conflicts are handled.
Often it may become necessary to include participative organizational development techniques
as well as conflict-handling interventions. When implementation success seems to
be very dependent on top management support, it is in line with a recent meta-analysis of
information systems implementation (Sharma & Yetton, 2003). This study shows that task
interdependence moderates the effect of management support on implementation success.
Since the activities connected to sophisticated marketing channels are highly interdependent
and cross-functional, it is important that management provides the resources and incentives
necessary to accomplish these projects.
However, the capability of organizations to fully exploit their current investments in installed
IT is generally an issue involving complex post-adoptive behaviors, and neither
prior use, habit, nor feature-centric views have been fully addressed in previous research
(Jasperson, Carter, & Zmud, 2005). Because of such deficiencies we can only cautiously
suggest that the successful implementation and use of Internet-based marketing may also
need interventions that induce members of the organization to engage in learning on these
IT-enabled work systems.
of them. In particular, an Internet-based marketing channel may imply difficult
changes in internaThus, we were interested in the characteristics of those organizations reporting successful
implementation of interactive technology.
The correlations found in this explorative part of the analysis indicate that the explanations
for success or failure in implementation differ from the explanations for success or failure in
initiation and adoption. Willingness to cannibalize seems to be a less-important driverl procedures before interactive features make it useful to customer
These findings as well as findings from a related study of Internet banking indicate that
the adoption and implementation of Web technologies are complex processes that can be
understood as both technology push and demand pull processes, and they are subject to
disagreement (Flohr Nielsen, 2006). Conflicts grow out of structural differentiation or specialization
and are found at the inter-organizational, inter-departmental, and interpersonal
levels. Differences in the willingness to cannibalize do not necessarily develop into manifest
conflict, but opinions often differ between key people such as IT and marketing managers.
Thus, when identifying a firm�s willingness to cannibalize as an important antecedent
to early adoption and implementation of Internet-based marketing channels and Internet
banking, it must be understood that such willingness reflects an overall attitude that results
either from compromise between key actors� different attitudes or from the defeat of one
or more actors.
From an organizational change view this seems to have important implications for practitioners.
In planned change processes it has to be taken into account how conflicts are handled.
Often it may become necessary to include participative organizational development techniques
as well as conflict-handling interventions. When implementation success seems to
be very dependent on top management support, it is in line with a recent meta-analysis of
information systems implementation (Sharma & Yetton, 2003). This study shows that task
interdependence moderates the effect of management support on implementation success.
Since the activities connected to sophisticated marketing channels are highly interdependent
and cross-functional, it is important that management provides the resources and incentives
necessary to accomplish these projects.
However, the capability of organizations to fully exploit their current investments in installed
IT is generally an issue involving complex post-adoptive behaviors, and neither
prior use, habit, nor feature-centric views have been fully addressed in previous research
(Jasperson, Carter, & Zmud, 2005). Because of such deficiencies we can only cautiously
suggest that the successful implementation and use of Internet-based marketing may also
need interventions that induce members of the organization to engage in learning on these
IT-enabled work systems.
Ownership.of.Technological.Innovation
Successful implementation of a strategy depends on employee commitment (Noble & Mokwa,
1999). Specific commitment to a strategy or an innovation is almost synonymous with the
concept of ownership (Argyris & Kaplan, 1994), or with the concept of user involvement
as used in information-systems literature (Barki & Hartwick, 1994). User involvement is
seen as the individual user�s understanding of the importance, for instance, of an information-
system project, and may in turn be established through user participation (Barki &
Hartwick, 1994; Ives & Olson, 1984).
Whenever achieved, the inherent feeling of ownership may not merely help in overcoming
resistance to change; rather, �owners� may play innovating roles themselves. Some may
even become "champions" of technological innovation, by acting as informal transformational
leaders contributing to the innovation by actively and enthusiastically promoting its
progress (Howell & Higgins, 1990). In information-systems projects users now often take
the lead because widespread decentralization has made information technology a powerful
business tool in the hands of end-users, including those who are responsible for satisfying
customers (Martinson & Chong, 1999).
Though intuitively compelling, the impact on performance of ownership, specific commitment,
and user involvement has not been well documented. The reported positive results
are often insignificant, and the literature on commitment still makes little comment on the
motivational impact of specific commitment (Becker, Billings, Eveleth, & Gilbert, 1996).
Even the reported positive impact of user involvement on information-system projects may
be questioned because of methodological problems (Ives & Olson, 1984).
In this chapter, "ownership" means employee commitment to the Internet project; ownership
is not limited to isolated individuals but may include all the employees working in a firm or
on a certain project. It is assumed that a strong feeling of ownership of an Internet project
will generally stand in opposition to any personal loyalty to existing marketing channels.
The effect of ownership on the adoption of Internet-based interaction with customers may
be mediated by the willingness to cannibalize. There may, however, also be a direct effect
because innovation is not always expected to cannibalize existing investments or because
the cannibalization effect is unimportant.
H4: The stronger the ownership feeling toward the Internet projects in a company, the
greater the company�s willingness to cannibalize.
H5: The stronger the ownership feeling toward the Internet projects in a company, the
more likely the company is to adopt Internet-based interaction with its customers
1999). Specific commitment to a strategy or an innovation is almost synonymous with the
concept of ownership (Argyris & Kaplan, 1994), or with the concept of user involvement
as used in information-systems literature (Barki & Hartwick, 1994). User involvement is
seen as the individual user�s understanding of the importance, for instance, of an information-
system project, and may in turn be established through user participation (Barki &
Hartwick, 1994; Ives & Olson, 1984).
Whenever achieved, the inherent feeling of ownership may not merely help in overcoming
resistance to change; rather, �owners� may play innovating roles themselves. Some may
even become "champions" of technological innovation, by acting as informal transformational
leaders contributing to the innovation by actively and enthusiastically promoting its
progress (Howell & Higgins, 1990). In information-systems projects users now often take
the lead because widespread decentralization has made information technology a powerful
business tool in the hands of end-users, including those who are responsible for satisfying
customers (Martinson & Chong, 1999).
Though intuitively compelling, the impact on performance of ownership, specific commitment,
and user involvement has not been well documented. The reported positive results
are often insignificant, and the literature on commitment still makes little comment on the
motivational impact of specific commitment (Becker, Billings, Eveleth, & Gilbert, 1996).
Even the reported positive impact of user involvement on information-system projects may
be questioned because of methodological problems (Ives & Olson, 1984).
In this chapter, "ownership" means employee commitment to the Internet project; ownership
is not limited to isolated individuals but may include all the employees working in a firm or
on a certain project. It is assumed that a strong feeling of ownership of an Internet project
will generally stand in opposition to any personal loyalty to existing marketing channels.
The effect of ownership on the adoption of Internet-based interaction with customers may
be mediated by the willingness to cannibalize. There may, however, also be a direct effect
because innovation is not always expected to cannibalize existing investments or because
the cannibalization effect is unimportant.
H4: The stronger the ownership feeling toward the Internet projects in a company, the
greater the company�s willingness to cannibalize.
H5: The stronger the ownership feeling toward the Internet projects in a company, the
more likely the company is to adopt Internet-based interaction with its customers
E-Business Strategies and Consumer Behavior Model
It is now conventional wisdom that both customers and manufacturers have strong incentives
to use Internet-based marketing channels (Alba et al., 1997; O�Cass & Fenech, 2003). It has
been argued that the Internet is changing the structure of marketing channels, especially in
industries such as retail banking, news media, and music, where an important part of the
output is in digital.form (Mols, Bukh, & Flohr Nielsen, 1999). However even many small
and medium-sized manufacturers have adopted and implemented Internet-based marketing
channels, though great differences can be observed in how these firms have actually gone
about this.
This chapter examines possible explanations of the adoption and implementation. Some of
the drivers of such radical innovations have been identified in previous research. Notably
willingness to cannibalize (Chandy & Tellis, 1998) and recent findings in the U.S. stress the
importance of the sense-and-respond capabilities of firms in e-business (Srinivasan, Lilien,
& Rangaswarny, 2002). As our study is based on a large European sample including several
small and medium-sized manufacturers, the intention is to allow more rigorous analyses using
structural equation modelling and trace how size may influence the models of adoption.
In continuation, the path to successful implementation is explored.
First, the chapter briefly reviews the literature on changes in marketing channels and on
organizational innovation. Then it proposes a basic research model for examining the adoption
of new channels, and the model and its 11 hypotheses are explained in detail. After
describing the methodology, we present the results of our survey of Nordic manufacturers,
stressing the role of willingness to cannibalize. Finally, the results and the theoretical and
managerial implications are discussed.
Internet-based marketing channels may radically interfere with the work and communication
connected with getting products and services from producer to consumer. However
the literature on marketing channels stresses that distribution systems are usually rigid and
stable because of persistent inertia. Firms wanting to convert from one type of marketing
channel to another often face resistance, conflict, and customer confusion (Anderson, Day,
& Rangan, 1997; Weiss & Anderson, 1992). Thus, Stern and Sturdivant (1987) contend that
of all marketing decisions facing firms, those that concern the design of distribution systems
are the most far reaching, resource demanding, and time consuming. The right investments in
distribution channels have traditionally provided long-term protection against competition,
and few researchers have been concerned with proposing strategic design principles focussing
on the dynamics of marketing channels or on feedback mechanisms that continually
monitor the design of distribution channels (for an exception, see Anderson et al., 1997).
The economic approach to analyzing marketing channels has been concerned with under
to use Internet-based marketing channels (Alba et al., 1997; O�Cass & Fenech, 2003). It has
been argued that the Internet is changing the structure of marketing channels, especially in
industries such as retail banking, news media, and music, where an important part of the
output is in digital.form (Mols, Bukh, & Flohr Nielsen, 1999). However even many small
and medium-sized manufacturers have adopted and implemented Internet-based marketing
channels, though great differences can be observed in how these firms have actually gone
about this.
This chapter examines possible explanations of the adoption and implementation. Some of
the drivers of such radical innovations have been identified in previous research. Notably
willingness to cannibalize (Chandy & Tellis, 1998) and recent findings in the U.S. stress the
importance of the sense-and-respond capabilities of firms in e-business (Srinivasan, Lilien,
& Rangaswarny, 2002). As our study is based on a large European sample including several
small and medium-sized manufacturers, the intention is to allow more rigorous analyses using
structural equation modelling and trace how size may influence the models of adoption.
In continuation, the path to successful implementation is explored.
First, the chapter briefly reviews the literature on changes in marketing channels and on
organizational innovation. Then it proposes a basic research model for examining the adoption
of new channels, and the model and its 11 hypotheses are explained in detail. After
describing the methodology, we present the results of our survey of Nordic manufacturers,
stressing the role of willingness to cannibalize. Finally, the results and the theoretical and
managerial implications are discussed.
Internet-based marketing channels may radically interfere with the work and communication
connected with getting products and services from producer to consumer. However
the literature on marketing channels stresses that distribution systems are usually rigid and
stable because of persistent inertia. Firms wanting to convert from one type of marketing
channel to another often face resistance, conflict, and customer confusion (Anderson, Day,
& Rangan, 1997; Weiss & Anderson, 1992). Thus, Stern and Sturdivant (1987) contend that
of all marketing decisions facing firms, those that concern the design of distribution systems
are the most far reaching, resource demanding, and time consuming. The right investments in
distribution channels have traditionally provided long-term protection against competition,
and few researchers have been concerned with proposing strategic design principles focussing
on the dynamics of marketing channels or on feedback mechanisms that continually
monitor the design of distribution channels (for an exception, see Anderson et al., 1997).
The economic approach to analyzing marketing channels has been concerned with under
Contributions.and. Implications. of. this.Study
The most important contribution of this study is the representation of a process-based
categorization of B2B models and their assessment. This approach can also be used as a
benchmark for the evaluation and comparison of other new and upcoming B2B business
models and processes based on these models
The authors assume that similar studies or parts of these are used by consulting companies
in approaches to carry out analyses of models and process chains or SWOT analyses. The
process-based approach in this cross-sectional study is presented with some selected B2B
buy- and sell-side models. A longitudinal study could provide more meaningful and deeper
insights.
Future research in this domain could examine:
� Details.of.the.processes:.Lists introduced in this paper for the B2B fields of buyand
sell-side. A major goal should be to increase the depth for the classification and
refinement of existing models: A survey methodology could be used to determine the
frequency of these processes used by different B2B models in the marketspace.
� Expansion.of.the.process:.Lists to other models such as B2B-marketplaces, e-collaboration,
or to the extended supply chain. This could widen the universe for classification
of B2B models and lead to standardization in the categorization.
� Establishment.of.process.B2B.model.arrays:.(Showing models and processes in a
table format) for simplified analysis of similarities and differences between models.
Such matrices can also be used for fitting software products to different business models
or in the support of �Make or Buy� decisions in different stages of organizational
readiness.
categorization of B2B models and their assessment. This approach can also be used as a
benchmark for the evaluation and comparison of other new and upcoming B2B business
models and processes based on these models
The authors assume that similar studies or parts of these are used by consulting companies
in approaches to carry out analyses of models and process chains or SWOT analyses. The
process-based approach in this cross-sectional study is presented with some selected B2B
buy- and sell-side models. A longitudinal study could provide more meaningful and deeper
insights.
Future research in this domain could examine:
� Details.of.the.processes:.Lists introduced in this paper for the B2B fields of buyand
sell-side. A major goal should be to increase the depth for the classification and
refinement of existing models: A survey methodology could be used to determine the
frequency of these processes used by different B2B models in the marketspace.
� Expansion.of.the.process:.Lists to other models such as B2B-marketplaces, e-collaboration,
or to the extended supply chain. This could widen the universe for classification
of B2B models and lead to standardization in the categorization.
� Establishment.of.process.B2B.model.arrays:.(Showing models and processes in a
table format) for simplified analysis of similarities and differences between models.
Such matrices can also be used for fitting software products to different business models
or in the support of �Make or Buy� decisions in different stages of organizational
readiness.
Key. Issues.and.Trends. in. E-Business
Over the last decade, economic and technological advances have created a period of intense
globalization. A single world market is emerging in which the opportunities for global business
are enhanced by technical advances. These rapidly evolving new technologies enable
companies to reach their customers and trading partners around the world in just seconds,
regardless of geographic and/or time distances, political boundaries, and other barriers. The
growth of the Internet has intensified the speed of globalization and the need for companies
to implement effective global marketing and e-commerce strategies. With non-U.S. B2B ecommerce
spending projected to reach $2.8 trillion by 2004 (87% of total e-commerce), global
e-commerce is a major growth opportunity for U.S. companies (Saucini, LLC, 2002).
� E-commerce, and particularly B2B, is still in a rapid growth phase
� The domestic B2B e-commerce opportunity is dwarfed by the international opportunity
(European e-commerce revenues will surpass those of North America by 2005)
� Trends in e-commerce adoption are rapidly shifting the buyer base away from the
current North American, English language dominance
� Research indicates that B2B buyers are three to four times more likely to buy from
an e-commerce site presented in their native language
globalization. A single world market is emerging in which the opportunities for global business
are enhanced by technical advances. These rapidly evolving new technologies enable
companies to reach their customers and trading partners around the world in just seconds,
regardless of geographic and/or time distances, political boundaries, and other barriers. The
growth of the Internet has intensified the speed of globalization and the need for companies
to implement effective global marketing and e-commerce strategies. With non-U.S. B2B ecommerce
spending projected to reach $2.8 trillion by 2004 (87% of total e-commerce), global
e-commerce is a major growth opportunity for U.S. companies (Saucini, LLC, 2002).
� E-commerce, and particularly B2B, is still in a rapid growth phase
� The domestic B2B e-commerce opportunity is dwarfed by the international opportunity
(European e-commerce revenues will surpass those of North America by 2005)
� Trends in e-commerce adoption are rapidly shifting the buyer base away from the
current North American, English language dominance
� Research indicates that B2B buyers are three to four times more likely to buy from
an e-commerce site presented in their native language
Analyzing. the. Effectiveness. of.B2B
After the fallout of the dot-com companies and some unfulfilled expectations of the �B2B
hype,� the analysis of the effectiveness of B2B is important as it builds a base for understanding
the problems and actual trends in the area. Kaplan and Garciano (2001) state that B2B�s
key role is that of reducing transaction costs faced by buyers and sellers. They identify the
following five ways in which B2B e-commerce can potentially decrease transaction costs
and effectively operate in the post dot.com crash era:
1. By.changing.or.improving.processes:.Ariba reduces the costs of purchasing used
automobiles by not having to physically ship the product to an auction site.
2. By.changing.the.marketplace:.For both buyers and sellers it is less costly to search
for products over the Internet than having to conduct a physical search.
3. By.changing.decisions:.Indirect benefits may arise due to the reduced transaction
costs. As transaction costs decline, the buyer might decide to outsource a product as
opposed to producing it himself. Furthermore, �better information about future demand
through B2B e-commerce may allow a seller to improve its demand forecasts and
change its production decisions� (Kaplan & Garciano, 2001, p. 5).
4. By.changing.information.incompleteness.and.asymmetries:.The Internet changes
the asymmetric information buyers and sellers have about each other and their products,
leading to a transformation in the marketspace.
5. By.changing.the.ability.to.commit:.By standardizing processes and by providing an
electronic trail, the Internet has the potential to increase the ability to commit, thus
reducing imperfect commitment costs.
Finally, Kaplan and Garciano (2001) conclude that in order to succeed future B2B business
models must include �measurable benefits and charge customers as a function of those benefits.�
Similarly, if a company cannot secure a customer�s commitment when allowing or
facilitating price discovery, it is likely to fail since its customers will likely use its services
to define a market for the product/service and go elsewhere to complete the transaction.
hype,� the analysis of the effectiveness of B2B is important as it builds a base for understanding
the problems and actual trends in the area. Kaplan and Garciano (2001) state that B2B�s
key role is that of reducing transaction costs faced by buyers and sellers. They identify the
following five ways in which B2B e-commerce can potentially decrease transaction costs
and effectively operate in the post dot.com crash era:
1. By.changing.or.improving.processes:.Ariba reduces the costs of purchasing used
automobiles by not having to physically ship the product to an auction site.
2. By.changing.the.marketplace:.For both buyers and sellers it is less costly to search
for products over the Internet than having to conduct a physical search.
3. By.changing.decisions:.Indirect benefits may arise due to the reduced transaction
costs. As transaction costs decline, the buyer might decide to outsource a product as
opposed to producing it himself. Furthermore, �better information about future demand
through B2B e-commerce may allow a seller to improve its demand forecasts and
change its production decisions� (Kaplan & Garciano, 2001, p. 5).
4. By.changing.information.incompleteness.and.asymmetries:.The Internet changes
the asymmetric information buyers and sellers have about each other and their products,
leading to a transformation in the marketspace.
5. By.changing.the.ability.to.commit:.By standardizing processes and by providing an
electronic trail, the Internet has the potential to increase the ability to commit, thus
reducing imperfect commitment costs.
Finally, Kaplan and Garciano (2001) conclude that in order to succeed future B2B business
models must include �measurable benefits and charge customers as a function of those benefits.�
Similarly, if a company cannot secure a customer�s commitment when allowing or
facilitating price discovery, it is likely to fail since its customers will likely use its services
to define a market for the product/service and go elsewhere to complete the transaction.
E-Procurement. Supplier. (EPS). Portal. in.B2B
The implementation of stage one was based on the results of an analysis of supplier-related
processes and the successful development of a process and functional concept for the supplier
portal for CLAAS prepared in advance of the implementation. The implementation included
installation and configuration of hardware and software, development and implementation
of defined functionalities, and deployment and testing of the application.
The processes for order, delivery, proposal, and invoice have been implemented based on
the standard described from the VDA (German Association of the Automotive Industry)
The EPS system represents one of the purest forms of Web-EDI e-business models for B2B.
There is no EDI server needed. The data interchange between the Web-EDI-server and the
SAP-Systems are transferred via a WebSphere connector using XML (Steinert, 2002). IBM
Global Services consultants state that a return on investment for a Web-EDI project using
EPS can be achieved in approximately two years on average.
The goal of the project was the successful implementation of the supplier portal for
e-procurement and supplier collaboration for CLAAS, a leading manufacturer of
agricultural engines in Germany with customers around the world. This supplier
portal supports sourcing and procurement processes of the company by providing
a web-based interface to suppliers and enabling efficient data interchange over
the Internet. The implementation approach divided the implementation of the
system into three stages with each stage containing a subset of functionalities
of the total planned scope of the project.
processes and the successful development of a process and functional concept for the supplier
portal for CLAAS prepared in advance of the implementation. The implementation included
installation and configuration of hardware and software, development and implementation
of defined functionalities, and deployment and testing of the application.
The processes for order, delivery, proposal, and invoice have been implemented based on
the standard described from the VDA (German Association of the Automotive Industry)
The EPS system represents one of the purest forms of Web-EDI e-business models for B2B.
There is no EDI server needed. The data interchange between the Web-EDI-server and the
SAP-Systems are transferred via a WebSphere connector using XML (Steinert, 2002). IBM
Global Services consultants state that a return on investment for a Web-EDI project using
EPS can be achieved in approximately two years on average.
The goal of the project was the successful implementation of the supplier portal for
e-procurement and supplier collaboration for CLAAS, a leading manufacturer of
agricultural engines in Germany with customers around the world. This supplier
portal supports sourcing and procurement processes of the company by providing
a web-based interface to suppliers and enabling efficient data interchange over
the Internet. The implementation approach divided the implementation of the
system into three stages with each stage containing a subset of functionalities
of the total planned scope of the project.
Standards.and.Architectures
munication
standards to be used. With the increasing use of EDI, however, this procedure
has proven to be too difficult to practice. The Web-EDI standards are mainly driven by
different organizations that have relationships with different industries. For example, in
Europe the VDA standard of the German Association of the Automotive Industry is one of
the commonly accepted descriptions of Web-EDI and is based on the well-known EDIFACT
standards. Some Web-EDI software products based on these standards are implemented
several hundred times in Europe
Newer trends and solutions in Web-EDI (IBM, 2003b) ignore the need for EDI and the
EDIFACT standard and provide direct ways to connect the ERP-system of an enterprise
with a web-EDI portal using a Web-EDI server ().
The trend is that an explicit EDI server with translation to the intermediate format of EDIFACT
or ODETTE is considered unnecessary for small- and intermediate-size organizations since
an XML-interface performs the same service. illustrates an example describing
this model (EDI Comp., 2003b).
standards to be used. With the increasing use of EDI, however, this procedure
has proven to be too difficult to practice. The Web-EDI standards are mainly driven by
different organizations that have relationships with different industries. For example, in
Europe the VDA standard of the German Association of the Automotive Industry is one of
the commonly accepted descriptions of Web-EDI and is based on the well-known EDIFACT
standards. Some Web-EDI software products based on these standards are implemented
several hundred times in Europe
Newer trends and solutions in Web-EDI (IBM, 2003b) ignore the need for EDI and the
EDIFACT standard and provide direct ways to connect the ERP-system of an enterprise
with a web-EDI portal using a Web-EDI server ().
The trend is that an explicit EDI server with translation to the intermediate format of EDIFACT
or ODETTE is considered unnecessary for small- and intermediate-size organizations since
an XML-interface performs the same service. illustrates an example describing
this model (EDI Comp., 2003b).
Web-EDI
Web-EDI uses technologies and standards such as HTML, Java, CGI, or ASP for electronic
data interchange over the Internet (Thomas, 1999). The supplier of a Web-EDI system provides
its business partners with a Web site on which they can electronically transact business by
means of a conventional web browser that communicates with a Web-EDI server. The target
user group for Web-EDI is small and middle-sized business partners who cannot afford their
own traditional EDI system due to initial cost and/or ongoing maintenance costs.
Web-EDI systems are transaction-oriented; that is, the processes on the Web-EDI server
are steered by business transactions like orders or accounting. The user must complete the
authentication and authorization process on the website in order to mail an order or retrieve
and print an order. If the user has filled out the corresponding HTML form completely, he
can send the data back to the Web-EDI server. The transmission of data by the Web-EDI
server is carried to the in-house system of the supplier automatically. The integration of the
data into the supplier�s system can be carried out by direct correspondence with its import
interfaces or its EDI converter.
If a supplier already has a traditional EDI system in use, conventional EDI methods are
preferred in order to avoid the additional efforts resulting from conversion into Web-EDI
formats. These in-house systems can normally be used with different EDI partners due to
the ability of the most EDI products to route information. The Web-EDI server is simply
a new data source for the converter. After the data arrives at the converter, the handling of
orders is the same as conventional EDI orders, and the translation process is completely
transparent to the end user.
data interchange over the Internet (Thomas, 1999). The supplier of a Web-EDI system provides
its business partners with a Web site on which they can electronically transact business by
means of a conventional web browser that communicates with a Web-EDI server. The target
user group for Web-EDI is small and middle-sized business partners who cannot afford their
own traditional EDI system due to initial cost and/or ongoing maintenance costs.
Web-EDI systems are transaction-oriented; that is, the processes on the Web-EDI server
are steered by business transactions like orders or accounting. The user must complete the
authentication and authorization process on the website in order to mail an order or retrieve
and print an order. If the user has filled out the corresponding HTML form completely, he
can send the data back to the Web-EDI server. The transmission of data by the Web-EDI
server is carried to the in-house system of the supplier automatically. The integration of the
data into the supplier�s system can be carried out by direct correspondence with its import
interfaces or its EDI converter.
If a supplier already has a traditional EDI system in use, conventional EDI methods are
preferred in order to avoid the additional efforts resulting from conversion into Web-EDI
formats. These in-house systems can normally be used with different EDI partners due to
the ability of the most EDI products to route information. The Web-EDI server is simply
a new data source for the converter. After the data arrives at the converter, the handling of
orders is the same as conventional EDI orders, and the translation process is completely
transparent to the end user.
Saturday, July 3, 2010
YANTRA STUDY POINTS TO THE POTENTIAL IMPROVEMENTS:
We now return to the Yantra/CellStar case study presented earlier, to emphasize
how these firms found real improvement through advanced supply chain management
network-type efforts. One of the most important factors in the effort
to improve the delivery system for the intended wireless customers was the
ability to handle reverse logistics. CellStar had determined that this factor was
the Achilles� heel in the wireless industry. Traditional reverse solutions, for
example, could not address the need to:
Maximize value of the returned handsets
Track handsets across the enterprise, including the repair process
Evaluate individual handset attributes (software, warranty, etc.)
Reconcile issues with multiple vendors and distributors
Manage multiple repair vendors
Assess product disposition at the unit level
Before developing its Omnigistics solution with Yantra, CellStar had little
chance of providing answers to these problems. Its returns management system
had no process-wide status. Reporting lacked a common format and was not
capable of handling details at a unit level. There was no ability to track unit
status (disposition decisions were made at the pallet level) and no mechanism
to track or manage warranty claims. In short, it was operating with a slow,
costly, and inflexible return-handling system.
With the help of its business ally, CellStar introduced Omnigistics and
brought a new and better dimension to reverse logistics services. In addition to
the software development cost, a multimillion-dollar investment was made in
business process reengineering the existing processes. With the help of Yantra
as the provider of the new and complex supply chain management system and
CSC as the systems integrator, CellStar also established a 230,000-square-feet
dedicated facility with specially trained forward and reverse logistics teams.
This facility became a certified repair center, with a dedicated account management
team.
Facing the issue of reverse logistics, the team adopted level 5 principles and
developed a new strategy and solution based on:
Collaboration � To integrate the customer�s business system, key
business partners, and CellStar�s logistics operations in order to provide
help from a seamless entity
Visibility � To provide electronic access into the processing at both
the enterprise and unit level
Speed � To compress event cycles
The solution delivered a single, seamless management system that streamlined
operations across the end-to-end reverse logistics process. Now the reverse
management system was centralized and could process at the unit level. Reporting
was on demand at the enterprise and unit level. Inventory management
decreased the amount of nonearning assets and maximized the high turnover
stock, while reducing or eliminating the slowest moving items. Asset reclamation
options were included in that part of the system. Multiple repair centers
were linked so they could monitor status at the unit level. Finally, multiple
warranty programs were in place to manage and track claims.
To illustrate the advantages, a major national retailer became an early customer
of the enhanced system. This retailer�s handsets were returned at the store
level and replaced with new units from store inventory. The returned handsets
were sent to the retailer�s centralized return center and then to a carrier for
disposition. The issues were symptomatic of the industry at the time. The
process was marked by escalating costs and loss of profitability. The value of
the returned handsets to the carrier was not known, and returns were difficult
and costly to handle at the store level.
how these firms found real improvement through advanced supply chain management
network-type efforts. One of the most important factors in the effort
to improve the delivery system for the intended wireless customers was the
ability to handle reverse logistics. CellStar had determined that this factor was
the Achilles� heel in the wireless industry. Traditional reverse solutions, for
example, could not address the need to:
Maximize value of the returned handsets
Track handsets across the enterprise, including the repair process
Evaluate individual handset attributes (software, warranty, etc.)
Reconcile issues with multiple vendors and distributors
Manage multiple repair vendors
Assess product disposition at the unit level
Before developing its Omnigistics solution with Yantra, CellStar had little
chance of providing answers to these problems. Its returns management system
had no process-wide status. Reporting lacked a common format and was not
capable of handling details at a unit level. There was no ability to track unit
status (disposition decisions were made at the pallet level) and no mechanism
to track or manage warranty claims. In short, it was operating with a slow,
costly, and inflexible return-handling system.
With the help of its business ally, CellStar introduced Omnigistics and
brought a new and better dimension to reverse logistics services. In addition to
the software development cost, a multimillion-dollar investment was made in
business process reengineering the existing processes. With the help of Yantra
as the provider of the new and complex supply chain management system and
CSC as the systems integrator, CellStar also established a 230,000-square-feet
dedicated facility with specially trained forward and reverse logistics teams.
This facility became a certified repair center, with a dedicated account management
team.
Facing the issue of reverse logistics, the team adopted level 5 principles and
developed a new strategy and solution based on:
Collaboration � To integrate the customer�s business system, key
business partners, and CellStar�s logistics operations in order to provide
help from a seamless entity
Visibility � To provide electronic access into the processing at both
the enterprise and unit level
Speed � To compress event cycles
The solution delivered a single, seamless management system that streamlined
operations across the end-to-end reverse logistics process. Now the reverse
management system was centralized and could process at the unit level. Reporting
was on demand at the enterprise and unit level. Inventory management
decreased the amount of nonearning assets and maximized the high turnover
stock, while reducing or eliminating the slowest moving items. Asset reclamation
options were included in that part of the system. Multiple repair centers
were linked so they could monitor status at the unit level. Finally, multiple
warranty programs were in place to manage and track claims.
To illustrate the advantages, a major national retailer became an early customer
of the enhanced system. This retailer�s handsets were returned at the store
level and replaced with new units from store inventory. The returned handsets
were sent to the retailer�s centralized return center and then to a carrier for
disposition. The issues were symptomatic of the industry at the time. The
process was marked by escalating costs and loss of profitability. The value of
the returned handsets to the carrier was not known, and returns were difficult
and costly to handle at the store level.
IMPROVEMENT STARTS IN A COMPLICATED ENVIRONMENT
Any discussion on the possibilities of achieving total enterprise optimization
begins with an understanding of just how complex an extended enterprise supply
chain has become. While the original supply chain efforts were directed toward
achieving optimum operating conditions across a linear set of tightly linked,
internal process steps, from beginning raw materials to final delivery of products
and services,Any analysis that is limited to internal processing
is doomed to operate with suboptimized conditions. There are simply too many
players in a typical business network, most of which are global in extent. The
end-to-end processing that has come under scrutiny for improvement now includes
a multitude of business partners. Concurrently, the necessary flow of
information and knowledge within a business network has become as important
as the physical flow of goods and the transfer of money across what is clearly
an extended enterprise. Supply chain optimization now requires the collaboration
of a host of business partners working in concert for the same end results.
It becomes imperative in such an environment that the firm seeking optimized
conditions make a passage from an internal-only perspective, in terms
of generating process improvement, to one where willing and trusted business
allies are made a part of the process improvement effort, with the end result
focused on customer satisfaction. To accomplish this objective, the leading
firms are merging their advanced supply chain management concepts with their
customer relationship management efforts, yielding a framework and roadmap
for progressing through a series of levels until the highest possible return on
the effort, in terms of value for the customer and benefits for the providing firm
and its allies, is attained. Along the way, a concurrent effort must be made to
balance supply chain progress with the firm�s customer relationship management
capabilities and synchronize the results of the two efforts. In the next
chapter, we will delve into these necessities, as we explain how firms partnering
in level 5 can take advantage of their intelligence sharing and outdistance
competitors in the creation of new revenues.
begins with an understanding of just how complex an extended enterprise supply
chain has become. While the original supply chain efforts were directed toward
achieving optimum operating conditions across a linear set of tightly linked,
internal process steps, from beginning raw materials to final delivery of products
and services,Any analysis that is limited to internal processing
is doomed to operate with suboptimized conditions. There are simply too many
players in a typical business network, most of which are global in extent. The
end-to-end processing that has come under scrutiny for improvement now includes
a multitude of business partners. Concurrently, the necessary flow of
information and knowledge within a business network has become as important
as the physical flow of goods and the transfer of money across what is clearly
an extended enterprise. Supply chain optimization now requires the collaboration
of a host of business partners working in concert for the same end results.
It becomes imperative in such an environment that the firm seeking optimized
conditions make a passage from an internal-only perspective, in terms
of generating process improvement, to one where willing and trusted business
allies are made a part of the process improvement effort, with the end result
focused on customer satisfaction. To accomplish this objective, the leading
firms are merging their advanced supply chain management concepts with their
customer relationship management efforts, yielding a framework and roadmap
for progressing through a series of levels until the highest possible return on
the effort, in terms of value for the customer and benefits for the providing firm
and its allies, is attained. Along the way, a concurrent effort must be made to
balance supply chain progress with the firm�s customer relationship management
capabilities and synchronize the results of the two efforts. In the next
chapter, we will delve into these necessities, as we explain how firms partnering
in level 5 can take advantage of their intelligence sharing and outdistance
competitors in the creation of new revenues.
HIGHER GROUND CAN BE GAINED:
A recent survey by CSC, in conjunction with Supply Chain Management Review
magazine (Quinn, 2004), clearly documented that savings and improvements
are real for serious supply chain efforts, often reaching three to eight points of
new profits. This study, as well as ones conducted by AMR Research and other
major consultancies, also shows that the important savings (particularly those
related to revenue increase) are eluding most firms, which are still bogged down
in the early levels of the maturity and SCOR� models and not inclined to work
with external business partners.
We see an enormous possibility in such a context. The opportunity to use
supply chain as a driving force behind further performance enhancement, and
to move a firm into a position where the distinguishing feature is being solidly
linked in an intelligent value network, has become the means to reap the greatest
return from an end-to-end supply chain improvement effort. Internal obstacles
and cultural conflicts tend to be the greatest inhibitors to achieving such aposition,
the most important of which are good data management and overcoming
process difficulties.
Distancing an individual business from its competitors in areas of importance
in a market has long been the goal of most enterprises. The chance to
extend market leadership, however, and to gain a dominant position through the
application of collaboration and technology focused on customer satisfaction,
the key ingredients of the intelligent value network, is not so well known and
has never been greater � for those businesses willing to overcome normal
cultural barriers and the traditional unwillingness to work cooperatively with
external resources to cope with process problems.
This opportunity is achieved by linking together four topics of importance
to today�s businesses: supply chain management, customer relationship management,
technology application, and customer intelligence. The last topic is our
terminology for the acquisition, management, and integration of customer
knowledge in order to create a differentiating customer value proposition for
the whole extended enterprise. By looking holistically at these usually disparate
topics, companies can develop integrated strategies and solutions for delivering
products and services to key customers better than any competitors. When the
effort is extended through business process management techniques to include
willing and trusted business allies working across an extended enterprise for the
same purposes, the advantages are unmatched.
magazine (Quinn, 2004), clearly documented that savings and improvements
are real for serious supply chain efforts, often reaching three to eight points of
new profits. This study, as well as ones conducted by AMR Research and other
major consultancies, also shows that the important savings (particularly those
related to revenue increase) are eluding most firms, which are still bogged down
in the early levels of the maturity and SCOR� models and not inclined to work
with external business partners.
We see an enormous possibility in such a context. The opportunity to use
supply chain as a driving force behind further performance enhancement, and
to move a firm into a position where the distinguishing feature is being solidly
linked in an intelligent value network, has become the means to reap the greatest
return from an end-to-end supply chain improvement effort. Internal obstacles
and cultural conflicts tend to be the greatest inhibitors to achieving such aposition,
the most important of which are good data management and overcoming
process difficulties.
Distancing an individual business from its competitors in areas of importance
in a market has long been the goal of most enterprises. The chance to
extend market leadership, however, and to gain a dominant position through the
application of collaboration and technology focused on customer satisfaction,
the key ingredients of the intelligent value network, is not so well known and
has never been greater � for those businesses willing to overcome normal
cultural barriers and the traditional unwillingness to work cooperatively with
external resources to cope with process problems.
This opportunity is achieved by linking together four topics of importance
to today�s businesses: supply chain management, customer relationship management,
technology application, and customer intelligence. The last topic is our
terminology for the acquisition, management, and integration of customer
knowledge in order to create a differentiating customer value proposition for
the whole extended enterprise. By looking holistically at these usually disparate
topics, companies can develop integrated strategies and solutions for delivering
products and services to key customers better than any competitors. When the
effort is extended through business process management techniques to include
willing and trusted business allies working across an extended enterprise for the
same purposes, the advantages are unmatched.
CUSTOMER RELATIONSHIP MANAGEMENT: A CONTEMPORARY VIEW
There is a high degree of complexity associated
with these efforts and a naturally high cost of integration across an
organization and its end-to-end network. As a result, current views of the potential
values are tempered by a need to bring focus to immediate process improvement
and bottom line returns. Nevertheless, when executed as part of a deployment
of strategies, with enhanced processes and enabling technology applications that
are used to acquire, develop, and retain an organization�s best customers, CRM
becomes a powerful tool for increasing revenue and profit.
In essence, a contemporary CRM operating model will serve to improve the
characteristics and performance of a customer-intimate organization. The inherent
characteristics for customer-intimate organizations will include:
Creation of the best business solutions for the key customers
Introduction of customized products and services to meet these customers�
unique needs
Presentation of a unique range of superior services, so customers can
get the most value from the products delivered
Establishment of the most flexible and responsive system of supply and
delivery possible with current technology
The operating model benchmarks will include:
Management systems geared toward creating superior results for carefully
selected strategic customers
A culture that embraces specific rather than general customer solutions
and thrives on deep and lasting relationships
Deep customer knowledge and breakthrough insights about the customer�s
underlying processes
Decision making delegated to employees close to the customer (Treacy
and Wiersema, 1995)
Reaching these conditions requires a lot of concerted effort and nurturing
a cultural imperative that is often hard for firms accustomed to working within
an internal-only focus. CRM has its roots in the idea that as a firm�s supply
chain moves toward maturity, it becomes more effective at both internal and
external processing; that is, it improves its ability to process within its four
walls, and then extends its learning, with the help of useful business allies, to
constructing a network of delivery that has superior features from the viewpoint
of the most important customers and consumers. Such an accomplishment meansWithin
the intelligent value chain, business allies are working together from
a right-to-left perspective. They begin with what it takes to have a competitively
advantaged value network in the eyes of the most important end customers or
consumers, and then they work backwards toward what the upstream side of
the value chain should be doing across the enterprise processes to achieve the
desired superior conditions. Together, the linked parties are working to find the
best solutions and practices for all of the key process steps. Beginning with
improved forecasting and moving through the necessary linked processes, the
network partners apply their best resources to find greater results with product
development and introduction, the ultimate distribution efficiency, the best
methods for product replenishment, jointly developed marketing strategies, and
the best possible order fulfillment system. Along the way, they work
collaboratively to find the best enterprise processes and become extremely
effective at any point of handoff between supply chain constituents. In short,
they are working in concert to develop business in a manner that greatly satisfies
the key customers and enhances profitability for all of the contributing allies.
Two requirements must be met as this intelligent value chain is constructed
and nurtured. First, each participant or major constituent of what becomes the
network of delivery must have attained a high level of capability in the supply
chain maturity model (level 3 or beyond), an important element of which will
be the ability to use BPM and its enabling business language, BPML, to enter
and access parts of disparate databases so valuable knowledge can be extracted
without compromising the security of the various systems. Second, the enabling
technology applications must be selected collaboratively and be functioning
successfully across the end-to-end network processing. That means the collaborating
business allies are working in concert, with each making valuable contributions
toward finding the enhanced state in which ASCM and CRM converge
to create the desired differentiation in the eyes of the most coveted
customers. They are doing this with the help of enabling BPM technology and
superior systems across the end-to-end processing linking them into an intelligent
value network.
with these efforts and a naturally high cost of integration across an
organization and its end-to-end network. As a result, current views of the potential
values are tempered by a need to bring focus to immediate process improvement
and bottom line returns. Nevertheless, when executed as part of a deployment
of strategies, with enhanced processes and enabling technology applications that
are used to acquire, develop, and retain an organization�s best customers, CRM
becomes a powerful tool for increasing revenue and profit.
In essence, a contemporary CRM operating model will serve to improve the
characteristics and performance of a customer-intimate organization. The inherent
characteristics for customer-intimate organizations will include:
Creation of the best business solutions for the key customers
Introduction of customized products and services to meet these customers�
unique needs
Presentation of a unique range of superior services, so customers can
get the most value from the products delivered
Establishment of the most flexible and responsive system of supply and
delivery possible with current technology
The operating model benchmarks will include:
Management systems geared toward creating superior results for carefully
selected strategic customers
A culture that embraces specific rather than general customer solutions
and thrives on deep and lasting relationships
Deep customer knowledge and breakthrough insights about the customer�s
underlying processes
Decision making delegated to employees close to the customer (Treacy
and Wiersema, 1995)
Reaching these conditions requires a lot of concerted effort and nurturing
a cultural imperative that is often hard for firms accustomed to working within
an internal-only focus. CRM has its roots in the idea that as a firm�s supply
chain moves toward maturity, it becomes more effective at both internal and
external processing; that is, it improves its ability to process within its four
walls, and then extends its learning, with the help of useful business allies, to
constructing a network of delivery that has superior features from the viewpoint
of the most important customers and consumers. Such an accomplishment meansWithin
the intelligent value chain, business allies are working together from
a right-to-left perspective. They begin with what it takes to have a competitively
advantaged value network in the eyes of the most important end customers or
consumers, and then they work backwards toward what the upstream side of
the value chain should be doing across the enterprise processes to achieve the
desired superior conditions. Together, the linked parties are working to find the
best solutions and practices for all of the key process steps. Beginning with
improved forecasting and moving through the necessary linked processes, the
network partners apply their best resources to find greater results with product
development and introduction, the ultimate distribution efficiency, the best
methods for product replenishment, jointly developed marketing strategies, and
the best possible order fulfillment system. Along the way, they work
collaboratively to find the best enterprise processes and become extremely
effective at any point of handoff between supply chain constituents. In short,
they are working in concert to develop business in a manner that greatly satisfies
the key customers and enhances profitability for all of the contributing allies.
Two requirements must be met as this intelligent value chain is constructed
and nurtured. First, each participant or major constituent of what becomes the
network of delivery must have attained a high level of capability in the supply
chain maturity model (level 3 or beyond), an important element of which will
be the ability to use BPM and its enabling business language, BPML, to enter
and access parts of disparate databases so valuable knowledge can be extracted
without compromising the security of the various systems. Second, the enabling
technology applications must be selected collaboratively and be functioning
successfully across the end-to-end network processing. That means the collaborating
business allies are working in concert, with each making valuable contributions
toward finding the enhanced state in which ASCM and CRM converge
to create the desired differentiation in the eyes of the most coveted
customers. They are doing this with the help of enabling BPM technology and
superior systems across the end-to-end processing linking them into an intelligent
value network.
CREATING THE INTELLIGENT VALUE NETWORK:
To reap the most benefit from level 5 efforts, the linked businesses should apply
their efforts toward specific customers and consumer groups, such that the
perception these groups have of the network is one of superior capabilities and
the one that renders the greatest satisfaction � or, more importantly, the greatest
overall value. Attaining such a condition requires the features of supply
chain maturity to be matched with a �customer intelligence progression.� That
is, the network allies will be using the knowledge being shared, as well as the
process improvements, to distinguish the final results in the eyes of the most
important buyers.
Using the maturity model, which is repeated as Figure 8.1, to describe the
progression of supply chain efforts, we are reminded that the first two levels
are internal only, where focus is brought to functional improvement and operational
excellence to internal operations. The cultural wall standing between
levels 2 and 3 represents all of the collective inhibitions and obstacles to accepting
an external view of the processing and working collaboratively with
willing business allies to build network improvements, which distinguish the
value chain in the eyes of the most important customers. Levels 3 and 4 rep resent the
positions achieved by market leaders, while level 5 is intended to
indicate the presence of total network connectivity with the highest processing
capabilities.Beginning in the mid-1990s, most firms progressed through the first levels
of the supply chain evolution, moving from enterprise integration, where early
savings were made through concentrated sourcing and logistics efforts, to corporate
excellence, where internal obstacles were conquered and planning, order
management, manufacturing skills, and inventory management became serious
parts of the effort. During this time, many companies also progressed into a
form of operational CRM. Sales force automation became a factor, as companies
learned they could use customer data to enhance the ability of sales representatives
to help customers find extra values and build more revenues. Call
centers came into vogue as contact centers were established to match the services
needed with what would truly help the key customers and to guide responses
to customer needs through multichannel customer service hubs. Toward
the end of that period, while in the second phase of the effort, campaign management
became a factor, as firms learned they could ally themselves with key
suppliers and customers to improve the results of special sales efforts.
At the beginning of the new century, those firms that maintained a dedication
to the supply chain effort moved into level 3, and began collaborating in
earnest with their key business partners, to find the hidden values in the supply
chain linkage that eluded those firms bogged down in an internal-only focus.
During this period, these firms typically advanced to a form of collaborative
CRM, applying technology to increase the knowledge available to business
allies having the same purposes. Using the Internet as the major tool of communication,
these companies began to share valuable customer and consumer
information with selected and trusted business allies, so they could further
improve their abilities to create and sustain new revenues. Partner relationship
management became the tool of choice, as these allies learned they could share.
their efforts toward specific customers and consumer groups, such that the
perception these groups have of the network is one of superior capabilities and
the one that renders the greatest satisfaction � or, more importantly, the greatest
overall value. Attaining such a condition requires the features of supply
chain maturity to be matched with a �customer intelligence progression.� That
is, the network allies will be using the knowledge being shared, as well as the
process improvements, to distinguish the final results in the eyes of the most
important buyers.
Using the maturity model, which is repeated as Figure 8.1, to describe the
progression of supply chain efforts, we are reminded that the first two levels
are internal only, where focus is brought to functional improvement and operational
excellence to internal operations. The cultural wall standing between
levels 2 and 3 represents all of the collective inhibitions and obstacles to accepting
an external view of the processing and working collaboratively with
willing business allies to build network improvements, which distinguish the
value chain in the eyes of the most important customers. Levels 3 and 4 rep resent the
positions achieved by market leaders, while level 5 is intended to
indicate the presence of total network connectivity with the highest processing
capabilities.Beginning in the mid-1990s, most firms progressed through the first levels
of the supply chain evolution, moving from enterprise integration, where early
savings were made through concentrated sourcing and logistics efforts, to corporate
excellence, where internal obstacles were conquered and planning, order
management, manufacturing skills, and inventory management became serious
parts of the effort. During this time, many companies also progressed into a
form of operational CRM. Sales force automation became a factor, as companies
learned they could use customer data to enhance the ability of sales representatives
to help customers find extra values and build more revenues. Call
centers came into vogue as contact centers were established to match the services
needed with what would truly help the key customers and to guide responses
to customer needs through multichannel customer service hubs. Toward
the end of that period, while in the second phase of the effort, campaign management
became a factor, as firms learned they could ally themselves with key
suppliers and customers to improve the results of special sales efforts.
At the beginning of the new century, those firms that maintained a dedication
to the supply chain effort moved into level 3, and began collaborating in
earnest with their key business partners, to find the hidden values in the supply
chain linkage that eluded those firms bogged down in an internal-only focus.
During this period, these firms typically advanced to a form of collaborative
CRM, applying technology to increase the knowledge available to business
allies having the same purposes. Using the Internet as the major tool of communication,
these companies began to share valuable customer and consumer
information with selected and trusted business allies, so they could further
improve their abilities to create and sustain new revenues. Partner relationship
management became the tool of choice, as these allies learned they could share.
USING CUSTOMER INTELLIGENCE IS A KEY TO SUCCESS:
Information abounds in most business organizations. The problem is that most
of the important data is not used in an intelligent manner, because it is stored
in nonintegrated databases and rarely shared across internal business units.
What must be done with this valuable information forms the basis of customer
intelligence. That begins with a common definition of customers, a description
of the tools to be applied, and the information integration architecture necessary
to make the system a viable business enhancement process.
Knowledge is the key, and information about customers builds knowledge.
Companies must manage their customer data better to be able to act upon
customer knowledge. Figure 8.7 shows the customer intelligence maturity model,
where we have arrayed the key operational improvement characteristics against
the levels of maturity progression. From basic through foundational, core, and
distinctive levels, the important areas where customer intelligence can bring a
favorable impact are depicted, so a company can gauge how far along the
continuum it wants to or should proceed. Firms need to assess where they are,
what their competitors are doing, and then determine where they need to be in
order to achieve the advantages that we have outlined.
of the important data is not used in an intelligent manner, because it is stored
in nonintegrated databases and rarely shared across internal business units.
What must be done with this valuable information forms the basis of customer
intelligence. That begins with a common definition of customers, a description
of the tools to be applied, and the information integration architecture necessary
to make the system a viable business enhancement process.
Knowledge is the key, and information about customers builds knowledge.
Companies must manage their customer data better to be able to act upon
customer knowledge. Figure 8.7 shows the customer intelligence maturity model,
where we have arrayed the key operational improvement characteristics against
the levels of maturity progression. From basic through foundational, core, and
distinctive levels, the important areas where customer intelligence can bring a
favorable impact are depicted, so a company can gauge how far along the
continuum it wants to or should proceed. Firms need to assess where they are,
what their competitors are doing, and then determine where they need to be in
order to achieve the advantages that we have outlined.
RESPONDING TO THE CUSTOMER EXPERIENCE:
The intelligent value chain that evolves will have many facets, but it will remain
focused on customer satisfaction. The architecture that makes such a value chain
possible is described in Figure 8.6. It progresses from the back-office systems,
necessary to meet the needs of the customers, to the customer touch points so
critical to the provision of value-added services. In between, a customer intelligence
hub is at work, using BPM and providing the profile, rules management,
events and treatments, and the quality data needed to enhance the ASCM/CRM
systems.
New definitions are then brought to the benefits and values being delivered
to the most strategic customers. Differentiated (often customized) answers to
members of a particular segment�s business problems are part of the delivery.
Points of view are specific to each market segment. Solutions are comprised of
a mix of tools, competencies, and offerings matched to actual needs. Specific
solutions are packaged and delivered with a defined and quantifiable business
value � measured across the entire value chain, and for the individual partners,
using the economic value added tools described. The customer intelligence
system at work synthesizes data consolidation and analytics so that a single
view of the customer emerges, as well as individual customer analytics, which
are used in profiling, evaluation, and modeling for success. A single up-to-date,
integrated view of the customer relationship is constantly maintained, along
with robust customer insights to tailor the correct treatment to the right customer
at the right time.
There are three dimensions to customer intelligence, with specific features
and advantages:
1. Customer information integration
Integration and rationalization of disparate customer data, to provide
a persistent cross-channel data store to serve as a focal point for analytic
processing and as a clearinghouse for multiple disparate
touch points
Establishment of relationships in the data to support analysis at the
customer, prospect, household, and segment levels
Development of an operations format for use of customer knowledge
through all customer interaction points
Development of event-based or delta-based sensing mechanisms to
identify changes in front-end CRM systems, such as customer behavior
or profile
Transfer of information on event or delta to the hub-based repository
for integration and consolidation
Utilization of enterprise application integration or low-latency tools
to move data from front-end systems to operational data storage
2. Customer insights: segmentation and modeling
Ability to analyze cleansed and consolidated customer data to develop
descriptive and/or predictive models
Understanding of the economic or lifetime value of each individual
customer
Customer segmentation based on value, demographics, and behavioral
information
Quantification of each customer�s responsiveness to marketing and
other stimuli
Identification of the appropriate treatment or offer for each customer,
and delivery of this insight to front-end application
Mining of vast amounts of data to identify hidden customer insights
Capture and codification of analytical best practices in a business
rules engine, to create intelligent recommendations in a near realtime
environment
3. Customer insights: operationalization
Ability to offer insights at the point of contact
Products and services matched to individual customers
Rules-driven customer interactions
Differentiated service treatments for valuable customers
focused on customer satisfaction. The architecture that makes such a value chain
possible is described in Figure 8.6. It progresses from the back-office systems,
necessary to meet the needs of the customers, to the customer touch points so
critical to the provision of value-added services. In between, a customer intelligence
hub is at work, using BPM and providing the profile, rules management,
events and treatments, and the quality data needed to enhance the ASCM/CRM
systems.
New definitions are then brought to the benefits and values being delivered
to the most strategic customers. Differentiated (often customized) answers to
members of a particular segment�s business problems are part of the delivery.
Points of view are specific to each market segment. Solutions are comprised of
a mix of tools, competencies, and offerings matched to actual needs. Specific
solutions are packaged and delivered with a defined and quantifiable business
value � measured across the entire value chain, and for the individual partners,
using the economic value added tools described. The customer intelligence
system at work synthesizes data consolidation and analytics so that a single
view of the customer emerges, as well as individual customer analytics, which
are used in profiling, evaluation, and modeling for success. A single up-to-date,
integrated view of the customer relationship is constantly maintained, along
with robust customer insights to tailor the correct treatment to the right customer
at the right time.
There are three dimensions to customer intelligence, with specific features
and advantages:
1. Customer information integration
Integration and rationalization of disparate customer data, to provide
a persistent cross-channel data store to serve as a focal point for analytic
processing and as a clearinghouse for multiple disparate
touch points
Establishment of relationships in the data to support analysis at the
customer, prospect, household, and segment levels
Development of an operations format for use of customer knowledge
through all customer interaction points
Development of event-based or delta-based sensing mechanisms to
identify changes in front-end CRM systems, such as customer behavior
or profile
Transfer of information on event or delta to the hub-based repository
for integration and consolidation
Utilization of enterprise application integration or low-latency tools
to move data from front-end systems to operational data storage
2. Customer insights: segmentation and modeling
Ability to analyze cleansed and consolidated customer data to develop
descriptive and/or predictive models
Understanding of the economic or lifetime value of each individual
customer
Customer segmentation based on value, demographics, and behavioral
information
Quantification of each customer�s responsiveness to marketing and
other stimuli
Identification of the appropriate treatment or offer for each customer,
and delivery of this insight to front-end application
Mining of vast amounts of data to identify hidden customer insights
Capture and codification of analytical best practices in a business
rules engine, to create intelligent recommendations in a near realtime
environment
3. Customer insights: operationalization
Ability to offer insights at the point of contact
Products and services matched to individual customers
Rules-driven customer interactions
Differentiated service treatments for valuable customers
THE VALUE OF CUSTOMER INTELLIGENCE:
There is an important purpose behind the effort to establish greater customer
intelligence. Bringing together a single view of the customer with high-value
analytics can serve to optimize customer interactions, reduce operational costs,
and enhance revenue-generating opportunities. To begin, most organizations
have multiple records and accounting for the same customer, with no consistent
information transfer across business units within the same organization. This
condition leads to the absence of a single view of the customer and leads to
inconsistent customer experiences. Much time and effort are wasted collating
reports and gathering information, rather than focusing valuable resources on
analyzing high-value information and knowledge. Much of the marketing effort,
which is intended to build a demand, is focused on mass-market techniques,
rather than the preferred targeted segments that offer the most lucrative returns
on the effort. The inability to target the right customer at the right time, with
no predictive modeling capabilities, exacerbates the problem and leads to expending
corporate energies on low- versus high-level customers and a total lack
of optimized service levels.
Solutions to these complications can add dramatically to the firm�s performance,
including such features as:
Data management personnel savings
Faster call handling of inbound inquiries
Prospect and customer solicitation savings
Reduction in returned communications
Improved data quality in critical operational systems
Improved targeting for cross-sell, up-sell, retention, and acquisition
campaigns
Lower customer attrition or churn rates
More importantly, attaining such conditions puts the internal house in order
and brings the firm to the point of being able to approach customer intelligence
in a more contemporary manner. By today�s standards, CRM has become the
deployment of strategies, processes, and enabling technologies that are used to
acquire, develop, and retain an organization�s best customers. It includes understanding
customer needs, the relative importance of each customer segment,
and the best, most economical means to meet those needs. Within an environment
focused on this view of CRM, strategy, processes, organization, and culture
begin to revolve around a central focus dedicated to satisfying customers in the
most appropriate manner and sustaining those with most strategic value indefinitely.
Businesses adopting such an environment recognize that performing the Process orientation
has never had more meaning in this environment. Organizations
that remain internally fragmented and operate in a stovepipe manner
will never achieve the advantages cited. They will be doomed to local optimizations
within some business units and be prevented from achieving network
process and systems optimization. Such systems as enterprise resource planning,
CRM, and collaborative planning, forecasting, and replenishment simply
will never be achieved in an optimal manner due to the process inefficiencies
that will occur. Process design and enablement with new technologies and
methodologies and tools are what will provide the greatest opportunity to increase
corporate performance in the modern era. The drivers behind this return
to a process focus, moreover, will be an enhanced customer-controlled environment,
where customer satisfaction is the real end objective, with use of the
Internet to create and control the sharing of valuable knowledge.
When ASCM and CRM converge in this advanced level of the evolution,
some important characteristics will be apparent:
Demand management and forecasting will be at improved levels, with
actual need matched with capability to supply.
Sales and operations planning will move to advanced planning and
scheduling, where key suppliers and customers participate in diagnostics
and planning sessions to bring a reality to the planning and supply
processing.
Inventory management will be a network effort, in which the linked
allies work to deliver the right goods to the point of need in the right
quantities at the right time.
Visibility into the end-to-end processing will be on-line, real time, allowing
the constituents to view what is taking place, track important
events, and adapt the supply chain to ever-changing market conditions
faster and more accurately than the competition.
Event management will be at the highest possible level of effectiveness,
as the reactions to any planned sales effort will be instantly relayed back
to the important upstream partners, so they can react appropriately to
actual event conditions and results.
Investment in the extended enterprise will be driven by the good of the
whole network, not just individual partners� local shareholder needs.
intelligence. Bringing together a single view of the customer with high-value
analytics can serve to optimize customer interactions, reduce operational costs,
and enhance revenue-generating opportunities. To begin, most organizations
have multiple records and accounting for the same customer, with no consistent
information transfer across business units within the same organization. This
condition leads to the absence of a single view of the customer and leads to
inconsistent customer experiences. Much time and effort are wasted collating
reports and gathering information, rather than focusing valuable resources on
analyzing high-value information and knowledge. Much of the marketing effort,
which is intended to build a demand, is focused on mass-market techniques,
rather than the preferred targeted segments that offer the most lucrative returns
on the effort. The inability to target the right customer at the right time, with
no predictive modeling capabilities, exacerbates the problem and leads to expending
corporate energies on low- versus high-level customers and a total lack
of optimized service levels.
Solutions to these complications can add dramatically to the firm�s performance,
including such features as:
Data management personnel savings
Faster call handling of inbound inquiries
Prospect and customer solicitation savings
Reduction in returned communications
Improved data quality in critical operational systems
Improved targeting for cross-sell, up-sell, retention, and acquisition
campaigns
Lower customer attrition or churn rates
More importantly, attaining such conditions puts the internal house in order
and brings the firm to the point of being able to approach customer intelligence
in a more contemporary manner. By today�s standards, CRM has become the
deployment of strategies, processes, and enabling technologies that are used to
acquire, develop, and retain an organization�s best customers. It includes understanding
customer needs, the relative importance of each customer segment,
and the best, most economical means to meet those needs. Within an environment
focused on this view of CRM, strategy, processes, organization, and culture
begin to revolve around a central focus dedicated to satisfying customers in the
most appropriate manner and sustaining those with most strategic value indefinitely.
Businesses adopting such an environment recognize that performing the Process orientation
has never had more meaning in this environment. Organizations
that remain internally fragmented and operate in a stovepipe manner
will never achieve the advantages cited. They will be doomed to local optimizations
within some business units and be prevented from achieving network
process and systems optimization. Such systems as enterprise resource planning,
CRM, and collaborative planning, forecasting, and replenishment simply
will never be achieved in an optimal manner due to the process inefficiencies
that will occur. Process design and enablement with new technologies and
methodologies and tools are what will provide the greatest opportunity to increase
corporate performance in the modern era. The drivers behind this return
to a process focus, moreover, will be an enhanced customer-controlled environment,
where customer satisfaction is the real end objective, with use of the
Internet to create and control the sharing of valuable knowledge.
When ASCM and CRM converge in this advanced level of the evolution,
some important characteristics will be apparent:
Demand management and forecasting will be at improved levels, with
actual need matched with capability to supply.
Sales and operations planning will move to advanced planning and
scheduling, where key suppliers and customers participate in diagnostics
and planning sessions to bring a reality to the planning and supply
processing.
Inventory management will be a network effort, in which the linked
allies work to deliver the right goods to the point of need in the right
quantities at the right time.
Visibility into the end-to-end processing will be on-line, real time, allowing
the constituents to view what is taking place, track important
events, and adapt the supply chain to ever-changing market conditions
faster and more accurately than the competition.
Event management will be at the highest possible level of effectiveness,
as the reactions to any planned sales effort will be instantly relayed back
to the important upstream partners, so they can react appropriately to
actual event conditions and results.
Investment in the extended enterprise will be driven by the good of the
whole network, not just individual partners� local shareholder needs.
THE IMPORTANCE OF FOCUS ON PROCESS:
To begin, managing businesses to achieve maximum value requires an understanding
of what is meant by value. There has long been a quantitative approach
to business management based on generally accepted accounting principles. As
the various approaches have matured, they have become much more sophisticated,
especially with the introduction of activity-based costing, balanced
scorecards, and financial dashboards, all of which build on two fundamental
concepts: when you can�t measure it (however that might be), you can�t improve
it, and what you measure generally gets better. We now ask what it is that
delivers goods or services with inherent value from a business or enterprise. It
is a set of focused and coherent processes that bring satisfaction to the consumer.
To improve a business, then, as you change the underlying processes,
each process needs a set of measures which when folded together reflect attainment
of the organization�s goals as well as maximum customer satisfaction �
the essential aims of an advanced supply chain system.
In the quest for such a condition, it has been said that there have been �five
big ideas� in terms of operational management, notably:
Introduction of the moving production line and standardized product by
Henry Ford and Frederick Taylor
Statistical control of quality by W. Edwards Deming
Lean production by Toyota
Theory of Constraints by Eli Goldratt
Process focus by Michael Hammer and James Champy
Of these ideas, process focus is the only one that looks �end to end,� while the
others tend to work on single activities. In the current complicated business
world, you cannot get far by focusing on a single task. Most equipment, for
example, can be relied upon to deal with a single task effectively. On the other
hand, process can be defined as �end-to-end work.� It is an organized group
of related tasks that work together to create value. All supply chain work fits
this description and becomes process work (e.g., �order to cash� or new product
introduction). The redesign of work on an end-to-end basis is central to improvement;
it is the antidote to nonvalue-adding activities. Consequently, process
can have the biggest impact on enterprise operations. Contemporary performance
problems, as a result, are process problems, not task problems. We
must use techniques suited to dealing with the process. This is where simulation
comes in and offers the greatest value.
of what is meant by value. There has long been a quantitative approach
to business management based on generally accepted accounting principles. As
the various approaches have matured, they have become much more sophisticated,
especially with the introduction of activity-based costing, balanced
scorecards, and financial dashboards, all of which build on two fundamental
concepts: when you can�t measure it (however that might be), you can�t improve
it, and what you measure generally gets better. We now ask what it is that
delivers goods or services with inherent value from a business or enterprise. It
is a set of focused and coherent processes that bring satisfaction to the consumer.
To improve a business, then, as you change the underlying processes,
each process needs a set of measures which when folded together reflect attainment
of the organization�s goals as well as maximum customer satisfaction �
the essential aims of an advanced supply chain system.
In the quest for such a condition, it has been said that there have been �five
big ideas� in terms of operational management, notably:
Introduction of the moving production line and standardized product by
Henry Ford and Frederick Taylor
Statistical control of quality by W. Edwards Deming
Lean production by Toyota
Theory of Constraints by Eli Goldratt
Process focus by Michael Hammer and James Champy
Of these ideas, process focus is the only one that looks �end to end,� while the
others tend to work on single activities. In the current complicated business
world, you cannot get far by focusing on a single task. Most equipment, for
example, can be relied upon to deal with a single task effectively. On the other
hand, process can be defined as �end-to-end work.� It is an organized group
of related tasks that work together to create value. All supply chain work fits
this description and becomes process work (e.g., �order to cash� or new product
introduction). The redesign of work on an end-to-end basis is central to improvement;
it is the antidote to nonvalue-adding activities. Consequently, process
can have the biggest impact on enterprise operations. Contemporary performance
problems, as a result, are process problems, not task problems. We
must use techniques suited to dealing with the process. This is where simulation
comes in and offers the greatest value.
USING PROCESS SIMULATION TO MINIMIZE THE RISK:
Now that we have explained how to take a firm to the highest and most appropriate
level of the supply chain maturity model, and how to track the savings
from that model and the SCOR� model to financial statements, we are prepared
to consider how to make sure the potential savings are real before engaging in
what could be a high-risk transformation process. In this chapter, we will introduce
the idea of using computer-based simulations to test business improvement
changes before implementation and will suggest ways in which simulations
can be used to help optimize processes and supply chains before
encountering risk in the possible outcomes. Simulation will be explored and
defined as a logical business implementation tool, with the inherent techniques
explained along with numerous examples of how firms are getting the most
benefit from the tool.
SIMULATION DEFINED
In essence, simulation provides a �virtual test bench� for process improvement,
as it is a technique that focuses on quantitative measures that could result from
various potential actions. It provides a representation of the process actions in
a manner that is transparent to the business user, thereby generating a prediction
of potential business performance � should the process, rules, and parameters
be adopted or altered in practice. It provides a means of testing alternative
solutions and outcomes before actually engaging in the introduction of the
changed processing.
As we explore simulation, we will explain how it is used to gain value, its
role within a business process management suite, and how it can be applied to
business intelligence and management of the enterprise, through analysis of the
resulting metrics. Additionally, we will show how optimization efforts can be
applied with simulation to approach true process optimization in an automated
manner. This level of optimization, implemented within business process management
� enables the extended enterprise to more effectively manage its endto-
end supply chain and supporting business processes.
level of the supply chain maturity model, and how to track the savings
from that model and the SCOR� model to financial statements, we are prepared
to consider how to make sure the potential savings are real before engaging in
what could be a high-risk transformation process. In this chapter, we will introduce
the idea of using computer-based simulations to test business improvement
changes before implementation and will suggest ways in which simulations
can be used to help optimize processes and supply chains before
encountering risk in the possible outcomes. Simulation will be explored and
defined as a logical business implementation tool, with the inherent techniques
explained along with numerous examples of how firms are getting the most
benefit from the tool.
SIMULATION DEFINED
In essence, simulation provides a �virtual test bench� for process improvement,
as it is a technique that focuses on quantitative measures that could result from
various potential actions. It provides a representation of the process actions in
a manner that is transparent to the business user, thereby generating a prediction
of potential business performance � should the process, rules, and parameters
be adopted or altered in practice. It provides a means of testing alternative
solutions and outcomes before actually engaging in the introduction of the
changed processing.
As we explore simulation, we will explain how it is used to gain value, its
role within a business process management suite, and how it can be applied to
business intelligence and management of the enterprise, through analysis of the
resulting metrics. Additionally, we will show how optimization efforts can be
applied with simulation to approach true process optimization in an automated
manner. This level of optimization, implemented within business process management
� enables the extended enterprise to more effectively manage its endto-
end supply chain and supporting business processes.
GAINING VALUE FROM DISCRETE EVENT SIMULATION:
Discrete event simulation can be used to model various processes, using entities
or tokens moving through queues over time. Figure 9.3 describes the project
steps in such an effort, beginning with establishment of the objectives and scope
and proceeding to implementation. Typically, there are two types of queues
involved in discrete event simulation. First, we have those where entities just
wait, what we normally consider a queue. Second, we see those where entities
reside while the �value-adding work� is carried out. These queues are often
considered to be activities. The �event� occurs when the model changes state,
normally instantaneously. This is typically the start or end of an activity or some
form of interruption, such as a breakdown, lunch break, etc. At the end of an
activity, the simulation would check to see what other activities can now begin
as a result and schedule the end of that activity after allocating the required
Figure 9.3. Project Steps
About Lanner Applications in Air Travel Status
Establish
Objectives & Scope
Data & Level of Detail
Structure Model
Build Model
Verify Model
Validate Model
Experimentation
Project Management
Documentation
& Communication
Present Results
Implementation
Project Definition
Model Building and Testing
Experimentation
Project Completion
About Simulation
or tokens moving through queues over time. Figure 9.3 describes the project
steps in such an effort, beginning with establishment of the objectives and scope
and proceeding to implementation. Typically, there are two types of queues
involved in discrete event simulation. First, we have those where entities just
wait, what we normally consider a queue. Second, we see those where entities
reside while the �value-adding work� is carried out. These queues are often
considered to be activities. The �event� occurs when the model changes state,
normally instantaneously. This is typically the start or end of an activity or some
form of interruption, such as a breakdown, lunch break, etc. At the end of an
activity, the simulation would check to see what other activities can now begin
as a result and schedule the end of that activity after allocating the required
Figure 9.3. Project Steps
About Lanner Applications in Air Travel Status
Establish
Objectives & Scope
Data & Level of Detail
Structure Model
Build Model
Verify Model
Validate Model
Experimentation
Project Management
Documentation
& Communication
Present Results
Implementation
Project Definition
Model Building and Testing
Experimentation
Project Completion
About Simulation
WHY SHOULD A FIRM SIMULATE POTENTIAL BUSINESS PROCESSES?
Simulation becomes valuable when there is variability of outcomes in the business
processing or when parameters and rules are changed. Under these conditions,
it is not easy to predict the outcomes, particularly when these factors change
over time. For example, the famous �beer distribution game� represents a simple
supply chain consisting of a retailer, wholesaler, and factory. The retailer orders
cases of beer from the wholesaler, which in turn orders beer from the factory.
There is a delay between placing an order and receiving the cases of beer. The
game demonstrates that a small perturbation in the number of cases of beer sold
by the retailer can cause large shifts in the quantity of cases stored and produced
by the wholesaler and factory, respectively. Such a system is subject to dynamic
complexity � like the majority of contemporary supply chains.
Of course, many operating systems are subject to both variability and dynamic
complexity. Indeed, the variability of one component interacts with the
variability of another to create dynamic complexity.The level of customer
service is simple to predict, since there is no variability
in the system and because there is no interaction between components.
The lack of interaction is a result of the service time being exactly the same
for each customer, which means that there is no queuing or blocking. The
Most activities, however, do not take exactly the same time every time.
Assume that the times given above are averages, so customers arrive on average
every five minutes and it takes on average five minutes to serve a customer.
What is the average time a customer spends in the queue waiting to be served?
This is not an easy question to answer, especially when subsequent steps are
also considered, as there is variability in both customer arrivals and service
times. Queues would develop between the steps and create consequential effects
on performance. Most people, when asked for a specific time, tend to underestimate
the likely queuing time. Of course, the actual queuing time depends
on many things even in the one-step system, such as:
Variability in arrivals
Variability in regular service time
Variability in service time that might be affected by type of customer
or time of day
Discrete event simulation provides the technique for evaluating such systems
effectively, modeling the process from the �bottom up,� starting at the
required level of detail. Changing the process inherent in the model provides
the ability to evaluate the effect of such a change. Operations that involve
multiple processes and how they interact can also be modeled, by effectively
linking multiple models together.
The benefits of simulation include:
Risk reduction
Greater understanding of process conditions and interactions1.
processing or when parameters and rules are changed. Under these conditions,
it is not easy to predict the outcomes, particularly when these factors change
over time. For example, the famous �beer distribution game� represents a simple
supply chain consisting of a retailer, wholesaler, and factory. The retailer orders
cases of beer from the wholesaler, which in turn orders beer from the factory.
There is a delay between placing an order and receiving the cases of beer. The
game demonstrates that a small perturbation in the number of cases of beer sold
by the retailer can cause large shifts in the quantity of cases stored and produced
by the wholesaler and factory, respectively. Such a system is subject to dynamic
complexity � like the majority of contemporary supply chains.
Of course, many operating systems are subject to both variability and dynamic
complexity. Indeed, the variability of one component interacts with the
variability of another to create dynamic complexity.The level of customer
service is simple to predict, since there is no variability
in the system and because there is no interaction between components.
The lack of interaction is a result of the service time being exactly the same
for each customer, which means that there is no queuing or blocking. The
Most activities, however, do not take exactly the same time every time.
Assume that the times given above are averages, so customers arrive on average
every five minutes and it takes on average five minutes to serve a customer.
What is the average time a customer spends in the queue waiting to be served?
This is not an easy question to answer, especially when subsequent steps are
also considered, as there is variability in both customer arrivals and service
times. Queues would develop between the steps and create consequential effects
on performance. Most people, when asked for a specific time, tend to underestimate
the likely queuing time. Of course, the actual queuing time depends
on many things even in the one-step system, such as:
Variability in arrivals
Variability in regular service time
Variability in service time that might be affected by type of customer
or time of day
Discrete event simulation provides the technique for evaluating such systems
effectively, modeling the process from the �bottom up,� starting at the
required level of detail. Changing the process inherent in the model provides
the ability to evaluate the effect of such a change. Operations that involve
multiple processes and how they interact can also be modeled, by effectively
linking multiple models together.
The benefits of simulation include:
Risk reduction
Greater understanding of process conditions and interactions1.
SIMULATION AND KEY PERFORMANCE INDICATORS:
Key performance indicators (KPIs) help an organization define and measure
progress toward organizational goals. Once an organization has analyzed its
mission, identified all its stakeholders, and defined its goals, it needs a way to
measure progress toward those goals. KPIs are typically used for that purpose
as measurements that are quantifiable, agreed to beforehand, and reflect the
critical success factors of an organization. They will differ depending on the
organization, but within a vertical industry sector some should be common and
used to benchmark a company�s performance against competitors.
A business needs to set targets for each KPI. A company goal to be the
employer of choice might include a KPI of �people turnover rate.� After the
KPI has been defined as �the number of voluntary resignations and terminations
for poor performance, divided by the total number of employees at the beginning
of the period� and a way to measure it has been set up by collecting the
information in the human resources system, the target has to be established.
�Reduce people turnover by 5% per year� is a clear target that everyone will
understand and be able to take specific action to accomplish. The question then
becomes: What are the specific actions that will deliver the objective?
Business process management is about managing corporate or business performance
through managing those processes which drive the firm to the desired overall objectives.
KPIs therefore need to be designed at various levels in order
to be relevant at an individual process level. While the KPI defined above
concerning turnover rate might be relevant for the board, it is not appropriate
for the supervisor of the human resources department�s contact center. That
center�s performance may well have an effect on turnover rate, but it requires
its own process-level KPIs, perhaps based on responding successfully to employee
questions, in order for it to be managed effectively.
Simulation and optimization supporting the identification and design of
KPIs have been used extensively to help improve processes and consequently
to ultimately improve business performance. Simulation can be used to both
help define and set targets for a KPI. This feature is in addition to the use of
simulation to identify process changes (resources, rules, and structural needs),
which deliver improved performance. Simulation aids the definition of a KPI
(that is, the equation and data of which it is composed), through examining the
reaction of that KPI under different circumstances. This procedure ensures that
the KPI does in fact properly connect to the organization�s goals and will help
drive the appropriate behavior and reaction to different potential events. Most
KPIs are developed directly from the overall goals or critical success factors
of the organization. Process-based KPIs tend to be focused on results or outputs
from a process, such as customers served per hour or claims processed.
Simulation is also valuable in the setting of targets against KPIs (such as
the number of calls to be answered per hour), because the simulation can
accurately assess what is achievable in theory by the process and resources
employed. Many KPIs are now presented as part of a �digital cockpit,� using
gauge or dashboard-style displays. Depending on the KPI and the targets selected,
they often include some use of zones to highlight acceptable levels (e.g.,
green, yellow, and red). It is important when calibrating these gauges to understand
the effect of natural fluctuations due to inherent randomness within processes
or behavior. Simulation can support this calibration to help ensure that
unnecessary reaction to natural short-term fluctuations does not occur.
Processes have a series of steps, and at each step measurement can be taken
to better understand the behavior of the process under different circumstances.
Identification of key points in the process and the relevance of specific measures
(probes) in predicting failure of the process can provide significant opportunity
for improved process management and business value. Effective process monitoring
through probes at specific points in the process involves watching factors
to give prior warning that the target levels are under threat. Simulation is able
to help identify these probes and the threshold values that indicate a deterioration
of the process which will ultimately end in an unacceptable KPI.
progress toward organizational goals. Once an organization has analyzed its
mission, identified all its stakeholders, and defined its goals, it needs a way to
measure progress toward those goals. KPIs are typically used for that purpose
as measurements that are quantifiable, agreed to beforehand, and reflect the
critical success factors of an organization. They will differ depending on the
organization, but within a vertical industry sector some should be common and
used to benchmark a company�s performance against competitors.
A business needs to set targets for each KPI. A company goal to be the
employer of choice might include a KPI of �people turnover rate.� After the
KPI has been defined as �the number of voluntary resignations and terminations
for poor performance, divided by the total number of employees at the beginning
of the period� and a way to measure it has been set up by collecting the
information in the human resources system, the target has to be established.
�Reduce people turnover by 5% per year� is a clear target that everyone will
understand and be able to take specific action to accomplish. The question then
becomes: What are the specific actions that will deliver the objective?
Business process management is about managing corporate or business performance
through managing those processes which drive the firm to the desired overall objectives.
KPIs therefore need to be designed at various levels in order
to be relevant at an individual process level. While the KPI defined above
concerning turnover rate might be relevant for the board, it is not appropriate
for the supervisor of the human resources department�s contact center. That
center�s performance may well have an effect on turnover rate, but it requires
its own process-level KPIs, perhaps based on responding successfully to employee
questions, in order for it to be managed effectively.
Simulation and optimization supporting the identification and design of
KPIs have been used extensively to help improve processes and consequently
to ultimately improve business performance. Simulation can be used to both
help define and set targets for a KPI. This feature is in addition to the use of
simulation to identify process changes (resources, rules, and structural needs),
which deliver improved performance. Simulation aids the definition of a KPI
(that is, the equation and data of which it is composed), through examining the
reaction of that KPI under different circumstances. This procedure ensures that
the KPI does in fact properly connect to the organization�s goals and will help
drive the appropriate behavior and reaction to different potential events. Most
KPIs are developed directly from the overall goals or critical success factors
of the organization. Process-based KPIs tend to be focused on results or outputs
from a process, such as customers served per hour or claims processed.
Simulation is also valuable in the setting of targets against KPIs (such as
the number of calls to be answered per hour), because the simulation can
accurately assess what is achievable in theory by the process and resources
employed. Many KPIs are now presented as part of a �digital cockpit,� using
gauge or dashboard-style displays. Depending on the KPI and the targets selected,
they often include some use of zones to highlight acceptable levels (e.g.,
green, yellow, and red). It is important when calibrating these gauges to understand
the effect of natural fluctuations due to inherent randomness within processes
or behavior. Simulation can support this calibration to help ensure that
unnecessary reaction to natural short-term fluctuations does not occur.
Processes have a series of steps, and at each step measurement can be taken
to better understand the behavior of the process under different circumstances.
Identification of key points in the process and the relevance of specific measures
(probes) in predicting failure of the process can provide significant opportunity
for improved process management and business value. Effective process monitoring
through probes at specific points in the process involves watching factors
to give prior warning that the target levels are under threat. Simulation is able
to help identify these probes and the threshold values that indicate a deterioration
of the process which will ultimately end in an unacceptable KPI.
CONSIDER THE ADVANTAGES OF EXPERIMENTATION:
Consider a health service example, where the number of patients admitted to
the clinic is a set number arriving according to a variable timing profile. To
establish the weekly variability of utilizations of clinical staff, the model can
be run for either a single run of 50 weeks or for 50 runs of a single week. Each
of these runs will enable the variation of utilizations to be observed and confidence
intervals calculated. Multiple runs are important. You would not judge
the fairness of a coin by just one or two tosses!
It is true that the above model is simplistic, as indeed the profile of patients
in such a model would probably vary in ways that would require more extensive
modeling (e.g., the definition of a likely profile over a longer period to take into
account current observed fluctuations from week to week). However, the experimentation
options hold true: either a short period of experimentation can be
repeated many times (with different random number sampling), or a model can
be run for a much longer time and the range of random effects can be observed.
How many repeats and how long to run a model are questions that can be
answered by a combination of input and output data analysis. It is important
when running a model that it experience all the randomness of the input data
and that the output results �settle down� before conclusions are drawn.
At a second level, a user may wish to alter different parameters within a
model to observe the different effects. Again, with this type of experimentation
the range of results might also be important, once they are more accomplished
through elongated or repeated experiments.
At a third level, a user may wish to compare one model with another. For
example, in manufacturing there may be two investment options: production
layout A and production layout B. These may indeed be the only options,
although within each solution there may be parameter choices (e.g., containing
buffer storage level options). In addition, there is again the optional value of
establishing the potential range of results.
With all these levels of experimentation, there are a variety of experimental
designs that can be used � different numbers of replications and different types
of factorial experimental designs, ranging from full factorial to half factorial to
Latin square-type designs where different parameter combinations are chosen.
For different models, the model itself can simply be considered a different type
of parameter.
the clinic is a set number arriving according to a variable timing profile. To
establish the weekly variability of utilizations of clinical staff, the model can
be run for either a single run of 50 weeks or for 50 runs of a single week. Each
of these runs will enable the variation of utilizations to be observed and confidence
intervals calculated. Multiple runs are important. You would not judge
the fairness of a coin by just one or two tosses!
It is true that the above model is simplistic, as indeed the profile of patients
in such a model would probably vary in ways that would require more extensive
modeling (e.g., the definition of a likely profile over a longer period to take into
account current observed fluctuations from week to week). However, the experimentation
options hold true: either a short period of experimentation can be
repeated many times (with different random number sampling), or a model can
be run for a much longer time and the range of random effects can be observed.
How many repeats and how long to run a model are questions that can be
answered by a combination of input and output data analysis. It is important
when running a model that it experience all the randomness of the input data
and that the output results �settle down� before conclusions are drawn.
At a second level, a user may wish to alter different parameters within a
model to observe the different effects. Again, with this type of experimentation
the range of results might also be important, once they are more accomplished
through elongated or repeated experiments.
At a third level, a user may wish to compare one model with another. For
example, in manufacturing there may be two investment options: production
layout A and production layout B. These may indeed be the only options,
although within each solution there may be parameter choices (e.g., containing
buffer storage level options). In addition, there is again the optional value of
establishing the potential range of results.
With all these levels of experimentation, there are a variety of experimental
designs that can be used � different numbers of replications and different types
of factorial experimental designs, ranging from full factorial to half factorial to
Latin square-type designs where different parameter combinations are chosen.
For different models, the model itself can simply be considered a different type
of parameter.
Fitting.Organization,.Environment,.and.ICT:
In the previous section, we argued that businesses can be involved in three types of organizational
integration. As the business needs to be integrated, ICT systems need to be
integrated, too (as is discussed in contingency theory; see, e.g., Borgatti, 2001). Therefore,
as companies are confronted with three basic types of integration at organizational level
(internal, within the Extended Enterprise, and with the marketplace) we should recognize
three levels of IT-integration as well.
The first type of IT-integration companies should realize is the internal integration of the
diverse systems within company walls generally referred to as �enterprise application integration�
(EAI).
The two other types of IT-integration concern B2Bi, the topic of this chapter. First there is the
extended enterprise integration (EEi). In the context of the extended enterprise, companies
that dispose of capabilities that are useful for each other try to cooperate/collaborate. It is
important to note that partnering organizations have decided to do business with each other
for an extended period of time. They know the other company can deliver to a certain extent
what is needed. A partnership is set up to get more out of the other company than what is
already being delivered, and it is recognized that some form of coordination is necessary to
realize additional benefits. Partnering enterprises need to find out how they can be of more
value to each other. The development of customized software is part of this value adding
effort. It is clear that partner-specific IT investments can be made.
Essentially, this is not the case in the other type of B2Bi. This second form of B2Bi we call
market B2Bi. Companies that do business in the marketplace do not cooperate/collaborate.
Basically for each transaction they try to find out who can deliver what is needed. Every
time again, companies have the free choice to choose the services from a company (present
in the marketplace) that fulfills the needs. Therefore, no thorough coordination among the
companies is needed. Of course, service-providing companies try to pick up signals from the
market to deliver the services that are useful, and they try to minimize costs, but there is no
partnering. This scenario shows the IT integration alternatives. Market Web services have
mainly been developed in isolation and may be found through a market mechanism such
as the global UDDI (universal description, discovery, and integration) registries. Furthermore,
organizations may do business with many other organizations through an electronic
marketplace. Figure 3 shows the ideas presented here.
Currently, the boundary between EEi and market B2Bi is vague. These two types of B2Bi
actually cover a whole continuum of B2Bi practices (as is also clear from organization theory).
With the current state of technology, we believe that Market B2Bi primarily concerns the
indirect integration through electronic marketplaces. In the future new Web services standards
and semantic Web standards may be developed that enable organizations to dynamically
integration. As the business needs to be integrated, ICT systems need to be
integrated, too (as is discussed in contingency theory; see, e.g., Borgatti, 2001). Therefore,
as companies are confronted with three basic types of integration at organizational level
(internal, within the Extended Enterprise, and with the marketplace) we should recognize
three levels of IT-integration as well.
The first type of IT-integration companies should realize is the internal integration of the
diverse systems within company walls generally referred to as �enterprise application integration�
(EAI).
The two other types of IT-integration concern B2Bi, the topic of this chapter. First there is the
extended enterprise integration (EEi). In the context of the extended enterprise, companies
that dispose of capabilities that are useful for each other try to cooperate/collaborate. It is
important to note that partnering organizations have decided to do business with each other
for an extended period of time. They know the other company can deliver to a certain extent
what is needed. A partnership is set up to get more out of the other company than what is
already being delivered, and it is recognized that some form of coordination is necessary to
realize additional benefits. Partnering enterprises need to find out how they can be of more
value to each other. The development of customized software is part of this value adding
effort. It is clear that partner-specific IT investments can be made.
Essentially, this is not the case in the other type of B2Bi. This second form of B2Bi we call
market B2Bi. Companies that do business in the marketplace do not cooperate/collaborate.
Basically for each transaction they try to find out who can deliver what is needed. Every
time again, companies have the free choice to choose the services from a company (present
in the marketplace) that fulfills the needs. Therefore, no thorough coordination among the
companies is needed. Of course, service-providing companies try to pick up signals from the
market to deliver the services that are useful, and they try to minimize costs, but there is no
partnering. This scenario shows the IT integration alternatives. Market Web services have
mainly been developed in isolation and may be found through a market mechanism such
as the global UDDI (universal description, discovery, and integration) registries. Furthermore,
organizations may do business with many other organizations through an electronic
marketplace. Figure 3 shows the ideas presented here.
Currently, the boundary between EEi and market B2Bi is vague. These two types of B2Bi
actually cover a whole continuum of B2Bi practices (as is also clear from organization theory).
With the current state of technology, we believe that Market B2Bi primarily concerns the
indirect integration through electronic marketplaces. In the future new Web services standards
and semantic Web standards may be developed that enable organizations to dynamically
The.Extended. Enterprise. vs.. Other.Forms. of.Doing. Business:
For a long time, two basic forms of economic organization have been recognized: markets
on the one hand and hierarchies (firms) on the other. Powell (1990) refers to
Ronald Coase as the person who first discussed the firm as a governance structure
rather than just as a black box that transforms inputs into outputs. Coase (1937)
asserts that firms and markets are alternative means for organizing similar
kinds of transactions. Only in the 1970s did ct upon Coase�s findings. One of these proponents,
Williamson (1975, 1985), argues that some transactions are more likely to take
place within hierarchically organized firms (Williamson equated firms with hierarchies)
than through a market interface. More specifically, he states that transactions that are to
be executed within hierarchically organized firms are likely to involve uncertainty about
their outcome, recur frequently and require substantial �transaction-specific investments�
(of money, time, or energy) that cannot be easily transferred. On the other hand, exchanges
that are straightforward, non-repetitive, and require no transaction-specific investments can
be expected to take place across a market interface. This dichotomous view of markets and
hierarchies�as discussed by Williamson (1975)�sees firms as separate from
markets and assumes the presence of sharp firm boundaries. These
sharp boundaries, however, do not always seem to be present. This is true especially in the
case of partnering organizations (extended enterprises, see Figure 1). Transactions between
partnering companies can be seen as a hybrid form of economic organization. That is, if
transactions are distributed as points along a continuum with discrete market transactions
located at one end and the highly centralized firm at the other end, partnering companies
fall in between these poles. The definition of Podolny and Page is very much aimed at
identifying the differences between the network form of organization on the one hand,
and markets and hierarchies on the other hand:
In pure markets companies do not aim at enduring relations, and in hierarchies there is a
clearly recognized, legitimate authority that can resolve disputes that arise among actors.
Besides these two characteristics, some scholars (e.g., Dore, 1983; Powell, 1990) have argued
that network forms of organization also posses another characteristic, namely a distinct ethic
or value-orientation on the part of exchange partners. Hirschman (1970) argues that partners
are willing to make relationship-specific investments without contractual guarantees protecting
those investments, and for Powell the norm of reciprocity is key (1990, pp. 303-304):
on the one hand and hierarchies (firms) on the other. Powell (1990) refers to
Ronald Coase as the person who first discussed the firm as a governance structure
rather than just as a black box that transforms inputs into outputs. Coase (1937)
asserts that firms and markets are alternative means for organizing similar
kinds of transactions. Only in the 1970s did ct upon Coase�s findings. One of these proponents,
Williamson (1975, 1985), argues that some transactions are more likely to take
place within hierarchically organized firms (Williamson equated firms with hierarchies)
than through a market interface. More specifically, he states that transactions that are to
be executed within hierarchically organized firms are likely to involve uncertainty about
their outcome, recur frequently and require substantial �transaction-specific investments�
(of money, time, or energy) that cannot be easily transferred. On the other hand, exchanges
that are straightforward, non-repetitive, and require no transaction-specific investments can
be expected to take place across a market interface. This dichotomous view of markets and
hierarchies�as discussed by Williamson (1975)�sees firms as separate from
markets and assumes the presence of sharp firm boundaries. These
sharp boundaries, however, do not always seem to be present. This is true especially in the
case of partnering organizations (extended enterprises, see Figure 1). Transactions between
partnering companies can be seen as a hybrid form of economic organization. That is, if
transactions are distributed as points along a continuum with discrete market transactions
located at one end and the highly centralized firm at the other end, partnering companies
fall in between these poles. The definition of Podolny and Page is very much aimed at
identifying the differences between the network form of organization on the one hand,
and markets and hierarchies on the other hand:
In pure markets companies do not aim at enduring relations, and in hierarchies there is a
clearly recognized, legitimate authority that can resolve disputes that arise among actors.
Besides these two characteristics, some scholars (e.g., Dore, 1983; Powell, 1990) have argued
that network forms of organization also posses another characteristic, namely a distinct ethic
or value-orientation on the part of exchange partners. Hirschman (1970) argues that partners
are willing to make relationship-specific investments without contractual guarantees protecting
those investments, and for Powell the norm of reciprocity is key (1990, pp. 303-304):
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