The my-way-or-else approach to business integration is doomed if businesses donโt do it right, says Joanne Friedman, CEO of ConneKted Minds Inc., an IT advisory firm in Richmond Hill, Ont. She outlines the pitfalls of what she calls โthe corporate dโoh!โ of prescriptive collaboration and offers a better way in an interview with Stefan Dubowski.
IT Focus: What is the corporate dโoh?
Joanne Friedman: Itโs the major oops, the major design flaw in prescribed collaboration: I do not operate the same way you do; and because we operate differently, and youโre not considering the trading partners as part of the collaboration design equation, youโre automatically going to drive up your costs if youโre the large enterprise. Youโre going to be forced into system plurality and further down the line youโll not be able to get corporate value out of it.
IT Focus: But prescribed collaboration is supposed to do away with system plurality. How does it foster that which itโs supposed to fight? Friedman: Right now an Intel or an HP or a Cisco may have five or more systems all doing exactly the same kind of message transfer. Theyโve been forced to do that, because if Iโm even a mid-sized company that has no ERP โ I donโt need an ERP โ my back-office systems integration is non-existent. Iโm forcing you to put up a portal for me to access your informationโฆ.The plurality is what has evolved.
IT Focus: So why shouldnโt an enterprise simply cut those partners unable to participate in the prescribed collaboration scheme out of the equation?
Friedman: If you look at what it costs to on-board a trading partner, itโs as much as $5,000 just to find the trading partner. Then you have to go through a series of qualifications, which cost money. You also have to make sure they can negotiate contract pricing. You have to go down many, many steps. All told, it becomes a very expensive proposition. Moreover, if you have a good relationship with that company youโre now going to drop because they wonโt play ball on technology the way you do, youโre really shooting yourself in the foot. Itโs the cost of replacing that supplier, plus the cost of renegotiating contracts with a new supplier.
IT Focus: How might prescriptive collaboration hurt mid-tier suppliers?
Friedman: For the large enterprise, being a trading partner of choice in an industry means extreme customer service, better pricing, going the extra mile. For a mid-tier company, if all of their competitors have the same product, and all of the pricing has been driven down, how do they win business? How they run their business becomes the key differentiating factor. In the course of differentiating myself, I run my business a certain way. You, as a customer, now come to me and say, โThou shalt do it my way.โ In order to get you the data you need at the right time, at the right system, I have to reverse engineer all of my business processes, the systems and the data to make sure I can accommodate your request.
In doing so, I will highlight some gaps. I canโt change this business process because to satisfy you, Mr. Large Enterprise, I am now going to put at risk all my Tier 2 customers, my supply chain, my service providers. It may be part of process Iโm changing, but things are connected together. If I change that one part, Iโm really changing a much, much larger picture.
IT Focus: So itโs not just one piece. Prescribed collaboration can affect the entire value network for the mid-tier company.
I do not operate the same way you do; and because we operate differently, and youโre not considering the trading partners as part of the collaboration design equation, youโre automatically going to drive up your costs if youโre the large enterprise.Joanne Friedman>Text
Friedman: It has a ripple effect. Itโs a cascade. And the other flaw is, right now the way business process integration and its predecessor B2B are structured, youโre actually doing pieces of processes. Youโre not doing a full order-to-cash process. Youโre automating parts โ invoicing, purchase ordering, advance shipping notices. Those are artifacts being automated.
When we do business together and you want me to do it your way, Iโm looking at a point-in-time reference, like a forecastโฆ.Itโs a step. That step has an effect on other business operations. And the more steps I automate that are not linked together, the more jeopardy I put myself in. Iโm changing a part of one process, a part of another. My business is not going to look the same after the fact.
IT Focus: How should an enterprise collaborate in such a way as to mitigate ill effects on partners and itself, then?
Friedman: Itโs called supplier relationship management, which starts with something as dead simple as asking. Survey your trading community. Can they handle a business process change? Can they handle the commitment to technology, both in capital resource and business process enabled by the technology? Find out what theyโre capable of. Thatโs really the first step.
The second step is to define the thou-shalt in strataโฆ.Create a codification on trading partners that can handle the process change, but canโt handle the infrastructure; those that can handle the infrastructure, but canโt handle the process change. Find out about your trading community that lets you say, โMy trading partners have eight different classes. At the lowest level, they have a non-persistent Internet connection. At the highest level, theyโre my peer.โ Then break it down into chunks. Not only does it reduce time to deployment, it reduces cost. It also decreasesโฆthe charge to supplier relationship management, which is really not reported by IT. Itโs the increase in communications costs, the increases in sales costs, the increases in marketing costs.
IT Focus: Is the idea for the enterprise then to get to a just-enough system?
Friedman: Yes, itโs called just enough technology โ JET. At one level, just enough technology says I have a non-persistent Internet connection. I have no capital or resources to commit to this, but Iโm trying to accommodate your needโฆ.Give me the capability of taking an Excel spreadsheet and creating exactly what you want and sending it off to you when I can connect. Thatโs the just enough technology for that class of company. Just enough technology one level above that says, I have not an ERP, but an accounting system. I have an inventory control capability. I have a provider that gives me 24-7 access to the Netโฆ.Give me the something out of my accounting package that allows me to produce what you want and send it to you, knowing that itโs the lightest weight for that tier. Itโs a spectrum. The codification of trading partners that goes with this is basic browser at worst, or e-mail at worst.
By creating this stratification I can also calculate and measure, from the large enterpriseโs point of view, things like, hmm, hereโs a typical mid-tier provider that bills me $1 million a year for parts. But the value they contribute is actually greater than the amount Iโm paying them, because theyโre one of a kind. Perhaps they go the extra mile, always deliver on time, jump high hurdles. I donโt want to lose them as a supplier because theyโre critical to my business.
IT Focus: So the partner analysis provides a value analysis that the enterprise can use.
Friedman: Itโs technology value management. Thatโs what weโre saying this for.
IT Focus: But isnโt this difficult for an enterprise to do?
Friedman: Itโs not difficult. Itโs more time consuming, but hereโs the benefit: lower costs; greater on-boarding and adoption; a more seamless flow of information. Instead of it costing $2,800 to bring a trading partner on board, youโll end up with a repeatable process, youโll eliminate some of those plural systems and have a lower SRM (supplier relationship management) charge. Itโs not really a matter of shifting responsibility. If anything it divides the responsibility equally.
IT Focus: What examples have you seen of companies avoiding the corporate dโoh?
Friedman: Fujitsu, Panasonic, IBM. Theyโre part of E2open, a high-tech exchange. They have, as a solution, set the capabilities Iโve described. They go from the top tier down the smallest trading partnerโฆ.They did it thoughtfully.