This is the third part of an ongoing series on where the application technology market is today, including ERP vendors like SAP, Oracle, and others–, and where the market is headed.  The series provides insight on how to get ahead of the current trends and ride the wave that is building rather than getting swept away with it.  The current business trends and market forces for technology will reward the swift and adaptable who are able to address the key business areas that have been lacking in the technology space and it will severely punish those who lag behind. 

Today’s Technology Landscape and IT’s Alignment (or Misalignment) with Business Priorities

Far too long ERP and technology implementations have only focused on one of the 3 key value propositions, the pillar of “operational excellence” using things like process improvement or quality management.  This is a pure operational focus which ignores the critical components of business–, customers, and selling them the products or services they want.  From a business metrics perspective (or Operational business metrics and not Key Performance Indicators [FN1]) the focus on operations, automation, quality, and other business process management alignment with technology only deals with lagging indicators to business health and success.

Unless your products, services, or markets are commodity based, in the strictest sense of the word, this is a dangerous approach.  In the strictest sense it is like having tactics without a strategy.  In the end the consequences are usually disastrous.  They tend to be “knee jerk” and reactive rather than planned and proactive. 

The entire industry is filled with “consultants” and technology solutions to address current state business health and performance.  These only deal with lagging indicators that are “after the fact” and do not help business move forward.  Nearly all of today’s technology solutions, as provided by technology vendors and consultants, only address “operational excellence” propositions and do very little to address business value propositions or competitive pressures focused on customers and innovation.  With SAP in particular the functionality is available to address all of these business concerns but few consultants and even fewer vendors have any idea how to approach these key business areas.  They only work in the area and arena of business tactics, they have little understanding or idea of the business functionality related to competitive pressures, how to set it up, or even more basically, how to extract the key requirements from the business for scoping or blueprinting. 

“Tactics without strategy is the noise before defeat.” – Sun Tzu

Technology to Business Alignment Landscape – A Patchwork of Lagging Indicators is the Wrong Direction

Below is a graphic that shows the common CONSULTING DRIVEN application patchwork most CIO, IT Director, or IT decision makers are tasked with implementing and maintaining.  Notice that it is both a hodge-podge of systems, and creates a difficult to manage relationship that distorts the technology relationship with the business.  Notice that today most systems and technology work focuses on the lagging indicator side of the business, on the financial side, or on the cost control / efficiency side of the equation.  Current system integrator and consulting direction does not correctly align technology with where business is actually done–, at the customer facing points of interaction.  So, from a genuine business perspective can you see where the misalignment of technology is?

• EC = Enterprise Consolidation – inter-company or multi-company financials.
• APO = Advanced Planning and Optimization – advanced production and service planning, logistics, and supply chain capabilities.
• ERP = Enterprise Resource Planning – integrated back-office systems for managing sales, procurement, inventory, financials, etc.
• SRM = Supplier Relationship Management – vendor, procurement, and supply management including vendor marketplace bidding portals.
• SCM = Supply Chain Management – sometimes another “flavor” or style of APO, or sometimes additional transportation and warehousing functionality.
• BI (or BW) = Business Intelligence or Business Warehouse – data warehousing and reporting.
• HR (HRM, HCM) = Human Resources, Human Resource Management, or Human Capital Management – HR processing.
• CRM = Customer Relationship Management – usually a large contact management system the way most companies use them.

Notice that the current system integrator promoted technology solutions are not focused on correct [business and IT alignment], in other words, current approaches to technology are not “integrating technology and IT spend with business.” The current technology landscape that is promoted by software vendors, supported and implemented by system integrators, and understood by consultants contains only one area focused on leading indicators–, CRM.  In some instances, where the business insists, BI / BW reports may help to integrate data for meaningful leading indicator evaluation.  This only seems to happen when initiated by the business and not generally by the consultants.  And even in the area of CRM there are very few “consultants” who have any idea about customer acquisition or customer retention.  As a result most CRM applications are little more than glorified contact management systems.

Far too often today I see and hear technology consultants advocate for process improvements.  As if somehow that last mile of automation, or that last small amount of incremental improvement is going to somehow make a breakthrough in your company’s market position.  If you believe that, I’ve got LOTS of swampland in Florida for sale in an area where home prices were never touched and are still rising at double-digit interest rates every day!  Keep in mind that this statement and criticism of the focus on constant “process improvement” comes from an insider, a “process expert” in the supply chain area around Sales and Distribution as well as Materials Management.  So this criticism is not from an outsider and it even affects the entire range of solutions I generally consult in.  However one key difference is that I try to bring a dimension of those business concerns to every project I do.

“[B]usiness executives said the top IT priority and most important business driver (cited by 53 percent of those surveyed) was acquiring and retaining customers. Yet how well did IT actually support that mission during the past year? Nearly 50 percent of the business execs judged IT’s performance as ‘fair’ or ‘poor.’ Another 5 percent said IT did not support acquiring or retaining customers at all. Business execs’ ratings of IT’s impact on managing customer relationships were equally bad.”  Thomas Wailgum, “Enterprise Software Unplugged,” February 20, 2009,  CIO Magazine online. http://advice.cio.com/thomas_wailgum/why_the_recession_is_marginalizing_cios

If the operational value proposition is not what the future holds, and if there are higher and higher costs but smaller and smaller returns on investment, where is the next big technology opportunity?  Think of it like this, if lagging indicators are like “supply” and leading indicators represent “demand” and you focus on improving the supply side but do nothing for demand you end up with a collapsing business model.

In other words, the process improvement or “operational excellence” model leads to lots of capacity and a need for more and more customers to fill that capacity.  As competitors across the board all have focused on these process improvements, and as they have all gained capacity, you must lower your prices to continue to fill the capacity pipeline.  This is the “supply side” of business when what is actually needed is the “demand side” where customer retention, customer acquisition, and innovative products or services are found.

The entire technology sector must focus on customers and on innovation, without customers there is no business and without innovation products and services are converted to commodities competing on price. IT has an opportunity for innovation and leading edge business solutions using technology, not technology solutions that use business.

[FN1]  Using Key Performance Indicators for Building a Strategy Focused Organization and Why Indexed KPIs are Critical for Business Performance and Success

Part 1:  What is the Proper Relationship for the CIO, CEO, and CFO?

In the first part of this series we looked at the changing business landscape and what it means to the CIO, IT Director, IT Manager, or other key technology decision makers.  From a high level the current global business competition, as well as economic issues are directly affecting the C-level executive requirements and the CIO – CFO – CEO dynamic.  This article reviewed how and where the CIO role is coming under tremendous pressure and how to change the current dynamic by more appropriately partnering with the CFO and the CEO.  This partnership is a critical business bridge between lagging business indicators of business financial and process health on the CFO – COO side of the business house and the leading indicators of sales and product or service pipelines on the CEO side of the business house. 

Part 2:  CIO, CFO, and CEO Alignment – Why ROI is Lacking from Today’s System Landscape

The second part was an overview of the current system landscape and its focus on business processes and the emerging trend of trying to focus on the customer.  This piece also looked at the future business landscape and how the technology focus and direction will be permanently changed no matter what happens with the economy and global competition.  Because the technology marketplace (business consumer) is becoming more sophisticated and more attuned to business / technology alignment, the IT dynamic is going through a structural change.  The whole technology sector is slowly moving away from the “operational excellence” value proposition to the “customer focus” and “innovation” areas of the business.  Very few of the consulting companies and few of the application vendors see this sea change and are doing little to address it.  This is the area of technology market winners and losers of the next 20 years.

Part 3:  Changing the Direction of SAP, ERP, and IT Applications to Focus on the Customer and Innovation

The third part in the series looked at current technology landscapes and how they are aligned and then looked at future technology landscapes.  A brief review of the supply side and the demand side of business shows that unless you have lots of customers (demand) to fill a bigger and bigger pipeline (supply) then your business model collapses.  While it is hidden during good economic climates, any disruption in those economic conditions which fails to fill the capacity pipeline points out the glaring insufficiency of the “operational focus” to technology.  During any economic disruption, or any reduction in demand from customers for your products or services the current technology model falls apart. 

Part 4:  Future Technology Landscape Alignment for the CIO, IT Director, or Key IT Decision Maker

The final part of the series looks at the emerging technology landscape and what the future holds.  It lays out an emerging technology landscape model which has some re-alignment and some components already in use by some of the world’s most successful companies.  A new alignment of technology with the customer facing processes, and the use of social or collaboration tools across the enterprise with a clear business objective is explored.  The driver for the future change will be because the business does not see the revenue generation prospects of technology–, they fail to see the possibilities of promoting customer retention, customer acquisition, innovation, and marketplace analytics.  The new technology model looks to change that dynamic.

The first part of this series looked at What is the Proper Relationship for the CIO, CEO, and CFO?  The CIO role is already challenging and gaining in difficulty in today’s business environment.  And by all measures it looks as though things will continue to become more difficult and complex as time goes on.  Today’s CIO must not only keep up with technology, and business process improvement with automation, but must also become a “mini-MBA” in applying technology solutions to forward looking business strategies including customer acquisition, customer retention, revenue growth and profitability.  Although it is a monumental task it is possible.

Where technology can achieve solid ROI and breakthrough results in the enterprise are in the two key value areas that have not been well addressed: customer focus (beyond CRM) together with product or service innovation.

Want ROI?  The Next Wave in ERP Will Occur by Changing the Focus from Process to Customer

The heart of the business is the customer, without them there is no business. Today’s technology initiatives, whether they are with ERP products like SAP, various CRM offerings, or a whole host of other technologies and packages focus more on processes and on technology than they do on the heart of the business.  I’m a fan of visual models.  They help me to think through, adjust, and understand complex ideas in a simplified and high level manner.  For example, the simple model below represents today’s package application technology landscape in terms of the 3 key areas of business. 

• The large red bubble is the technology process focus on the value proposition of “operational excellence,”
• the orange block are the technology tools and systems that are typically applied,
• the smaller green bubble is the value area of “customer focus,”
• and the tiny center of intersection between business processes and customers in the blue block is the value area of “customer focused innovation”.

That is the sad state of today’s typical technology environment.

Customer Focused Innovation at the Process and Customer Intersection is the Ultimate Objective of a Change in Technology Focus

Successful package applications and technology application over the next couple of decades will dramatically alter this dynamic.  They will focus more aggressively on the customer and the innovation intersection between the customer and business processes.  Business processes will necessarily get closer to the customer and technology will be focused on the integration of the customer into business processes.  By doing so customers will have a greater influence over the types, quality, and availability of products and services.  The following model shows what I believe the next twenty years will develop as the winning technology landscape of the future:

• Although covered with technology, business processes become a secondary focus to the customer for technology.
• To enable this the technology landscape shifts to encompass more of the customer interaction with the business, potentially leading to ideas such as “mass customization.”
• The area of customer-centered innovation becomes much larger as businesses learn to integrate their customers deeper into their business processes.
• The customer naturally becomes much more important to the application of technology like never before.

The current state of the economy and global economic pressures have created a disruption in the classic technology model of process improvement and process automation.  Together with global competition and a potentially permanent change in customer purchasing characteristics winners and losers will emerge in the new technology arena.  As customers take center stage and innovation becomes more important just for business survival collaboration will become more and more important as well.  The transformation of business and technology will require new collaborative technology tools to build bridges between business, customers, and the product or service development areas.

Because of the pace of change, focusing on “best practices” and internal process improvement, or even extending processes is no longer enough. Business can rarely (if ever today) integrate, automate, and streamline to achieve marketplace success –, to one degree or another nearly every competitor is doing this or is quickly headed in that direction.

Business complexity and the breakneck pace of change turns yesterday’s breakthrough technology into today’s commodity; vendors are modestly integrated into the extended supply chain, all the way from raw materials to end customer delivery; customers are more sophisticated and have more options than ever through the Internet; competitors have worked to incorporate similar technology throughout their entire process chains by integrating, automating, and accelerating their processes.  As a result, business demand on technology simultaneously creates new opportunities and new struggles. 

Want BIG ROI for Your Technology Investment?

Part 1:  What is the Proper Relationship for the CIO, CEO, and CFO?

In the first part of this series we looked at the changing business landscape and what it means to the CIO, IT Director, IT Manager, or other key technology decision makers.  From a high level the current global business competition, as well as economic issues are directly affecting the C-level executive requirements and the CIO – CFO – CEO dynamic.  This article reviewed how and where the CIO role is coming under tremendous pressure and how to change the current dynamic by more appropriately partnering with the CFO and the CEO.  This partnership is a critical business bridge between lagging business indicators of business financial and process health on the CFO – COO side of the business house and the leading indicators of sales and product or service pipelines on the CEO side of the business house. 

Part 2:  CIO, CFO, and CEO Alignment – Why ROI is Lacking from Today’s System Landscape

The second part was an overview of the current system landscape and its focus on business processes and the emerging trend of trying to focus on the customer.  This piece also looked at the future business landscape and how the technology focus and direction will be permanently changed no matter what happens with the economy and global competition.  Because the technology marketplace (business consumer) is becoming more sophisticated and more attuned to business / technology alignment, the IT dynamic is going through a structural change.  The whole technology sector is slowly moving away from the “operational excellence” value proposition to the “customer focus” and “innovation” areas of the business.  Very few of the consulting companies and few of the application vendors see this sea change and are doing little to address it.  This is the area of technology market winners and losers of the next 20 years.

Part 3:  Changing the Direction of SAP, ERP, and IT Applications to Focus on the Customer and Innovation

The third part in the series looked at current technology landscapes and how they are aligned and then looked at future technology landscapes.  A brief review of the supply side and the demand side of business shows that unless you have lots of customers (demand) to fill a bigger and bigger pipeline (supply) then your business model collapses.  While it is hidden during good economic climates, any disruption in those economic conditions which fails to fill the capacity pipeline points out the glaring insufficiency of the “operational focus” to technology.  During any economic disruption, or any reduction in demand from customers for your products or services the current technology model falls apart. 

Part 4:  Future Technology Landscape Alignment for the CIO, IT Director, or Key IT Decision Maker

The final part of the series looks at the emerging technology landscape and what the future holds.  It lays out an emerging technology landscape model which has some re-alignment and some components already in use by some of the world’s most successful companies.  A new alignment of technology with the customer facing processes, and the use of social or collaboration tools across the enterprise with a clear business objective is explored.  The driver for the future change will be because the business does not see the revenue generation prospects of technology–, they fail to see the possibilities of promoting customer retention, customer acquisition, innovation, and marketplace analytics.  The new technology model looks to change that dynamic.

Back in the late 1990’s, while at Grant Thornton, and then later when the management consulting organization was sold to Hitachi I worked on a comprehensive knowledge management model. 

This knowledge management model was used to advance the concept of a learning organization because that was a clear business fit for consulting companies.  In consulting  a consultant’s capabilities are directly tied to their knowledge, and that knowledge is a consultant’s, and a consulting company’s capital or stock in trade.

Back in 1997 and 1998 I worked through the model and developed a systematic approach, by using primitive collaboration and social media tools, to convert consulting into knowledge centered learning organizations. 

It relied heavily on:

• collaboration,
• cooperation, and
• information dissemination.

This was done by using the tools that were available at the time.  A systematic process was developed to capture, then synthesize, organize and disseminate the information and knowledgeable individuals throughout the organization.  By doing this a collaborative learning organization was developed. 

Early Collaboration and Social Media Efforts that Started to Produce Results Shortly After Y2K

Even the most knowledgeable, talented, and proficient consultants get stuck sometimes. It is the nature of dealing with complex business and technology problems, sometimes you need a little help.  We recognized the need in the business to have dynamic but high quality tools, templates, and resources available to consultants.  And at the same time we also recognized the need to be able to tap into other knowledgeable experts within the organization on a moment’s notice, even if we didn’t know the individual to realize they had the skills we were looking for.  And above all it had to be simple and almost instantaneous.

It had to be, the right knowledge, right now!

We wanted a structured method that was fairly simple and intuitive to create a collaborative environment.  After looking at our technology landscape right after Y2K we started to use MS Exchange Public Folders, Outlook Shared User Folders, e-mail, and MS Messenger. 

A Simple Collaborative Solution Using MS Exchange Public Folders and MS Messenger

We developed an MS Exchange folder structure that matched our client project needs and sales force needs for tools, templates, resources and our own best practices on demand.  The beauty of MS Exchange was that the Web Access version allowed our consultants to leverage public folders through the web interface from anywhere, just like they were using MS Explorer / MS File Manager.  The public folder structure was the perfect fit because there was little to learn beyond the new folder hierarchy.  Dragging, dropping, and opening files in this MS Explorer like interface was intuitive and took no time to adjust to.  This was immensely helpful at some client sites where security is very high so that only the client’s computers or hardware were allowed on the client’s corporate network.  In other words, where access to internal resources would have been limited or non-existent this allowed for ready access to anything that was needed.  Add to this the MS Exchange folder permissions are robust making security meaningful.

Together with this we used MS Messenger, but rather than just having an employee’s  name that an employee in one part of the country had never worked with or even heard of, we applied their key skill to the logon name.  From a standard list of key skill codes for SAP (SD, MM, PP, FI, CO, AM, CRM, SRM, APO, etc.) we placed that in front of the person’s name so that it automatically grouped like skills, and placed the skill reference first in a list of over a hundred resources.  In an instant if you needed some input from a seasoned Sales and Distribution person you would just look on the list for those names starting with SD_Employee_Name.  SAP practice users were then exposed to each other all over the United States by their skill codes so that even if they did not know the user, if they had a question of a colleague or peer they could just ask in real time. 

There was also a regular weekly publication containing special “tips and tricks” for productivity or functionality.  This was simply sent through e-mail and a copy stored in the knowledge management folder in MS Exchange.  It could be referenced at any time in the future.  This created a reusable knowledge repository that allowed the quality of the tools, templates, resources, presentations, and other material to be continually advanced and quickly reused.

When I left we had just started on the internal forum posting initiative.  This was to provide a central location to capture knowledge sharing or information discussions in a searchable database.  Using open source content management systems and open source integrated forums our goal was to create a central communication collaboration hub to capture and exchange ideas, custom coded solutions, and best practices.  With the many available add-ons to the open source CMS systems we considered adding an internal high level project management status tracking system and resource request system for senior level managers to gain near real-time visibility to the status and resource needs of all of the many projects taking place all over the country.

This was a very practical way we leveraged existing technology and built the structure and processes around it to add business value.  It enhanced the customer value proposition by providing better and faster customer solutions, more customer focus, and better internal employee interaction.  In other words, this whole solution was low cost and used existing collaboration tools to advance business interests.  It helped to promote end client satisfaction because of the nature and ability to gain “the right answer right now.”

The real issue is not to use collaborative tools in the enterprise just to collaborate.  They must serve a business purpose and a business need.  The business enterprise is not a social club, but social tools can be used to serve the business purposes or goals. 

Refinements, Enhancements, and New Dimensions to Collaboration and Knowledge Tools

I’ve often joked that I get paid a lot to take the ideas and information that is already in an employee’s head and present it to the company as the solution to their problem.  The difference between my approach and others is that I have no problem telling the company that the answers are right there with their own people.

As the efforts and my research on the subject matured I wrote a piece about my perspective on this issue as it had matured and called it “SAP, ERP III, SOA — Learning Organizations through Social Media Collaboration.”  That article laid out a way to integrate social media tools like Forum software into the SAP help system.  What this means is that end users can capture real time information about the system, or shortcuts, or requests for simplification or other useful information and disseminate it to the organization.  This also provides a method for workers in any department or area, in real time, to provide feedback that focuses on the company value proposition or competitive pressures.  Here is the model I produced:

1)  Raw Information:  The unstructured data, ideas, “crib notes,” and thoughts that we all have.  However in this instance, it is the raw information surrounding the job or responsibility that the individual performs within the enterprise.  Sometimes these are the “workarounds” to get something done when you run into obstacles or roadblocks, other times they are just shortcuts, techniques, to perform a job or function.

2)    Organized Information:  This is the process of capturing and classifying that raw information.  This is where the “knowledge bases” and other types of information systems come in.  Many enterprises make it this far. Sometimes these are the “workarounds” to get something done when you run into roadblocks or obstacles.  Other times they might be the shortcuts or techniques to more efficiently perform a job or function.

3)    Acquired Information Experience: This is the interaction with the organized information.  This can be through search functions, employed taxonomies, reports, or other methods of accessing the organized information.  This is after the capture of the information in steps 1) and 2) above, and involves its wider availability than in the individual who originally developed or “held” the knowledge or information.  Few organizations or enterprises make it much further than this.  However, this is the beginning of the true learning organization.

4)    Applied Experience (Knowledge!):  This is the practical application of the organized information after it has been acquired.  Whether this acquisition is through word of mouth, training, or some type of information management system (that is wrong named a knowledge management system) or through a “knowledge base”. This is where the cost savings, revenue opportunities, continuous process improvement opportunities, and real competitive advantage begins to come to fruition.

5)    Refined Experience:  Simply the continuous improvement process of updating the existing organized information (or “knowledge base”) with new things that have been learned. 

This knowledge model I created in the late 90’s seems to be pretty well accepted today [Fn1].  Notice it is very different than an information model because knowledge by its very nature requires information together with the context of application and experience.

The ERP III future will rely heavily on delivering on the value propositions of customer focus and innovation. 

It is my belief that both of these pillars will occur through the use of corporate collaboration tools–, but only corporate collaboration tools that are focused on the business goals of capturing critical “knowledge” and information around these two key premises.

Customer Focused Lessons from My Former Life as a Customer Service Rep After High School

Several years ago before starting SAP consulting work I used to do customer service work on the phone.  I can’t tell you how many times a customer would have a great idea, or a valid concern related to our products and services.  It would have been ideal to capture and take action on some of these ideas.  In fact, as a young “kid” I used to bring some of these ideas to our management and nearly all of them were ignored, or hushed, or told “I’m sure we already tried that…” and on and on.  Basically, the customer service rep, your company’s “face” to the customer who knows them the best is often ignored.  Sales people certainly don’t listen to the poor “lowly” customer service reps.  But often they know the best what the customer is actually looking for.  The key is to find ways to capture their knowledge and high points of their interaction with  customers that relate to innovating new or better products and services, or solving recurring problems, etc.  Collaborative tools are a great fit here.

The same is true for your company’s engineering and sales departments.  The same is true for your manufacturing areas, your distribution, your supply chain, your finance areas, etc.  Creating common collaborative communities of interest is a great way to advance your company’s value proposition and deal directly with competitive pressures.

Why Enterprise Collaboration Tools have Not Yet Taken Off

 One reason is, in a word, geeks!  I know, I am one (not really, but trying to fit in here :- )

Too many organizations undertake the introduction of social media for the purpose of introducing social media into the enterprise.  Again, this is like having information without the context of application and experience.  That information is NOT knowledge, nor are collaboration tools which are divorced from a specific business purpose very productive (if at all).

So, for example, Facebook, MySpace, and Twitter may NOT fit in your enterprise.  And frankly I can not think of many enterprises where they would fit.  However, being able to capture employee, customer, and vendor knowledge or suggestions or input or criticisms and making sure they are published internally to the right people may make a huge difference for your company.

Why Consultants and Collaboration Evangelists Have Not Shown Much Progress

Niether consultants nor business has learned how to use social media to drive business value.  There are few consultants out there with a coherent or even minimally functional method for business to use collaboration tools to propel a company’s key value propositions.  Even if you move down one layer beneath the value proposition to the competitive pressures in the marketplace these “social media mavens” there is still no coherent method for social media use.

It doesn’t have to be that way…

In my prior post “SAP, ERP III, SOA — Learning Organizations through Social Media Collaboration” there are 9 steps noted toward the end of that post on exactly how to use open source forum software for developing a learning organization.  This same concept can be generalized and applied to knowledge capture activities around innovation or customer experience.  The way you use these forum type tools inside the company depends on what your goals are, but the instructions for use are there.

~~~~~~~~~~~~~~~~~~~~

[FN1]  The knowledge model I produced was based on a synthesis of a number of sources I had studied at the time to try to bring some clarity around the confusion between “information management” and “knowledge management.”  At that time, or possibly earlier, there may have been someone else with the same ideas and a similar model but I couldn’t find it then.  So if someone else can claim *earlier* authoriship I won’t dispute it.  I produced my first version right around Y2K.