As e-business efforts grow increasingly sophisticated, leading-edge companies will seek to maximize real time capabilities to manage internal business processes, customer responsiveness and supply-side efficiencies. To this end, smart business executives are looking for any tool that can give them an edge over the competition, over business disaster or over financial complexities. One such latest and greatest is "real time," or the drive to eliminate delay from every aspect of business processes and information systems.
Beyond the hype of "get it done yesterday," there are a range of perspectives and approaches to real time that can yield impressive results or be a colossal waste of resources. Even more than what the organization does and with whom it does business, managers must be concerned with the timing of when things happen. Not that this is a new managerial requirement, but the constant evolution of information technologies has made timing issues ever more critical. In addition, managers need to be cognizant of how long business processes take and how much time should elapse between events to maximize the use of resources, like people, financial capital, physical resources, facilities and production lines.
Information technology is designed to make calculations approach the instantaneous, while the number of things a system can compute has multiplied the complexity of business processes and requires more management time to address the results. "Real time" is not about doing everything at once, but rather about allocating time resources where managerial insight and experience can drive business success. While driving everything to be accomplished in real time is a noble goal (like climbing Everest or flying to the moon), in the pragmatic world of immediate business results, quarterly earnings and weekly revenue goals, real time must be viewed as yet another tool and only a tool that can help bring business success.
Using Real Time as a Tool
Externalization, which was the e-commerce battle cry of 1999 and 2000, has led Global 2000 companies to dramatically expand the integration of their operations, strategies and business processes into those of their trading partners. The heightened interaction among larger numbers of trading partners has forced companies to pursue increasingly intricate solutions spanning multiple trading partners. Although these solutions are not "out of the box," e-commerce technologies are continually improving, enabling companies to manage more complicated and participatory multi-trading partner business processes.
And just as the technologies are improving, leading-edge organizations are going to step beyond simply managing their physical supply chains to actually manage and manipulate other aspects of externalized commerce processes. For instance, instead of handling physical logistics (where is it?) and financial accounting (how much did it cost?), they will master the time dimensions of business processes, in conjunction with supply chain and finance solutions, in order to drive the next wave of innovation. The time dimensions of business processes come in three flavors: When did, should or will something happen; should something happen more quickly or more slowly; and do historical or future assets have value? Finally, in order to have any of these real-time capabilities impact the "real" value of the company, the information and knowledge generated must be delivered to the correct decision makers (at the right time) to be applied to customer-facing and supplier-facing processes.
Right now, however, externalized business processes are infrequently designed to accommodate the management of time dimensions, even though it is commonly understood that business processes ideally occur within specific time frames and involve the location(s) of products, people, stores of value and information. e-Business solution managers are often asked by business process owners to enable "real-time" interactions or access. While processes with "zero latency" may seem attractive and can even be useful, it is more prudent to design solutions with latencies appropriate to given processes (i.e., annual reports are "updated" once per year). It is going to become increasingly useful to coordinate not only the location of business process assets and the "timeliness" of various process elements, but also the likelihood that a given asset will be available at a certain location in the future, thereby mitigating business process uncertainties and risk.
Additionally, instead of only focusing on what is occurring now, organizations need to begin addressing future-looking elements of their business processes. To this end, Global 2000 companies will look to financial instruments, like receivables, equity and debts, to value the resources and capacities that they predict will be required to fulfill commerce demands at future times. Futures contracts and capacity reservations will enable customers to hedge against potential future shortages. If those shortages do not occur, or if another organization experiences the same shortages, the company can sell those reservations. For suppliers, this can mean reduced uncertainty in demand over long-term periods, which is equal to a more attractive investment, leading to potential increases in corporate value.
Although not as pervasive an opportunity as the forward-looking process solutions, retro-looking process solutions will also provide value. Organizations with information inventories and/or direct supplies in historical archives, like libraries, research and media/entertainment, will need ways to retrieve potentially decomposing analog assets. Because digitization of all potential assets is prohibitive in terms of resources, such organizations will have to assess the "commercial" utility of information assets as well as provide capabilities for future reuse.
Also, companies can derive business process benefits from contractions in the time allocated to processes like payables, receivables and inventory turns. Beyond tighter integration with trading partners for efficiencies, individual trading partners are going to use trusted intermediary services to accelerate processes.
Despite the fact that investment in the time aspects of business process solutions will trail improvements in physical processes, Global 2000 organizations will want to identify temporal aspects of ongoing e-business efforts to ensure continued competitive advantages and ongoing incremental accrual of all available benefits. The impact is that improving the real-time aspects of commerce chains will maximize opportunities for decreased operational costs and improved fiscal heath.
The Role of Continuous Business Analytics
As companies increasingly rely on Web commerce systems, it follows that they must also better understand solution utilization and performance. Even more importantly, companies need to understand how these e-business systems are affecting business processes.
e-Business analytical tools will continue to help companies better track customer satisfaction, product/service sales performance, market share, etc., and aid in controlling costs associated with the electronic distribution channels. However, while extremely valuable, real-time capabilities often precipitate conflict and confusion as they proliferate in Global 2000 companies; the bottom line is that the existing approaches to business intelligence and analytics are woefully inadequate in helping companies achieve competitive advantage. As a result, by 2003 or 2004, a new real-time approach to enterprise business analytics will emerge, enabling an integrated framework of continuous business analytics (CBAs) across all e-business and enterprise systems. Continuous business analytics will enable companies to assess the health of critical business processes and operations in real time, providing mechanisms to improve cost control, customer satisfaction, systems performance and, ultimately, shareholder value.
Building a CBA framework requires companies to rethink how information is extracted and analyzed from IT systems. Traditional data warehouses, data mining and business report generators at present typically do not monitor systems on a continuous real-time basis, nor do they adequately address emerging e-business processes like inter-enterprise process design and supply/service chain integration. For the most part they are limited to after-the-fact reporting and analysis, with limited capabilities to alert upon threshold triggers, extract real-time trends or facilitate the development of predictive scenarios.
An integrated CBA framework must be designed by simultaneously considering: 1) how the company defines economic analysis; 2) how the organization defines business process components; 3) what information will be extracted in real time from existing and proposed IT infrastructure; and 4) how continuous analytics achieve cross-system consensus to enable order-of-magnitude improvements in real-time business performance. This, in theory, is great but, in reality, CBA is an aggressive effort, it has never been done before and it is likely to be costly.
Therefore, it must be executed in a staged approach, identifying specific economic objectives and a finite set of IT systems. CBA pushes the envelope of available integration methods and technologies, and it may require cooperation among several critical supplier types, for example existing process mapping, business intelligence, application development and enterprise application. Not to dash all hope, however: CBA enables real-time business intelligence by integrating the planning, modeling, execution, and analytical methods and systems of an enterprise. This type of analytical framework can lead to improvements in the control of business processes (both internal and those externalized across supply/service chain partners), yielding significant economic impact and competitive advantage.
Though not broadly available, the supplier community is beginning to respond to this market opportunity and by 2004 or 2005 a continuous business analytics framework will be required to enable real-time intelligence and consensus across enterprise systems.
Trickle Down: Business Analytics Affects Content Management
In order to be of any use to the organization, the knowledge from business analytics has to be communicated to the right decision-makers at the right time. By 2003 or 2004, comprehensive, integrated information delivery and analysis architectures will become available, delivering both unstructured and structured information through enterprise portals. Through 2006, further integration, including business application suppliers embedding such tools as analytic engines into their products, will enable optimization of customer-related business processes and data quality, thereby reducing "information sprawl" and yielding substantial business return on investment (ROI).
However, it is true that most companies concentrating on e-business solutions today have neglected to provide the necessary content behind these initiatives. Indeed, content, delivered in an appropriate, personalized fashion, is proving to be the information currency of the e-business era, because it provides the necessary information for clients to make decisions and control user attention. Without the necessary content, decisions are delayed or made with wrong assumptions. Because of this increasing requirement for real-time-relevant content, content management (CM), supply chain management (SCM) and Net market suppliers are now rushing to add robust content capabilities to their offerings. This will result in a $10 billion CM market by 2004.
But first, by the end of 2002, the ability to effectively manage content, both real-time dynamic (templated Web pages) content for near-real-time personalization and approved/in-process static life-cycle-based content (like manuals, standard operating procedures, project plans, images, reports and computer-aided design drawings) will permeate e-business architectural offerings. Such control and effective use of content will increasingly drive competitive differentiation in the e-world; it is expected that more than 95 percent of Global 2000 organizations will deploy CM technology by 2003, whereas less than 10 percent currently do.
It is also expected they will concentrate their efforts in this area to survive. Indeed, the more service-oriented the requirements of the site, the better the content and personalization services must be ideally, getting "smarter" each time a user accesses them. Moreover, the technology users will increasingly require access to all relevant information, such as documents, images, e-mail and transactional reports, on a condensed relevant basis, because easy access to the right content enables users to make faster, better decisions that will drive value. This implies that, not only is the CM infrastructure critical, its ability to capture, search and deliver the relevant chunks based on role and security levels is equally as important.
Demand Chain Management
The Pragmatic Real-time Demand Enterprise: The Selling Experience
Leading Global 2000 sell-side enterprises are creating strategies to fully integrate their online and physical stores, as well as their partner, warehouse and manufacturing efforts, to provide a pragmatic real-time selling experience for their customers, and to increase customer lifetime value. In sell-side/customer-facing systems, analytical tools cannot operate in isolation; e-business analytical tools cannot accurately assess the dynamics of customer interaction/satisfaction or product/service market acceptance and growth unless they reach consensus by aggregating and analyzing information from other customer relationship management (CRM) and partner relationship management (PRM) systems. They must have the ability to extract analytical data from information flows across enterprise systems not just be "mined" from transactional systems after the fact, "reported" upon closing the financial books, or assembled from databases in glorified "dashboard" presentation formats.
By 2006 or 2007, an integrated selling experience for best-practice organizations will include a fully customer-configured shopping and delivery experience. Stores such as Best Buy and Circuit City are beginning to fully integrate real-time options for shopping by providing online shopping and in-store immediate pick up, thus implying real-time integration and visibility into a single-store inventory. Although these efforts would currently be considered experiments or "one-offs," by 2010 the "real-time" retail enterprise will be the norm. For most retailers, manufacturers and distributors, this means beginning transformation now to implement pragmatically and stepwise across all suppliers, warehouses and stores.
Given the impact and complexity of transforming to the real-time enterprise, companies are advised to avoid a "big bang" effort. The cornerstone for successful real-time transformation will entail determining the overall real-time strategy, prioritizing the transformation portfolio and following smaller implementation cycles during the next three to five years. Making this integrated experience a reality will require changes to processes and technologies, including:
o Upgraded point-of-service systems to be implemented through 2004 or 2005: The point-of-service (POS) "back office" will provide options for real-time inventory posting and integration with main inventory systems. This will enable sales staff to work anywhere in the store as well as drive new metrics for performance, based on factors such as being in the right part of the store and the number of orders placed.
o Complete integration of the value chain: Accurate inventory visibility across the entire value chain is becoming a customer demand rather than a competitive differentiator. It will not be enough to merely provide visibility across an enterprise's stores, which will be vital by 2004 customers will require visibility into suppliers' inventories by 2006. Retailers will need to make decisions as to how much real-time inventory tracking is too much and whether to centralize data management of inventory or to open store POS systems to direct online inquiry and update. Additionally, customers will expect access to this information, as well as place or track orders, from any wireless or wired device.
Beyond 2007, integrated smart products, like automobiles, dishwashers, refrigerators and ovens, and user-customized business rules will also need to be planned. These products can be configured to trigger automated orders, self-adjust based on operating conditions and automatically call for and schedule service requests all spreading real-time across the entire product life cycle, not just the selling cycle.
The Pragmatic Real-time Demand Enterprise: Real-time Credit Solutions
Beyond selling to customers, most organizations are ultimately interested in collecting payment from customers. In most commerce situations, the buyer seeks to make payments as late as possible, and the supplier tries to collect receipts as soon as possible. Credit and collections management become more critical as a firm moves into e-commerce due to accelerated business cycles. Although B2C online ordering solutions are typically linked to credit card suppliers for credit approval, B2B transactions primarily rely on the extension of trade credit, either through direct billing by the enterprise or through third-party arrangements.
Credit checking may take several days because businesses require additional steps to determine the credit risk of a new customer and whether trade credit terms should be extended. This often positions the credit department as the "bad guy" within an organization. However, poor credit decisions can result in uncollected accounts receivable (A/R) and increased days sales outstanding (DSO), as well as lead to inevitable A/R write-offs, which directly hits profitability. Better credit decisions will improve customer satisfaction, increase sales and improve working capital positions. Chief financial officers should consider emerging business applications to manage the credit and collections process.
Options also exist for companies looking to streamline revenue processes, with benefits accruing to both buyer and seller. Web-based order processes immediately expose the relatively slow credit process, enabling the transaction to proceed from ordering to fulfillment with minimal risk and delay. New solutions enable credit decisions to be made against a backdrop of risk decision models to develop a credit score, incorporating existing account history and credit bureau resources. In addition, a firm can transfer the trade credit financing to a third-party lender because emerging solutions can assign the trade credit receivable to a third-party lender, enabling DSO to be zero for the seller.
By 2003, acceptance rates by Global 2000 enterprises of such technologies as real-time credit checking capabilities via integration of Web-based solutions into sell-side architectures, call-center solutions and routine enterprise resource planning (ERP) ordering processes will increase to 25 percent. By 2004 or 2005, the deployment of real-time credit solutions will be routine; late adopters will be at a competitive disadvantage.
Supply Chain Management
Procure, But All in Good Time
The flip side of selling, marketing and collections is the world of supply: sourcing, procurement, asset management and reconciliation/settlement. While the order of the day in demand-side processes is speed, supply-side processes are dominated by the need for prudence force process efficiencies, get the best deal and pay the minimum required as late as possible. The proliferation of e-procurement and other supply-side applications is forcing organizations to not only select applications to automate processes, but also design when process elements occur and when information validity expires. As with demand processes, the effective management of real-time capabilities will drive the success of procurement, strategic sourcing, settlement, and supplier relationship management solutions. Failure to account for time variables will retard return on investment. Here are some ways in which those real-time capabilities will pervade supply processes:
o Procurement: Within the requisition and approval processes inherent in procurement solutions, buying organizations must establish how long a requisition can persist before being approved or rejected, which then provides users with the sense that the application improves their ability to procure needed goods or services. It is the sense that workflow items linger long enough to be noticed, but not so long as to languish, that is the key, while also allowing users to maintain the feeling that they are still in control of the process. In addition, buying and supplying organizations must negotiate the persistence of prices and product descriptions quoted in catalogs. If item prices are changed after the creation of the requisition or purchase order, the procurement system must know if the requisition/order is to be updated with the new price or if the supplier will honor the original price. Although the optimal arrangement will depend on procurement category and trading-partner relationship specifics, prices cannot (realistically) remain static indefinitely, nor can managers be expected to approve requisitions with continually variable item prices. This is also important in direct supply scenarios, where engineering change orders can retard procurement processes and also add exponential costs to product development efforts. In addition, both buying and supplying organizations must establish consistent and explicit expectations surrounding "reasonable" response times to orders, inquiries and disputes.
o Strategic sourcing: As a process-predecessor to procurement, sourcing events must be designed to elicit appropriate supplier responses. Although communicating RFx response expectations is common practice, electronic sourcing events, due to their dynamic nature, must be engineered to generate the most and best supplier quotations, often within a constrained period.
o Reconciliation and settlement: Perhaps even more critical to both suppliers and buying organizations is the reconciliation and settlement of invoices and accounts attention to this area will increase through 2005. Suppliers have expectations as to when they will get paid for goods or services; although this is often specified in contracts, it is still behooves to the buying organization to schedule the most opportune time to remit payment. This can be improved if suppliers submit electronic invoices and buying organizations have the capability to accept and automatically processes electronic requests for payment. Ultimately, the ability to accurately and quickly settle supplier accounts will be linked to supplier contracts if the buyer is confident that suppliers can be accurately paid in 15 days, this should be reflected in contractual expectations in exchange for better prices and delivery term.
o Supplier relationship management (SRM): Organizations pursuing SRM capabilities must determine the expiration date of supplier information like transaction history and credit rating. Because historical transaction and supplier performance data will be increasingly critical to successful supply side operations (2005+), buyers will need to determine whether more recent behavior is more pertinent than that of previous years or may be indicative of cyclical characteristics such as seasonal capabilities. Indeed, organizations may find it prudent to purge SRM data marts of outdated information on a regular schedule, to both reduce storage requirements and focus analytical efforts on more relevant data, but only when that information is no longer required to manage supplier performance.
Ultimately, the ability to manage real time requirements within supply side processes will drive an organization's ability to meet real time requirements within demand-side processes. Where time to market is important, the ability to manage, communicate and execute time commitments in supply processes will enable companies to meet the real time demands of channel partners and customers.
Driving toward the completely real-time enterprise can be the rallying cry for a next wave of business process innovation and, pursued pragmatically, can deliver results "as advertised". But as with any tool, if misused it can do more damage than good, even beyond the resources that were spent developing real-time capabilities in the first place. Knowing everything, immediately, all the time, without end will ultimately deliver extraneous information and, at times, deliver it when it is expressly not required or to the wrong people.
Seek out opportunities to eliminate waste and speed processes, but treat time like you would any other resource that is at times best saved and other times best spent. Only experience and pragmatism can determine which is which.
Kip Martin is vice president, electronic business strategies at META Group, a research and consulting firm focusing on information technology and business transformation strategies.