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The
Adaptive Enterprise approach: how to turn the real-time
vision into a reality
By Charles
Manly
Much
has been written in the past year about the growing importance
on the CXO agenda of
achieving information integration during business change.
Information integration is the ability
to link together the information retained in disparate enterprise
systems to gain a complete
view of enterprise performance - a challenge to achieve
even if the business is at a
(nowadays rare) steady state.
Leading analysts such as Gartner and META Group are promoting
the requirement for
corporations to focus on this issue as part of their Corporate
Performance Management and
Business Process Management concepts centered upon putting
in place the right business
processes to become more agile, or more responsive to business
change.
In this context, commentators have pointed specifically
to the limitations of Enterprise
Resource Planning (ERP) and traditional data warehousing
solutions to support the access of
consistent, accurate, up-to-the-minute information - because
they are solutions built for a
steady state. Enterprise Application Integration (EAI) and
web services have also been
actively promoted as solutions to this information integration
problem.
However all of these technologies are generally point solutions,
unsuitable for integration of
information from multiple, disparate systems. Arguably these
solutions just add to the
complexity, and –critically for the business decision-maker
- there is no guarantee that the
actual information integrated will be in appropriate formats.
Moreover, these projects are not
quick-fix and must be constantly updated to account for
changing business conditions.
What is needed instead is a strategic approach, championed
by executive staff, that is
predicated upon the concept that business change is the
norm. This approach calls for the
creation of an adaptive information architecture to provide
executives with up-to-date, fully
integrated information necessary for rapid business decision-making.
Vitally, this information framework must itself be fully
adaptable to changes in the business,
such as mergers, acquisitions, reorganizations and new product
strategies, so that the
information is truly indicative of current, historic and
projected business performance.
In
2002 leading international business school INSEAD termed
organizations which put in place
this type of “next generation” information strategy
as Adaptive Enterprises.
In a departure from above-mentioned traditional integration
approaches, leaders of the
Adaptive Enterprise focus upon the integration of information
within the systems, not of the
systems themselves. ERP, traditional data warehousing and
the EAI and/or web services
based systems -linking infrastructures fundame ntally ignore
the importance of the information
itself and the requirement to maintain accurate, consistent
data as the business changes.
Furthermore, Adaptive Enterprise leaders strive for an information
strategy that provides
“visibility” and “flexibility” in
equal measures and not a trade-off between the two. Visibility
means the ability to ‘slice and dice’ business
performance information from any perspective
through key entities such as customers, products or financials
even as strategies and
structures change. Flexibility is the ability to move as
fast as the market changes because
local units can use best of breed solutions while giving
global reporting a cross-enterprise
perspective on information.
The benefits of the Adaptive Enterprise approach can be
applied in any area of the business.
For example, a corporation can identify its top corporate
accounts worldwide and assess
their profitability by country, product or sales team. The
decision-makers can then use the
same data to explore how the business would perform if the
business were reorganized on a
customer account basis – without extensive systems
integration or re-coding.
All of this
process can be achieved without removing precious resources
from the local units who are
able to continue to operate and report, as suits their market
requirements, without the need
to conform to an ERP-type centralized business model.
Two Routes – Both Dead-Ends
Decision-makers of most successful businesses aspire to
be adaptive, and many have tried to
achieve it by one of two routes, both by-and-large unsuccessful.
Some organizations, notably those which have grown organically,
have standardized on one
enterprise software application worldwide, however painful,
time -consuming and expensive
the process might be. In these instances the board enjoys
excellent visibility of the business
once the process is completed and there is a common approach
to reporting throughout the
business.
However this comes at a price. Any major change can significantly
reduce the global visibility
– for example integration of an acquisition’s
management accounts can take months to port
to the chosen platform. Furthermore, it takes considerable
time and money for the
Standardized Enterprise to effect the cultural and process
change associated with
persuading operating units to adopt the same software.
The alternative path is the Decentralized Enterprise. Here
the organization leaders have
decided that the operating business units should have the
autonomy to choose the business
processes and supporting IT applications that are most appropriate
for their local
requirements. Usually this results in a best-of-breed approach.
As a consequence, the
businesses have a greater degree of flexibility in how they
respond to opportunities and
market changes.
But the center has to spend heavily in terms of time and
resources to gain aggregated data
that may or may not be accurate. Typically such businesses
experience information
disconnect (or ‘semantic’ disconnect) where
the center is unable to compare information from
different systems as the assumptions and context are different
for each system. For
example, aggregating sales data by “product group”
makes the assumption that all operating
companies have identical, current definitions of the valid
“product groups,” though there is
no guarantee of this, nor a procedure to ensure it.
The Adaptive Enterprise combines the benefits of both the
Standardized and Decentralized
Enterprise without their drawbacks. It enjoys the ‘visibility’
of a standardized approach in
that information from across the organization can be viewed
from any perspective at a global
or regional level. It also provides the organization with
‘flexibility’ when it needs to react to
internal or external change, as local units have the freedom
to use solutions that enable
them to perform at peak efficiency.
Indeed, a successful Adaptive Enterprise will recognize
the importance of regional and local
distinctiveness and put in place systems that meet these
specific information needs as well
as the global requirement. The challenge is to set up and
maintain such systems efficiently
both
in time and cost terms.
Getting
Started
The
perceived drawback to the Adaptive Enterprise as a concept
is that it can appear to be
a
very long and xpensive strategy to undertake before benefits
are realized. However, a
project-based
start to the process will pay immediate benefits while building
a model which
can
evolve into an enterprise-wide strategy. In other words,
companies are advised to ‘Think
Big,
Start Small, Evolve Smart.’
Think
Big - The CIO, or other business champion, sees integrated
information as a core asset
and
source of competitive advantage and envisions how this information
could be managed
better
for a more accurate, real-time view of business performance.
The CIO will have seen a
proliferation
of data warehouses or the implementation of new operational
systems created
for
specific needs, such as market segment analysis or customer
account management,
without
any central co-ordination or benefit to the organization
as a whole.
With
the Adaptive Enterprise approach, however, all existing
investments are integrated at
an
information level to form an enhanced global view that can
withstand change.
Many
of our global customers address their enterprise-wide information
integration strategy
by
the application of an adaptive information architecture
containing the following three key
components:
Creation
of a ‘next generation’ data warehouse that has
a non-rigid design that can
accommodate change for a country or large region. This flexible
warehouse will enable
the vertical integration of information held in disparate
operational systems through to
business intelligence reporting. It will also have sophisticated
‘beyond OLAP’ business
modeling capabilities to provide multiple perspectives of
the information.
· Separate management of “transaction”
(static) data and “reference” (business
context) data as a fundamental part of the next generation
data warehouse strategy
to enable the horizontal integration of reference data across
disparate operational
systems. This procedure enables the comparison of ‘like’
for ‘like’ across the
operational systems.
· If the company has more than one ‘next generation’
data warehouse, the warehouses
are then federated ‘pyramid fashion,’ with country
warehouses linked into a top-level
warehouse at a contextual level. This structure enables
simultaneous global and local
reporting formats in styles that suit each level. All warehouses
in this structure are
interlinked to share information.
Unlike traditional data warehousing solutions, these three
components enable an organization
to build up a picture - during business change - of key
business entities such as customers,
products and suppliers across disparate systems while allowing
local units to operate as
market requirements dictate.
Traditional data warehouses are rarely built to accommodate
change rapidly due to their rigid
schemas. If the company reorganizes its product range, channel
strategy or key account
process, the data concerning these items becomes obsolete
until the hierarchies are
reorganized.
In addition, traditional data warehouses do not treat transaction
data separately from
business reference data. This means that when changes in
the structure of source systems
for the data warehouse occur, ‘like’ is no longer
being compared with ‘like.’ In next generation
data warehousing, the ability to separate transaction data
from reference data with a centra
reference data repository ensures that, whatever changes,
‘like’ is always compared with
‘like,’ and data is not being overwritten. This
ensures that management can have confidence
in the accuracy of the information as well as get the right
data quickly into their business
models to make fast, effective decisions.
The management of reference data is now a key component
of an enterprise-wide
information management strategy, which encompasses housing
and mapping the
‘vocabularies’ of all the operating units and
a single resultant view of how entities such as
customers, suppliers and products are described. The same
generic product might be
described in very different ways in two different operational
systems but the reference data
repository understands that they are the same.
Some organizations have researched extensively all the differing
descriptions of these items
within every single business and created a central database
that recognizes differing local
descriptions but stores them as they really are, stripped
of local customization. This means
that any changes to these items can be fed out to the local
data warehouses whenever
anything changes – yet the local operations can continue
to code and view the information
according to their individual preferences.
With federated data warehousing, the specific requirements
of each region are catered for at
the regional level with core information being fed into
the global data warehouse for a toplevel
view. This allows full visibility and flexibility across
the enterprise.
Start Small – Any IT project needs to have a very
clear and fast return-on-investment if it is
to gain executive sign-off - and this is also true in the
case of the Adaptive Enterprise
approach. For many corporations, two critical areas stand
out as having an immediate need
for global information management, while requiring local
account management to continue:
supplier and customer management. Both areas represent untapped
potential for value
creation if information to support initiatives in each area
is integrated for analysis across
diverse systems.
For example, a manufacturing leader with a multi-billion
dollar turnover has started with a
global supply chain project which aims to give its hundreds
of procurement managers
worldwide a holistic view of the corporation’s supplier
relationships. The executives can view
information drawn from all the systems that contain supplier
information in one unified view
that adapts to change. Everyone in the organization will
have the ability, looking at the
supplier relationship from any perspective, to create their
own reports and to model new
approaches.
In this case a reference data ‘repository’ drives
all the data warehouses around the business,
ensuring that the definition of key business information
is the same in all systems. The
starting point for this kind of activity is a data modeling
exercise where the definition of how
products, suppliers and contracts are described and collated.
This is a resource-intensive,
but one-time, process.
Evolve Smart - Building the Adaptive Enterprise can be compared
to the construction of a
jigsaw. The initial projects may be situated in different
parts of the organization to address
different problems. The most important criteria for the
Adaptive Enterprise approach is that
they demonstrate significant contribution to business performance
through cost-savings
and/or revenue generation opportunities.
The
same worldwide manufacturer, previously discussed, is already
planning how the
principles
and processes developed for the initial ‘small’
project can be applied to other
functions
within the business. Through orchestrated word-of-mouth
across the organization,
the
potential of the Adaptive Enterprise approach is being discussed
and fed into future
strategies
with the expectation that the adaptive information within
the business will
eventually
encompass everything they do.
Conclusion
CIOs
contemplating better ways to manage information should continue
to focus on distinct
areas
that ave the potential to deliver significant margin improvement.
Invariably these
areas
will have been the focus of prior, unsuccessful data warehouse-related
projects, so
the
participants must be open to new approaches. While these
tactical projects are
implemented
on a quarterly cycle, the organization should also work
toward achieving the
larger
goal of leveraging adaptive business information as a strategic
asset of the company.
By
adopting the Adaptive Enterprise approach, for the first
time executives can move beyond
management
of the ‘status quo’ and start to manage the
global business with the same
responsiveness
and effectiveness that they managed smaller, local businesses
earlier in their
careers.
All the information containing the learning and experience
from across business
units
worldwide can be harnessed, enabling global business decision-makers
to plan and actfaster
and better than the competition.
Charles
Manly is chief operating officer of Kalido Ltd., provider
of information integration
software
to support enterprise management of complex change such
as mergers,acquisitions,
reorganization and globalization. He can be reached on
charles.manly@kalido.com. |
