• home
• about
• services
• partnering
• publications
• archive
• copyright
• legal notice
• news

White papers

E-pragma - From Business Capability to Experience Model | Xpragma white paper

Xpragma white paper
July 15, 1999
by Marc Buyens (@mbuyens), Xpragma
marc.buyens@xpragma.com
url: http://www.xpragma.com/epragma_wp.php
Download aa a PDF-file

E-pragma is not a specific concept, neither is it a new methodology. It simply is a focus area for the activities of our company. In essence it is the deployment of Enterprise Application Integration (EAI) approaches in an e-commerce or e-business context. More specifically, we have a special interest for the integration of ERP solutions into such environment.

Wave one

In the past years we have seen a number of important IT-evolutions of which we would like to highlight the following two:

• The first one is the success and the explosive growth of the Internet with all its related usage patterns such as Intra- and Extranets, web portals, application servers, etc. The Internet has introduced a series of business capabilities, new opportunities, but also challenges that are unseen before. However, business usage of the Internet was not yet the mainstream movement.
• A second evolution was the enormous success of ERP-solutions. To some extent driven by Euro and Y2K necessities, ERP has become the de-facto approach for most core business applications. Be it that mixed feelings do exist regarding implementation complexity and ROI, overall ERP is now seen as an approach that cannot be avoided. Currently, ERP-growth rates are slowing down and this for a number of reasons: saturation of the market, end-of-the-year freeze, etc. Consequently, ERP-vendors are looking for opportunities to extend their portfolio of solutions.

Until now, these two worlds have lived more or less separately. They served very different purposes and had little to do with each other. Apart from Oracle, none of the major ERP players has its solutions Internet- or browser-enabled, although most vendors are moving towards it. On the customer side, there are a number of companies that already did integrate Internet storefronts with their ERP back-end applications, but it still is a minority. However, the momentum is building up.

Now that we approach the new millennium, the next wave of challenges awaits us. In this phase, e-Business (1) and the integration of ERP solutions into this environment will be a major focus area, both for customers and IT-vendors.

Wave two

There is a lot of hype around the Internet and the usage of this medium as a real business platform. Some people do question the viability of this approach as they claim that the stock value of most Internet-only companies is not a fair representation of their real business results. Granted. However, there is already sufficient proof that the web will be much more than a simple play-area for IT-freaks. The web, in all its forms, will become the real battleground where successful and less successful companies will be separated.

The purpose of this paper is not to convince you of this. There is sufficient literature available in case you need more argumentation. For us, it simply is a fact that various forms of Internet-related e-Commerce will dominate the business landscape for the coming years. Therefore, companies that want to be successful in the next century will have to master the principles of this paradigm, its behaviour patterns, its marketing requirements, its technology and start using all of this to their advantage. Unfortunately, unless you are a new start-up company, you will have to achieve all of this, building up these capabilities on top of your existing business environment and the infrastructure that supports it.

The challenge that awaits you

e-Enabling your business is easier said than done. Indeed, whatever the technological approach used (applications servers etc.), somewhere the e-Business solution will have to link to your company's basic capabilities: the back-end processing, the legacy applications and, as most companies use them now, the ERP solutions.

This will be a challenging task as e-Business and ERP are two completely different worlds, each with their own rules. While both the Internet and the ERP wave have lived together for several years, their characteristics are fundamentally different. The following table gives an overview some of the differences.

E-business versus ERP characteristics

	e-Business	ERP
Mission	e-Business is all about innovation; Creating new opportunities; New types of business; Doing new things or doing things in a fundamentally different way.	The mission of ERP, certainly in the beginning, was about cost reduction and productivity; Doing repetitive tasks in a more performant way; Avoiding duplication of effort; Improving the quality of the process; Avoiding the ongoing maintenance cost of home-developed applications; Mastering the Euro and Y2K problems.
Focus	New opportunities; New business models; Taking an approach that differentiates your company from the traditional ones; Niche markets; Front-end oriented; Business-to-consumer	Traditional business; Well-known business processes; Efficiency; Back-end oriented; Internal only or business-to-business
Approach	Usage of (b)leading edge technology; Innovation; New media; New distribution models; Disintermediation	Established technology; Re-engineering of existing business processes; Automation of repetitive, commodity tasks; Better integration of these tasks; Standards
Speed of deployment	Rapid deployment; Try to get first to the market; Tactical decisions; Home developed or with the help of small start-ups	Complex; Lengthy implementation cycles; Long-term strategic decisions; Formal planning; Implemented with the help of large system integrators
Spread	Often single-department initiatives	Most often company-wide
Change mentality	Change oriented, although not always organised for it; Flexibility; Try-and-error	Rigid; Stability; Difficult to change after implementation; Formal change procedures
Tactical vs. Strategic	Is seen by most larger companies as a tactical exercise, but really plays in the strategic initiatives segment	Is seen by most larger companies as a strategic exercise, but in essence handles mostly the transactional segment, automating commodity and often non-strategic tasks
Control	Always inter-company or business-to-consumer, with less control of the business process Customer imposes the business process	Mostly intra-company with full control of the business process Company imposes the business process
Risk	High	Should have been low, but reality shows that most implementations do have serious overruns in both time and budget.
Business processes	New business processes	Well-known business processes; Repetitive tasks
Usage patterns	24x7x365; International Company-to-any	Most often, traditional usage patterns; More limited international aspects; Company-to-some
Customer	Experience focused; Customer is part of the process; New and unknown customers	Business process focused; Customer is mostly external to the process; Mostly known customers

 

We agree that these statements are rather black-or-white. There are of course a number of aspects where e-Business and ERP solutions are closer to each other. But the purpose here is to highlight differences, especially those that have the potential to cause problems while integrating the two worlds. And as you can see, there are enough differences to have the guarantee that not only technology, but also organisational change, politics, cultural conflicts, etc. will complicate the integration work.

Working towards integration

So, knowing that the various forms of e-Business will be essential requirements for the coming years, how can companies move towards it? What is needed to fit the two worlds together?

In our discussions, we use the following diagram to depict the integration process.

Capabilities

The capability layer (the top layer on this picture) represents the basic capabilities of the company. These can be the design of a new product, the production of such product, the sale and distribution of it. Various (IT) technologies will be used to support these capabilities. The data objects that are the representation of these capabilities are reasonably well known, shared by multiple companies. Often standard definitions exist for each specific industry segment.

Capabilities represent the stable part of the company. They are the result of the strategic choices the company has made in the past: the industry segment they are in; the type of business; the product mix; the manufacturing locations; the distribution channels; etc. Capabilities are the things that cannot be readily changed or replaced if changing business needs arise.

ERP solutions are typical technologies that provide various levels of IT application support for most of the basic capabilities. By also ensuring the data integration between most of these basic capabilities, they also implement part of the next layer: the business process layer.

Business Processes

The business process layer depicts the assembly of basic capabilities to deliver "value". They are the procedures to deliver the basic capabilities to the market in such a way that the company can achieve its business objectives. They represent the effectiveness of the company, its productivity.

The business processes represent the internal end-to-end process; the execution of the various steps as the company itself experiences them. The view of the customer (see next layer) on this process might be completely different.

For most industries, the business processes are also well known. Therefore, ERP solutions can successfully support most of these processes. However, here we already get into the first problems. No single-vendor ERP solution does support all business process requirements, even not within a single industry segment. Therefore, most companies start using complementary solutions such as CRM (Customer Relationship Management), SCM (Supply Chain Management), etc. to cover the remaining part.

In addition, as the business processes represent the effectiveness and the productivity of the company, they have strategic value. Many companies will try to implement business processes that give them some differentiation from the competition. Because of this, they face the risk that standard ERP-solutions will only provide incomplete support for this.

Business processes represent the agile part of the company. They represent the capability of the company to change its business approach, without having the need to alter the long-term strategic choices the company has made.

Business processes must be easy to change for three reasons:

• To be able to quickly deliver new or changing experience models (see hereafter) for changing market needs;
• To be able to deliver personalised experience models;
• To be able to re-adjust the business processes so that the experience model is delivered in the most productive, the most cost-effective way.

Experience Models

The experience model layer represents the view of the customer on his relationship with the company. It is, if you want, the customer-visible part of the business process. More important, it is the customer's personalised, unique view on the business process.

The customer's view on the process might be very simplistic: he can select a book via his web browser, order it and agree on payment via credit card, receive confirmation and shipment notices via e-mail and get delivery of the book at home within 5 days.

For the customer, this is the business process. The reality behind might be an extremely complex process, involving multiple companies, locations, etc. As such, the experience model simply is the externalisation of the internal business process. These visible aspects are the only things that matter for the customer. He can even have the experience of a high-quality, rapid, fully automated service, while most of the internal business process still is handled manually.

It is important to understand that the experience model is the only thing the company can influence to increase revenue, increase market share or improve its "image". It is the only thing that is visible for (experienced by) the customer. The business processes that support the experience can of course be optimised so that they become more productive, less costly, but in itself they do not influence the view of the customer. Therefore, companies must be organised in such a way that they can easily change the experience model of the customer if the need arises.

Application Integration

This is what it is all about. If you do want to offer the customer above (the one who buys the book) the experience of delivery within 3 days, what do you have to change in your business processes? Is this requirement so fundamental that you have to develop a new capability (e.g. a new distribution centre), or is it possible to use other techniques to re-model the business process so that you can deliver this experience?

This is where EAI plays its role. Of course, EAI must then be able to achieve its basic mission and adhere to the definition we described it in our Status Report on Application Integration (2):

EAI is the ongoing process of putting an IT infrastructure in place, so that a logical environment is created that allows business people to easily deploy new or changing business processes that rely on IT.

As we said above, the customer's experience can be quite different from the reality of the business processes. Some companies really provide the experience of a fully automated, high quality process, while most of the internal work still is handled manually.

Of course, there is reality. In theory, you might be able to deliver such superior experience model with all manual business processes. The experience requirements will however force you towards process automation, workflow, etc. And this is where application integration comes into the picture. In essence, application integration is the thing that facilitates the change of business processes. It does so by providing techniques that allows you to change the flow of the business process, it solves incompatibilities between basic capabilities, and it removes an important part of the technical complexity. Doing so, it enables approaches whereby, based upon the same basic capabilities, new or better forms of experience models can be delivered to the customer, in a cost-effective way.

As we have discussed in other papers, technological changes in business processes will often have to go hand-in-hand with requirements for organisational change, resolving aspects of cultural conflicts, management, organisational learning, etc. We have all seen the movements of TQM (Total Quality management), BPR (Business Process Reengineering), BPI (Business Process Improvement/Innovation), etc. As increased interest will grow for the application integration paradigm, perhaps that some consultant firm will come up with a new EOI (Enterprise Organisational Integration) approach that has to support this.

Competing with the start-ups

Beware, there is the growing group of start-up companies that build their e-Business strategy from scratch. Doing so, they select the technical solution that is most adapted to this strategy. This approach allows them to move fast, much faster than most of the established companies can do. In various domains, this will allow them to conquer leading positions.

Whether they can keep such positions is another question. As their success grows, so grows the complexity of their challenge. If their initial technological and organisational choices do not scale up to their success, then they will face problems similar to the ones experienced by the traditional companies.

There is however one big difference. By necessity, traditional companies will have to work slowly from the capability level towards the experience level, changing and adapting their infrastructure and organisation. This will be a painful process, but the advantage is that such approach will typically take into account requirements for growth, scalability, etc.

Start-ups typically start immediately at the experience level, but of course for a smaller business environment. However, if successful, scalability growth pains might seriously damage the experience feeling. While working towards the experience level is by necessity a difficult and lengthy process, loosing the customer's experience is very easy. Re-conquering the experience might be impossible. So also the start-ups do face serious challenges.

Although the Internet scene is still dominated by the successes of these start-ups, it is for sure that large corporations are currently developing and deploying major changes to their IT infrastructure and associated capability for business process change. Most of them feel confident that, once this preparation work is finished, they will be in a position to rapidly wipe out the dominating e-Business position of some of their smaller competitors. Whether this will become the reality is still unseen. But that we will live a number of interesting e-Business battles in the coming years is guaranteed.

Categories: E-business strategy

About the author

Marc Buyens is analyst, management consultant and owner of Xpragma.
Marc started Xpragma in 1999 after a 20+ years career in the IT sector. Today, he provides advice, training and mentoring services focusing on the intersection of technological evolution, organisational change and business strategy: a messy world of unfulfilled promises.

http://www.facebook.com/marcb254
http://www.linkedin.com/in/marcbuyens
http://www.twitter.com/mbuyens