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8/12/2019 SETLabs Briefings Enterprise Agility
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SETLabs BriefingsVOL 4 NO 1
BUSINESS INNOVATION through TECHNOLOGY
July - Sep 2006
PLATFORMS FORENTERPRISE AGILITY
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SETLabs Br i efi ngs
Advisor y Board
Aveejeet Pali t
Pr incipal Solu tions M anager,
System I ntegrati on Practice
Deependra Moi tr a
Associate Vi ce President,
Software Engineeri ng &Technology L abs
Gaur av Rastogi
Associate Vi ce President,
Global Sales Effecti veness
George Eby Mathew
Pr incipal Researcher,
Software Engineeri ng &
Technology L abs
Kochikar V P
Associate Vi ce President,
Education & Research Uni t
Raj Joshi
M anaging Di rector,
I nfosys Consul ti ng I nc.
Ranganath M
Vi ce President & Head,
Domain Competency Group
Sri nivas Uppaluri
Associate Vice President & Head,
Global M arketing
Subu Gopar aju
Vi ce President & Head,
Software Engineeri ng &
Technology L abs
I cannot think of a better example for agility than this one from thethresholds of Pepsicos KFC. During the outbreak of the Avian flu in Asia two yearsago, KFC, known the world over for its vintage chicken recipes, adapted to sellingfish in Vietnam and a few other countries. Or for that matter, consider erstwhile HPCEO Carly Fiorinas favourite example that HPs printer business can plug in orplug out a supplier in hours compared to weeks earlier. That is agility requiringorganizations not only to change their supply chains at the blink of an eye but alsochange almost everything about the way it does business in response to anunanticipated environmental factor.
While not many corporations can successfully adapt to adverse
environmental conditions, organizations that do so very well have control over theirbusiness that lends them the ability to conform (adaptability) to a changedenvironment and the ability to change course (agility) in challenging environments.
If not for a harsh environment, more and more companies are finding thatcranking a good business model is no longer paying off. Many would recall formerXerox CEO Paul Allaire famous conference call of Wall Street analysts when he said:We have an unsustainable business model. A February edition of Fortune Magazinethis year listed Microsoft, Sony, Verizon, Wal-Mart and many more stalwarts ofyesteryears facing this challenge today and called it one of the biggest challenges forglobal corporations today. Unless enterprise agility is designed into organizationalDNA, reinventing their outmoded business models or responding to environmentalchallenges is a pipedream.
One thing that keeps technologists, researchers and practitioners awake atnight is the quest to find out how IT can help build platforms for enterprise agility pretty much the theme of this issue of SETLabs Briefings. In fact Davenport, Hammerand Champy strongly argue that information technology must be seen as one of themajor enablers of organizational change rather than a tool to implement businessprocesses. IT minimizes business risks by alerting decision makers throughknowledge transport and control mechanisms. IT helps both in the speed and qualityof decision making an asset for agile enterprises. So we cover several of thesethemes in this issue.
One of our articles look at how web services and shared data servicesimprove the quality of decision making in the context of an agile organization. Wecover research on business process management that bridges the gap betweenorchestration of business processes on the IT DNA powering processes to ride on
inherent flexibility that IT provides. Examples of agile platforms in banking andutilities add to the vertical flavors. We felt incomplete without devoting two articlesto software engineering process, project management as well as process design inthe agility context.
We are indeed grateful to Prof Venkat Ramaswamy from the Ross Schoolof business, University of Michigan, for contributing an extra-ordinary article onbuilding co creation platforms for value creation a distinct example of how IT canbe used as a platform to partner with customers to create value for the firm in anever changing canvas of consumer expectations.
George Eby Mathew
Editor
Agility as an edge
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July - Sep 2006
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Tutorial: Adopting Agile Methodologies of Software DevelopmentBy Nayan Jyoti Kar
Established paradigms of software development are being challenged by agile methodologieswhich are increasingly gaining mindshare. The popularity of these methodologies are based on thefact that the development process espouse values such as simplici ty, commication amongdevelopers, and constant feedback from the user community.
Perspective: Business Process Management: Facilitating Enterprise
AgilityBy Akash Saurav Das, Sandeep Gaikwad & Vi vek RautBridging the gap between business and technology landscapes is a cri tical, step to align businessrequirements with information technology infrastructure. An effective enterprise BPMparadigm does just that, and in the process enhances agility.
Trends: Towards Enterprise Agility through Effective DecisionMakingBy Sri ram Anand & Jai GaneshFacilitating the executive decision making process through innovative use of emergingtechnologies, pays rich dividends. T he authors propose an Enterprise Digital Dashboardarchitecture framework, which builds on the concepts of Web Services and shared data services.
Third Angle: Co-Creating Experiences of Value with CustomersBy Venkat Ramaswamy
The interactive space between a firm and its customers has the potential to create businessvalue. The basis of value for the customer shifts from a physical product to the total co-creationexperience. Prof. Venkat Ramaswamy of the University of Michigan, builds a compelling casefor building experience co-creation plat forms.
Viewpoint: Enhancing the Agility for Customer Information Systemin UtilitiesBy Ananth Chandramouli , Cli fton M uhammad & Vivek
Customer I nformation Systems (CIS) play a critical part in the service delivery chain in utili tycompanies. Managing these systems as their scope enlarges is proving to be a herculean task.
This viewpoint builds a case for enhancing the agility of CIS by focusing on a betterunderstanding of technology and business drivers, as well as leveraging new technologies.
Viewpoint: How Strategic is building an Agile Enterprise ?
By Vani Vangala
The ability to respond quickly to changing business conditions is critical for enterprises today.The author argues that enterprises need to become agile for improved performance andlonger life expectancy by treading a multi-fold path to agili ty.
Practitioners View: Strategic Agility Planning for BanksBy Prashant Gupta & Prashant Tewari
Robustness and scalability is the key to agile processes in banks. Drawing on their vastexperience in designing systems for some of the worlds largest banks, the authors propose anagil ity framework, which will enable banks to implement agility enabling strategies.
Tutorial: Agility in Software Engineering Processes
By Shaur ya Vardhan GargWri ting enterprise software using agile processes helps speed up the software developmentlifecycle. T he key, the author opines, is to replace processes and tools with individuals andinteractions, and also replace comprehensive documentation with working software.
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.
.
Companies must learn to build platforms that enable
experience co-creation processes across the portfolio of experience
environments. I n thi s view, I T platforms become a strategic
enabler of experience co-creation processes. Experience co-
creation platforms are about creating the pre-conditions to
accommodate a wide var iati on in individual ized experiences
that are contextual and granular.
Venkat Ramaswamy, PhD
Director of the Center for Experience
Co-Creation, Ross School of Business,
University of Michigan.
One of the challenges that organizations face in their journey
towards agil i ty is their inabi l i ty to track change drivers
proactively. I t becomes even more di ff icult for the
organization to do so i f they do not have systems, processes
and the data to identi fy and make judgments on the changes
occur r ing in their environment.
Prashant Gupta
Senior Consultant
Banking Domain Competency Group
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Adopting Agile Methodologiesof Software Development
Agile methodologies are chal lenging established
paradigms of software development.
By Nayan Jyoti Kar
SETLabs BriefingsVOL 4 NO 1
July - Sep 2006
Agility in the business context is the ability of an enterprise to be proactive to changeshappening in the environment in order to
maximize the benefits. The key factors that determine
the degree of agility of an enterprise are:
Level of awareness Keeping abreast of the
changes and being prepared for the same.
Innovation Quotient (I.Q.) The
percentage of those people whose ideas
finally make it into practice [Skyrme,
David 1998].
AGILITY: PROACTIVE VS REACTIVE
Being proactive has a definite edge over being
reactive. Proactive means setting the pace forothers to catch-up and reactive is exactly the
opposite. Reactive enterprises often find
themselves scampering to meet the challenges set
by an innovative and aware enterprise.
The level of awareness and the I.Q.
would determine whether an enterprise is
proactive or reactive. The relationship between
awareness, I.Q. and agility determine the state
of an enterprise (Figure 1).
As the level of Awareness and I.Q.
increases, the Agility also increases making the
enterprise more proactive.
SIMPLE STEPS TO AGILITY
Agility can be attained using a simple two-step
approach:
1. Handle external factors
2. Formulate Internal Policies
STEP 1: HANDLE EXTERNAL FACTORS
The external environment for an enterprise
includes all the factors that directly or indirectly
impact business operations (Figure 2). Some of
these factors are:Market: The market conditions are generally
volatile and change dramatically. The reasons for
change might be totally unrelated to the industry.
An Agile Enterprise is not caught
unawares by the rapidly changing market
scenario. It embraces the change and devises
ways to use it to its own advantage. Sometimes,
an Agile Enterprise introduces innovations that
change the market scenario. This results in the
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realignment of the business plans of its
competitors.
Customer: The customers role has gone through
rapid changes in recent times from being a mere
end-user to playing a more active role in the
development process for the product leading to
co-creation of value.
An Agile Enterprise welcomes the
customer feedback and tries to incorporate them
in the product. It also strives to foresee some of
the changing business needs and provides
suggestions for the same to the customer. This
adds value to provider-customer relationship
and opens new avenues for future business.
Government Regulations: New laws could beenacted or old ones modified over time that may
impact the business. Usually, such changes are
notified well in advance by the regulatory
authorities. Awareness is the key with respect to
this factor.
Natural Calamities: Natural calamities can be
dealt with by having a business continuity plan
and appropriate disaster recovery initiatives to
prevent a complete shutdown of operations and
ensure that critical activities can keep on running
in face of such a situation.
STEP 2: FORMULATE INTERNAL POLICIES
The Business Enterprise is a synergy of various
smaller units performing different functions.
Agility at the enterprise level can be achieved
when all these units themselves become
Agile. This can be achieved by formulating
policies to govern the functions of the different
units.
It is very important to formulate a
flexible policy that evolves over time and a policy
that acts as an enabler and not as a limiting factor.There are various agile methodologies
that provide a framework for formulation of such
policies. These methodologies are primarily
developed keeping software development as
focus. They can be applied to other enterprises
with minor modifications. It is important to note
that there is no best-fit methodology for an
enterprise.
BUSINESSENTERPRISE
MARKET
CUSTOMERS
GOVT.REGULATION
NATURE
Figure 2.Source:
External Factors Influencing an EnterpriseInfosys Research
AWARENESS & I.Q.
AGILITY
Figure 1:Relationship between Awareness, I.Q. and AgilitySource:Infosys Research
REACTIVE
PROACTIVE
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POPULAR AGILE METHODOLOGIES
Extreme Programming (XP)
Extreme programming was developed
by Kent Beck when he introduced it in his book
Extreme Programming Explained. It has been
one of the most popular agile methodologies
owing to its simplicity.
Extreme Programming is a discipline
of software development based on values of
simplicity, communication, feedback, and
courage. It works by bringing the whole team
together in the presence of simple practices, with
enough feedback to enable the team to see where
they are and to tune the practices to their unique
situation. [Jeffries, Ron 2001]
The core XP practices which form the
heart of this methodology are (Figure 3):
Whole Team: The team comprises of all the
contributors - the development team (including
a lead), the customer and the business analysts.
The team together determines
What needs to be done?
How?
What is the time frame?
This collective activity ensures that future efforts
would be in the right direction.
Planning Game Planning game lays the outline
for the development of the product. It is a
characteristic of almost all Agile methodologies.
The activities involved are:
Short iterations of 3 weeks
Frequent Plan updates
Story assignment (a story is a
particular requirement displayed on a 3
X 5 card)
Small Releases Frequent releases with partial
functionality are delivered. This enables thecustomer to do an interim review of the product
and suggest changes, if required.
Every release should be as small as
possible, containing the most valuable business
requirements. [Beck, Kent 2000]
Customer Tests:There are a number of customer-
defined tests listed during the whole team
meeting phase. The purpose of these tests is to
validate each release to the customer.
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Simple Design:A design is simple if it is focused
only on the current functionality and doesnt
consider potential future functionalities.
If you believe that the future is
uncertain, and you believe that you can cheaply
change your mind, then putting in functionalityon speculation is crazy. Put in what you need
when you need it. [Beck, Kent 2000]
Pair Programming: Pair programming involves
two people working together on development
of a single program. This leads to prevention
and early detection of defects by peer
collaboration.
Pair programming is a dialogue
between two people trying to simultaneously
program and understand how to program
better. [Beck, Kent 2000]
Test-Driven Development:This step involves
developing unit tests in short cycles. At the time
of release, all these tests are run to check program
reliability and each of these tests must pass for a
successful release.
Refactoring:A successful iterative development
process has a good design as the foundation. In
XP, the process of continuous design
improvement is called Refactoring.
The Refactoring process focuses on
removal of duplication (a sure sign of poor
design), and on increasing the cohesion of the
code while lowering coupling. [Jeffries, Ron
2001]
Continuous Integration: XP stresses on the
integration of the units as soon as they are
developed. Integration is never left as the last task.
Late integration invariably complicates the
process and increases defect injection rate.
SCRUM
The Scrum methodology gets its name from the
huddle formed by rugby players to clash with
the players from opposition. It was developed
by Ken Schwaber and Jeff Sutherland. The
primary thought behind this methodology is that
the world is totally unpredictable and hence, it
is impossible to accurately plan for the future.
Scrum relies on self-commitment, self-
organization, and emergence rather thanauthoritarian measures. [Schwaber, Ken 1996]
The Scrum methodology revolves around short
30-day iteration called a Sprint (Figure 4). The
Scrum framework is divided into three stages:
Pre-Sprint: The Pre-Sprint stage involves Sprint
planning. This is a process of creating a list of
features to be incorporated in the system. The
owner determines which feature is to be taken
up in the next Sprint. A Sprint Goal is also
FeedbackLoop
Market Customer
Agile Enterpr ise
Agilit y Roadmap
Core Team
BusinessEnablers
(HR, F&A,CCD, FAC)
BusinessUnits
(IHL, APAC,EMEA)
AgileMethodologies
(XP,Scrum)
Figure 5.Source:
A Generalized Approach to AgilityInfosys Research
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established which provides a purpose to the team
to achieve.
Sprint: Sprint stage leads to the development of
the software. The feature picked up from the list
is implemented in a 30-day cycle. There is a daily
Scrum meeting which improves the visibility of
each persons work. Changes to any feature
during a Sprint are not allowed, except under
extraordinary circumstances.
Post-Sprint: This stage involves customer
demonstration, progress review and technical
review. This stage ensures that the customer
and the team have an early preview to the
system.
At the end of this stage, the entire Scrum
process is repeated.
AGILITY - A GENERALIZED APPROACH
While there are factors and methodologies
contributing to agility, a generalized
methodology can also be adopted to achieve
agility (Figure 5).
A few of the major participant factors in this
approach are:
Core Team: The Core Team takes inputs from
external factors such as market conditions, and
customers etc, to formulate an Agility
Roadmap. This team comprises of selected
people from all units.
Agility Roadmap: The Agility Roadmap is a
framework set by the Core Team for the various
units of the enterprise. It consists of a set ofguidelines which aim to assist the enterprise in
achieving the ultimate goal Agility. The
important point is that the guidelines are not
rigid and can be changed by the target units.
Business Units (BUs):The Enterprise is divided
into various Business Units that have a certain
degree of autonomy. This division could be on
the lines of geography or types of activities. A
BU can be thought of as a mini enterprise
within an enterprise. An Agile BU, on its part,
forms Core Teams at BU level that are responsible
for finding ways to maneuver on the Road to
Agility set by the Enterprise-level Core Team. It
promotes the use of Agile Methodologies (XP, or
Scrum) in all its processes and increases
interaction with customers. An agile BU also
improves or changes the Agility Roadmap and
informs the Enterprise-level core team of the
changes.
Business Enablers: The Business Enablers are the
units that help in smooth operations of the BUs.
Human Resources (HR), Finance & Accounts
(F&A), and so on fall into this category. The
Agility Roadmap sets certain goals for the
Business Enablers which complements the goals
set for the BUs.
Customer:Customer in this approach should be
one who is interested and involved in the product
development. Customer interaction at every level
is an important aspect of an Agile Enterprise. This
not only gives higher visibility of the process to
the customer, but also reduces the inherent
unpredictability of the planning and development
process. However, it should be noted that the onus
is on the Enterprise to appraise the customer of the
progress and get his feedback.
Feedback Loop:The Feedback Loop ensures that
communication channel between Customers &
BUs, Core Team & Business Enablers and Core
Team & BUs is always open.
Agile Methodologies:The functioning of BUsand Business Enabler units are aided by the Agile
Methodologies such as XP and Scrum. The units
decide which methodology would best fit their
goals on the Agility Roadmap.
AGILITY IN ACTION A CASE STUDY
Consider the case of a mid-size CMM Level 5 IT
solutions company that has bagged an important
contract from a telecommunication major.
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The Background: A Senior Project Manager of
the IT company is given the overall charge of the
assignment. The project is very important as it
could propel the company in to a big league.
The Problem: The task was to port the billing
systems of the telecommunication company to a
new technology platform with some
enhancements. The existing billing system was
developed on an old proprietary technology,
which will cease to be supported in the near
future. New regulations have also come into
effect that require certain changes to be made to
the system. Both the factors make adherence to
the timelines sacrosanct and strict penalties are
proposed in case of any deviation. The staffing
requirements are intimated as soon as the
proposal is accepted and the requirements
collection phase is started in an earnest. It was
noticed later that a major error in resource
estimation had crept in.
Planned Quick Fix: A project that is bound bystrict timelines simply cannot afford to be short
on trained manpower. The project manager,
therefore, took a two-pronged approach to tackle
this issue:
Recruit trained technical experts
Train the internal resources in tandem
with the requirement collection phase.
The Crisis: But the project went off the track as
the scheduling plan seemed to be in complete
disarray. The requirement collection team is yet
to finalize the requirements and the training plan
was behind schedule and suddenly
compounding the situation was a dearth of
trained people in the new technology. While
initiating corrective measures on the resources
front, the senior project manager dispatched a
manager onsite to gauge the situation there.
The Analysis: A thorough study of the
requirements gathering methods brought some
startling facts to light. The requirements
collection team didnt have a single point of
contact with the client. They were contacted by
multiple people with new ideas on a regular basis
and were swamped with changing requirements
and new requests. Hence, most of the time was
utilized in documentation rather than the actual
work.
The Solution: After a careful consideration of
the situation, a few changes are initiated to instill
agility and solve the crisis. These changes areaimed not only at solving the issue at hand but
preventing recurrence of such issues in the
future.
The Training department is given a
directive to formulate a policy of in-house
training on latest technologies. The recruitment
policy is modified as it needs to be driven by
certain degree of foresight. If there is a shortfall
of experts on a specific technology, a suitable
Examining requirements gathering methods will indicatethat most of the time is being utilized in documentation
rather than development!
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number should be recruited from outside. These
steps would make sure that there is no resource
crunch.
The requirements collection process is
streamlined. The client is requested to fix a
single point of contact for requirement changes
and new requirements. The projects which
have frequent requirement changes need to do
away with traditional steps of Software
Development Life Cycle. SCRUM methodology
can be used in such projects to prioritize
requirements.
A part of the requirements will be
frozen for a month. After a month, the client
would get a working prototype of the earlier
frozen requirements. Now, another set of
requirements would be taken up on priority
and this process of iterative development will
go on. The priority will be decided by the client.
The team is asked to document only the
absolutely necessary information. These steps
would ensure that priceless time is saved and
client would get a preview of the system long
before the final implementation.
The learning from this project forces the
organization to give a serious thought to Agile
Methodologies. A central co-ordination team is
formed to rollout an Agile strategy for the
future.
The Impact: Two months later, the IT project
team successfully delivered two working
prototypes with limited functionality to theclient. The client is thrilled by the quality of
work delivered. The final delivery is now on
schedule and Agility seems to have saved the
day for the IT company.
AGILITY MYTHS:
As is the case with any emerging trend, there are
many misconceptions about Agility. Some common
myths are
Agility is for small or mid-sized
enterprises only.
False:Agility is not a function of the size of
an enterprise. It demands grace of an expert
ballerina from a tiny mouse as well as a giant
elephant.
Agility means lightweight process, i.e.,
unstructured methods with little or no
documentation.
False: Lightweight signifies the ability of
the process to adapt to changes. Agile
methodologies do insist on minimal
documentation. The emphasis is on
documenting only what is necessary and
not on churning out stacks of irrelevant
documents.
CONCLUSION
Agility in Enterprises is not a modern fad. This is
the defining factor which would shape the
businesses of tomorrow.
The need to be innovative has never been
felt more acutely. This modern era of cut-throat
competition can be best exemplified by Darwins
Theory of Natural Selection, i.e., change or perish.
Those who embrace change and innovate are the
survivors. Others would just fade away. Therefore,
it is prudent for todays businesses to open their
eyes to this reality and start their journey on the
Agile Speedway.
REFERENCES1. The Future Of Competition: Co-creating
Unique Value With Customers, C. K.
Prahalad and Venkat Ramaswamy,
Harvard Business School Publishing, 2004
2. Agile Software Development Ecosystems,
Alistair Cockburn and Jim Highsmith,
Addison-Wesley, 2004
3. Extreme Programming Explained: Embrace
Change, Kent Beck, Addison-Wesley, 2000
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4. SCRUM Development Process, Ken
Schwaber, Paper presented at
OOPSL A95 , referenced from http://
www.controlchaos.com/old-site/
scrumwp.htm, accessed July 2005
5. Agile Software Development with
SCRUM, Ken Schwaber and Mike Beedle,
Prentice Hall, 2005
6. Scrum Log, Jeff Sutherlands Website at
http://jeffsutherland.com/scrum/
index.html, accessed July 2005
7. What is Extreme Programming?, Ron
J e f f r i e s W e b s i t e a t h t t p : / /
www.xprogramming.com/xpmag/
whatisxp.htm, November 2001
8. Creativity is not Innovation, David Skyrmes
Website at http://dev.skyrme.com/
updates/u17.htm#creativity, March 1998
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Today, success of any business dependslargely on its ability to adapt quickly tochanging market scenario. Failure to adapt to theuncertain business environment directly impacts
the Returns On Investments (ROI). It is therefore
important for enterprises to be able to withstand
changes in other words, be agile.
Agility, as a guiding principle, yields
measurable benefits because an agile enterprise
models the business processes and
organizational structure that facilitates
competent ROI. An agile enterprise in effect
translates into cost effectiveness, optimum
organizational efficiency and a comparatively
smaller time-to-market.
EFFECTIVE BUSINESS PROCESS
MANAGEMENT & AGILITY
A business process requires documentation and
is no longer an abstract concept. It is sometimes
prudent to screen technical complexities to
provide prospective customers and partners a
clear understanding of the requirements. The
need for an encoding mechanism that captures
the business processes in an effort to provide
flexibility across, and within, an enterprise hasfuelled the formulation of sound Business
Process Management (BPM) frameworks. BPM
enables enterprises to align their business
requirements with information technology
infrastructure; it bridges the gap between
business and technology landscapes. It helps
develop cross-functional business processes;
defines, automates, and controls business
activities as a whole that incorporates people,
processes and the systems.
BPM also helps enterprises keep track
of intermittent changes or modifications made to
the IT infrastructure without affecting cost,
operational efficiency and speed of response.
To address the various business process
issues and effectively implement them, a BPM
programme begins with identifying the business
process. The next step is to analyze and design
the respective process. People who carry out the
business processes then formulate business
SETLabs BriefingsVOL 4 NO 1
July - Sep 2006
Business Process Management:Facilitating Enterprise Agility
By Akash Saurav Das, Sandeep Gaikwad & Vivek Raut
BPM has taken a giant leap forward in
bridging the gap between business and
technology landscapes
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process rules domain specific rules that define
business policies, constraints, computations,
reasoning capabilities and various other aspects
of the organization. These business rules form
the foundation of effective decision-making. The
business rules are represented technically by the
IT organizations of enterprises. The business
processes can be interpreted by machines and run
on Business Process Machine Server (BPMS)
while process metrics are maintained for
monitoring and controlling the processes.
Specifications such as Business Process Query
Language (BPQL) have been developed by the
Business Process Management Initiative (BPMI)
to query the process state and process
specifications. The Repository that manages the
deployment of process also comes under the
scope of BPQL.
PERFORMANCE MANAGEMENT
Performance management is the essence of an
agile enterprise that helps maintain efficient
operations of the business processes. BPM also
provides a knowledge base that helps new users,
customers or partners to understand the flow of
business activities within an enterprise. This
provides consistency and time efficiency to
business processes. Used effectively,
performance management and knowledge base
can help cut down the costs and improve
efficiency.BPM has often proved to be useful in
reducing the average timeline for a project by
making the business process-centric. BPM
templates are used in different market
verticals. The advantage that these templates
offer is manifold.Along with saving a
considerable amount of time, they also reduce
paper processing.and provide immediate access
to critical sections.
With reusability and rapid prototyping
as its hallmarks, BPM helps organizations to
maintain their competitive edge in the market by
streamlining the processes and increasing their
operational efficiency.
INSTITUTIONALIZING BPM
Enterprises now consider BPM as an important
measure to take their businesses to higher levels.
BPM, through automation of many tasks,
enhances process efficiency. Following are a few
benefits of a well-thought out BPM programme:
Shorter revenue cycle will act as an
impetus to enterprise business
Productivity will rise to an optimum level
as fewer people will be needed to perform
the same task
Minimization of error and hence,
improved accuracy
Improved time management due to
knowledge base and templates and better
communication by use of process
modeling tools
Improved management over performance
and process metrics
Better service to customer hence increased
customer satisfaction.
BPM, however, is not without
challenges. For an enterprise, achieving agility
through BPM means to be process centric andthe transformation from IT-centric to process-
centric is gradual and requires significant
changes to business strategy and practices. The
transition time, however, is critical and holds the
key to success.
STANDARDS FOR BPM
Various industry bodies and institutions have
proposed several standards or languages for
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BPM. A single standard, however, may not
support all the functionalities of BPM and a
combination of industry standards is
recommended to take full advantage of BPM.
Following is an illustrative list of BPM
standards:
Business Process Modeling Language
(BPML) standard of the bpmi.org group
uses XML specification, which is an open
standard and one of the essential features
for a BPM standard. It supports many
features, open standard languages such
as XML, WSDL specification, various
transaction management concepts and
so on.
One of the other significant standards is
Business Process Execution Language
(BPEL), which is proposed by BEA, IBM,
Microsoft, SAP and Siebel Systems. Most
of the features that are supported by
a BPM standard are also supported by
BPEL.
The XPDL (XML Process Definition
Language), a standard proposed by
Workflow Management Coalition,
follows more minimal features such as
portability and orchestration than other
standards. Orchestration , usually
referred to as workflow, is about finding
an effective way of implementing the
business rules throughout the flow
enabling flows to dynamically adapt theirbehavior.
XLANG is a Web-service orchestration
standard proposed by Microsoft. It
defines how message transfer takes place
between Web services.
While BPML and BPEL are block-
structured standards, BPSS (Business Process
specification Schema) gives us a visual
representation of the designed and implemented
process definitions. The Web Service
Choreography Interface (WSCI) is an interface
definition language whereas XPDL (XML Process
Definition Language) is a workflow definition
language. Any of these standards in isolation
seldom cater to all the required functionalities:
BPEL supports most of the functionalityrequirements of BPM but not all and if the
objective is to acquire all the functionalities
required by BPM then a combination of BPEL,
BPSS and BPML may be more suitable.
BPM TOOLS
The use of BPM tools largely depends on the
requirements of enterprises: small enterprises
may use them for modeling their business
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processes and larger enterprises may find it
useful while creating new applications.
Requirements of a BPM managed
process, which are essential for a BPM tool, are:
Business Process Modeling Language
Graphical environment and specifications,
which define the business process rules
for execution of process
Storage environment for storing the
process and session information.
Tools for capturing manual work and
presenting it
BPM engine for controlling the software
components that are using the described
process for their operations.
Flexibility to face changes that may occur during
modeling or after completion of modeling
Support for open standard language like
XML for communication between Web
services which are going to be modeled.
Many software companies provide
software for defining the business process flow.
A few of the BPM tool vendors are FIleNets
Business Process manager, Fuegos FugoBPM,
Intalios Intalio|n3, Handysofts BizFlow.
CONCLUSION
BPM helps an enterprise to make on-the-fly
changes to its processes and ensure compliance
with the changes that are mandated by market
conditions and the information technology
infrastructure in an enterprise. BPM will play a
significant and enabling role in the future to
help enterprises achieve agility. By breaking
down problems into a number of smaller
manageable problems, the BPM templates
provide reusable solutions. Finally, BPM has
helped position businesses as process-based
enterprises.
REFERENCES
1. The Case For BPM, Accessible from
http://www.ascentn.com/about_bpm
.html
2. Three Promises of BPM: Agility,
Flexibility, Visibility, Accessible from
http ://www.transformmag.com/
d b _ a r e a / a r c h s / 2 0 0 2 / 1 1 /
tfm0211f1.shtml
3. BPM: The next Must Have App,
A c c e s s i b l e f r o m h t t p : / / w w w .
cioupdate.com/reports/article.php/
11050_3363061_3
4. Web Services, Grid Computing, and
Business Process Management:
Exploiting Complementarities for
Business Agility, Proceedings of the IEEE
ICWS, 2004
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Towards Enterprise AgilityThrough Effective Decision
Making
I nnovative use of web ser vices and shared data
ser vices in an archi tecture framework makes for
effective decision making
By Sr iram Anand & Jai Ganesh
SETLabs BriefingsVOL 4 NO 1
July - Sep 2006
Organizations operating in fast pacedbusiness environments need to respondto fast moving windows of opportunities and
to challenges and growth possibilities. There are
short lead times for extracting and presenting
Key Performance Indicators (KPIs) and shorter
lead times for decision making. These business
needs are not in sync with the technological
challenge such as the presence of disparateenterprise systems (for example, ERP, SCM,
CRM and so on). This situation gets complicated
with the increasing number of mergers and
acquisitions resulting in different business units
within an enterprise having their own data
warehouses. Adding to this is the increasing
number of users inside and outside the
enterprise who need real time access to
information.
In such a scenario, an Enterprise Digital
Dashboard (EDD) would improve the lead time
in and quality of decision making by extracting
and generating KPIs from enterprise software
systems. The EDD is an effective tool for
executives to get a top-level view of their
enterprise as well as their closely linked partners.
Decision makers require easy access to data such
as total sales per month, inventory status and anumber of other KPIs. The EDD offers an
enterprise decision maker a single view of the
metrics being monitored in a user-friendly
manner.
The EDD is, in many ways, similar to
an automotive dashboard, which provides the
driver with a single view of the state of the
automobile. Development of an EDD involves
extracting and generating metrics, indicators,
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sales figures, increasing production of certain
product lines, identifying lead times,
inventory levels, and other key organizational
data from the enterprise software systems.
This information resides within applications,
databases, and processes, and must be
extracted and analyzed to determine its
impact on a business.
There are two primary areas that
represent issues in the rollout of successful
EDDs: retrieval of pertinent data from a
multitude of data sources and interacting with
business systems that may be developed using
heterogeneous technologies.
How can enterprises enhance their
agility through effective decision-making is a
question that currently demands attention.
EDD: VALUE AND CHALLENGES
The EDD, by providing a single view of the
metrics that are being monitored, considerably
improves the efficiency and effectiveness of
decision-making.
An EDD-enabled enterprise is
typical ly characterized by faster and
improved decision-making capabil i t ies
owing to the availability of real-time access
to information, KPI of the organizations
business units, and access to KPIs of its key
partners. In addition, access to notifications
and alerts about critical events facilitatetimely and relevant action.
An EDD also helps improve agility by
enabling enterprises leverage the available data
to make informed decisions and deliver the
right information to the right people at the
right time.
Though benefits abound, implementing
EDD is strewn with challenges. Some of them
are:
Disparate data types
Disparate technologies
Disparate locations
Disparate ownerships
Disparate data
This is put upfront to convey all the key
challenges to the reader. So he will keep this in
mind while reading the architectural challenges.
EDDs are difficult to implement owing
to the complexities involved in combining and
calculating data from disparate enterprise
systems such as SAP, and i2. In addition, there
are associated problems such as duplication of
data that necessitate data synchronization.
Multiple systems in different lines of business
access data in different ways based on their needs
and specific technologies. There are no consistent
practices or techniques in place for the access and
update of data. Apart from this, the same data
element may be stored and accessed in multiple
formats in different databases.
A n e n t e r p r i s e d a s h b o a r d i s
fundamentally a representation of core business
data in multiple formats. The data elements may
be rolled up to different levels to suit the
requirements of the audience in question.
Therefore, one of the fundamental issues
involved in the development of a dashboard is
to obtain quality data from a variety of sources
without difficulties.
Large enterprise IT groups typicallyhave a diversified portfolio of systems that has
grown over time and caters to a wide collection
of consumer applications and end users. Though
unstructured growth of applications leads to
multiple monolithic applications that efficiently
deliver core functionality, they fail to exist in
harmony with other applications. Enterprise
dashboards therefore must communicate with
multiple business applications to display the
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correct information and apply correct rules in
order to display certain data.
ARCHITECTURAL CHALLENGES
Critical data scattered across
geographies is a barrier for effective decision
making (Figure 1). The diversity of the data
sources involved makes management of the data
sources and the centralization of common dataacross lines of business and geographies very
important for fulfilling the business
requirements. Following are some of the specific
issues and challenges in this regard:
1. View of data:The scatter of critical data
across multiple databases in various
business and geographies is a serious
issue obstructing a clear view of the data.
For example, customer data if so scattered
impedes identification of key customer
attributes. Independent, unmanaged
changes to systems and databases leads
to confusion that in turn results in higher
effort and cost to obtain consolidated
customer information.1
2. Systems logic:A wide spread of systems
and databases may affect the performance
of business applications owing to complexbusiness logic. The applications are
burdened with embedded logic associated
with multiple data elements residing in
different databases. Chaos may be the rule
in the absence of a clear mapping between
business processes and the data elements
that are needed to fulfill those processes.
3. Integration costs: Technology and
toolkits available for data access have
Das
hboar
d
Da
taAccess
Tier
BusinessApps - USA
SCM - Europe
ERP - Asia
BusinessApps - South
America
LegacyMainframe -
USARDBMS - USA
Legacy-Europe
SCM - Europe
ERP - Asia
SCM - Asia
CRM - Asia
OracleSouth
America
DataSynchronization
Legend
Data common across business lines/geographies
Applications in Eu rope
Applications in Asia
Applications in the U.S.A
Applications in So uth America
Figure 1:Current state of systems and databases. Source:Infosys Research
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matured significantly whether they are in
the J2EE space or the Microsoft space.
Depending on the manner in which
specific technologies have evolved in a
given Line of Business (LOB), the data
access techniques may vary between
applications and can result in higher costs
incurred for integration across LOBs.
4. Channels of update: The core business
data in a specific database may be
updated by various means: Direct,
Indirect or by other channels. Data can
either be updated directly through the
business applications dedicated for that
LOB or indirectly upgraded through
synchronization with databases of other
LOBs. It can also be updated through
other channels such as IVR or by a
customer service representative over
telephone or manually.
Multiple channels of data updates can havea bearing on user experience. For example,
a user may request for a change in personal
information over the phone or IVR and
attempt to lookup the same data online.
Latencies in the update of the data that has
been sent over the phone may result in
incorrect data to be displayed.
5. Resource contention: Heavy loads on
databases are common during a bulk
update. For example, there may be certain
periods of time when customer
enrollment through the submission of
paper forms for some specific financial
offerings may increase. Such a bulk
update might invlove measures to lock
the database front and consequently users
who are making changes to the online
application are likely to experience
inconsistencies.
6. Latencies in data retrieval:The spread of
critical data across multiple databases and
the associated redundancy may cause
addi t ional la tencies for cer ta in
applications. This can happen due to the
bulk update
scenario illustrated above. Such a scenario may
also arise due to overheads associated with data
synchronization. Alternatively, this may happen
when common, redundant data is retrieved
from a database associated with a certain line
of database that also retains line of business
data.
Considering the above challenges to
effective implementation of EDD, Web
services are an effective technology to power
EDDs. Web services, by being loosely coupled
and interoperable, enable easy extraction of
appropriate data from enterprise systems and
facilitate executive decision-making. Web
services enable EDD to process enterprise-wide data to arrive at an appropriate metrics
that can then be displayed as a portal screen.
A high degree of personalization can also be
made possible depending upon the type of
metrics chosen by the decision maker. The
result is a shorter lead-time for decision-
making as timely information is made
available with access to data in multiple
sources.
ILLUSTRATIVE BUSINESS SCENARIO
The automotive industry is in the middle of
adversities: global economic slowdown, global
over-capacity, decreasing prices and margins,
consolidation, and so on. Access to critical
information and effective decision-making
therefore are of prime importance. Large
automotive companies operate across
geographies.
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Consider the case of a multi-billion
dollar automotive company with business units
spread all over the world. Massive consolidation
in the automotive industry and within the company
has resulted in a wide variety of disparate IT assets
residing in different geographies and supporting
different business models.
Seamless sharing of information across
all operations of the automotive company,
however, is necessary to leverage the benefits of
consolidation such as cost reduction and effective
information access. Appropriate alignment
between geographically dispersed business units
and functional groups is required to create a
unified view of sales, dealers, consumers,
products, and services. Currently, each business
unit, functional group, and brand of the company
operates through independent systems,
programs and so on. As a result, there is limited
synergy across the organization, leading to
inefficiencies and lack of coordination.
The automotive company is structured
across geographies as strategic business units
(SBUs). The SBUs are a mix of both legacy as well
as modern systems (for example, ERP, SCM and
CRM). The systems of the company across SBUs
are as follows:
1. North America [Legacy systems
(Mainframes)]
2. Europe [Legacy + SCM]
3. Asia [ERP + SCM + CRM]
4. South America [Java based + OracleRDBMS]
The company wants to offer its CXOs a top-level
view of performance of its SBUs. The KPIs
required are the following:
Revenues by SBU
1. Drill down (break-up by product
categories)
2. Drill down (break-up by brands)
Revenues target vs actual by SBU
1. Drill down (break-up by product
categories)
2. Drill down (break-up by cars)
Revenue forecast by SBU
1. Drill down (break-up by product
categories)
2. Drill down (break-up by cars)
Sales volumes by SBU
1. Drill down (break-up by product
categories)
2. Drill down (break-up by cars)
Production volumes by SBU
1. Drill down (break-up by
manufacturing plants)
2. Drill down (break-up by cars)
Top dealers by SBU
1. Drill down (break-up by product
categories)
2. Drill down (break-up by cars)
Profit margins by SBU
1. Drill down (break-up by product
categories)
The above scenario illustrates the key
decision making metrices required by the CEO
and the disparate nature of the systems in place
within the organization.
A Web services based EDD architecture
is proposed to provide a clear top-level view to
the executive decision makers of the company.
Proposed Architectural SolutionThe key architectural requirements for the
proposed framework include: ability to integrate
data sources in a loosely coupled manner, ability
to provide a unified view of information persistent
across varied data sources, use design patterns
wherever appropriate, buy instead of build use
proven commercial/open source products/
frameworks instead of building from scratch
(Figure 2, page 21).
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The architecture consists of two main
tiers:
1. The Data Access tier
2. The Enterprise Dashboard tier:
(The EDD provides an aggregated view
of the enterprise information collected
from varied data sources that are
geographically dispersed).
Data Access Tier: The core Enterprise
Information Integration (EII) functionality is
implemented by the data access tier. The data
access tier will focus on the various issues and
challenges discussed in detail above. While most
conventional data integration solutions result in
a number of touch points between the business
logic and the integration logic, Web services
provide a loosely coupled and extensible solution
wherein different types of data sources can be
integrated with the EDD without requiring many
changes to the existing functionalities. The
solution to the problem of the automotive
company lies in providing a consolidated view
of data across the enterprise by eliminating
multiple data update channels and by providing
a single suite of applications to access/update
data.2Implementing this suite of applications as
services would eliminate any lock-in on protocols
and integrate easily in a heterogeneous
environment. Specific aspects of the new
architecture to address these issues would be as
follows:
Provide a composite view of datatailored to business processes and usage
patterns 3
Develop shared data services that can
retrieve information for a set of related
applications. Each client application uses
a subset of the classes managed by the
data service, but the data service manages
the relationships between the classes and
ensures that each application is aware of
all data changes, regardless of the source
of change
Design service contracts based on the needs
of individual LOBs/client applications
Provide information on demand (in
response to service requests) by
optimizing performance and caching
heavily accessed data
Enforce data security by authenticating
invocation clients and protecting against
unauthorized data access
Eliminate back door updates by providing
the service layer that guarantees data
consistency across all systems.
Enterprise Dashboard Tier: The
Enterprise Dashboard provides a user interface
and takes care of other non-functional tasks such
as security, internationalization, scalability,
availability and caching. This allows incremental
adoption of the Web services strategy, which is a
big draw for organizations that have a huge IT
infrastructure to migrate.
The specific characteristics of the overall
architecture are as follows:
Web services created for the purpose of
providing functionality in a loosely
coupled, implementation independent
manner. These implementations will
leverage the core business logic in the
existing applications.
A centralized database that maintainsdata common to multiple lines of business
and geographies. This will require
rationalization and consensus building of
the data models that satisfy current and
anticipated needs. This database will
become the system of record and the
owner for the common data.
A set of services that manage data access/
update for all databases. These services
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will manage all data access/update and
will become the de facto data access layer
for all applications. Transaction
management for complex transactions
that span multiple databases will not be
performed at the service layer. The
services will provide access to multiple
data sources; it will be the responsibilityof the data consumers to manage
heterogeneous transactions. 4
LOB data continues to reside in existing
databases. Depending on the specific line
of business and the problems (or lack
thereof) associated with the business data,
this data will continue to remain in the
existing databases. Physically, the data
may be migrated to one common platform
if it makes sense from a strategic vendor
management or licensing perspective.
However, the important point to note is
that data will be segregated on the basis
of usage by lines of business with the
shared data services layer simply
providing a uniform mechanism of
accessing the data. Infrastructure functionality consolidated
and implemented as a Web service to
allow additional consumers to leverage
the same rules and components. An
important benefit is in the area of
security, specifically authentication and
access control.
Scalability and availability of various
applications handled in a streamlined
Legend
Figure 2:Web Services based EDD architecture Source:Infosys Research
D
ata
We
bS
erv
ices
Das
hB
oard
Functionalitybased
Web Services
Functionalitybased
Web Services
ERP WebServices
SCM WebServices
WSRPCompliant
Portlets
BusinessApps -USA
SCM - Europe
ERP - Asia
Business Apps -South America
LegacyMainframe
USARDBMS - USA
SCM - Europe
ERP - Asia
ERP - Asia
SCM - Asia
CRM - Asia
OracleSouth America
CentralizedCommon
Data
Data common across business lines/geographies
Applications in Europe
Applications in Asia
Applications in the U.S.A
Applications in South America
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manner by using Web services.
Implementing strict service contracts with
specific levels of service decouples the
service consumers from actual service
implementations. This enables the
service implementer to have the
flexibility of deploying service
implementations in the most optimal
manner. Apart from this, Web service
management tools may be used for
service lifecycle management.
Benefits of Web Services
It is important to analyze the actual benefit
gained due to the migration to Web services that
help realize an EDD. This analysis will help in
identification of the factors that may be used for
the calculation of Return On Investments (ROI).5
The various factors associated with the technical
and business viewpoints are as illustrated
below:
Cost reduction: In the existing setup, as
individual LOBs manage various aspects,
including infrastructure and common data, each
of them incur these costs in addition to costs
incurred to address customer experience issues
and troubleshoot problems.
With the centralization of common
functionality and data, and the elimination of
multiple redundant data sources and channels
of update, a significant portion of this cost may
be eliminated. There may be higher upfront costsinvolved in implementing the Web services, but
the long-term costs related to recurring yearly
expenses should be lower at least as far as the
common data, processes, and functionality are
concerned.
Flexible business applications: Web services
with a robust service contract and SLAs will
allow new applications to be built faster and
cheaper. This will pave the way for
modifications to business process as well as the
ability to meet IT challenges of new business
requirements. Essentially, this will result in one
less problem to solve for the CIO. The
streamlined availability of data through the
shared data services will ease the
implementation of new business applications.
Integration across LOBs will be significantly
easier as common data will be shared and
accessed in a standard fashion.
Transparency for LOBs: In the existing model,
applications had to be designed to handle issues
with respect to heterogeneous systems, data
redundancy, and data synchronization. Business
processes also had to be designed to
handle anomalies in synchronization. The
implementation of Web services will completely
insulate LOB applications from redundancies
in data storage and issues with data
synchronization.
Unified Patterns: As discussed earlier, the
dependency on proprietary techniques and
frameworks used for component development in
various LOBs can be eliminated by implementing
Web services. For example, in the case of data
services, this will provide unified data usage
patterns across applications/LOBs thereby
enabling developers to talk a common language.
The redesign and implementation of shared data
services results in the data being available in
granularity that is based on real business needs.
Consumer applications will not have to retrievedata in raw format and assemble pieces to create
front-end views.
CONCLUSION
Gaining competitive advantage in a global
business environment means that the managers
should have easy access to information that
facilitates informed decision-making. The
technology adoption trend is shifting to a
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scenario where the decision makers should be
able to access KPIs of the enterprise using various
devices, accessing KPIs of business units
distributed across the globe.
A Web-services-based EDD solution
has tremendous potential to solve this business
problem by enabling information aggregation
from multiple disparate systems spread across
the enterprise. Web services-based EDD costs
less as it leverages the existing legacy
investments. The reference architecture
leverages Web services and handles all the
functionalities as desired for an EDD. The
proposed architecture is based on live
experience in designing a Web services based
SOA. The architecture described above provides
the core service-orientation to the IT architecture
of an automotive firm and can be considered as
a baseline architecture for all EDD enterprise
enablement. The architecture enables a trueflexible aggregation of information from the
internal systems of the organization using Web
services, and offers a single point of contact for
decision making information. Further, this
enables existing legacy applications to take part
in the overall business architecture.
Integration solutions from EAI vendors involve
large initial investments. Moreover the EAI
products are not very flexible, do not fully
support incremental investments and are
proprietary. Moreover it is not easy to work
around with EAI systems while integrating with
IT systems of different partners with
heterogeneous systems.
The above problems need to be addressed while
implementing a Web services based EDD
solution. This is because the solution should be
able to interact with various systems, should be
flexible, should support incremental
investments, and should be able to interact with
the systems of the firms partners. Web services
address most of these. Web services support
the data coming from various disparate systems
to have a single view of the data. The following
are some of the benefits that may be obtained in
a retail scenario by implementing an EDD using
Web services:
Web services based EDD allows the
decision makers to have a single unifiedview of data thereby enhancing the
quality of decision making
Web services enable the aggregation of
data from the disparate systems of the
automotive firm thereby facilitating easy
data extraction from various databases,
applications and processes. This would
empower the decision maker to make
decisions based on the sales trends and
A Web Services-based EDD solution, when implemented
effectively, enables information aggregation from multiple
disparate systems and helps decision makers access key
performance indices
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customer preferences in various channels
and forecast future sales across various
channels and also have better inventory
planning.
REFERENCES
1. Data Services for Next-Generation SOAs,
Christopher Keene, Web Services Journal,
December 2004
2. How Do You SOA Enable Your Data
Assets? Jim Green, DM Direct Newsletter,
October 15, 2004
3. 12 Steps to Implementing A Service
Oriented Architecture, David S.
Linthicum, White paper Grand Central
Communications, October 2004
4. Architecting Data Assets, Jeff Schulman,
Gartner Research, August 2004
5. Ash Parikh, Rajesh Pradhan and Nirav
Shah, Teaming up portals and web
services. Java Pro Magazine (May 2004).
6. Jon Byous, Single Sign-on Simplicity with
SAML. http://java.sun.com/features/
2002/05/ single-signon.html
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Co-Creating Experiences ofValue with Customers
Building Experience Co-Creation Platforms
enhances value creation and fosters innovation.
SETLabs BriefingsVOL 4 NO 1
July - Sep 2006
By Venkat Ramaswamy
In an era of ubiquitous connectivity, active,informed, networked, and empoweredcustomers are challenging the traditional firm-
centric process of value creation that has served
companies so well over the past hundred years.
Prahalad and Ramaswamy (2004) argue that we
are on the cusp of a profound shift in the way
value is created from a firm-centric process to
a co-creation process jointly by the customer and
the company. In a co-creation process, customer
value emerges from the space of interactions
between the customer and the company, and the
quality of customer experiences associated with
those interactions and their outcomes
outcomes that simultaneously generate businessvalue to the companies that facilitate them
effectively.
The traditional view of value creation and
its dominant logic are shown in Figure 1 overleaf.
This dominant logic of the modern
corporation that has served us so well over the
past hundred years is now being challenged as
never before. For starters, individuals today are
far more informed through the Internet and
connected with each other than ever before. The
mere fact that there are over 1.6 billion
cellphones, not to mention countless ways of
voicing and self-expression, and
communicating with other consumers (e.g., e-
mail, instant messaging, SMS, Blogs with RSS,
etc.), enable individuals to learn about others
experiences with products and services much
more rapidly. Firms were assumed to have more
information and knowledge than individuals.
Individuals now have a new found freedom
that liberates them from being targets to be had
by institutions. As individuals increasingly have
the motivation and the means to take more
control of their experiences, companies can nolonger act autonomously, designing products,
developing production processes, crafting
marketing messages, and controlling sales
channels with little or no interference from
consumers. Customers now seek to exercise their
influence in every part of the business system.
For instance, there are currently over 30 million
blogs, over one-third of which were created in
the first quarter of 2005. Further, over half of
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the bloggers are adults. Blogs fundamentally
challenge the nature of relationship between the
institution (company) and the individual
(customer). Armed with new tools and
dissatisfied with available choices, individuals
(customers) want to interact with firms, as well
as (customer) communities to co-create value.
The use of interaction as a basis for value creationis at the crux of the emerging opportunity space.
THE NEW OPPORTUNITY SPACE:
ENABLING EXPERIENCE ENVIRONMENTS
Consider the case of Apple. Through its iTunes
service, customers have downloaded over 350
million songs of their choice, after listening to a
sample of the song, thereby escaping the
tyranny of the CD (although individuals still can
download an entire CD if they so wish).
Individuals including musicians can also
publish and share their own playlists using the
iMix tool that Apple provides. The community
of music lovers is engaged in helping
individuals discover new music. The
downloaded music can be transferred to the
Apple iPod over 5 million iPods were sold in
the first quarter of 2005 alone. The success of
the iPod lies in the fact that Apple understood
and focused on the user experience that
results from user interaction with the iPod.
Working backwards from the user experience,
Apple designed the interface right down to
the scroll wheel to facilitate a compelling
experience environment of accessing and
listening to music. Besides the physically cool
design, this meant paying a lot of attention to
the underlying software according to Steve
Jobs the software is the user experience. In
other words, the software enables individuals
to scroll through their library quickly, construct
playlists on the go, or simply play user-defined
playlists. Moreover, at the Apple stores (which
as of early 2005 had over 50 million customer
visits; over $1 billion in retail sales; and over $40
million in profit), individuals can learn about
how to actually get music into the iPod (from
their own music collections), download songs
from iTunes, and get answers to simple
questions such as how do I get music into my
iPod?. The Apple store is a learningenvironment, besides being a sales
environment. Individuals interactions with
knowledgeable people at the genius bar
(including consumers from Apple user groups)
supports the consumers learning experience.
Thus, as shown in Figure 2, value to
me as an individual consumer lies in the human
experience associated with outcomes of processes
of interactions with Apples iPod, the process of
Traditional View of Value
Value = Fn (Products & Services)
Suppliers The Firm Marketing
Channels
SCM ERP CRM
PassiveCustomers
Firm-centric products and serviceshave been the basis for value creation
The Dominant Logic of Value Creation
1. Value creation is associated with products andservices
2. Firms have more information and knowledge thancustomers
3. The firm unilaterally defines and creates value for thecustomer through its activities
4. Value is exchanged with customers who representpassive demand for the firm's offerings
Figure 1:
Source:
Traditional View of Value Creation
Center for Experience Co-Creation, Ross School ofBusiness, University of Michigan
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downloading songs from iTunes, and/or
interacting with Apple employees as well as the
user community. As every experience iscontextual, the challenge for companies like
Apple is to build the capabilities that allow
individual customers to interact with customer
communities, as well as an extended network of
companies, to co-create their own experiences of
value. At the heart of the new value creation
system, are experience environments that go
beyond product and service offerings.
An experience environment (which can
be anywhere in the business system) is centered
on individual-centric interactions with thecompanys products, processes, and people, as
well as customer communities. These interactions
are where the customer experience is, and what
the company must deeply understand to design
the technology platforms and information
infrastructure to support compelling experience
environments. This is a profound transformation.
It challenges the very heart of managerial
capitalism as we have known it over the past 100
years: that the role of the firm is to organize its
activities around creating goods and services for
customers. No longer can any companyunilaterally create value for the customer through
its marketed offerings. Rather, companies must
learn to engage customers in a process of co-
creating value, based on the customers view of
value and not the companys.
Consider a patient with a cardiac
pacemaker that monitors and manages his
heart rhythm and performance, a valuable
benefit. However, this patients comfort level
would increase substantially if someone or
something monitored his heart remotely, andalerted him and his doctor simultaneously of
any deviations from a predetermined
bandwidth of performance, relevant to his
condition. Doctor and patient together could
decide on the remedial response. This scenario
gets more complicated when the patient travels
far from home. A mere alert will not suffice.
The patient needs directions to the best nearby
hospital, and the attending physician needs
Value = Co-Created Experience of Interactions and Outcomes
ConsumerCommunities
NodalFirm
NodalFirm
NodalFirm
NodalFirm
Network of Firms:Access to Competence
Customer Communities:Access to Competence
EMPLOYEES
PROCESSES
CUSTOMERSPRODUCTS
ExperienceEnvironment
Experience Co-Creation
Figure 2:New value creation system Source:Center for Experience Co-Creation,Ross School of Business, University of Michigan
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access to the patients medical history. How do
the two doctorshis primary care provider
back home and the physician on call at the out-
of-town hospitalcoordinate their diagnosis
and treatment? Should he call his spouse? How
can he recognize and assess the risks and
develop an approach to compliance and
cooperation with these medical professionals?
The doctors, the facilities and services, and the
pacemaker are all part of a network centered
on the patient and his well-being, as shown in
Figure 3 above. Companies are already
installing elements of these network
capabilities. Consider Medtronic, Inc., a world
leader in cardiac rhythm management that
seeks to offer lifelong solutions for patients
with chronic heart disease. It has developed a
system of virtual office visits that enablesphysicians to check patients implanted cardiac
devices via the Internet. With the Medtronic
CareLink Monitor, the patient can collect data
by holding a small antenna over his implanted
device. The data is captured by the antenna,
downloaded by the monitor, and transmitted
by a standard telephone line to the Medtronic
CareLink Network. On a dedicated secure Web
site, physicians can review patient data and
patients can check on their own conditions
but no one elsesand grant access to family
members or other caregivers.
Medtronics CareLink system goes
beyond the cardiac device itself and unleashes
opportunities for an expanding range of value
creation activities. For example, each persons
heart responds to stimulation slightly
differently, and the response can change over
time. In the future, doctors will be able to
respond to such changes by adjusting the
patients pacemaker remotely. Furthermore,
Medtronics technology platform can support a
wide range of devices and remote monitoring/
diagnostic systems, potentially used for
monitoring blood sugar readings, brain activity,
blood pressure, and other important
physiological measures.
I believe that this pacemaker story is
a prototype of the emerging process of value
creation. The patients interactions with the
doctor, the family, and the ER at the out-of-
town hospital affect the quality of the patients
overall experience. The meaning of value itself
changes from the physical product, the
pacemaker, to the co-creation experience of a
specific patient. This co-creation experience
originates in the patients interactions. And the
quality of this experience determines the value
that is created. The goal then is to build the
underlying technology platforms and the
infrastructure to support a portfolio ofexperience environments that arise from
different experience scenarios as shown in
Figure 4 overleaf.
The value of patient outcomes differs
according to each scenario (not to mention by
patient as well). Consider the context of a crisis
out of town. It is important for Medtronic to
understand deeply the nature of the interaction
events at a granular level. Each experience
Primarydoctor
Patients withsimilar condition
Medicalspecialists
Scan anddiagnostics
clinic
Doctor on call atout-of-town hospital
Emergencyservices
Pacemakermanufacturer
Patient
Figure 3:Source:Center for Experience Co-Creation,Ross School of Business, University of Michigan
Doctor-patient network
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scenario in effect can activate multiple experience
environments. The challenge is to identify a
core set of experience environments as shown
below, and build technology platforms and event-
centric information infrastructures to support aportfolio of experience environments.
Companies must learn to build
platforms that enable experience co-creation
processes across the portfolio of experience
environments (i.e., experience co-creation
platforms). In this view, IT platforms become
a strategic enabler of experience co-creation
processes. However, this view forces companies
not to be focused on product specifications and
features that hardwire the process of customer
experience. (Product quality is still critically
important. It is a necessary but not a sufficient
condition for co-creating experiences). Rather,
experience co-creation platforms are aboutcreating the preconditions to accommodate a
wide variation in individualized experiences
that are contextual and granular. A much deeper
understanding of the experience scenarios of
consumers is called for. This depth of
understanding is impossible without active
customer involvement and dialogue. Second,
the experience environments are not just about
hardware; the flexibility for a variety of
Patient Experience Scenarios
Primarydoctor
Patients withsimilar condition
Medicalspecialists
Scan anddiagnostics
clinic
Doctor on call atout-of-town hospital
Emergency
services
Pacemaker
Patient
Primarydoctor
Patients withsimilar condition
Medicalspecialists
Scan anddiagnostics
clinic
Doctor on call atout-of-town hospital
Emergency
services
Pacemaker
Patient
Primarydoctor
Patients withsimilar condition
Medicalspecialists
Scan anddiagnostics
clinic
Doctor on call atout-of-town hospital
Emergency
services
Pacemaker
Patient
Primarydoctor
Patients withsimilar condition
Medicalspecialists
Scan anddiagnostics
clinic
Doctor on call atout-of-town hospital
Emergency
services
Pacemaker
Patient
1
Crisis out of townI'm going on a trip, but I'd like to know
whom to turn to once I'm there
I'm a little uneasy and would like to bechecked out remotely by my primary doctor What do you do when you have a similar problem?
1
2
3
4
2
3
4
1
2 3
1
2
Figure 4:Patient experience scenarios Source:Center for Experience Co-Creation,Ross School of Business, University of Michigan
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experiences derives from sophisticated use of
software. A deep and imaginative
understanding of the enabling technologies is a
must. Third, individuals engage in an
experience co-creation process when they
interface with an experience environment,
interact in the context of an event, and assimilate
experience outcomes. These call for new levels
of transparency and access from the customers
perspective, as well as the companys
perspective.
THE EXPERIENCE CO-CREATION PROCESSConsider the environment of tracking the
building of my custom houseboat with Sumerset,
one of the largest houseboat manufacturers in the
world, in Kentucky, USA. This is how a typical
customer interaction might work. I as a customer
can access the manufacturing plant and track the
progress of my boat. Let us assume that I get a
new idea - such as moving the dining table by 4 ft.
The engineers can discuss with me the pros and
cons of doing that. We can make joint decisions
about the changes through the principle of
informed choice, recognizing the cost and quality
and safety implications of the choices made. Of
course, Sumerset can say, that beyond a certain
level of risk, they will not participate in the process.
Sumerset can also introduce me to the community
of houseboat users and I can engage in a dialogue
with them. I can evaluate my choices as I go along,
as well as learn about the possible uses of a
houseboat that I could not have imagined.
The co-creation process gives the
customer a greater level of knowledge and
expertise about houseboats, and with it a
greater degree of self-esteem. Dialoguing with
Sumersets employees and tracking the
progress of the boat along the factory floor
creates a sense of emotional bonding with the
product and the company (an outcome of value
to the customer). Sumersets transparency and
willingness to dialogue enhances the
customers readiness to trust the company and
believe in the quality of its product. Access to
the community of Sumerset customers
increases the consumers enjoyment of the
houseboat. Thus, the basis of value for the
customer shifts from a physical product (with
or without ancillary services) to the total co-
creation experience, which includes co-
designing as well as all the other interactions
among the consumer, the company, and, the
larger community of houseboaters. Thus, theco-created experience outcomes depends on
the nature and level of access to the companys
employees and extended community, as well
as the level of transparency of all parties.
As the Sumerset example illustrates,
individuals must be able to co-construct unique
value for themselves through customer-network
interactions that facilitate contextualized
experience outcomes through dialogue, access,
A Portfolio of 'Core' Experience Environments
PATIENT PATIENT PATIENT PATIENT
PrimaryDoctor
RemoteDoctor