The Enterprise Alphabet Soup

1
The Enterprise Alphabet Soup

• 1980s - JIT, TQM, MRP II, CIM
• 1990s - Convergence of TQM, Re-Engineering,
  Benchmarking, Change Management and Strategic
  Planning.
• NOW - Convergence of Total Customer Experience,
  Network-Centric Enterprise, Virtual and Agile
  Enterprise, Knowledge Based Enterprise and
  Service Based Enterprise.

2
Traditional Enterprise

• Vertically Integrated
• Self-sufficient converted raw materials to
  finished goods.
• Tight coordination among processes.
• Examples are, early automobile and computer
  firms.

3
Virtual Enterprises

• Concentrate on core competencies.
• Focus on processes at which the enterprise can
  excel or be world-class.
• Partner companies perform other processes.
• Examples
• CISCO concentrates on new product development and
  sales.
• Auto manufacturers focus on vehicle design and
  final assembly.

4
Virtual Integration

• New organization model for the information age.
• Harnesses the benefits of two different business
  models.
• Coordination of a vertically integrated
  enterprise.
• Focus and specialization that drive virtual
  enterprises.

5
Vertical Integration

• Use of technology and information to blur the
  traditional boundaries and roles in the value
  chain - suppliers, manufacturer and end users.
• New levels of efficiency and productivity.
• Example - Dells direct business model.

6
Dells Direct Business Model

• Bypass dealer channels.
• Directly to customer and build product to order.
• Eliminated resellers markup.
• Eliminated risks and costs associated with large
  finished goods inventory.
• Focus is on delivering solutions and systems to
  customers.

7
Virtual Integration

• Combines pieces of contemporary business strategy
  in a unique way
• Customer focus, supplier partnership, mass
  customization, just-in-time manufacturing.
• Stitching together a business with partners that
  are treated as if they are inside the company.

8
Virtual Integration

• Partnerships vs. Outsourcing.
• Dell sets quality measures and builds
  data-linkages with partners to monitor
  performance.
• Partners become part of the company.
• As few partners as possible.
• Partners must maintain leadership in technology
  and quality.

9
Virtual Integration

• Information shared with business partners in a
  real time fashion.
• Share daily production requirements with
  suppliers.
• Share design databases and methodologies with
  suppliers.
• Time to market is dramatically reduced.

10
Virtual Integration

• Challenges in establishing supplier
  collaborations
• Changing focus from how much inventory to how
  fast it is moving.
• Inventory velocity is a key performance measure.
• Long-term contracts just-in-time delivery.
• Example, Sony monitors for Dell computers.

11
Virtual Integration

• Substitute information for inventory.
• Ship only when there is real demand from real
  customers.
• Traditional model (computer industry)
• stack up units in warehouse and then in channel.
• Stuff channel to get rid of old inventory.

12
Virtual Integration

• Partnerships with customers
• Customer segmentation is an important element of
  Dells virtual integration with customers.
• Segmentation takes the company closer to the
  customer.
• Better understanding of customers needs.
• Ability to produce better forecasts.
• Reduced inventories.

13
Vertical Vs. Virtual Integration

• Vertical integration allows a company to be
  efficient under stable conditions.
• Virtual integration allows a company to be
  efficient and responsive to change at the same
  time.

14
Value Webs

• Forces Reshaping Value Chains
• Peripheral changes in the roles of value chain
  members
• Customer/Consumer preference for personal
  customization
• These forces morph value chains to value webs

15
Value Chains Vs. Value Webs

• Value chains do not motivate their members to
  develop an integrated infrastructure.
• Value webs promote a fully integrated
  infrastructure that links together all the
  members.

16
Value Web Management (VWM)

• A model of infrastructure that is capable of
  supporting the value webs.
• Produced by the marriage of business and
  technical infrastructure.
• An extension of the old Supply Chain Management.

17
VWM

• Allows value web members to exchange critical
  information/knowledge in real time and
  synchronize their efforts to respond and produce
  the desired results also in real time.

18
VWM and SCM

• SCM promotes logistics as the key mechanism to
  link the individual members of the value chain.
• VWM promotes one integrated business system.

19
Key Concepts

• Information/Knowledge Value Web collects,
  archives, retrieves, creates, shares, and
  otherwise leverages information that can be
  translated into knowledge and wisdom.
• Real Time The best enterprises must manage their
  business in real time because of the dynamic and
  fast paced environment in which they operate.

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Guiding Principles of the Value Web

• Disintermediation the removal of any
  intermediary node in the value web a synonym for
  value chain collapse.
• Reintermediation change in role of any
  intermediary to better serve the value web.
• Infomediation the addition of new
  information/knowledge-based intermediaries.

21
Guiding Principles of the Value Web

• Role Transformation changes in the roles of
  value web members, individually and as a whole.
• Dematerialization the conversion of materials
  and material-related assets to bits and bytes.

22
Guiding Principles of the Value Web

• Digitization capturing all pertinent
  information/knowledge for the value-web members
  to be used efficiently, effectively and
  interactively.
• Resource Exploitation leveraging certain
  pre-specified skills, capabilities,
  competencies, assets, structures, and
  infrastructures of others within the value web.

23
Reference Articles

• Andrews, P. P. and J. Hahn (199), Transforming
  Supply Chains into Value Webs, Strategy
  Leadership. pp. 7-11.
• Magretta, J. (1998), The Power Of Virtual
  Integration An Interview With Dell Computer's
  Michael Dell, Harvard Business Review. pp. 73-84.
• Hammer, M. (2000), The Rise Of The Virtual
  Enterprise. Information Week. pp. 152.