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The Business Architecture (3): BPR and Lean Operations explained the management of waste (deficient products) reduction as a strategic improvement following the first installments of ERP applications. Waste (deficient products) was known before (evident), but with ERP enhancements and organizational improvements waste could be significantly reduced. In a similar way Business Process Reengineering improved efficiency as an effect of organizational alignments, knowledge assembly and transfer, education and finally the (logistic) supply chain.

What’s next? There are several discussions about “analytics” and “performance management”. These areas increase the visibility and the need to increase efficiency, but they aren’t the business strategy to respond to this need. At those time the waste factor inside the “bill of material” raised the awareness about lost of products, components, and other assembly parts over the production processes, but itself it didn’t reduce that. After TQM (total quality management) strategies were embedded the effects of waste (deficient product) could be tackled along the different business topics (balance sheet, ability to deliver, customer demand, quality and maintenance in customer servicing).

A natural extension of the “supply chain” and the “outsourcing” business strategies is the usage of business networks. From an overall perspective business networks are distinguished between the collaborative (emergent, innovative, creative, risk sharing) and coordinated (matured, transactional, control, central). From an evolutionary perspective regarding the development of the business networks the collaborative might change over into the coordinated, once the former emergent get environmental scaling features (it becomes standard, get replicate behavior, and is consumer focused for the market or parts of it).

BNT is discussed at several places within media, one source is SAP Insider Online, you might also view in the Geoffrey Moore’s video (although mainly focused to IT, some of the messages are transferable to other industries as well). Also other resources at TCG advisors might open mindsets regarding market dynamics and various transformations. Have also a view on C.K. Prahalad.

Comparing across the different industries, several types of business networks are already in place and they respond to the demand of efficiency and performance. One of the typical architecture messages associated with this network transformation is the need to provide platforms to support business scenarios associated to these networks. Most of these network collaborations aren’t local, so the typical functionality demand of such platforms points to: international, multi-cultural, cross-domain, etc. 

For most of the system analysts (a job/skill description out of the 70´s and 80’s, indicating multi-dimensional IT expertise domains) this is the job they want to go for. Back to the first contribution of this series, let’s look for an example in construction industry: a luxury penthouse floor on top of a sky-crabber. Now, selling this floor might be interesting, but the sky-crabber needs to be constructed as well. The penthouse floor doesn’t have special, additional requests regarding the fundaments of the building, but the sky-crabber has. Or in other words: the great view from the penthouse over the city and its skyline doesn’t have impacts on the construction of the penthouse. The construction details to achieve the appropriate height have a specialized request for construction of the sky-crabber, but don’t deliver the living environment of the penthouse.

Most industries are facing an increasing consumer demand regarding features and prices. Due to clear composition descriptions and interfaces the electronic manufacturers achieved large progress over the last 10 to 15 years. The electronic market is globally scalable, so equipment is offered worldwide. From that perspective competition is globally as well.

These controlled servicing networks deal with the same constraints as described by the market expectations. For instance compare the demand for TV equipment ahead of global events like the Olympics. If the control of coordinated networks doesn’t function (the equipment isn’t available in right lot sizes and not at right times), the sales-brand is damaged, not per definition this will also be true for the supply providers of that network (they might be “invisible” for the consumers at the market).

Examples from life sciences drive attention to networks of innovation. The research demand to deliver pharmaceuticals for different therapies can’t be managed nowadays by each single pharmaceutical corporation. This implies joint research, and knowledge, handling of shared patents and IP, and separate, independent sales products/channels. This can only be build on high level of trusts.

Companies dealing with these networks use mutual signed engagement contracts. But all know that trust can be controlled (steered) by contracts only.

A major challenge for innovation networks is the balance between

  • the transition emergence/scalable and
  • the restrictions out of localizations.

Localizations are sometimes legal determined. But, once they are correlated to ethical and cultural values, the network needs adjusted steering and fine-tuning. These considerations will also affect financial servicing on different provisioning levels in the markets.

What are the implications of networks and network transformations to the financial industries? To answer this question, we have to determine the role of FSI on the market place of all industry players. New entrants (from automotive, retail/wholesale, consumer, ..) might provide financial services along some specialized channels into targeted, high profiled customer bases. A next topic is scaling in the sense of global & international: this isn’t easy (not only due to legal constraints). Next consider the departmental function of “inhouse cash” within and between the corporations. From tehese elements, it’s more than evident that financial services industry is on change. FSI investments in e-business companies, the current loan crisis, and the messages early August (by Mr. Greenspan), are some of other amplifier indications. We all know that a bank has to stay in business: 24 hours a day, 7 days a week. It’s not allowed to disappear for a short moment and to launch a complete new organizational setup “overnight”.

The influence of business networks will strongly vary among the different market participants. Some of these restrictions will imply a narrowing of services offered to the market, other will reduce the global spread. In all cases FSI market participants have to deal with the challenge to open their expertise for joint business partners, independent whether they are from consumer, oil & gas, or other industries.

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