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Business Network Transformation in Today’s Economy

If there was ever a need for an excuse to transform business networks, the latest sales reports from the automotive industry can provide it. Things must change. As the saying goes, “If you always do, what you have always done, you will always get, what you have always gotten.” The current business model is unsustainable. Companies need to scrutinize every expense and activity with the question – Does this expense or activity add value to my core business or is it a commodity item? Commodity items include any activities or expenses that are required to operate a business, but do not offer any competitive differentiators or specific value above and beyond what every other business has.

Electricity is an example of a commodity item. Yes, your company needs electricity, but you can buy it for a monthly fee from a utility without having to invest, operate or maintain your own personal electrical power plant. What other services does a company need that can be purchased as a service for less money than building and maintaining it in-house? Can you save money and invest in other areas that have much higher returns?

Today, companies are looking at each activity and expense and asking themselves the question – Is this a commodity item? Are there managed services companies (utilities) that can do a better job and for less money due to their expertise and economies of scale?

Here is another way of looking at it – ACME company designs, manufactures and markets the best widgets in the world. They are very good at designing and marketing widgets. ACME also runs a customer support center, a trucking company, an HR department, a payroll department, manufacturing operations, an IT department, an EDI department, and a facilities maintenance department , but ACME is not recognized or valued for any of these departments. Their competitive differentiators are designing and marketing the best widgets.

If ACME could find a higher quality and less expense way to run HR, customer support, marketing, manufacturing, IT, EDI, facilities, logistics and transportation, etc., then they could use those savings to further invest in developing the areas where they have competitive differentiators – designing and marketing widgets. This is not to say that these other departments are not important to your business, just the oposite – they are CRITICAL! They just aren’t always competitive differentiators that need to be developed and maintained in-house.

If ACME chooses to focus on their competitive differentiators and use managed service providers for their non-core services, then they must have a solid business network strategy in place. This strategy must include an effective way of managing distributed services. This includes having real-time visibility into the services performed, accurate and real-time communications with the managed service providers. It will not be effective to introduce slow and error prone communications into an extended business network. The more you use managed service providers the faster and more accurate your communications must be in order to effectively manage it. The vision of a successful business network only works if the business network “connections” work.

OK – how do you ensure visibility, accurate and real-time communications with managed services providers in your business network? You need to automate and integrate your business processes with electronic data exchanges. The traditional approach is EDI, but flat file, XML, CSV and any other electronic data exchange can be used. You can not introduce a series of human interactions into a business process and maintain an accurate, consistent and real-time exchange of business data. It must be automated and integrated.

A follow-up question now – Are the electronic data exchanges, that automation and integration enable, a core value to your company, or a commodity service in the same manner as a phone service or the internet?

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