Services Blueprint: Roadmap for Execution

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"This book provides managers with a strong, practical grounding in the concepts that are critical to understanding the transformation from front-end e-business to cross-enterprise service platforms."
--Dr. Peter Zencke, Member of the Executive Board, SAP AG

The trend is clear: Corporations are increasingly relying on technology-enabled services to gain a competitive edge. E-Commerce->e-business->e-services->multi-channel services. Industry leaders and followers alike are digitizing services in order to become more customer-driven and process-centric. To execute this service digitization strategy, managers must learn to effectively translate business imperatives into multi-channel services processes, applications, and infrastructure. Services Blueprint: Roadmap for Execution reveals how managers can plan, analyze, and execute a coherent services strategy without getting lost in a sea of technical buzzwords.

Services Blueprint begins by introducing and defining the concept of services digitization and the two components--focal points and service platforms--required to execute it effectively. The authors then examine the different blueprints: multi-channel customer relationship management, spend management, supply chain management, human capital management, and product lifestyle management. Throughout the book, case studies illustrate key insights and best practices as companies evolve their execution focus: enterprise applications->Web Services->composite applications->services.

Drawing on their experience working with leading businesses, Kalakota and Robinson provide readers with a roadmap of how to achieve differentiation through multi-channel services, translate business objectives into process models such as order-to-cash, and leverage enterprise application investments to create new cross-enterprise services platforms. Services Blueprint clearly explains why some firms are better at digitizing business processes and capturing value than others.

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From e-Business to Services: Why and Why Now?

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Table of Contents

 Foreword.


 Preface.


 1. From E-Business to Services: Why and Why Now?


 2. Focal Points of Digitization.


 3. Service Platforms: Enablers of Digitization.


 4. Multi-Channel Customer Blueprint: Creating New Service Experiences.


 5. Spend Management Blueprint: Enabling Supplier Management Services.


 6. Supply Chain Blueprint: Creating an Adaptive Enterprise.


 7. Employee-Centric Blueprint: Enabling Human Capital Management.


 8. Product Innovation Blueprint: Enabling Product Lifecycle Management.


 9. Vision to Execution: The Blueprint Methodology.


10. The Analysis and Design of New Services: Meso-Level Blueprint.


11. Making Digitization Happen: Micro-Level Technology Blueprint.


12. The Discipline of Execution: A Tale of Two Companies.


Endnotes.

Preface

This book was seeded in a moment of tension. We were engaged in a project with a Fortune 500 firm aimed at designing new online and multi-channel services that leveraged existing e-business investments. In particular, the project was focused on the issues of translating the business imperatives “One Face to the Customer” and “Easy To Do Business With” into cross-enterprise services and delivered via portals. It was clear to us that in order to execute the plan and build a unified customer portal, the different e-business initiatives across the firm needed to be aligned. Its fragmented approach would not be sufficient to get the firm to where the leadership wanted to go. A different strategy was needed.

As we presented our findings, the grumbling and arguments began. “Wait a minute. We might be serving the same customer, but we are a complex conglomerate with multiple business units, each with different operating targets and incentive structures. In some business units, the e-business initiatives are more advanced than in others. We don’t want to be held back by the slower moving units; so, each business unit should launch its own e-business effort. At this very moment, we have ten different Siebel CRM implementations in progress with multiple consulting firms. We don’t think that an integrated approach to support a unified customer-facing portal or consistent user experience will work in our company.”

It was an uncomfortable moment as we looked out at the audience and realized that the notion of creating a cross-enterprise service platform to support customized user experiences delivered via enterprise portals is a novel concept for many managers. Although increased user demand for online and multi-channel services is straining the business processes and systems of most firms, managers are not aware of the structural problems they have to deal with. Political fiefdoms breached. Cross-enterprise processes architected. New infrastructure deployed. Incentives realigned.

The bottom line: Top management everywhere wants to leverage technology to deliver consistent, high-quality customer, employee, supplier, and partner experiences across channels and divisions. Current practices are not going to get them there. Leading companies are moving quickly to fix the problems. Companies such as Intel, Wal-Mart, GE, Boeing, IBM, UPS, and American Express are deploying new service platforms to create competitive differentiation. Leaders are beginning to understand that new cross-enterprise and multi-channel services will set them apart.

What are the leading companies doing differently? As we did more research on best-practice service platforms, we realized that the state-of-the art in integration strategies was subtly changing. The traditional view of integration is tying together back-office processes and applications (often labeled Enterprise Application Integration). The emerging view of integration is a flexible composition of processes, applications, and infrastructure (broadly labeled e-Services or Web Services). Whatever the terminology, a services-driven architecture forms the foundation of enterprise portals.

Clearly, the game has changed. The challenge facing management is no longer: What enterprise applications do we invest in? The new question confronting leading companies is: Now that I have enterprise applications, how can I leverage the company’s investment in them? How do I invest in and create a blueprint of service platforms that can deliver integrated services through the various portals that face my customers, employees, suppliers, and managers? What do I need to do to differentiate in terms of services? These business questions form the framework for this book.

E-Commerce. E-Business. Now Services.

Users don’t care about technology; they care about services and their effective delivery. The broader market is already anticipating the movement to service platforms. Simply look at the announcements by various vendors: IBM (WebSphere and e-business-on-demand); Sun Microsystems (Sun ONE and Services on Demand); Microsoft (.NET Application Servers); SAP (NetWeaver and xApps); Siebel (UAN); PeopleSoft (AppConnect); and BEA (WebLogic).

Our research indicates that three out of four venture investments are earmarked for enabling services, rather than content or enterprise apps. Millions of dollars are being spent trying to market service platforms with fuzzy explanations of what it really means. So, what are these new service platforms and who needs them? How do you use them to create services? What strategy tools and methods are appropriate and in what context?

Answers to these questions will shape the blueprint of digitization in the next decade. Some specific business and technology trends driving the need for services blueprints are:

• Business Process Management Trends. Inside-out processes are complementing outside-in services. Companies are not limiting themselves to thinking about process management or automation; instead, they are thinking about digitizing the entire set of composite processes (e.g., order-to-cash) that deliver value in the form of a service. This “service enablement” trend is new and has huge implications for companies.
• ROI/Value Trends. Investing in technology is getting much harder. The commoditization cycle times are short, industry consolidations are occurring more frequently, and the timeline for technology investments is shrinking. As a result, the challenge for management is not spending money but extracting an ROI. In a high-growth market you can get away with implementing monolithic, proprietary, closed applications and architectures. A cost-focused economy forces a little bit of “show me the money” technological pragmatism.
• Application Integration Trends. Applications need to be integrated into cohesive services. If you look at most large companies, they may have hundreds of uncoordinated integration initiatives, all with different objectives. This is not a good situation, as, increasingly, Web applications tend to be cross-enterprise types of applications with complex workflows.
• Infrastructure Trends. The way software is built is changing. In the last decade we have seen three structural migrations—mainframe to client/server (2-tier) to Web apps (3-tier) to Web Services (multi-tier). Services oriented architectures are gaining momentum as companies struggle with the age-old issues of extending, scaling, maintaining, and integrating applications.
• Macro-Economic Trends. The structure of the twenty-first century organization is difficult to understand and even more difficult to plan for. A volatile mix is triggering changes: growing globalization, productivity and efficiency pressures, shrinking product life cycles, and evolving technology. As the complexity increases, managers are struggling with issues of how to create effective service platforms to support a changing business environment.

All these trends argue for a “big picture” services blueprint at the enterprise level that can conceptualize, communicate, and coordinate these diverse needs.

The Need for a Services Blueprint

As business processes increasingly become digitized, the role of management is changing from technology users to the reluctant “architects of services blueprints.” They need answers to strategic questions such as:

• What kind of platform will be most effective in supporting online self-service customers?
• In a converging world of service channels—bricks, clicks, and mobile—how should firms organize, strategize, and invest?
• What is the systematic model for planning the next generation of cross-enterprise processes? What mistakes and obstacles should managers avoid?
• How can companies make smarter investments in integration capable of binding different channels, devices, and applications?

Scratch the surface of almost any major business issue and you will find the blueprint theme—the unifying umbrella for integrating diverse legacy and emerging technology initiatives. This is especially true in firms that are attempting to bring about tighter brick-and-click, or with the introduction of mobile technology, brick-click-and-mobile, process integration.

The concepts of multi-channel services and service platforms are now entering the corporate technology lexicon. The Internet is becoming the delivery mechanism for a whole range of services. A big myth of e-business is that first movers have a better chance of locking out their competition. The truth is that technology provides only a temporary advantage. User requirements are constantly evolving, and just because you are first doesn’t mean you’ll stay there. When a company’s services are functional, elegant in their design, fairly priced, and a pleasure to use, the company will be successful. It will grow in the good times, weather the bad times, and make the difficult transition from one generation of technology to another.

The Focus of this Book

The die is cast. Digitization is beginning to accelerate: e-commerce → e-business → services. Applications are evolving in parallel to support digitization inside company walls: enterprise apps → Web portals → service platforms. Service platforms are the foundation for implementing business initiatives ranging from consolidation to merger integration. They are essential for supporting cross-enterprise process imperatives such as cost reduction, new experience design, and innovation.

Managers are not interested in the nuts and bolts of technology that the various vendors are pushing. However, they are interested in the big picture and the value derived from technology investments. We understand this dilemma and present a balanced perspective of what managers need to know to make effective technology decisions. We are writing both to challenge the dominant orthodoxy of current piecemeal strategies and to address three critical issues:

• How to plan in an economy where differentiation is achieved not through products but through technology-enabled services.
• How to translate business imperatives into better technology execution.
• How to organize the changes Web Services have wrought on the business landscape.

Since most firms operate on some form of a digital backbone, managers need a better grasp of the changing nature of enterprise applications and infrastructure. They must understand that unless their firms create an effective services strategy, they are likely to be left behind.

At a more detailed level, our goal is to thoroughly explain the set of complex choices that executing a service platform strategy entails. In order to make these choices with less then perfect information, managers need to understand:What exactly is a service platform? How should managers go about investing in supporting infrastructure? What is the blueprint for making these multi-million dollar platform decisions? Who are some best-practice firms we can learn from? These are some of the questions that we address in the ensuing pages. We also present a variety of case studies of companies deploying service platforms that show services in action.

The Audience for This Book

Any executive, line of business manager, project manager, consultant, or student involved with managing or implementing business applications, or interested in learning more about them should read this book. Although it will certainly be of interest to those directly engaged in strategic planning activities, it targets a much broader audience.

We approach the topic of services from a business angle, not a technical one. Currently, when managers look at the enterprise software landscape, all they hear is EAI, BPM, XML, LDAP, UDDI, SOAP—a tangle of tools and standards. It often takes a Ph.D. or an army of consultants to sort through the chaos. It is time to make it simpler for managers who are investing in platforms and infrastructure.

At present, that need is unmet. This book fills that gap by:

• Presenting a senior manager’s perspective on the important digitization issues.
• Providing business insight into the new cross-enterprise platforms.
• Developing a blueprint that helps companies maneuver the services minefield.

We wrote this book to give managers and corporate strategists a better handle on their role in IT oversight and management. In the space of a few years, platform and infrastructure management have leaped from the back office to the boardroom, and most managers are ill-equipped to understand this subject. Nor is it easy for them to attain this understanding when they are surrounded by buzzwords rather than conceptual clarity.

The Organization of This Book

The book is organized into three separate sections, the first of which introduces and defines the services blueprint concept. In Chapter 1, we present the five compelling business reasons fueling the move towards services and outline the different categories of services blueprints—process improvement, strategic transformation, and business transformation. The chapter ends with two interesting case studies: General Electric and Wal-Mart that illustrate the critical role of execution in achieving consistent results.

Chapter 2 builds on the formula: Services Blueprint = Focal Point + Service Platform. We present our finding that companies that execute effectively tend to have focal points that prevent distractions. Ten different focal points are illustrated. These focal points include “Easy To Do Business With,” low price, fast service, business process outsourcing, and real-time business. Each focal point is illustrated using real-world business examples.

Chapter 3 addresses the question: What does it take to execute against a focal point? The answer and the topic of the chapter are service platforms. We also present the three critical elements of the service platform—enterprise portals, composite processes, and the integration layer—and study some existing examples of service platforms.

In the second section, we dive into the specifics of the different services blueprints: multi-channel customer-facing, spend management, supply chain management, employee-facing productivity, and product lifecycle management.

In each of these chapters, we give a brief history of the area (e.g., CRM, SCM) and present several long-term trends and emerging business requirements shaping the field. We then deconstruct the blueprint and show what the different layers are and how they come together to create business value. Each chapter concludes with an integrative best-practice case that gives the previous discussion a practical context. The different cases include J.C. Penney, Eastman Chemical, Nike, New York Times Digital, and General Motors.

The final section focuses on execution, or how to put a services blueprint together. Chapter 9 centers on the macro-level blueprint. The questions addressed in this chapter are issues confronting executives: Why do good strategies produce bad results? For results, how should their efforts be organized? How should the strategy (e.g., Balanced Scorecard), process (e.g., Six Sigma), and applications (e.g., IT Portfolio) be linked?

We continue on to the meso-level process blueprint in Chapter 10, which discusses how to analyze and design new services. Services are built from processes; so, at the core of any service is the notion of process analysis, design, and improvement. The most widely used technique for process thinking is Six Sigma. We introduce the reader to Six Sigma, which we think is a useful and under-utilized technique in services digitization.

Chapter 11 talks about the micro-level technology blueprint. Despite the downturn in the economy, leading firms are undertaking a large replacement cycle—migrating from enterprise applications to cross-enterprise service platforms. To help readers understand the infrastructure evolution, we explain the relevant concepts of enterprise data models, application portfolio models, portal infrastructure, and federated architecture and bring them to life in the Princeton and Georgia-Pacific case studies.

Finally, Chapter 12 presents the challenge of business transformation. How do you go about reinventing your business? To illustrate this point, we wrote two intriguing and contrasting case studies on AT&T and IBM. The point that we emphasize is how companies can fail or succeed in their business transformation efforts based on the quality of strategy and execution. We conclude the book with some final thoughts that summarize its key points.

Ravi Kalakota
Marcia Robinson

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