In this corporate scandal-ridden era, forward-looking CEOs, CFOs and CIOs should seize the opportunity to improve information integration not just for regulatory purposes but also to provide necessary corporate intelligence for better business strategies
The business world is reeling from the effects of major corporate disasters, with events surrounding companies such as Enron, Xerox, Qwest and Worldcom sending shock waves throughout. The repercussion from this succession of events is a renewed focus on how information is managed and verified within large corporations.
Investors and regulators are demanding greater transparency of company performance and in turn, financial directors are requiring similar transparency throughout their organization at every level. Moreover they know they need to secure timely information much faster if they are to spot discrepancies before they occur.
If there is one positive result to emerge out of the immense scale of corporate failure witnessed recently, it will hopefully be a heightened focus on the transparency of information. Long before the events of 2002, however, corporations have grappled with the challenge of integrating information from disparate IT systems to gain a single global view of performance throughout business change.
When organizations are changing strategy, merging and de-merging, and restructuring on a regular basis it is very hard to access and compare information from disparate sources throughout the organization. In essence, executive boards have been ¡®flying blind¡¯ with no clear picture of true company performance.
It is therefore little surprise that problems have arisen in the telco sector, amongst others. The telco sector has undergone immense expansion and consolidation very quickly. The result has been the creation of large multi-national decentralized businesses typified by poor visibility and flexibility of information across the enterprise. Senior executives need to react, but are paralyzed by the lack of meaningful information across the enterprise.
It¡¯s not only the telco sector that is suffering from this information disconnect. In today¡¯s global competitive environment, executives need fast access to timely, accurate information on any aspect of the business at any level from any perspective. They need this knowledge no matter how much or how often it changes. And they need the ability to maintain this high visibility across the entire organization through major changes of the internal and external environment.
INSEAD Business School labels organizations that have achieved this goal as ¡°Adaptive Enterprises.¡± This label applies to organizations that have attained an increased state of both visibility and flexibility of information across their enterprise.
¡®Visibility¡¯ in this case means the ability to have multiple views of the business at a global level. The board can therefore explore business performance information extracted from disparate systems and view it from any perspective and at any level of detail ? for example, global, regional, local, product and customer.
The board can also compare and model different sets of data to gain new insights into business performance and strategies, view the impact of past decisions and model new ones simultaneously. ¡®Flexibility¡¯ on the other hand means being able to respond to changes in an organization both globally and locally.
As highlighted by recent events, there are few global companies that can currently claim to be Adaptive Enterprises. And in all fairness there are a number of barriers to achieving true visibility and flexibility in corporate information systems.
Firstly, there has been an accumulation of disparate information systems over the years, exacerbated by ceaseless mergers and acquisitions and the wholesale uptake of enterprise information systems. The wide-scale implementations of Enterprise Resource Planning (ERP), Customer Relationship Management (CRM), and Supply Chain Management (SCM) systems are just some of the trends that have led to federated, disconnected information systems.
Not only is different information represented by different data in different places across different business units and functions, but it is also duplicated in many areas. In these cases businesses have gained the operational flexibility that they need, but they cannot integrate information across the silos. This lack of visibility prevents a true view of performance as viewed through key business metrics such as sales, customer satisfaction and profitability.
Secondly, the degree (or lack) of flexibility within local operating units can have a significant effect on the quality of information received by management. Each operating unit functions in its own distinct way, and their rigid structure make it difficult to respond quickly to internal and external changes. The result is that up-to-date relevant information is extremely hard to gather together globally and regionally.
Thirdly, the impact of change can hamper an organization¡¯s ability to view key business metrics whatever the chosen IT strategy. Most systems are developed for the ¡°steady-state¡± and assume no change. However, change is a constant and many companies struggle to deliver accurate information speedily when they are undergoing changes such as re-organizations, new products, consolidation programs and de-mergers. Ironically, it is during these periods of change that companies most need accurate and timely data. It is this problem that has undone the attempts of many organizations to standardize on one ERP platform or operational system organization-wide.
On top of all these factors, the advent of the extended enterprise, typified by cross-firm alliances, with chains of suppliers and customers, has made access to quality, up-to-date information even more challenging. Data now resides not just across multiple business units but across customers, partners and suppliers as well. The challenge is to harness and formulate all this information fast and flexibly enough to make the right decision.
Adaptive Enterprises have recognized these needs and put in place processes and technologies to address them. They have made a decision that they will integrate the information within the systems. They know that they need global visibility if they are to be confident of the transparency of their information, capitalize on opportunities and survive downturns.
They also recognize that it is too expensive and in most cases unfeasible to standardize on any one ERP or CRM platform and migrate the whole organization to it. Instead they put in place software solutions that enable local operations to continue business as usual while being able to analyze information from across all the business units on a like-for-like basis.
For the Adaptive Enterprise, the starting place is to think big, start small and evolve from there. ¡®Thinking big¡¯ means envisioning the ultimate aims for integrating information across the entire organization, and defining an over-arching strategic objective with clear long-term return on investment (ROI).
The next step is to ¡®start small.¡¯ If an organization can find a key strategic problem with which to start exercising this approach then it can establish a knowledge base and build out its expertise across the whole corporation.
The Adaptive Enterprise will find a business unit with a business critical short-term strategic issue, undertake a point-of-concept project to define ROI and then determine the task, success factors, timescales and measurement.
Following the successful implementations, the Adaptive Enterprise ¡®evolves smart¡¯ with a strategic framework for scaling upward and outward across the organization using the expertise acquired during the initial smaller scale project.
Information is a corporate asset as important as any other kind. The ability to find and analyze the required quality global management information, even as the business and market changes, quickly and cost-effectively, will be one of the critical competencies of successful corporations in the 21st century. And in the aftermath of recent corporate scandals, it has moved to the top of the agenda, not just of corporations themselves, but of investors and regulators too.
Cliff Longman is chief technical officer for the Kalido Group.