Feature Article: Convergence and Dispersion - New Business Models Require New IT Approaches

by Julie Fraser

In the past several years, two key trends have captured the imagination of management consultants and their corporate clients: innovation and globalization. 

More and more companies are devising business strategies to confound the competition by improving, not only the speed, but also the effectiveness and profitability of innovations.  They are also fostering in processes and relationship structures, as well as products. 

Globalization is driving companies to re-think not only where they perform certain activities, but also whether they want to own those processes and assets, or outsource them to a partner.

These two trends are driving specific strategies for industrial companies that may appear to work in opposite directions.

•    Convergence: On the one hand, innovation and globalization force different departments

      and disciplines to work together effectively, and to better synchronize the cycles of major

      business processes such as product design, production, and supply chain response. 
•    Dispersion: On the other hand, these two trends are leading to a reliance on facilities and

      business partners located throughout the world to operate an effective industry network.

      We’ve heard many times that companies now compete as networks, not enterprises.

So what does that mean for IT?  How can applications support these major shifts?

First, current “enterprise applications” must be viewed as important foundational systems and reliable data sources.  These include ERP, PLM, SCM, CRM, and MES.  However, these are not necessarily the sole starting point for extensions to handle convergence and dispersion. 

There are boundary-spanning specialty applications that no doubt will eventually be subsumed by the vendors of these other software suites – but do not fit into those boxes neatly.  For example, applications to optimize features and options across a product set; applications to accurately and consistently assess new products for both market appeal and costs; applications to manage and optimize pricing; and so on.

Clearly, companies must provide improved capabilities for work flow and business process flow to be automated across multiple departments.  Beyond that, companies must create special capabilities for multi-discipline teams – which may be static or ad hoc, depending on the situation – to work together effectively.   This teamwork is particularly critical at major decision points – at product concept go/no go, transfer into production, when a quality problem arises, if supplier capabilities shift, as new distribution needs or opportunities arise, etc.

Companies also need multi-facility and multi-partner capabilities.  The fact that most companies play roles in many industry networks means that new systems must cope with contractual differences, IP protection fears, and constant change.  So specialized systems designed to handle the ever-changing relationship rules between trading partners are also likely to be critical.

The good news is, the investments that industry has made in IT to date will be a strong foundation.  The SOA, BPM and analytics investments that solution providers are now making will serve this new environment well.  It will allow these applications to integrate more effectively, to serve data to each other and to new applications, and to ensure that major disciplines have a core system of record. 

However, for most companies, this is just the start.  Improved information flows across industry’s extended supply and distribution chains will be supported by applications specifically designed to make multi-company business processes faster and more efficient.   The role of industry network performance as a source of competitive advantage will grow.  Management teams will invest in IT solutions that offer visibility, insight and management of the industry network, not just their own enterprise.