According to new research, companies capture the
most value from their enterprise solutions by adopting ongoing programs that
continually integrate, optimize and extend their systems. By Thomas H. Davenport, Susan Cantrell and Jeanne
G. Harris Outlook Journal, July 2002
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Still not convinced that your enterprise solutions have
generated any real value? We understand your concern. After all, it's a major
undertaking to implement organizationwide enterprise solutions, and the fact
is, most companies are still building out their systems.
Enterprise solutions, of course, connect and manage
information flows across complex organizations, allowing managers to make
decisions based on information that truly reflects the current state of their
business. These systems also automate complex transaction processes and thus
save costs.
Because standardization and integration are essential parts
of the enterprise solutions value proposition, companies can't get the full
benefits until they install the systems throughout their organizations—as
opposed to, for example, a discrete implementation for supply chain management
or CRM. Given this reality, how likely is it that your enterprise systems will
live up to your expectations and deliver real value?
The Accenture Institute for Strategic Change studied the
experiences of 28 leading adopters of enterprise solutions. Results of the
research showed that companies that approach implementation using three
parallel strategies will capture significant value from their enterprise
solutions. These companies—including Intel Corporation, Verizon Wireless and
The Dow Chemical Company—told us that to extract the full measure of value,
they treat enterprise solutions as an ongoing program that allows them to
continually:
Integrate—provide a common platform to
enable maximum efficiency.
Optimize—leverage the enterprise
solutions investment to generate more value.
Extend—take advantage of further
enterprise solutions capabilities.
Python and Pig
Unlike earlier systems, in
which users could realize substantial benefits as soon as the system was
installed, experience suggests that enterprise solutions take time to deliver
value. In fact, productivity may even decline initially. What IT pundits
mistook for exhaustion and executives' short attention spans was, in fact, the
reflection of a need to absorb the impact of enterprise solutions prior to the
next wave of business value realization. As one IT executive in the insurance
industry explained, "We are like a python digesting a pig."
Executives need to change the way they view their
enterprise solutions initiatives. They need to think in terms of an ongoing
program rather than in terms of a project with a specified end point. As one
participant in our study put it, "Implementing the basic transactional
architecture is only Phase 1 of our overall program." Indeed, such a program
will contain many projects, some of which will involve the implementation of
system functionality and others that will involve business benefits derived
from the systems.
Because companies expect to continually implement
additional enterprise solutions functionality, integrate newly acquired
best-of-breed applications and integrate systems from acquired companies, few
of the executives we interviewed could see an end to these initiatives. But to
be successful and, ultimately, to create value, all these initiatives need to
be undertaken using the same three-pronged, business-oriented approach—an
approach that is valid even if systems are completely installed.
 Integration
To get full value
from an enterprise solution, an organization needs to go through the often
painful process of agreeing on a common way to define key information and
perform key business processes. After standardizing data and processes,
enterprise solutions allow large, complex global organizations to speak an
enterprisewide common language.
Standardization does more than save money; it also speeds
up communications and decision making. Financials from diverse business units
can be consolidated easily. A global customer's orders can be viewed by anybody
within the company from any location. The perennial aggravation of conflicting
management reports can be banished forever. A financial systems manager at
Microsoft emphasized how enterprise systems have enabled common processes,
policies, reports and metrics at the company, eliminating duplicate systems.
Although standardization is best addressed during the
initial implementation, many of the organizations we studied found it too
difficult; as a result, different versions, or "instances," of enterprise
solutions proliferated. Our research showed that it is quite common for
companies to consolidate instances after the initial implementation is
complete.
In some cases, instances may have proliferated as a result
of mergers or acquisitions. At Verizon Wireless, which merged several large
wireless communications companies, consolidation became a major cost-saving
objective. According to the project manager, "Getting funding to consolidate
was the easiest business case I've ever written." He estimates that
consolidation has saved the company $25 million over two years.
From a business perspective, the most obvious route to
consolidation-related cost savings is the adoption of shared services. Moving
to common, centralized processes for such transaction-intensive activities as
accounting, human resource management and procurement can yield savings of up
to 30 percent.
From an IT perspective, consolidation may involve reducing
the number of data centers and hardware platforms. A US consumer products
company, for example, consolidated 75 data centers worldwide into two—one in
the East and one in the Midwest—and now uses a single hardware platform.
Optimization
Although few
organizations today are interested in radical new process designs, companies
focused on optimizing the value of their enterprise solutions investment
regularly examine and improve how processes flow and fit with the system and
how information is provided to critical workforces.
For example, one consumer products company has implemented
its enterprise solutions system worldwide and now regularly examines the
processes it supports. System deployment is highly centralized; however, the
process improvement program, while companywide, is implemented at the local
level. Each operating unit or geography decides where to focus and how best to
implement change. Best practices are transferred quickly from one area of the
company to another.
 Other practitioners of this
strategy, like Dow, credit business process optimization for their ability to
react swiftly to changes in their business model due to internal or strategic
changes or to external pressures such as market consolidation.
As companies gain mastery over their back offices, the
focus of process optimization shifts to a different type of worker—one who is
higher paid, more independent and more focused on knowledge work than on
transactions.
Optimizing high-value knowledge work, such as sales and
marketing, new product development and strategic planning, provides significant
opportunities to improve not just efficiency but also innovation and
effectiveness (see "The Art of
Work," Outlook, January 2002). Since there are now
enterprise solutions modules that support each of these processes, many
organizations we studied were adding CRM and supply chain management functions
to their core enterprise systems, although they had not yet undertaken the
redesign of the business processes employed in these areas. Those organizations
that don't are unlikely to gain the maximum value from these initiatives.
Enabling Critical Workforces
Increased
demand from frontline workers will be driven by greater familiarity with data
produced by enterprise solutions. Senior executives want better data and
analytical capabilities, and they will be driven by a desire to achieve the
maximum benefits in a business case. Enterprise solutions can make a company's
critical workforces—for example, the frontline staff in sales, customer service
and product development—more effective through better decision making and much
more productive through the automation of routine tasks (see "Mission Critical,"
Outlook, January 2002).
However, this will happen only if that staff has access to
the right information—and then actually uses it. Supply chain planners, for
example, need a huge amount of accurate information, including current orders,
sales projections, current and planned production, inventory levels, pending
shortages and transportation alternatives. It all must be pulled together and
synthesized quickly before the correct supply chain decisions can be made.
Prior to enterprise solutions, this information simply
wasn't available. Now companies have to ensure that supply chain planners and
other frontline workers have the skills, the analytical software, the business
processes and the authority to use all the new information effectively.
Senior management is another group of critical workers when
it comes to using information produced by enterprise solutions. Now that
executives have real-time, global, cross-functional data, how are they going to
manage the business differently?
Cisco Systems has popularized the concept of the "virtual
close," or the ability to close its financial books in a matter of minutes (see
"Rise of the Digital
CFO," Outlook, January 2001). The company's financial
and general managers have used this capability to make better predictions about
the effect of acquisitions on the company's financial health and about the
implications of operational changes on key performance metrics. Cisco has
weathered the downturn in the telecom-equipment market better than its
competitors in part because of its rapid, responsive financial processes.
What management process needs to be optimized in your
organization? And how can enterprise solutions data be used to make it better?
It may be strategic planning; the management of mergers, acquisitions, or
divestitures; or communications with key stake-holders. Whatever the managerial
domain, it's likely that enterprise solutions-enabled and managed information
will mean significant improvement in the process.
Of course, a new enterprise solution can inadvertently
trigger sensory overload when previously data-starved managers suddenly become
inundated with new reports. Since the best technology is useless if managers do
not pay attention and use the information it can deliver, companies must help
manage attention effectively and improve decision-making processes. Some tools,
like balanced scorecards, exception alerts or what General Electric Company
calls a "digital dashboard"—all of which can be tied into an enterprise
package—actually help focus management attention.
Extension
Executives at many
companies we interviewed described the importance of implementing new systems
on top of their newly integrated architecture—a strategy we call
extension. This involves the continual development of more
users who are more widely dispersed geographically, as well as more
functionality and more connections within the enterprise. One multinational
company executive described the rationale for extension—in this case, for new
CRM and business-to-business information exchange initiatives—as being based on
"the principle that we can achieve real value by leveraging off the base."
The companies in our study have continually added new
functionality to their core systems; CRM and supply chain capabilities seem to
be the most popular extensions. Indeed, some companies in difficulty—notably,
several in Japan— are implementing CRM and supply chain management well before
they complete their enterprise solutions projects, or even instead of such
projects. These executives believe that the benefits of these customer-facing
systems are too great to put off until the basic infrastructure is in place.
After CRM and supply chain management, the most likely
candidate for enterprise solutions extension is new product development. In our
study, however, we found a low incidence of such projects thus far.
In addition, a number of companies are undertaking
one-to-one projects to integrate their enterprise solutions with those of
individual customers or suppliers. This approach to interorganizational
integration demands that the partners either agree on data definition or
process flows, or that they employ a system that translates one organization's
information into a format that can be used by the other organization.
The other leading approach for interconnecting enterprise
solutions is to go through an intermediary organized by an industry consortium.
This is appealing because it allows a company to establish a single connection
between its enterprise solutions and the industry hub, as well as minimize the
work of integration.
What kind of industry hub would perform this enterprise
solutions interconnection role? Increasingly, the industry consortia that were
originally organized as online eMarkets are evolving into enterprise solutions
hubs. The most aggressive mover in this direction has been Elemica, a
consortium that connects the enterprise solutions of the 22 chemical companies
that sponsor it. This approach works particularly well for Elemica, since
almost all of its sponsors have installed SAP; moreover, chemical companies see
one another as customers and suppliers, as well as competitors.
(Separate Accenture research suggests that participants
should adopt a portfolio of approaches to eMarkets and exchanges to maximize
the likelihood of success. Direct connections of enterprise solutions within
trading partners should be one bet within a portfolio. If a company already
participates in an industry group that has made progress on process and
information standards, it should encourage the consortium to develop
capabilities as an enterprise solutions hub. If there is no such association, a
company would be better off pursuing one-to-one enterprise solution connections
with its largest customers and suppliers. See "Why B2B eMarkets Are Here to
Stay," Outlook, July 2001.)
 Ongoing
Evaluation
In this article, we have emphasized that the parallel
strategies described above—integration, optimization and extension—should be
conceived and implemented as an ongoing program. Our research suggests that to
do this successfully, companies will need to create a permanent organizational
unit to implement this program. This can be achieved without creating another
layer of overhead and bureaucracy.
This unit shouldn't be large—in fact, most organizations
will want to substantially decrease the size of their project offices after the
core system has gone live. Many of the unit's members, particularly those on
the business side, may be temporarily assigned to enterprise solutions value
projects, as happened at one company we interviewed. Companies may also employ
consultants for specialized tasks. But unless there is some coordination within
the organization, they will be hard-pressed to capture significant value.
The unit should include personnel knowledgeable about the
system itself, process improvement approaches, and the structure and function
of the organization. Roles could include overseeing not only projects to
enhance the value of the enterprise solution but also the installation of new
software and reconfigurations of the system to accommodate changes in corporate
structure, such as a reorganization or an acquisition.
Intel Corporation, for example, plans to set up such a
group as it completes the initial installation of its enterprise solution. And
organizations like Canada Post Corporation have set up "SAP Centers of
Excellence." The US Defense Logistics Agency plans to name a "benefit
realization manager," whose job will be to enforce changes and achieve the sort
of results described above.
In any case, the unit should be positioned centrally within
a company so its staff can serve as internal consultants or leaders for
specific enterprise solutions-related projects throughout the organization.
Alternatively, there could be specialization by the type of business change,
particularly when specific groups—like a Six Sigma organization, for
example—already exist.
This is a time of great opportunity. If your company is
well along in its enterprise solution implementations, hang in there: The
first, messy phase of the campaign is over. You are now positioned to achieve
substantial value from the systems on which you've spent so much money, time
and effort. But it won't happen automatically; it will require your ongoing
attention—to integration, optimization and extension.
 Thomas Davenport is the director of
the Accenture Institute for Strategic Change and a distinguished scholar in
residence at Babson College in Wellesley, Massachusetts. He is an acclaimed
speaker on the topics of information and knowledge management, reengineering,
enterprise systems, and electronic business and markets. A widely published
author, Dr. Davenport was named one of the 10 "Masters of the New Economy" by
CIO in 2000.
thomas.h.davenport@accenture.com Susan Cantrell is a research fellow at
the Accenture Institute for Strategic Change. Her work focuses on business
innovation, knowledge work and information systems. She has a master's degree
in management information systems, and she has written articles for
publications such as Industry Standard, Across the
Board and Strategy and Leadership.
susan.cantrell@accenture.com Jeanne Harris is a Chicago-based
associate partner and senior research fellow at the Accenture Institute for
Strategic Change. Her research focuses on improving managerial performance,
knowledge management, business intelligence and enterprise systems; she also
speaks frequently on these topics to executive audiences. Her research findings
have been published in Sloan Management Review, California Management Review
and Strategy and Leadership.
jeanne.g.harris@accenture.com Back to
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