The Enterprise Alphabet Soup

1980s - JIT, TQM, MRP II, CIM1990s - Convergence of TQM, Re-

Engineering, Benchmarking, Change Management and Strategic Planning.

NOW - Convergence of Total Customer Experience, Network-Centric Enterprise, Virtual and Agile Enterprise, Knowledge Based Enterprise and Service Based Enterprise.

Traditional Enterprise

Vertically Integrated Self-sufficient; converted raw materials

to finished goods. Tight coordination among processes. Examples are, early automobile and

computer firms.

Virtual Enterprises

Concentrate on core competencies. Focus on processes at which the enterprise can

excel or be world-class.Partner companies perform other processes. Examples

CISCO concentrates on new product development and sales.

Auto manufacturers focus on vehicle design and final assembly.

Virtual Integration

New organization model for the information age.

Harnesses the benefits of two different business models. Coordination of a vertically integrated

enterprise. Focus and specialization that drive

virtual enterprises.

Vertical Integration

Use of technology and information to blur the traditional boundaries and roles in the value chain - suppliers, manufacturer and end users.

New levels of efficiency and productivity.

Example - Dell’s direct business model.

Dell’s Direct Business Model

Bypass dealer channels.Directly to customer and build

product to order.Eliminated reseller’s markup.Eliminated risks and costs associated

with large finished goods inventory. Focus is on delivering solutions and

systems to customers.

Virtual Integration

Combines pieces of contemporary business strategy in a unique way Customer focus, supplier partnership,

mass customization, just-in-time manufacturing.

Stitching together a business with partners that are treated as if they are inside the company.

Virtual Integration

Partnerships vs. Outsourcing.Dell sets quality measures and builds

data-linkages with partners to monitor performance.

Partners become part of the company.As few partners as possible.Partners must maintain leadership in

technology and quality.

Virtual Integration

Information shared with business partners in a real time fashion.

Share daily production requirements with suppliers.

Share design databases and methodologies with suppliers.

Time to market is dramatically reduced.

Virtual Integration

Challenges in establishing supplier collaborations Changing focus from how much inventory

to how fast it is moving. Inventory velocity is a key performance

measure. Long-term contracts just-in-time delivery. Example, Sony monitors for Dell computers.

Virtual Integration

Substitute information for inventory. Ship only when there is real demand

from real customers. Traditional model (computer

industry) stack up units in warehouse and then in

channel. Stuff channel to get rid of old inventory.

Virtual Integration

Partnerships with customers Customer segmentation is an important

element of Dell’s virtual integration with customers.

Segmentation takes the company closer to the customer.Better understanding of customer’s needs.Ability to produce better forecasts.Reduced inventories.

Vertical Vs. Virtual Integration

Vertical integration allows a company to be efficient under stable conditions.

Virtual integration allows a company to be efficient and responsive to change at the same time.

Value Webs

Forces Reshaping Value Chains Peripheral changes in the roles of value

chain members Customer/Consumer preference for

personal customization These forces morph value chains to

value webs

Value Chains Vs. Value Webs

Value chains do not motivate their members to develop an integrated infrastructure.

Value webs promote a fully integrated infrastructure that links together all the members.

Value Web Management (VWM)

A model of infrastructure that is capable of supporting the value webs.

Produced by the marriage of business and technical infrastructure.

An extension of the old Supply Chain Management.

VWM

Allows value web members to exchange critical information/knowledge in real time and synchronize their efforts to respond and produce the desired results also in real time.

VWM and SCM

SCM promotes logistics as the key mechanism to link the individual members of the value chain.

VWM promotes one integrated business system.

Key Concepts

Information/Knowledge: Value Web collects, archives, retrieves, creates, shares, and otherwise leverages information that can be translated into knowledge and wisdom.

Real Time: The best enterprises must manage their business in real time because of the dynamic and fast paced environment in which they operate.

Guiding Principles of the Value Web

Disintermediation: the removal of any intermediary node in the value web; a synonym for value chain collapse.

Reintermediation: change in role of any intermediary to better serve the value web.

Infomediation: the addition of new information/knowledge-based intermediaries.

Guiding Principles of the Value Web

Role Transformation: changes in the roles of value web members, individually and as a whole.

Dematerialization: the conversion of materials and material-related assets to bits and bytes.

Guiding Principles of the Value Web

Digitization: capturing all pertinent information/knowledge for the value-web members to be used efficiently, effectively and interactively.

Resource Exploitation: leveraging certain pre-specified skills, capabilities, competencies, assets, structures, and infrastructures of others within the value web.

Reference Articles

Andrews, P. P. and J. Hahn (199), Transforming Supply Chains into Value Webs, Strategy & Leadership. pp. 7-11.

Magretta, J. (1998), The Power Of Virtual Integration: An Interview With Dell Computer's Michael Dell, Harvard Business Review. pp. 73-84.

Hammer, M. (2000), The Rise Of The Virtual Enterprise. Information Week. pp. 152.