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Saturday, June 04, 2005

Organizations, Sustainable Edge & Technology

(Via Knowledge@Wharton) John Hagel and John Seely Brown discuss the ideas written in their book - The Only Sustainable Edge. Excerpts with edits and comments:

The sustainable edge is about the notion that strategic advantage should be viewed in dynamic terms as opposed to static terms. While traditionally strategic advantage was based on geographic distance or core competencies(typically static), increasingly the only sustainable edge has to do with the capacity to accelerate capability building.The book focuses on management techniques that are emerging to help build that kind of dynamic strategic advantage – like understanding that it is not just corporate training that is important but rather rich participation with partners who are at the edge as well. This puts a new spin on why distributed collaboration around the world might be critical in creating this sustainable edge.
There are more edges today, and the edges themselves are also becoming more important. Like mobile edge in Korea and the whole notion of the mobile Internet, all these things are developing very rapidly in Asia. That is why having relationships and partnerships in those countries really helps. The idea of process networks should be assessed in terms of how you build longer term relationships. For example, Toyota has worked with its supplier networks, and has been able to turn these networks into sites of innovation in contrast to Detroit –which views suppliers as people who perform "to spec" rather than as major sources of innovation in their own right. These supplier networks operating around the world can be inverted into new nodes of innovation - how you can use an innovative insight here, rub it against another insight over there, and build productive frictions and compromises to be able to take an overall systems point of view of all these collections of ideas coming up - then we are into a whole new game.
In terms of the overall requirement of adding more value to customers in an environment of intensifying competition, more edges are being created or managed actively at a variety of levels.
- At one level, a lot of activities that were typically done within the enterprise are getting carved out and performed on an outsourced basis with the rapid growth of process outsourcing. This is not just in administrative kinds of activities, but it's getting into the core operating processes of the business like contract manufacturing activities, product innovation being outsourced...those kinds of core activities are now at the edge of the enterprise. You have to manage those activities with your outsourced partners.
- Secondly, the broader notion of these process networks is that you are orchestrating or coordinating activity at multiple layers across a network rather than just your first-tier partners. And that creates more edges that need to be managed as well.
The evolution of technology can be viewed as the shift from process automation to practice enhancement. Earlier, the primary focus of IT investment by large enterprises has been to automate and standardize the core operating processes of the business. The net result is focused on handling exceptions that get thrown out by the automated processes, and that can't be handled by the rules or procedures that have been specified. The real opportunity for technology now is to help people to address the exceptions - it involves people, collaboration, tools necessary to address the exception, and then, to create a record of the exception-handling so that you can see patterns emerge of where these exceptions are occurring over time. It is much easier to constantly evolve the processes and practices of the organization with the kind of inherent agility that service-oriented architectures in principle provide you. But this also puts a new spin on how you want to design SOA with new focus on capturing the context of a breakdown between enterprises. The focus is on architecture that works between enterprises rather than architecture that works within an enterprise.
In addition to service-oriented architecture we need social-oriented architecture. One of the limitations of service-oriented architectures is that most of the investment and thinking around this has been very enterprise-centric. But most of the exceptions emerge; they are in the business processes that span multiple enterprises - in supply-chain activities or customer relationship management, or the coordination of distribution channels or channel partners. That requires a very different lens for viewing IT architectures. It has to start from the outside and moves back into the enterprise. This contrasts with the traditional IT architecture, which typically moves from the glass house out to the edge of the enterprise and ultimately beyond the enterprise- it's a service grid for a process network. Paradoxically, rather than IT diminishing the opportunity for strategic advantage, these new generations of IT dramatically expand the opportunity for strategic advantage.

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