Understanding your Digital Business Model by its Business Functional Requirements for Operational Technology
Understanding your Digital Business Model by its Business Functional Requirements for Operational Technology
Andy Mulholland is Vice President and Principal Analyst focusing on cloud business models. Formerly the Global Chief Technology Officer for the Capgemini Group from 2001 to 2011, Mulholland successfully led the organization through a period of mass disruption. Mulholland brings this experience to Constellation’s clients seeking to understand how Digital Business models will be built and deployed in conjunction with existing IT systems. Coverage Areas Consumerization of IT & The New C-Suite: BYOD, Internet of Things, IoT, technology and business use Previous experience: Mulholland co authored four major books that chronicled the change and its impact on Enterprises starting in 2006 with the well-recognised book ‘Mashup Corporations’ with Chris Thomas of Intel. This was followed in…...
Read morePart 3; A Digital Business is more than the addition of e-commerce channels, instead it must embrace three distinct and different business functions. Digital Business models are defined as agile, dynamic, and responsive to external opportunities through sense and respond capabilities. This is the common terminology used in relation to the Front Office, with the external role winning of sales revenue. Yet without major changes it’s difficult to see how the Back Office internal activities delivered by optimized enterprise IT processes can support such a flexible business-operating model. Its time to re-examine and identify the revised business functions together with what and how technologies provide them.
Slowly but surely all enterprises have become dependent on technology to operate their internal processes, but Digital Business takes this a new level of integration with, and operation through, external Digital Markets. Buy practices are as much transformed as Sell methods, plus a slew of external business and technology Services must connect, and support, enterprise operations.
Part I of this series entitled ‘Why your IT Operation can’t run your Digital Business Operations, and in turn, why you Digital Operations can’t run your IT Operations’ defined the reality of the difference between the Front and Back Offices, their technology and operations. Part 2 re-examined, and updated, the best practices for the operation of the Back Office supporting the internal fulfillment processes of the enterprise under the title; ‘The role of existing business functions and technology provisioning in a Digital Business’.
Part 2 also introduced the diagram below to illustrate the Back Office functions concentrating on the lower four blocks. In Part 3 the focus is on the top three blocks covering Front Office functions. Finally in Part 4 the last block covering the Business functions and Technologies of the Enterprise Business Platform and its role as the new integration engine will be defined.
Part 3 Business Functions and Technology alignment of the Front Office; The three blocks at the top of the diagram, Machines, Commerce and People, are generally seen as supporting the new externally focused Front Office by using the new wave technologies. It’s the combination of new technologies enabling new business capabilities that produce the business game change of Digital Business. The center block is called ‘Commerce’ rather than ‘online web sales’ or a similar description from the 2000 era of moving to offer the sales catalogue on an external webserver, to reflect the greatly expanded commercial role of true Digital Business.
Q; What is Digital Business?; A; When your Digital Sales model gains its opportunistic advantage through your Digital Procurement model exploiting supplier opportunities, and the majority of your standardized ‘book to bill’ processing is done in alignment through an external Business Process Outsourcing provider then an Enterprise can be said to be a true Digital Business.
This explanation supports the use of the broader term ‘Commerce’ to embrace both the Buy and Sell operations working together in Digital Business. (It’s hard to succeed in the Sell function without the support of the Buy function!) In a true Digital Business environment the administrative ‘paperwork’ flow will also be Digital and for good reasons, both commercial and technical, probably best serviced using an external Business Process Outsourcing, BPO, Service Provider. The BPO Service Provider can forward consolidated financial data through the Firewall in a secure manner, instead of the multiple accesses required for all the many, different participants in each buy/sell operation. Multiple penetration of the Firewall is always a security risk and leaving these operations to remain internally provided from behind the firewall is introducing an un-necessary risk.
This last point is especially important as a further principle of Digital Business models is that all activities are directly cost attributable to ensure ‘real-time’ financial management of these rapidly changing opportunistic operations.
Its worth remarking that SAP have created products, and ‘Services’ to integrate new Front Office Commerce into existing internal IT ERP systems and processes. As part of this SAP have added new business capabilities to embrace the data from the Machine functional block as well. The SAP drivers in providing new capabilities to connect to and enhance their installed ERP base means that their point of focus is different to that of Salesforce whose focus is on empowering people. This point will be expanded later.
Front Office Digital Business is made possible by two important differences from existing Back Office IT. The first is the common standardized nature of environment, or fabric, based on the Internet with associated technologies allowing any person, or computing device to successfully interact. The second is the use of Cloud, Apps and Services to provide the capability without having to be purchased as an investment using a Capital Expenditure, or CapEx, budget, (with the resulting difficult to allocate overhead charges). The agile, flexibility of the Digital Business model with its opportunistic, constantly changing requirements is made financially viable by this all-important shift in provisioning allow almost real-time understanding of operating profit, or loss, for a given business action, or activity.
Front Office functions should be deployed on an Operational Expenditure, or OpEx, budget with direct cost allocations against the function, user or business activity. Financial reporting and justifications from IT do not provide the necessary information to successfully manage a Digital Business.
The necessity to for Digital Business to be managed through very different financial controls to those used for IT was the subject of a previous blog. With this point in mind the question of the functionality of the other two Front Office blocks, ‘People’ and ‘Machines’, can be defined in relationship to their role of supporting, and enhancing, the capabilities of ‘Commerce’. The use of Collaboration and Social Tools has been widely discussed as an aid to sales and marketing is well understood, but the question of the functionality requirements in an integrated Digital Business may not be so clear.
The Collaboration of ‘People’ is an unstructured series of interactions driven by reaction to events, as such it is more likely that it will be focus externally around reacting to market, sales, and customers issues rather than internally around the ‘structured’ processes and information of the enterprises own operations.
Salesforce has consistently focused on providing a highly integrated approach to supporting and empowering the business value the People can bring to the enterprise describing it as the ability to ‘connect every employee with the files, data, and experts they need — anywhere, anytime’.
The Salesforce white paper ‘taking action at the speed of social’ defines much of the Business capabilities required for the ‘People’ function though extra functions may be added to refer to a specific enterprise individual needs. This is a fast reactive environment frequently driven by individuals, and groups, preferences for different tools and methods of working so it has to be provisioned accordingly. And that means by using fast, lightweight, quick to build and deploy ‘Services’ from external sources with attributable cost management.
‘Machines’, the third block, is more complicated to define as it introduces the topic of Internet of Things, or IoT, instrumentation, which is still a developing set of technologies and business functions. For more detailed information of IoT, which is a huge topic in its own right, please see the blogs posted on this site on alternative weeks.
The ‘Machine’ functions bring the ability to ‘sense’ as in monitoring for triggering actions and changes, or acquiring data as to norms and progressive change. This vastly extends an enterprises abilities to be ‘aware’ and decide, when and how, to opportunistically react in many different vertical industry sectors.
In comparison to the ‘People’ function which seeks to harness the tacit knowledge and experience of the Enterprise workforce as well as customers, suppliers, experts etc. externally, the ‘Machine’ function is to produce straight forward data. It will be new Data from new sources that will add to an Enterprise overall picture of the environment in which it operates, but it is unlikely to be in the familiar forms of data aligned to the Data used in the internal IT systems.
Sensors and sensing data is usually described as ‘Industrial Technology’ Data to differentiate from existing ‘Information Technology Data’, and it will increasingly come from other than in-house controlled sources too. Defining the functionality and aligning the manner of provisioning is the new challenge.
The key question with the functions of ‘Machine’ is with what do they interact to add value to the enterprise. It can be as part of the Front Office externally facing market activities, or the Back Office internal processes of fulfillment. In time it will be both and introduce new challenges of scale, risk and security.
As an example of ‘Machine’ functions supporting Back Office internal operations SAP has successfully deployed IoT sensing into internal manufacturing environments fully integrated with their Connected Manufacturing ERP suite. The Business value is clearly to monitor, and manage, previously unknown aspects of the manufacturing systems in order to extend, and improve, the current operations. In time this may extend to embrace an Enterprises suppliers and logistics companies making for new sources of data in unfamiliar formats. The makers of large Manufacturing plant have developed their own data formats and models that relate to the operations they believe should be monitored.
By contrast Salesforce is equally successfully deploying IoT to bring data into Front Office operations where subjective, high value, business decisions can be taken by people, even if the resulting actions then use particular Salesforce Front Office processes. Consider the difference between the type of data about a machine production rates etc., used in the Connected Manufacturing application, and, an experienced factory plant engineer interpreting a number of graphs showing continuous operating parameters to take the decision to plan preventative maintenance.
The Business function with technology alignment for the functions of ‘Machine’ are different from those of IT, and will almost certainly develop with time into a wholly new technology deployment environment.
The key question with the functions of ‘Machine’ is with what do they interact to add value to the enterprise? Is it part of the Front Office externally facing market activities, or the Back Office internal processes of fulfillment? In time it will be both, and the Front Office will transform into a wholly different environment driven totally by technology to support Digital Business.
Connecting, processing, and adding value, to this complex new Front Office set of three functional blocks; Machine, People and Commerce, and to the existing Back office blocks of Core Competencies, BPO, Applications and Data Center calls for an Enterprise integration capability that is radically different from the IT Middleware of today. The last and eighth functional block; the Enterprise Digital Business Platform is the subject of Part 4 of this series, and is an entire set of functions and technologies integrated together to perform this role.
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