setlabs briefings enterprise agility

8/12/2019 SETLabs Briefings Enterprise Agility

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SETLabs BriefingsVOL 4 NO 1

BUSINESS INNOVATION through TECHNOLOGY

July - Sep 2006

PLATFORMS FORENTERPRISE AGILITY


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SETLabs Br i efi ngs

Advisor y Board

Aveejeet Pali t

Pr incipal Solu tions M anager,

System I ntegrati on Practice

Deependra Moi tr a

Associate Vi ce President,

Software Engineeri ng &Technology L abs

Gaur av Rastogi


Global Sales Effecti veness

George Eby Mathew

Pr incipal Researcher,

Software Engineeri ng &

Technology L abs

Kochikar V P


Education & Research Uni t

Raj Joshi

M anaging Di rector,

I nfosys Consul ti ng I nc.

Ranganath M

Vi ce President & Head,

Domain Competency Group

Sri nivas Uppaluri

Associate Vice President & Head,

Global M arketing

Subu Gopar aju

Vi ce President & Head,

Software Engineeri ng &

Technology L abs

I cannot think of a better example for agility than this one from thethresholds of Pepsicos KFC. During the outbreak of the Avian flu in Asia two yearsago, KFC, known the world over for its vintage chicken recipes, adapted to sellingfish in Vietnam and a few other countries. Or for that matter, consider erstwhile HPCEO Carly Fiorinas favourite example that HPs printer business can plug in orplug out a supplier in hours compared to weeks earlier. That is agility requiringorganizations not only to change their supply chains at the blink of an eye but alsochange almost everything about the way it does business in response to anunanticipated environmental factor.

While not many corporations can successfully adapt to adverse

environmental conditions, organizations that do so very well have control over theirbusiness that lends them the ability to conform (adaptability) to a changedenvironment and the ability to change course (agility) in challenging environments.

If not for a harsh environment, more and more companies are finding thatcranking a good business model is no longer paying off. Many would recall formerXerox CEO Paul Allaire famous conference call of Wall Street analysts when he said:We have an unsustainable business model. A February edition of Fortune Magazinethis year listed Microsoft, Sony, Verizon, Wal-Mart and many more stalwarts ofyesteryears facing this challenge today and called it one of the biggest challenges forglobal corporations today. Unless enterprise agility is designed into organizationalDNA, reinventing their outmoded business models or responding to environmentalchallenges is a pipedream.

One thing that keeps technologists, researchers and practitioners awake atnight is the quest to find out how IT can help build platforms for enterprise agility pretty much the theme of this issue of SETLabs Briefings. In fact Davenport, Hammerand Champy strongly argue that information technology must be seen as one of themajor enablers of organizational change rather than a tool to implement businessprocesses. IT minimizes business risks by alerting decision makers throughknowledge transport and control mechanisms. IT helps both in the speed and qualityof decision making an asset for agile enterprises. So we cover several of thesethemes in this issue.

One of our articles look at how web services and shared data servicesimprove the quality of decision making in the context of an agile organization. Wecover research on business process management that bridges the gap betweenorchestration of business processes on the IT DNA powering processes to ride on

inherent flexibility that IT provides. Examples of agile platforms in banking andutilities add to the vertical flavors. We felt incomplete without devoting two articlesto software engineering process, project management as well as process design inthe agility context.

We are indeed grateful to Prof Venkat Ramaswamy from the Ross Schoolof business, University of Michigan, for contributing an extra-ordinary article onbuilding co creation platforms for value creation a distinct example of how IT canbe used as a platform to partner with customers to create value for the firm in anever changing canvas of consumer expectations.

George Eby Mathew

[email protected]

Editor

Agility as an edge


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Tutorial: Adopting Agile Methodologies of Software DevelopmentBy Nayan Jyoti Kar

Established paradigms of software development are being challenged by agile methodologieswhich are increasingly gaining mindshare. The popularity of these methodologies are based on thefact that the development process espouse values such as simplici ty, commication amongdevelopers, and constant feedback from the user community.

Perspective: Business Process Management: Facilitating Enterprise

AgilityBy Akash Saurav Das, Sandeep Gaikwad & Vi vek RautBridging the gap between business and technology landscapes is a cri tical, step to align businessrequirements with information technology infrastructure. An effective enterprise BPMparadigm does just that, and in the process enhances agility.

Trends: Towards Enterprise Agility through Effective DecisionMakingBy Sri ram Anand & Jai GaneshFacilitating the executive decision making process through innovative use of emergingtechnologies, pays rich dividends. T he authors propose an Enterprise Digital Dashboardarchitecture framework, which builds on the concepts of Web Services and shared data services.

Third Angle: Co-Creating Experiences of Value with CustomersBy Venkat Ramaswamy

The interactive space between a firm and its customers has the potential to create businessvalue. The basis of value for the customer shifts from a physical product to the total co-creationexperience. Prof. Venkat Ramaswamy of the University of Michigan, builds a compelling casefor building experience co-creation plat forms.

Viewpoint: Enhancing the Agility for Customer Information Systemin UtilitiesBy Ananth Chandramouli , Cli fton M uhammad & Vivek

Customer I nformation Systems (CIS) play a critical part in the service delivery chain in utili tycompanies. Managing these systems as their scope enlarges is proving to be a herculean task.

This viewpoint builds a case for enhancing the agility of CIS by focusing on a betterunderstanding of technology and business drivers, as well as leveraging new technologies.

Viewpoint: How Strategic is building an Agile Enterprise ?

By Vani Vangala

The ability to respond quickly to changing business conditions is critical for enterprises today.The author argues that enterprises need to become agile for improved performance andlonger life expectancy by treading a multi-fold path to agili ty.

Practitioners View: Strategic Agility Planning for BanksBy Prashant Gupta & Prashant Tewari

Robustness and scalability is the key to agile processes in banks. Drawing on their vastexperience in designing systems for some of the worlds largest banks, the authors propose anagil ity framework, which will enable banks to implement agility enabling strategies.

Tutorial: Agility in Software Engineering Processes

By Shaur ya Vardhan GargWri ting enterprise software using agile processes helps speed up the software developmentlifecycle. T he key, the author opines, is to replace processes and tools with individuals andinteractions, and also replace comprehensive documentation with working software.


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Companies must learn to build platforms that enable

experience co-creation processes across the portfolio of experience

environments. I n thi s view, I T platforms become a strategic

enabler of experience co-creation processes. Experience co-

creation platforms are about creating the pre-conditions to

accommodate a wide var iati on in individual ized experiences

that are contextual and granular.

Venkat Ramaswamy, PhD

Director of the Center for Experience

Co-Creation, Ross School of Business,

University of Michigan.

One of the challenges that organizations face in their journey

towards agil i ty is their inabi l i ty to track change drivers

proactively. I t becomes even more di ff icult for the

organization to do so i f they do not have systems, processes

and the data to identi fy and make judgments on the changes

occur r ing in their environment.

Prashant Gupta

Senior Consultant

Banking Domain Competency Group


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Adopting Agile Methodologiesof Software Development

Agile methodologies are chal lenging established

paradigms of software development.

By Nayan Jyoti Kar


July - Sep 2006

Agility in the business context is the ability of an enterprise to be proactive to changeshappening in the environment in order to

maximize the benefits. The key factors that determine

the degree of agility of an enterprise are:

Level of awareness Keeping abreast of the

changes and being prepared for the same.

Innovation Quotient (I.Q.) The

percentage of those people whose ideas

finally make it into practice [Skyrme,

David 1998].

AGILITY: PROACTIVE VS REACTIVE

Being proactive has a definite edge over being

reactive. Proactive means setting the pace forothers to catch-up and reactive is exactly the

opposite. Reactive enterprises often find

themselves scampering to meet the challenges set

by an innovative and aware enterprise.

The level of awareness and the I.Q.

would determine whether an enterprise is

proactive or reactive. The relationship between

awareness, I.Q. and agility determine the state

of an enterprise (Figure 1).

As the level of Awareness and I.Q.

increases, the Agility also increases making the

enterprise more proactive.

SIMPLE STEPS TO AGILITY

Agility can be attained using a simple two-step

approach:

1. Handle external factors

2. Formulate Internal Policies

STEP 1: HANDLE EXTERNAL FACTORS

The external environment for an enterprise

includes all the factors that directly or indirectly

impact business operations (Figure 2). Some of

these factors are:Market: The market conditions are generally

volatile and change dramatically. The reasons for

change might be totally unrelated to the industry.

An Agile Enterprise is not caught

unawares by the rapidly changing market

scenario. It embraces the change and devises

ways to use it to its own advantage. Sometimes,

an Agile Enterprise introduces innovations that

change the market scenario. This results in the


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realignment of the business plans of its

competitors.

Customer: The customers role has gone through

rapid changes in recent times from being a mere

end-user to playing a more active role in the

development process for the product leading to

co-creation of value.

An Agile Enterprise welcomes the

customer feedback and tries to incorporate them

in the product. It also strives to foresee some of

the changing business needs and provides

suggestions for the same to the customer. This

adds value to provider-customer relationship

and opens new avenues for future business.

Government Regulations: New laws could beenacted or old ones modified over time that may

impact the business. Usually, such changes are

notified well in advance by the regulatory

authorities. Awareness is the key with respect to

this factor.

Natural Calamities: Natural calamities can be

dealt with by having a business continuity plan

and appropriate disaster recovery initiatives to

prevent a complete shutdown of operations and

ensure that critical activities can keep on running

in face of such a situation.

STEP 2: FORMULATE INTERNAL POLICIES

The Business Enterprise is a synergy of various

smaller units performing different functions.

Agility at the enterprise level can be achieved

when all these units themselves become

Agile. This can be achieved by formulating

policies to govern the functions of the different

units.

It is very important to formulate a

flexible policy that evolves over time and a policy

that acts as an enabler and not as a limiting factor.There are various agile methodologies

that provide a framework for formulation of such

policies. These methodologies are primarily

developed keeping software development as

focus. They can be applied to other enterprises

with minor modifications. It is important to note

that there is no best-fit methodology for an

enterprise.

BUSINESSENTERPRISE

MARKET

CUSTOMERS

GOVT.REGULATION

NATURE

Figure 2.Source:

External Factors Influencing an EnterpriseInfosys Research

AWARENESS & I.Q.

AGILITY

Figure 1:Relationship between Awareness, I.Q. and AgilitySource:Infosys Research

REACTIVE

PROACTIVE


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POPULAR AGILE METHODOLOGIES

Extreme Programming (XP)

Extreme programming was developed

by Kent Beck when he introduced it in his book

Extreme Programming Explained. It has been

one of the most popular agile methodologies

owing to its simplicity.

Extreme Programming is a discipline

of software development based on values of

simplicity, communication, feedback, and

courage. It works by bringing the whole team

together in the presence of simple practices, with

enough feedback to enable the team to see where

they are and to tune the practices to their unique

situation. [Jeffries, Ron 2001]

The core XP practices which form the

heart of this methodology are (Figure 3):

Whole Team: The team comprises of all the

contributors - the development team (including

a lead), the customer and the business analysts.

The team together determines

What needs to be done?

How?

What is the time frame?

This collective activity ensures that future efforts

would be in the right direction.

Planning Game Planning game lays the outline

for the development of the product. It is a

characteristic of almost all Agile methodologies.

The activities involved are:

Short iterations of 3 weeks

Frequent Plan updates

Story assignment (a story is a

particular requirement displayed on a 3

X 5 card)

Small Releases Frequent releases with partial

functionality are delivered. This enables thecustomer to do an interim review of the product

and suggest changes, if required.

Every release should be as small as

possible, containing the most valuable business

requirements. [Beck, Kent 2000]

Customer Tests:There are a number of customer-

defined tests listed during the whole team

meeting phase. The purpose of these tests is to

validate each release to the customer.


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Simple Design:A design is simple if it is focused

only on the current functionality and doesnt

consider potential future functionalities.

If you believe that the future is

uncertain, and you believe that you can cheaply

change your mind, then putting in functionalityon speculation is crazy. Put in what you need

when you need it. [Beck, Kent 2000]

Pair Programming: Pair programming involves

two people working together on development

of a single program. This leads to prevention

and early detection of defects by peer

collaboration.

Pair programming is a dialogue

between two people trying to simultaneously

program and understand how to program

better. [Beck, Kent 2000]

Test-Driven Development:This step involves

developing unit tests in short cycles. At the time

of release, all these tests are run to check program

reliability and each of these tests must pass for a

successful release.

Refactoring:A successful iterative development

process has a good design as the foundation. In

XP, the process of continuous design

improvement is called Refactoring.

The Refactoring process focuses on

removal of duplication (a sure sign of poor

design), and on increasing the cohesion of the

code while lowering coupling. [Jeffries, Ron

2001]

Continuous Integration: XP stresses on the

integration of the units as soon as they are

developed. Integration is never left as the last task.

Late integration invariably complicates the

process and increases defect injection rate.

SCRUM

The Scrum methodology gets its name from the

huddle formed by rugby players to clash with

the players from opposition. It was developed

by Ken Schwaber and Jeff Sutherland. The

primary thought behind this methodology is that

the world is totally unpredictable and hence, it

is impossible to accurately plan for the future.

Scrum relies on self-commitment, self-

organization, and emergence rather thanauthoritarian measures. [Schwaber, Ken 1996]

The Scrum methodology revolves around short

30-day iteration called a Sprint (Figure 4). The

Scrum framework is divided into three stages:

Pre-Sprint: The Pre-Sprint stage involves Sprint

planning. This is a process of creating a list of

features to be incorporated in the system. The

owner determines which feature is to be taken

up in the next Sprint. A Sprint Goal is also

FeedbackLoop

Market Customer

Agile Enterpr ise

Agilit y Roadmap

Core Team

BusinessEnablers

(HR, F&A,CCD, FAC)

BusinessUnits

(IHL, APAC,EMEA)

AgileMethodologies

(XP,Scrum)

Figure 5.Source:

A Generalized Approach to AgilityInfosys Research


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established which provides a purpose to the team

to achieve.

Sprint: Sprint stage leads to the development of

the software. The feature picked up from the list

is implemented in a 30-day cycle. There is a daily

Scrum meeting which improves the visibility of

each persons work. Changes to any feature

during a Sprint are not allowed, except under

extraordinary circumstances.

Post-Sprint: This stage involves customer

demonstration, progress review and technical

review. This stage ensures that the customer

and the team have an early preview to the

system.

At the end of this stage, the entire Scrum

process is repeated.

AGILITY - A GENERALIZED APPROACH

While there are factors and methodologies

contributing to agility, a generalized

methodology can also be adopted to achieve

agility (Figure 5).

A few of the major participant factors in this

approach are:

Core Team: The Core Team takes inputs from

external factors such as market conditions, and

customers etc, to formulate an Agility

Roadmap. This team comprises of selected

people from all units.

Agility Roadmap: The Agility Roadmap is a

framework set by the Core Team for the various

units of the enterprise. It consists of a set ofguidelines which aim to assist the enterprise in

achieving the ultimate goal Agility. The

important point is that the guidelines are not

rigid and can be changed by the target units.

Business Units (BUs):The Enterprise is divided

into various Business Units that have a certain

degree of autonomy. This division could be on

the lines of geography or types of activities. A

BU can be thought of as a mini enterprise

within an enterprise. An Agile BU, on its part,

forms Core Teams at BU level that are responsible

for finding ways to maneuver on the Road to

Agility set by the Enterprise-level Core Team. It

promotes the use of Agile Methodologies (XP, or

Scrum) in all its processes and increases

interaction with customers. An agile BU also

improves or changes the Agility Roadmap and

informs the Enterprise-level core team of the

changes.

Business Enablers: The Business Enablers are the

units that help in smooth operations of the BUs.

Human Resources (HR), Finance & Accounts

(F&A), and so on fall into this category. The

Agility Roadmap sets certain goals for the

Business Enablers which complements the goals

set for the BUs.

Customer:Customer in this approach should be

one who is interested and involved in the product

development. Customer interaction at every level

is an important aspect of an Agile Enterprise. This

not only gives higher visibility of the process to

the customer, but also reduces the inherent

unpredictability of the planning and development

process. However, it should be noted that the onus

is on the Enterprise to appraise the customer of the

progress and get his feedback.

Feedback Loop:The Feedback Loop ensures that

communication channel between Customers &

BUs, Core Team & Business Enablers and Core

Team & BUs is always open.

Agile Methodologies:The functioning of BUsand Business Enabler units are aided by the Agile

Methodologies such as XP and Scrum. The units

decide which methodology would best fit their

goals on the Agility Roadmap.

AGILITY IN ACTION A CASE STUDY

Consider the case of a mid-size CMM Level 5 IT

solutions company that has bagged an important

contract from a telecommunication major.


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The Background: A Senior Project Manager of

the IT company is given the overall charge of the

assignment. The project is very important as it

could propel the company in to a big league.

The Problem: The task was to port the billing

systems of the telecommunication company to a

new technology platform with some

enhancements. The existing billing system was

developed on an old proprietary technology,

which will cease to be supported in the near

future. New regulations have also come into

effect that require certain changes to be made to

the system. Both the factors make adherence to

the timelines sacrosanct and strict penalties are

proposed in case of any deviation. The staffing

requirements are intimated as soon as the

proposal is accepted and the requirements

collection phase is started in an earnest. It was

noticed later that a major error in resource

estimation had crept in.

Planned Quick Fix: A project that is bound bystrict timelines simply cannot afford to be short

on trained manpower. The project manager,

therefore, took a two-pronged approach to tackle

this issue:

Recruit trained technical experts

Train the internal resources in tandem

with the requirement collection phase.

The Crisis: But the project went off the track as

the scheduling plan seemed to be in complete

disarray. The requirement collection team is yet

to finalize the requirements and the training plan

was behind schedule and suddenly

compounding the situation was a dearth of

trained people in the new technology. While

initiating corrective measures on the resources

front, the senior project manager dispatched a

manager onsite to gauge the situation there.

The Analysis: A thorough study of the

requirements gathering methods brought some

startling facts to light. The requirements

collection team didnt have a single point of

contact with the client. They were contacted by

multiple people with new ideas on a regular basis

and were swamped with changing requirements

and new requests. Hence, most of the time was

utilized in documentation rather than the actual

work.

The Solution: After a careful consideration of

the situation, a few changes are initiated to instill

agility and solve the crisis. These changes areaimed not only at solving the issue at hand but

preventing recurrence of such issues in the

future.

The Training department is given a

directive to formulate a policy of in-house

training on latest technologies. The recruitment

policy is modified as it needs to be driven by

certain degree of foresight. If there is a shortfall

of experts on a specific technology, a suitable

Examining requirements gathering methods will indicatethat most of the time is being utilized in documentation

rather than development!


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number should be recruited from outside. These

steps would make sure that there is no resource

crunch.

The requirements collection process is

streamlined. The client is requested to fix a

single point of contact for requirement changes

and new requirements. The projects which

have frequent requirement changes need to do

away with traditional steps of Software

Development Life Cycle. SCRUM methodology

can be used in such projects to prioritize

requirements.

A part of the requirements will be

frozen for a month. After a month, the client

would get a working prototype of the earlier

frozen requirements. Now, another set of

requirements would be taken up on priority

and this process of iterative development will

go on. The priority will be decided by the client.

The team is asked to document only the

absolutely necessary information. These steps

would ensure that priceless time is saved and

client would get a preview of the system long

before the final implementation.

The learning from this project forces the

organization to give a serious thought to Agile

Methodologies. A central co-ordination team is

formed to rollout an Agile strategy for the

future.

The Impact: Two months later, the IT project

team successfully delivered two working

prototypes with limited functionality to theclient. The client is thrilled by the quality of

work delivered. The final delivery is now on

schedule and Agility seems to have saved the

day for the IT company.

AGILITY MYTHS:

As is the case with any emerging trend, there are

many misconceptions about Agility. Some common

myths are

Agility is for small or mid-sized

enterprises only.

False:Agility is not a function of the size of

an enterprise. It demands grace of an expert

ballerina from a tiny mouse as well as a giant

elephant.

Agility means lightweight process, i.e.,

unstructured methods with little or no

documentation.

False: Lightweight signifies the ability of

the process to adapt to changes. Agile

methodologies do insist on minimal

documentation. The emphasis is on

documenting only what is necessary and

not on churning out stacks of irrelevant

documents.

CONCLUSION

Agility in Enterprises is not a modern fad. This is

the defining factor which would shape the

businesses of tomorrow.

The need to be innovative has never been

felt more acutely. This modern era of cut-throat

competition can be best exemplified by Darwins

Theory of Natural Selection, i.e., change or perish.

Those who embrace change and innovate are the

survivors. Others would just fade away. Therefore,

it is prudent for todays businesses to open their

eyes to this reality and start their journey on the

Agile Speedway.

REFERENCES1. The Future Of Competition: Co-creating

Unique Value With Customers, C. K.

Prahalad and Venkat Ramaswamy,

Harvard Business School Publishing, 2004

2. Agile Software Development Ecosystems,

Alistair Cockburn and Jim Highsmith,

Addison-Wesley, 2004

3. Extreme Programming Explained: Embrace

Change, Kent Beck, Addison-Wesley, 2000


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4. SCRUM Development Process, Ken

Schwaber, Paper presented at

OOPSL A95 , referenced from http://

www.controlchaos.com/old-site/

scrumwp.htm, accessed July 2005

5. Agile Software Development with

SCRUM, Ken Schwaber and Mike Beedle,

Prentice Hall, 2005

6. Scrum Log, Jeff Sutherlands Website at

http://jeffsutherland.com/scrum/

index.html, accessed July 2005

7. What is Extreme Programming?, Ron

J e f f r i e s W e b s i t e a t h t t p : / /

www.xprogramming.com/xpmag/

whatisxp.htm, November 2001

8. Creativity is not Innovation, David Skyrmes

Website at http://dev.skyrme.com/

updates/u17.htm#creativity, March 1998


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Today, success of any business dependslargely on its ability to adapt quickly tochanging market scenario. Failure to adapt to theuncertain business environment directly impacts

the Returns On Investments (ROI). It is therefore

important for enterprises to be able to withstand

changes in other words, be agile.

Agility, as a guiding principle, yields

measurable benefits because an agile enterprise

models the business processes and

organizational structure that facilitates

competent ROI. An agile enterprise in effect

translates into cost effectiveness, optimum

organizational efficiency and a comparatively

smaller time-to-market.

EFFECTIVE BUSINESS PROCESS

MANAGEMENT & AGILITY

A business process requires documentation and

is no longer an abstract concept. It is sometimes

prudent to screen technical complexities to

provide prospective customers and partners a

clear understanding of the requirements. The

need for an encoding mechanism that captures

the business processes in an effort to provide

flexibility across, and within, an enterprise hasfuelled the formulation of sound Business

Process Management (BPM) frameworks. BPM

enables enterprises to align their business

requirements with information technology

infrastructure; it bridges the gap between

business and technology landscapes. It helps

develop cross-functional business processes;

defines, automates, and controls business

activities as a whole that incorporates people,

processes and the systems.

BPM also helps enterprises keep track

of intermittent changes or modifications made to

the IT infrastructure without affecting cost,

operational efficiency and speed of response.

To address the various business process

issues and effectively implement them, a BPM

programme begins with identifying the business

process. The next step is to analyze and design

the respective process. People who carry out the

business processes then formulate business


July - Sep 2006

Business Process Management:Facilitating Enterprise Agility

By Akash Saurav Das, Sandeep Gaikwad & Vivek Raut

BPM has taken a giant leap forward in

bridging the gap between business and

technology landscapes


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process rules domain specific rules that define

business policies, constraints, computations,

reasoning capabilities and various other aspects

of the organization. These business rules form

the foundation of effective decision-making. The

business rules are represented technically by the

IT organizations of enterprises. The business

processes can be interpreted by machines and run

on Business Process Machine Server (BPMS)

while process metrics are maintained for

monitoring and controlling the processes.

Specifications such as Business Process Query

Language (BPQL) have been developed by the

Business Process Management Initiative (BPMI)

to query the process state and process

specifications. The Repository that manages the

deployment of process also comes under the

scope of BPQL.

PERFORMANCE MANAGEMENT

Performance management is the essence of an

agile enterprise that helps maintain efficient

operations of the business processes. BPM also

provides a knowledge base that helps new users,

customers or partners to understand the flow of

business activities within an enterprise. This

provides consistency and time efficiency to

business processes. Used effectively,

performance management and knowledge base

can help cut down the costs and improve

efficiency.BPM has often proved to be useful in

reducing the average timeline for a project by

making the business process-centric. BPM

templates are used in different market

verticals. The advantage that these templates

offer is manifold.Along with saving a

considerable amount of time, they also reduce

paper processing.and provide immediate access

to critical sections.

With reusability and rapid prototyping

as its hallmarks, BPM helps organizations to

maintain their competitive edge in the market by

streamlining the processes and increasing their

operational efficiency.

INSTITUTIONALIZING BPM

Enterprises now consider BPM as an important

measure to take their businesses to higher levels.

BPM, through automation of many tasks,

enhances process efficiency. Following are a few

benefits of a well-thought out BPM programme:

Shorter revenue cycle will act as an

impetus to enterprise business

Productivity will rise to an optimum level

as fewer people will be needed to perform

the same task

Minimization of error and hence,

improved accuracy

Improved time management due to

knowledge base and templates and better

communication by use of process

modeling tools

Improved management over performance

and process metrics

Better service to customer hence increased

customer satisfaction.

BPM, however, is not without

challenges. For an enterprise, achieving agility

through BPM means to be process centric andthe transformation from IT-centric to process-

centric is gradual and requires significant

changes to business strategy and practices. The

transition time, however, is critical and holds the

key to success.

STANDARDS FOR BPM

Various industry bodies and institutions have

proposed several standards or languages for


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BPM. A single standard, however, may not

support all the functionalities of BPM and a

combination of industry standards is

recommended to take full advantage of BPM.

Following is an illustrative list of BPM

standards:

Business Process Modeling Language

(BPML) standard of the bpmi.org group

uses XML specification, which is an open

standard and one of the essential features

for a BPM standard. It supports many

features, open standard languages such

as XML, WSDL specification, various

transaction management concepts and

so on.

One of the other significant standards is

Business Process Execution Language

(BPEL), which is proposed by BEA, IBM,

Microsoft, SAP and Siebel Systems. Most

of the features that are supported by

a BPM standard are also supported by

BPEL.

The XPDL (XML Process Definition

Language), a standard proposed by

Workflow Management Coalition,

follows more minimal features such as

portability and orchestration than other

standards. Orchestration , usually

referred to as workflow, is about finding

an effective way of implementing the

business rules throughout the flow

enabling flows to dynamically adapt theirbehavior.

XLANG is a Web-service orchestration

standard proposed by Microsoft. It

defines how message transfer takes place

between Web services.

While BPML and BPEL are block-

structured standards, BPSS (Business Process

specification Schema) gives us a visual

representation of the designed and implemented

process definitions. The Web Service

Choreography Interface (WSCI) is an interface

definition language whereas XPDL (XML Process

Definition Language) is a workflow definition

language. Any of these standards in isolation

seldom cater to all the required functionalities:

BPEL supports most of the functionalityrequirements of BPM but not all and if the

objective is to acquire all the functionalities

required by BPM then a combination of BPEL,

BPSS and BPML may be more suitable.

BPM TOOLS

The use of BPM tools largely depends on the

requirements of enterprises: small enterprises

may use them for modeling their business


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14

processes and larger enterprises may find it

useful while creating new applications.

Requirements of a BPM managed

process, which are essential for a BPM tool, are:

Business Process Modeling Language

Graphical environment and specifications,

which define the business process rules

for execution of process

Storage environment for storing the

process and session information.

Tools for capturing manual work and

presenting it

BPM engine for controlling the software

components that are using the described

process for their operations.

Flexibility to face changes that may occur during

modeling or after completion of modeling

Support for open standard language like

XML for communication between Web

services which are going to be modeled.

Many software companies provide

software for defining the business process flow.

A few of the BPM tool vendors are FIleNets

Business Process manager, Fuegos FugoBPM,

Intalios Intalio|n3, Handysofts BizFlow.

CONCLUSION

BPM helps an enterprise to make on-the-fly

changes to its processes and ensure compliance

with the changes that are mandated by market

conditions and the information technology

infrastructure in an enterprise. BPM will play a

significant and enabling role in the future to

help enterprises achieve agility. By breaking

down problems into a number of smaller

manageable problems, the BPM templates

provide reusable solutions. Finally, BPM has

helped position businesses as process-based

enterprises.

REFERENCES

1. The Case For BPM, Accessible from

http://www.ascentn.com/about_bpm

.html

2. Three Promises of BPM: Agility,

Flexibility, Visibility, Accessible from

http ://www.transformmag.com/

d b _ a r e a / a r c h s / 2 0 0 2 / 1 1 /

tfm0211f1.shtml

3. BPM: The next Must Have App,

A c c e s s i b l e f r o m h t t p : / / w w w .

cioupdate.com/reports/article.php/

11050_3363061_3

4. Web Services, Grid Computing, and

Business Process Management:

Exploiting Complementarities for

Business Agility, Proceedings of the IEEE

ICWS, 2004


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15

Towards Enterprise AgilityThrough Effective Decision

Making

I nnovative use of web ser vices and shared data

ser vices in an archi tecture framework makes for

effective decision making

By Sr iram Anand & Jai Ganesh


July - Sep 2006

Organizations operating in fast pacedbusiness environments need to respondto fast moving windows of opportunities and

to challenges and growth possibilities. There are

short lead times for extracting and presenting

Key Performance Indicators (KPIs) and shorter

lead times for decision making. These business

needs are not in sync with the technological

challenge such as the presence of disparateenterprise systems (for example, ERP, SCM,

CRM and so on). This situation gets complicated

with the increasing number of mergers and

acquisitions resulting in different business units

within an enterprise having their own data

warehouses. Adding to this is the increasing

number of users inside and outside the

enterprise who need real time access to

information.

In such a scenario, an Enterprise Digital

Dashboard (EDD) would improve the lead time

in and quality of decision making by extracting

and generating KPIs from enterprise software

systems. The EDD is an effective tool for

executives to get a top-level view of their

enterprise as well as their closely linked partners.

Decision makers require easy access to data such

as total sales per month, inventory status and anumber of other KPIs. The EDD offers an

enterprise decision maker a single view of the

metrics being monitored in a user-friendly

manner.

The EDD is, in many ways, similar to

an automotive dashboard, which provides the

driver with a single view of the state of the

automobile. Development of an EDD involves

extracting and generating metrics, indicators,


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16

sales figures, increasing production of certain

product lines, identifying lead times,

inventory levels, and other key organizational

data from the enterprise software systems.

This information resides within applications,

databases, and processes, and must be

extracted and analyzed to determine its

impact on a business.

There are two primary areas that

represent issues in the rollout of successful

EDDs: retrieval of pertinent data from a

multitude of data sources and interacting with

business systems that may be developed using

heterogeneous technologies.

How can enterprises enhance their

agility through effective decision-making is a

question that currently demands attention.

EDD: VALUE AND CHALLENGES

The EDD, by providing a single view of the

metrics that are being monitored, considerably

improves the efficiency and effectiveness of

decision-making.

An EDD-enabled enterprise is

typical ly characterized by faster and

improved decision-making capabil i t ies

owing to the availability of real-time access

to information, KPI of the organizations

business units, and access to KPIs of its key

partners. In addition, access to notifications

and alerts about critical events facilitatetimely and relevant action.

An EDD also helps improve agility by

enabling enterprises leverage the available data

to make informed decisions and deliver the

right information to the right people at the

right time.

Though benefits abound, implementing

EDD is strewn with challenges. Some of them

are:

Disparate data types

Disparate technologies

Disparate locations

Disparate ownerships

Disparate data

This is put upfront to convey all the key

challenges to the reader. So he will keep this in

mind while reading the architectural challenges.

EDDs are difficult to implement owing

to the complexities involved in combining and

calculating data from disparate enterprise

systems such as SAP, and i2. In addition, there

are associated problems such as duplication of

data that necessitate data synchronization.

Multiple systems in different lines of business

access data in different ways based on their needs

and specific technologies. There are no consistent

practices or techniques in place for the access and

update of data. Apart from this, the same data

element may be stored and accessed in multiple

formats in different databases.

A n e n t e r p r i s e d a s h b o a r d i s

fundamentally a representation of core business

data in multiple formats. The data elements may

be rolled up to different levels to suit the

requirements of the audience in question.

Therefore, one of the fundamental issues

involved in the development of a dashboard is

to obtain quality data from a variety of sources

without difficulties.

Large enterprise IT groups typicallyhave a diversified portfolio of systems that has

grown over time and caters to a wide collection

of consumer applications and end users. Though

unstructured growth of applications leads to

multiple monolithic applications that efficiently

deliver core functionality, they fail to exist in

harmony with other applications. Enterprise

dashboards therefore must communicate with

multiple business applications to display the


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correct information and apply correct rules in

order to display certain data.

ARCHITECTURAL CHALLENGES

Critical data scattered across

geographies is a barrier for effective decision

making (Figure 1). The diversity of the data

sources involved makes management of the data

sources and the centralization of common dataacross lines of business and geographies very

important for fulfilling the business

requirements. Following are some of the specific

issues and challenges in this regard:

1. View of data:The scatter of critical data

across multiple databases in various

business and geographies is a serious

issue obstructing a clear view of the data.

For example, customer data if so scattered

impedes identification of key customer

attributes. Independent, unmanaged

changes to systems and databases leads

to confusion that in turn results in higher

effort and cost to obtain consolidated

customer information.1

2. Systems logic:A wide spread of systems

and databases may affect the performance

of business applications owing to complexbusiness logic. The applications are

burdened with embedded logic associated

with multiple data elements residing in

different databases. Chaos may be the rule

in the absence of a clear mapping between

business processes and the data elements

that are needed to fulfill those processes.

3. Integration costs: Technology and

toolkits available for data access have

Das

hboar

d

Da

taAccess

Tier

BusinessApps - USA

SCM - Europe

ERP - Asia

BusinessApps - South

America

LegacyMainframe -

USARDBMS - USA

Legacy-Europe

SCM - Europe

ERP - Asia

SCM - Asia

CRM - Asia

OracleSouth

America

DataSynchronization

Legend

Data common across business lines/geographies

Applications in Eu rope

Applications in Asia

Applications in the U.S.A

Applications in So uth America

Figure 1:Current state of systems and databases. Source:Infosys Research


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18

matured significantly whether they are in

the J2EE space or the Microsoft space.

Depending on the manner in which

specific technologies have evolved in a

given Line of Business (LOB), the data

access techniques may vary between

applications and can result in higher costs

incurred for integration across LOBs.

4. Channels of update: The core business

data in a specific database may be

updated by various means: Direct,

Indirect or by other channels. Data can

either be updated directly through the

business applications dedicated for that

LOB or indirectly upgraded through

synchronization with databases of other

LOBs. It can also be updated through

other channels such as IVR or by a

customer service representative over

telephone or manually.

Multiple channels of data updates can havea bearing on user experience. For example,

a user may request for a change in personal

information over the phone or IVR and

attempt to lookup the same data online.

Latencies in the update of the data that has

been sent over the phone may result in

incorrect data to be displayed.

5. Resource contention: Heavy loads on

databases are common during a bulk

update. For example, there may be certain

periods of time when customer

enrollment through the submission of

paper forms for some specific financial

offerings may increase. Such a bulk

update might invlove measures to lock

the database front and consequently users

who are making changes to the online

application are likely to experience

inconsistencies.

6. Latencies in data retrieval:The spread of

critical data across multiple databases and

the associated redundancy may cause

addi t ional la tencies for cer ta in

applications. This can happen due to the

bulk update

scenario illustrated above. Such a scenario may

also arise due to overheads associated with data

synchronization. Alternatively, this may happen

when common, redundant data is retrieved

from a database associated with a certain line

of database that also retains line of business

data.

Considering the above challenges to

effective implementation of EDD, Web

services are an effective technology to power

EDDs. Web services, by being loosely coupled

and interoperable, enable easy extraction of

appropriate data from enterprise systems and

facilitate executive decision-making. Web

services enable EDD to process enterprise-wide data to arrive at an appropriate metrics

that can then be displayed as a portal screen.

A high degree of personalization can also be

made possible depending upon the type of

metrics chosen by the decision maker. The

result is a shorter lead-time for decision-

making as timely information is made

available with access to data in multiple

sources.

ILLUSTRATIVE BUSINESS SCENARIO

The automotive industry is in the middle of

adversities: global economic slowdown, global

over-capacity, decreasing prices and margins,

consolidation, and so on. Access to critical

information and effective decision-making

therefore are of prime importance. Large

automotive companies operate across

geographies.


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Consider the case of a multi-billion

dollar automotive company with business units

spread all over the world. Massive consolidation

in the automotive industry and within the company

has resulted in a wide variety of disparate IT assets

residing in different geographies and supporting

different business models.

Seamless sharing of information across

all operations of the automotive company,

however, is necessary to leverage the benefits of

consolidation such as cost reduction and effective

information access. Appropriate alignment

between geographically dispersed business units

and functional groups is required to create a

unified view of sales, dealers, consumers,

products, and services. Currently, each business

unit, functional group, and brand of the company

operates through independent systems,

programs and so on. As a result, there is limited

synergy across the organization, leading to

inefficiencies and lack of coordination.

The automotive company is structured

across geographies as strategic business units

(SBUs). The SBUs are a mix of both legacy as well

as modern systems (for example, ERP, SCM and

CRM). The systems of the company across SBUs

are as follows:

1. North America [Legacy systems

(Mainframes)]

2. Europe [Legacy + SCM]

3. Asia [ERP + SCM + CRM]

4. South America [Java based + OracleRDBMS]

The company wants to offer its CXOs a top-level

view of performance of its SBUs. The KPIs

required are the following:

Revenues by SBU

1. Drill down (break-up by product

categories)

2. Drill down (break-up by brands)

Revenues target vs actual by SBU


categories)

2. Drill down (break-up by cars)

Revenue forecast by SBU


categories)


Sales volumes by SBU


categories)


Production volumes by SBU

1. Drill down (break-up by

manufacturing plants)


Top dealers by SBU


categories)


Profit margins by SBU


categories)

The above scenario illustrates the key

decision making metrices required by the CEO

and the disparate nature of the systems in place

within the organization.

A Web services based EDD architecture

is proposed to provide a clear top-level view to

the executive decision makers of the company.

Proposed Architectural SolutionThe key architectural requirements for the

proposed framework include: ability to integrate

data sources in a loosely coupled manner, ability

to provide a unified view of information persistent

across varied data sources, use design patterns

wherever appropriate, buy instead of build use

proven commercial/open source products/

frameworks instead of building from scratch

(Figure 2, page 21).


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The architecture consists of two main

tiers:

1. The Data Access tier

2. The Enterprise Dashboard tier:

(The EDD provides an aggregated view

of the enterprise information collected

from varied data sources that are

geographically dispersed).

Data Access Tier: The core Enterprise

Information Integration (EII) functionality is

implemented by the data access tier. The data

access tier will focus on the various issues and

challenges discussed in detail above. While most

conventional data integration solutions result in

a number of touch points between the business

logic and the integration logic, Web services

provide a loosely coupled and extensible solution

wherein different types of data sources can be

integrated with the EDD without requiring many

changes to the existing functionalities. The

solution to the problem of the automotive

company lies in providing a consolidated view

of data across the enterprise by eliminating

multiple data update channels and by providing

a single suite of applications to access/update

data.2Implementing this suite of applications as

services would eliminate any lock-in on protocols

and integrate easily in a heterogeneous

environment. Specific aspects of the new

architecture to address these issues would be as

follows:

Provide a composite view of datatailored to business processes and usage

patterns 3

Develop shared data services that can

retrieve information for a set of related

applications. Each client application uses

a subset of the classes managed by the

data service, but the data service manages

the relationships between the classes and

ensures that each application is aware of

all data changes, regardless of the source

of change

Design service contracts based on the needs

of individual LOBs/client applications

Provide information on demand (in

response to service requests) by

optimizing performance and caching

heavily accessed data

Enforce data security by authenticating

invocation clients and protecting against

unauthorized data access

Eliminate back door updates by providing

the service layer that guarantees data

consistency across all systems.

Enterprise Dashboard Tier: The

Enterprise Dashboard provides a user interface

and takes care of other non-functional tasks such

as security, internationalization, scalability,

availability and caching. This allows incremental

adoption of the Web services strategy, which is a

big draw for organizations that have a huge IT

infrastructure to migrate.

The specific characteristics of the overall

architecture are as follows:

Web services created for the purpose of

providing functionality in a loosely

coupled, implementation independent

manner. These implementations will

leverage the core business logic in the

existing applications.

A centralized database that maintainsdata common to multiple lines of business

and geographies. This will require

rationalization and consensus building of

the data models that satisfy current and

anticipated needs. This database will

become the system of record and the

owner for the common data.

A set of services that manage data access/

update for all databases. These services


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will manage all data access/update and

will become the de facto data access layer

for all applications. Transaction

management for complex transactions

that span multiple databases will not be

performed at the service layer. The

services will provide access to multiple

data sources; it will be the responsibilityof the data consumers to manage

heterogeneous transactions. 4

LOB data continues to reside in existing

databases. Depending on the specific line

of business and the problems (or lack

thereof) associated with the business data,

this data will continue to remain in the

existing databases. Physically, the data

may be migrated to one common platform

if it makes sense from a strategic vendor

management or licensing perspective.

However, the important point to note is

that data will be segregated on the basis

of usage by lines of business with the

shared data services layer simply

providing a uniform mechanism of

accessing the data. Infrastructure functionality consolidated

and implemented as a Web service to

allow additional consumers to leverage

the same rules and components. An

important benefit is in the area of

security, specifically authentication and

access control.

Scalability and availability of various

applications handled in a streamlined

Legend

Figure 2:Web Services based EDD architecture Source:Infosys Research

D

ata

We

bS

erv

ices

Das

hB

oard

Functionalitybased

Web Services

Functionalitybased

Web Services

ERP WebServices

SCM WebServices

WSRPCompliant

Portlets

BusinessApps -USA

SCM - Europe

ERP - Asia

Business Apps -South America

LegacyMainframe

USARDBMS - USA

SCM - Europe

ERP - Asia

ERP - Asia

SCM - Asia

CRM - Asia

OracleSouth America

CentralizedCommon

Data

Data common across business lines/geographies

Applications in Europe

Applications in Asia

Applications in the U.S.A

Applications in South America


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manner by using Web services.

Implementing strict service contracts with

specific levels of service decouples the

service consumers from actual service

implementations. This enables the

service implementer to have the

flexibility of deploying service

implementations in the most optimal

manner. Apart from this, Web service

management tools may be used for

service lifecycle management.

Benefits of Web Services

It is important to analyze the actual benefit

gained due to the migration to Web services that

help realize an EDD. This analysis will help in

identification of the factors that may be used for

the calculation of Return On Investments (ROI).5

The various factors associated with the technical

and business viewpoints are as illustrated

below:

Cost reduction: In the existing setup, as

individual LOBs manage various aspects,

including infrastructure and common data, each

of them incur these costs in addition to costs

incurred to address customer experience issues

and troubleshoot problems.

With the centralization of common

functionality and data, and the elimination of

multiple redundant data sources and channels

of update, a significant portion of this cost may

be eliminated. There may be higher upfront costsinvolved in implementing the Web services, but

the long-term costs related to recurring yearly

expenses should be lower at least as far as the

common data, processes, and functionality are

concerned.

Flexible business applications: Web services

with a robust service contract and SLAs will

allow new applications to be built faster and

cheaper. This will pave the way for

modifications to business process as well as the

ability to meet IT challenges of new business

requirements. Essentially, this will result in one

less problem to solve for the CIO. The

streamlined availability of data through the

shared data services will ease the

implementation of new business applications.

Integration across LOBs will be significantly

easier as common data will be shared and

accessed in a standard fashion.

Transparency for LOBs: In the existing model,

applications had to be designed to handle issues

with respect to heterogeneous systems, data

redundancy, and data synchronization. Business

processes also had to be designed to

handle anomalies in synchronization. The

implementation of Web services will completely

insulate LOB applications from redundancies

in data storage and issues with data

synchronization.

Unified Patterns: As discussed earlier, the

dependency on proprietary techniques and

frameworks used for component development in

various LOBs can be eliminated by implementing

Web services. For example, in the case of data

services, this will provide unified data usage

patterns across applications/LOBs thereby

enabling developers to talk a common language.

The redesign and implementation of shared data

services results in the data being available in

granularity that is based on real business needs.

Consumer applications will not have to retrievedata in raw format and assemble pieces to create

front-end views.

CONCLUSION

Gaining competitive advantage in a global

business environment means that the managers

should have easy access to information that

facilitates informed decision-making. The

technology adoption trend is shifting to a


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scenario where the decision makers should be

able to access KPIs of the enterprise using various

devices, accessing KPIs of business units

distributed across the globe.

A Web-services-based EDD solution

has tremendous potential to solve this business

problem by enabling information aggregation

from multiple disparate systems spread across

the enterprise. Web services-based EDD costs

less as it leverages the existing legacy

investments. The reference architecture

leverages Web services and handles all the

functionalities as desired for an EDD. The

proposed architecture is based on live

experience in designing a Web services based

SOA. The architecture described above provides

the core service-orientation to the IT architecture

of an automotive firm and can be considered as

a baseline architecture for all EDD enterprise

enablement. The architecture enables a trueflexible aggregation of information from the

internal systems of the organization using Web

services, and offers a single point of contact for

decision making information. Further, this

enables existing legacy applications to take part

in the overall business architecture.

Integration solutions from EAI vendors involve

large initial investments. Moreover the EAI

products are not very flexible, do not fully

support incremental investments and are

proprietary. Moreover it is not easy to work

around with EAI systems while integrating with

IT systems of different partners with

heterogeneous systems.

The above problems need to be addressed while

implementing a Web services based EDD

solution. This is because the solution should be

able to interact with various systems, should be

flexible, should support incremental

investments, and should be able to interact with

the systems of the firms partners. Web services

address most of these. Web services support

the data coming from various disparate systems

to have a single view of the data. The following

are some of the benefits that may be obtained in

a retail scenario by implementing an EDD using

Web services:

Web services based EDD allows the

decision makers to have a single unifiedview of data thereby enhancing the

quality of decision making

Web services enable the aggregation of

data from the disparate systems of the

automotive firm thereby facilitating easy

data extraction from various databases,

applications and processes. This would

empower the decision maker to make

decisions based on the sales trends and

A Web Services-based EDD solution, when implemented

effectively, enables information aggregation from multiple

disparate systems and helps decision makers access key

performance indices


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customer preferences in various channels

and forecast future sales across various

channels and also have better inventory

planning.

REFERENCES

1. Data Services for Next-Generation SOAs,

Christopher Keene, Web Services Journal,

December 2004

2. How Do You SOA Enable Your Data

Assets? Jim Green, DM Direct Newsletter,

October 15, 2004

3. 12 Steps to Implementing A Service

Oriented Architecture, David S.

Linthicum, White paper Grand Central

Communications, October 2004

4. Architecting Data Assets, Jeff Schulman,

Gartner Research, August 2004

5. Ash Parikh, Rajesh Pradhan and Nirav

Shah, Teaming up portals and web

services. Java Pro Magazine (May 2004).

6. Jon Byous, Single Sign-on Simplicity with

SAML. http://java.sun.com/features/

2002/05/ single-signon.html


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Co-Creating Experiences ofValue with Customers

Building Experience Co-Creation Platforms

enhances value creation and fosters innovation.


July - Sep 2006

By Venkat Ramaswamy

In an era of ubiquitous connectivity, active,informed, networked, and empoweredcustomers are challenging the traditional firm-

centric process of value creation that has served

companies so well over the past hundred years.

Prahalad and Ramaswamy (2004) argue that we

are on the cusp of a profound shift in the way

value is created from a firm-centric process to

a co-creation process jointly by the customer and

the company. In a co-creation process, customer

value emerges from the space of interactions

between the customer and the company, and the

quality of customer experiences associated with

those interactions and their outcomes

outcomes that simultaneously generate businessvalue to the companies that facilitate them

effectively.

The traditional view of value creation and

its dominant logic are shown in Figure 1 overleaf.

This dominant logic of the modern

corporation that has served us so well over the

past hundred years is now being challenged as

never before. For starters, individuals today are

far more informed through the Internet and

connected with each other than ever before. The

mere fact that there are over 1.6 billion

cellphones, not to mention countless ways of

voicing and self-expression, and

communicating with other consumers (e.g., e-

mail, instant messaging, SMS, Blogs with RSS,

etc.), enable individuals to learn about others

experiences with products and services much

more rapidly. Firms were assumed to have more

information and knowledge than individuals.

Individuals now have a new found freedom

that liberates them from being targets to be had

by institutions. As individuals increasingly have

the motivation and the means to take more

control of their experiences, companies can nolonger act autonomously, designing products,

developing production processes, crafting

marketing messages, and controlling sales

channels with little or no interference from

consumers. Customers now seek to exercise their

influence in every part of the business system.

For instance, there are currently over 30 million

blogs, over one-third of which were created in

the first quarter of 2005. Further, over half of


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the bloggers are adults. Blogs fundamentally

challenge the nature of relationship between the

institution (company) and the individual

(customer). Armed with new tools and

dissatisfied with available choices, individuals

(customers) want to interact with firms, as well

as (customer) communities to co-create value.

The use of interaction as a basis for value creationis at the crux of the emerging opportunity space.

THE NEW OPPORTUNITY SPACE:

ENABLING EXPERIENCE ENVIRONMENTS

Consider the case of Apple. Through its iTunes

service, customers have downloaded over 350

million songs of their choice, after listening to a

sample of the song, thereby escaping the

tyranny of the CD (although individuals still can

download an entire CD if they so wish).

Individuals including musicians can also

publish and share their own playlists using the

iMix tool that Apple provides. The community

of music lovers is engaged in helping

individuals discover new music. The

downloaded music can be transferred to the

Apple iPod over 5 million iPods were sold in

the first quarter of 2005 alone. The success of

the iPod lies in the fact that Apple understood

and focused on the user experience that

results from user interaction with the iPod.

Working backwards from the user experience,

Apple designed the interface right down to

the scroll wheel to facilitate a compelling

experience environment of accessing and

listening to music. Besides the physically cool

design, this meant paying a lot of attention to

the underlying software according to Steve

Jobs the software is the user experience. In

other words, the software enables individuals

to scroll through their library quickly, construct

playlists on the go, or simply play user-defined

playlists. Moreover, at the Apple stores (which

as of early 2005 had over 50 million customer

visits; over $1 billion in retail sales; and over $40

million in profit), individuals can learn about

how to actually get music into the iPod (from

their own music collections), download songs

from iTunes, and get answers to simple

questions such as how do I get music into my

iPod?. The Apple store is a learningenvironment, besides being a sales

environment. Individuals interactions with

knowledgeable people at the genius bar

(including consumers from Apple user groups)

supports the consumers learning experience.

Thus, as shown in Figure 2, value to

me as an individual consumer lies in the human

experience associated with outcomes of processes

of interactions with Apples iPod, the process of

Traditional View of Value

Value = Fn (Products & Services)

Suppliers The Firm Marketing

Channels

SCM ERP CRM

PassiveCustomers

Firm-centric products and serviceshave been the basis for value creation

The Dominant Logic of Value Creation

1. Value creation is associated with products andservices

2. Firms have more information and knowledge thancustomers

3. The firm unilaterally defines and creates value for thecustomer through its activities

4. Value is exchanged with customers who representpassive demand for the firm's offerings

Figure 1:

Source:

Traditional View of Value Creation

Center for Experience Co-Creation, Ross School ofBusiness, University of Michigan


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downloading songs from iTunes, and/or

interacting with Apple employees as well as the

user community. As every experience iscontextual, the challenge for companies like

Apple is to build the capabilities that allow

individual customers to interact with customer

communities, as well as an extended network of

companies, to co-create their own experiences of

value. At the heart of the new value creation

system, are experience environments that go

beyond product and service offerings.

An experience environment (which can

be anywhere in the business system) is centered

on individual-centric interactions with thecompanys products, processes, and people, as

well as customer communities. These interactions

are where the customer experience is, and what

the company must deeply understand to design

the technology platforms and information

infrastructure to support compelling experience

environments. This is a profound transformation.

It challenges the very heart of managerial

capitalism as we have known it over the past 100

years: that the role of the firm is to organize its

activities around creating goods and services for

customers. No longer can any companyunilaterally create value for the customer through

its marketed offerings. Rather, companies must

learn to engage customers in a process of co-

creating value, based on the customers view of

value and not the companys.

Consider a patient with a cardiac

pacemaker that monitors and manages his

heart rhythm and performance, a valuable

benefit. However, this patients comfort level

would increase substantially if someone or

something monitored his heart remotely, andalerted him and his doctor simultaneously of

any deviations from a predetermined

bandwidth of performance, relevant to his

condition. Doctor and patient together could

decide on the remedial response. This scenario

gets more complicated when the patient travels

far from home. A mere alert will not suffice.

The patient needs directions to the best nearby

hospital, and the attending physician needs

Value = Co-Created Experience of Interactions and Outcomes

ConsumerCommunities

NodalFirm

NodalFirm

NodalFirm

NodalFirm

Network of Firms:Access to Competence

Customer Communities:Access to Competence

EMPLOYEES

PROCESSES

CUSTOMERSPRODUCTS

ExperienceEnvironment

Experience Co-Creation

Figure 2:New value creation system Source:Center for Experience Co-Creation,Ross School of Business, University of Michigan


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access to the patients medical history. How do

the two doctorshis primary care provider

back home and the physician on call at the out-

of-town hospitalcoordinate their diagnosis

and treatment? Should he call his spouse? How

can he recognize and assess the risks and

develop an approach to compliance and

cooperation with these medical professionals?

The doctors, the facilities and services, and the

pacemaker are all part of a network centered

on the patient and his well-being, as shown in

Figure 3 above. Companies are already

installing elements of these network

capabilities. Consider Medtronic, Inc., a world

leader in cardiac rhythm management that

seeks to offer lifelong solutions for patients

with chronic heart disease. It has developed a

system of virtual office visits that enablesphysicians to check patients implanted cardiac

devices via the Internet. With the Medtronic

CareLink Monitor, the patient can collect data

by holding a small antenna over his implanted

device. The data is captured by the antenna,

downloaded by the monitor, and transmitted

by a standard telephone line to the Medtronic

CareLink Network. On a dedicated secure Web

site, physicians can review patient data and

patients can check on their own conditions

but no one elsesand grant access to family

members or other caregivers.

Medtronics CareLink system goes

beyond the cardiac device itself and unleashes

opportunities for an expanding range of value

creation activities. For example, each persons

heart responds to stimulation slightly

differently, and the response can change over

time. In the future, doctors will be able to

respond to such changes by adjusting the

patients pacemaker remotely. Furthermore,

Medtronics technology platform can support a

wide range of devices and remote monitoring/

diagnostic systems, potentially used for

monitoring blood sugar readings, brain activity,

blood pressure, and other important

physiological measures.

I believe that this pacemaker story is

a prototype of the emerging process of value

creation. The patients interactions with the

doctor, the family, and the ER at the out-of-

town hospital affect the quality of the patients

overall experience. The meaning of value itself

changes from the physical product, the

pacemaker, to the co-creation experience of a

specific patient. This co-creation experience

originates in the patients interactions. And the

quality of this experience determines the value

that is created. The goal then is to build the

underlying technology platforms and the

infrastructure to support a portfolio ofexperience environments that arise from

different experience scenarios as shown in

Figure 4 overleaf.

The value of patient outcomes differs

according to each scenario (not to mention by

patient as well). Consider the context of a crisis

out of town. It is important for Medtronic to

understand deeply the nature of the interaction

events at a granular level. Each experience

Primarydoctor

Patients withsimilar condition

Medicalspecialists

Scan anddiagnostics

clinic

Doctor on call atout-of-town hospital

Emergencyservices

Pacemakermanufacturer

Patient

Figure 3:Source:Center for Experience Co-Creation,Ross School of Business, University of Michigan

Doctor-patient network


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scenario in effect can activate multiple experience

environments. The challenge is to identify a

core set of experience environments as shown

below, and build technology platforms and event-

centric information infrastructures to support aportfolio of experience environments.

Companies must learn to build

platforms that enable experience co-creation

processes across the portfolio of experience

environments (i.e., experience co-creation

platforms). In this view, IT platforms become

a strategic enabler of experience co-creation

processes. However, this view forces companies

not to be focused on product specifications and

features that hardwire the process of customer

experience. (Product quality is still critically

important. It is a necessary but not a sufficient

condition for co-creating experiences). Rather,

experience co-creation platforms are aboutcreating the preconditions to accommodate a

wide variation in individualized experiences

that are contextual and granular. A much deeper

understanding of the experience scenarios of

consumers is called for. This depth of

understanding is impossible without active

customer involvement and dialogue. Second,

the experience environments are not just about

hardware; the flexibility for a variety of

Patient Experience Scenarios

Primarydoctor


Medicalspecialists

Scan anddiagnostics

clinic


Emergency

services

Pacemaker

Patient

Primarydoctor


Medicalspecialists

Scan anddiagnostics

clinic


Emergency

services

Pacemaker

Patient

Primarydoctor


Medicalspecialists

Scan anddiagnostics

clinic


Emergency

services

Pacemaker

Patient

Primarydoctor


Medicalspecialists

Scan anddiagnostics

clinic


Emergency

services

Pacemaker

Patient

1

Crisis out of townI'm going on a trip, but I'd like to know

whom to turn to once I'm there

I'm a little uneasy and would like to bechecked out remotely by my primary doctor What do you do when you have a similar problem?

1

2

3

4

2

3

4

1

2 3

1

2

Figure 4:Patient experience scenarios Source:Center for Experience Co-Creation,Ross School of Business, University of Michigan


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experiences derives from sophisticated use of

software. A deep and imaginative

understanding of the enabling technologies is a

must. Third, individuals engage in an

experience co-creation process when they

interface with an experience environment,

interact in the context of an event, and assimilate

experience outcomes. These call for new levels

of transparency and access from the customers

perspective, as well as the companys

perspective.

THE EXPERIENCE CO-CREATION PROCESSConsider the environment of tracking the

building of my custom houseboat with Sumerset,

one of the largest houseboat manufacturers in the

world, in Kentucky, USA. This is how a typical

customer interaction might work. I as a customer

can access the manufacturing plant and track the

progress of my boat. Let us assume that I get a

new idea - such as moving the dining table by 4 ft.

The engineers can discuss with me the pros and

cons of doing that. We can make joint decisions

about the changes through the principle of

informed choice, recognizing the cost and quality

and safety implications of the choices made. Of

course, Sumerset can say, that beyond a certain

level of risk, they will not participate in the process.

Sumerset can also introduce me to the community

of houseboat users and I can engage in a dialogue

with them. I can evaluate my choices as I go along,

as well as learn about the possible uses of a

houseboat that I could not have imagined.

The co-creation process gives the

customer a greater level of knowledge and

expertise about houseboats, and with it a

greater degree of self-esteem. Dialoguing with

Sumersets employees and tracking the

progress of the boat along the factory floor

creates a sense of emotional bonding with the

product and the company (an outcome of value

to the customer). Sumersets transparency and

willingness to dialogue enhances the

customers readiness to trust the company and

believe in the quality of its product. Access to

the community of Sumerset customers

increases the consumers enjoyment of the

houseboat. Thus, the basis of value for the

customer shifts from a physical product (with

or without ancillary services) to the total co-

creation experience, which includes co-

designing as well as all the other interactions

among the consumer, the company, and, the

larger community of houseboaters. Thus, theco-created experience outcomes depends on

the nature and level of access to the companys

employees and extended community, as well

as the level of transparency of all parties.

As the Sumerset example illustrates,

individuals must be able to co-construct unique

value for themselves through customer-network

interactions that facilitate contextualized

experience outcomes through dialogue, access,

A Portfolio of 'Core' Experience Environments

PATIENT PATIENT PATIENT PATIENT

PrimaryDoctor

RemoteDoctor

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