May/June 2011

Executive Corner

IT as an enabler for enterprise value networks

By Andy Chatha

As I mentioned in my opening remarks at the ARC World Industry Forum in Orlando in February, while the business drivers have not changed significantly for industry since last year, the intensity continues to increase. Recent events in the Middle East increased the level of uncertainty. Security-physical and cyber-is becoming a bigger challenge for all companies. The BRIC countries (Brazil, Russia, India, and China) are becoming stronger and more competitive every year. More "Facebook-generation" younger people are joining the workforce every year, bringing many new ideas and working styles. Government regulations increase by the day. We have started to upgrade the electric grid, with the Smart Grid having the potential to become as powerful and intelligent as the Internet. And the IT revolution continues, bringing with it, what ARC Advisory Group calls "easy IT" solutions. With all these changes going on, we need to become highly flexible and agile.

More investments are being made today in IT than in any other area. We have a tidal wave of new technology coming in social networks, mobility, Smart Grid, electric vehicles, and other areas. Corporate and venture capital investment in IT is at an all-time high. Facebook was recently valued at $50 billion, and this continues to go up every year. We will see many more Internet companies go public over the next couple of years. Industry has many opportunities to take advantage of this easy IT technology to help it meet current and future challenges. The newer IT solutions are easy to use, because they focus primarily on the consumer. Social networks and smart phones have become popular because they are so easy to use. The emerging Smart Grid is starting a revolution and, ultimately, will connect all home devices and appliances. Cloud computing makes IT like a utility, hiding all complexity from the user. As we have been saying for several years now, we all need to start adopting more of these easy IT solutions at our companies, since they can help us reduce cost and complexity.

Two relevant statements from Bob McDonald, chief executive officer of Procter & Gamble, appear in the company's annual report. The first statement refers to digitization: "With digitization, our goal is to standardize, automate, and integrate systems and data so we can create a real-time operating and decision-making environment. We want P&G to be the most technology-enabled company in the world." In the second, related statement, McDonald indicates the company is looking for a sevenfold increase in real-time data to help it meet its targeted 20-25% reduction in selected spending areas.

Any company that wants to reduce costs by 20-30% to compete effectively must-like P&G and others-innovate and look for new ways to do things using new solutions that enable new business models, which leads us to the interesting topic of Collaborative Value Networks.

For context, consider ARC's Collaborative Manufacturing Management (CMM) model, introduced in 2000. While the CMM concept provides a meaningful way to visualize and analyze the plant as a node in a supply chain network, it does not go far enough. Today's companies realize they must become more design- or innovation-centric, and supply chain networks do not incorporate design and engineering departments, which are managed separately by a different department. To become more innovation-centric, companies need to integrate their design, make, and deliver processes from end to end. Collaborative Value Networks extend CMM to the enterprise.

To enable a Collaborative Value Network, you need an easy-to-use, Facebook-type platform, and you have to digitize your company, moving your boxes of paperwork to the cloud. A few years ago, building this type of platform would have been prohibitively expensive, but today, the information technology is in place to build this platform at a reasonable cost. However, building such a platform requires executive leadership and common standards and processes at all levels. These enable everyone to work together efficiently, to stay engaged, and share ideas with our internal and external colleagues, whether in the same building or halfway across the world.


Andy Chatha, president and CEO at ARC Advisory Group, provides leadership to the ARC organization and guides its research and client activities. He has over 30 years experience in enterprise applications and automation as an executive advisor, market analyst, project manager, and software engineer.