Technology visionaries and management
thinkers have hyped the concept of the real-time enterprise for some time, but how does it actually work in practice? For many organisations, remoulding their business processes so they can operate in true real time will be a gradual process.
The examples below show this to be the case. At optical products manufacturer Corning, for instance, the aim is to be 'on time', rather than real time in the purest sense. And at pharmaceutical giant AstraZeneca, many of its financial processes have been automated but still some manual processes remain.
At all of these organisations, technology integration has proved challenging, but adapting long entrenched business processes – particularly where management and IT systems have historically been decentralised – has been the main hurdle. Information Age spoke to executives at four multinational organisations about their vision of the real-time enterprise and how they plan to build it.
On time at Corning
Rick Beers, the director of supply chain technology for Corning, the world leading manufacturer of optical products, has some crystal clear views about the so-called real time enterprise: the term, he says, is misleading, and the end result is not necessarily desirable.
For Corning, which is nearly seven years into a complete overhaul of its systems, its networks and its business processes, a better term is 'The on-time enterprise'.
"I'm an industrial engineer. What I need is the right information, at the right time, to do the right thing," says Beers.
Beers is not against the ideals that are usually promoted as part of the so-called real-time enterprise ambition, but his point is cautionary: The real-time enterprise, he stresses, should be based on a proper analysis of what a business really needs, and should not be driven merely by the urge to speed everything up.
"In an intellectual sense, RTE is a great theme. But when we apply it, it means on time."
This is not proving to be easy. Six years on from the beginning of its project to transform the company, making it more flexible and more responsive, Beers says the strategy is beginning to "yield significant results". But, he also adds: "We are only just getting started."
So far, building the 'on-time enterprise' has involved a major effort, both in process re-engineering and in systems. Corning and its subsidiaries manufacture products at some 40 plants in 20 countries, and these, along with all its other facilities, have all been linked by one integrated network. This company can now use this as the basis of real-time information flows throughout the organisation.
Simultaneously, the company has been working to achieve 'process excellence' – this means analysing how transactions are handled throughout the organisation and then creating end-to-end processes through one integrated software platform. "End-to-end processes. That's big. That's what this is all about," says Beers.
That software platform, unusually, involves no middleware, and very little point-to-point integration between disparate systems. Instead, Corning has adopted the unusual strategy of standardising entirely on one platform – PeopleSoft – throughout the world. Although it has a few specialist applications in use at certain locations, these are interfaced directly into PeopleSoft, which serves as the master database.
This means that all users and applications are being driven by one integrated, real-time database. But it is not necessarily as straightforward as this. Corning has 21 instances of the core PeopleSoft application suite, and only two have moved to the latest, web-based PeopleSoft 8. That means that there is a need for the different versions to be kept in synch.
Corning's long-term goal is to create an "information-driven enterprise", so that each manager has all the information he or she needs at any time "to focus on whatever needs attention". But Beers also admits that the most of the achievements focus on the transaction side at present. "The success we have had with the transaction systems has not come without cost. One of those is that we forgot to get the information out."
This is the next challenge. The opportunity for role-based portals on top of the transaction systems, says Beers, is enormous. Soon, a manager will "come in and have an exception-based cockpit" to tell them about all the events that might affect his or her business during that day.
Beers, having put in place the transaction architecture, now describes himself as being "fixated on real-time information flows", and even says that he is "staking the rest of my career" on the successful deployment of real-time information portals.
Financial systems at Astra Zeneca
Tim Watts, group financial controller at pharmaceuticals giant AstraZeneca, has no plans to implement a Cisco Systems-style "virtual close" any time soon. Quite apart from his doubts about its value, the company would have a number of technical challenges to overcome first.
"Pharmaceutical companies are relatively decentralised and historically we, therefore, have a lot of individual systems around the world," says Watts. These decentralised units report monthly into a Hyperion Enterprise financial system and an in-house built Oracle-based sales system.
While much of this work is automated, some units still have to print out the data from their legacy systems and manually key them in to the reporting systems. This can introduce errors that have to be corrected later, delaying the reporting process.
Management reporting, including balanced scorecard reporting, is performed once a month, while financial reports are released quarterly in dollars, to UK generally accepted accounting principles (GAAP), US GAAP and to international accounting standards (IAS) – because of its UK, US and Swedish stock exchange listings.
Since AstraZeneca was formed out of the merger of Sweden's Astra and the UK's Zeneca, the organisation has been simplified by the spin out of the specialties chemicals business and the divestiture of its agri-chemicals unit.
But Watts has taken a number of other measures to further simplify and speed-up reporting. First, he has challenged reporting units to improve their efficiency and accuracy – for example by changing some practices so that they conform more closely with practices adopted centrally.
Second, he is pushing for more widespread use of automated uploads from reporting units into the Hyperion and Oracle systems. This ought to be aided by the Europe-wide roll out of SAP, which will bring with it a standardised chart of accounts (SCOA) across Europe. This will eventually be rolled out globally.
But while Watts sees the Cisco-style virtual close as desirable, he is doubtful about whether it is a worthy end in itself. "I can see where Cisco is coming from, but I couldn't get too excited about it," says Watts.
Why? First, it is not the task of London-based executives to keep an eye on day-to-day changes in sales and profitability – this is left to locally based managers. "If we started reacting every week to daily sales in Venezuela, it would be ridiculous," says Watts.
Second, the virtual close concept does not take account of some of the judgmental issues involved in accountancy. "If you have got liabilities that are not expressed in terms of a formal invoice or legal agreement, there's almost invariably a judgment about how much the liability is," says Watts.
Finally, in terms of end-of-period closes, there is the basic logistical challenge of getting the entire management board of a major multinational corporation together in the same room, at the same time, to approve the accounts. That may prove to be the most difficult challenge of all.
Analytics at Continental Airlines
Operating in a highly competitive and dynamic market, Continental Airlines is one of the largest carriers in the US. In 1999, the company saw that to retain its market position, it would need to react immediately to customer demands as they arise. Continental also recognised that it must track its revenue flows on a continuous basis, as opposed to rolling up its books once a quarter or once a month.
As a result the airline began looking at various analytic packages, finally selecting development tools and some customer relationship management analytic applications from NCR Teradata, Continental's existing data warehouse vendor. Continental uses real-time analytics for three main purposes: customer service, revenue management and flight information. This enables Continental to provide a range of services, such as sending immediate alerts to passengers' mobile devices if a flight is delayed.
Information is also relayed to flight crews, so that if any passengers on a non-direct flight have a bad experience during the first leg of their journey the crew on the second flight will know to provide "a different level of service for customers we've inconvenienced", says Alicia Acebo, Continental's director of data warehousing.
Continental also uses real-time analytics to keep track of how it is measuring up to its global performance goals – such as losing less baggage.
In the area of customer service, booking services and operational information, Continental defines 'real time' as "seconds or minutes" says Acebo. However, in other areas, the ability to analyse up-to-the-moment data may be unnecessary, or could be hindered by other factors.
For example, in order to achieve more granular revenue management, Continental would have to make major adjustments to its operational systems in order to feed data to the data warehouse in real time. Continental already tracks its revenues on a daily basis – compared to on a monthly basis as it used to do prior to using Teradata.
The airline is currently looking at how it can improve its operational systems, and the goal is to "recognise revenue at the point in time when the passenger gets on the plane". Continental also wants to achieve "demand-based scheduling", to better react to changes in flight patterns. This might mean, for example, that the airline could decide, on the day, whether to use a large or a small plane for a flight, depending on demand.
Acebo says that building the models required for real-time analysis is "an ongoing process", noting that it took a year to build Continental's revenue management model – the company's most complex model. She says users started to get value from the system within four months.
Real-time analytics is used by 60 different departments at Continental, and one of the main benefits of the software is the ability "to do things you didn't even plan for", she says. "We haven't even tapped into all the value [of Continental's real-time analytic capabilities] yet," says Acebo.
CRM at IBM.com
In 1999, IBM decided to streamline the way customers purchase its products. Although the company dominated the market for IT systems and services in terms of size and revenue, it realised that a smaller but nimbler rival was running away with market share: Dell.
Like Dell, IBM has offered its products – from PCs to software to training packages – direct to customers since the early 1990s but, until recently, only through a geographically dispersed network of call centres. At the time, IBM viewed the web purely as an information channel where customers would research their purchases
before contacting a sales representative over the phone; in contrast, Dell sold direct to customers online, reducing its cost base and inventory levels at the same time.
IBM realised that, by merging its call centre and Internet channels, it could engage in each step of the customer purchasing cycle, so it integrated its call centre and online operations into a single division. "Customers want different ways to research products, buy products and do their own problem resolution," explains John Teltsch, vice president of IBM.com for the Europe, Middle East and Africa region.
For IBM, meanwhile, the sales process is quicker and less costly because sales people can refer to information customers have already submitted online – such as product configuration details – and processes are not repeated.
In order to draw together information from online and call centre interactions, IBM decided to deploy a customer relationship management system from Siebel and use this as its central customer database for sales, service and support. Customers can contact IBM through the call centre, through a 'Call me back' button on the web site, a text chat function on the web site or using email.
Although Teltsch concedes that IBM.com does not operate in real time in the purest sense, he says this is a goal the company is working towards. Real-time order status is available from IBM's SAP enterprise resource planning system – although this information won't be available over the web until the second half of 2002. In addition, IBM's partners and resellers can configure and order products online through its Partner Community tool.
IBM also plans to streamline a number of other processes in the customer cycle – for example allowing services customers to review and amend their contracts or service level agreements online, and invoicing electronically for certain products.
IBM is also piloting private 'eSites', where bigger customers can converse directly with dedicated sales people over the web. Many of these projects will go live by the end of 2002.
Teltsch says customer satisfaction has increased dramatically as a direct result of these projects, even though many customers now never see a sales person face-to-face. Average transaction value has increased, and IBM's distribution and order management expenses have decreased. "People have this image of IBM as a difficult company to do business with, but we have created a more efficient and effective mode of buying our products while still maintaining a personal relationship with our customers."