The digitization of both the commercial and social worlds has blurred any boundaries separating them and is fundamentally changing the way we do business. There are now billions of interconnected private and business mobile devices that are rapidly becoming an “open ended” or “customer-drive” supply chain. This has resulted in an explosion of “big data” from social networks, mobile applications, RFID tags and digital sensors that will enable businesses to be run in new and yet to be imagined ways. Following the, albeit misattributed, maxim: “you can’t manage what you can’t measure,” it is imperative that organizations today fully utilize their data. The insights that can be gained from this “big data” will open a myriad of new business opportunities and challenges. But to fully address these opportunities organizations need to embrace true Business Process Excellence based on the integration of big data, real-time event analysis and business processes management.
The tail wags the dog
For its first fifty years, businesses were primary drivers of innovation within the IT industry. But today, if you want to know about the latest developments in communication and online collaboration, ask your children.
The end users have become the trailblazers. People network with friends and acquaintances using Facebook, learn about events around the world and around the corner through Twitter, give instant comment and feedback on new products, services and customer support and share knowledge through Wikipedia.
By comparison, information technology in the business world frequently feels slow, inflexible and not overly user-friendly. The up-and-coming generation of managers no longer sees a separation between business and information technology and won’t settle for this.
This is the foundation of new forms of collaboration and cooperation within organizations—ways of working together that break down barriers between individual departments, specialist areas and IT organizations—as well as those separating companies from customers and business partners. More people, more expertise and more business information are being brought together that can increase an organization’s dynamism and effectiveness, if it can both manage these new business practices and react in real-time to business events.
The pot of gold at the end of the supply chain
Today’s network of billions of mobile devices is in effect an open ended, unpredictable, rapidly growing supply chain, which ends in a cloud. This is the real potential of Cloud computing, driving business innovation through new types of cooperation in every layer and operational level of a business. Sharing among product and process experts, department heads, customers, and partners in the planning process establishes an excellent basis for actually addressing customer needs with product improvements.
It also accelerates product development and delivery. Equipping participants with mobile end devices guarantees that coordination and decision-making happens in real-time and smoothly, i.e., anyone can enter or quit the interaction at any time. Multiple internal and external participants work together without organizational or geographic barriers to introduce operational improvements, process optimizations or improvements to the service portfolio. The result: The enterprise saves time and money, delivers better products and ultimately strengthens its competitive power.
Looking at the success of Apple makes clear the value of such collaboration and participation. Apple is establishing a complete ecosystem around its iPhone business. The company itself provides an excellent end device as well as an appealing marketing and payment platform through which the consumer can access applications for the iPhone. Apple allows the app developers to join in the business success without having to deal with the overhead of running an online shop, organizing payment transactions, etc. Apple takes care of all of that through its App Store and iTunes platforms available online—and makes money from it.
The “big data” explosion
It also generates a huge amount of data about customers and their buying patterns. The rise in the volume of data being generated globally by this open-ended supply chain is phenomenal. Social networks alone create hundreds of billions of pieces of content per month: in industry, smart grids increase the data handled by power providers by 700 percent; and mobile payments in banking are forecast to reach more than $1 trillion in the next two years generating auditable data for each transaction. Every new mobile user adds to this and there are currently 5.9 billion subscribers globally. IDC predicts that 1.8 zettabytes of data (a zettabyte is a trillion gigabytes) will be generated in 2012, a nine fold increase in five years. They also predict 35 zettabytes by 2020 with the available disk storage lagging far behind at 15 zettabytes.
But, according to Forrester, organizations effectively use less than five percent of their available data today. The business opportunities available through managing, analyzing and rapidly reacting to the remaining 95 percent are immense: continuously improved business processes and initiatives, identifying operational bottlenecks or roadblocks before they occur, improved customer information and their integration in new product development.
In addition, enterprises need to be able to react to rapidly changing regulations, new market players as well as changing consumer demands. This means managing big data in real-time and integrating the resulting information in automated and flexible business processes.
Real-time data, real-time information and real-time business processes
Business process management is playing an increasing role in enabling innovation in all industries, but one of the most important and significant sectors is banking. The banking industry continues to experience turbulent times. Ongoing industry consolidation, Basel III compliance, the emergence of the mobile-payments business model and the pressing need for more sophisticated market surveillance systems are some examples of the many and varied pressures on the industry. One common thread runs through these different issues: in all cases, changes must occur in the business processes of banks, brokers, exchanges and regulators. And these processes must cut across the boundaries of individual departments, companies and institutions.
New requirements for bank capital
According to the Basel Committee on Banking Supervision, hundreds of billions of euros will need to be raised by banks to meet the new equity rules. A recent report by KPMG highlighted that the impact on banks’ profitability and liquidity as a result of regulatory pressures worldwide will amount to a “systemic reduction” if business models do not change. These changes must provide real-time transparency in all transactions, allowing the consolidated business exposure to be immediately reflected in new capital requirements. The changed models must also allow business misconduct to be detected and addressed when it happens. The emergence of mobile payments, forecast to reach more than $1 trillion in the next two years, will also put pressure on the industry. Each mobile payment will generate auditable data that must at least be stored but at best analyzed in real-time to identify new business opportunities. It has been described as a “game-changing opportunity” for telecommunication operators to displace credit-card companies and banks.
Furthermore, consumers show little interest in paying any additional fees for these mobile services. Or, as the Yankee Group succinctly put it, “Every silver lining comes with a big, dark cloud.” Generating revenue from mobile transactions will require new, creative business models from banks, mobile operators and retailers – business models that can be implemented quickly, and monitored and optimized continuously.
To successfully manage and fully benefit from the business insights hidden in big data, enterprises need to adopt Business Process Excellence practices. This is a medium to long-term project: identifying, modelling and optimizing processes, focusing corporate culture on data driven decision making, introducing collaborative working practices and building an extremely flexible and adaptable IT infrastructure.
But the bottom line is this: the enterprise with the most flexible processes – that is, the one that can make the quickest, most cost effective changes, will come out on top. From a technology viewpoint, the enterprise that implements a software-based, flexible process layer extending across company departments, partners, regulators and customers, the Business Process Excellence layer, will get there first.
About the author
Karl-Heinz Streibich is Chief Executive Officer of Software AG. He has been with the company, as CEO, since September 2003. He also holds several honorary positions including Member of the Presidency of the German IT Association BITKOM, Member of the Executive Committee of the regional economy initiative Frankfurt Rhein Main e.V., Co-Chairman of the working group “Innovative eGovernment services” within the framework of the German Chancellor’s IT summit, and a Co-Founder of the German Software Cluster of Excellence.
Karl-Heinz Streibich studied Communication Technologies in Offenburg and visited post-graduate courses at Harvard University, Stanford University and London School of Marketing.