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IT as an Enabler for Enterprise Value Networks

In his opening remarks at ARC Advisory Group’s 15th Annual World Industry Forum in Orlando, Florida in February 2011, Andy Chatha, ARC’s founder and president, introduced ARC’s Collaborative Value Networks concept, commenting that while the business drivers haven’t changed significantly for manufacturers since last year, the intensity continues to increase. Recent events in the Middle East increased the level of uncertainty.

Security – both physical and cyber – is becoming a bigger challenge for all companies. The BRIC countries are becoming stronger and more competitive every year. More young people from the "Facebook-generation" join 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 Chatha calls "easy IT" solutions. "With all these changes going on, we need to become highly flexible and agile," said Chatha.

"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."

According to Chatha, 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. Smart grid is starting a revolution and ultimately, will connect all home devices and appliances. Cloud computing makes IT seem like a utility, hiding all complexity from the user."

Continuing a theme from last year’s forum, Chatha stated, "We need to start adopting more of these easy IT solutions at our companies, since they can help us reduce cost and complexity."

Chatha next cited two relevant statements from Bob McDonald, CEO of Procter & Gamble. The first statement refers to digitisation: "With digitisation, our goal is to standardise, auto mate, 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 that the company is looking for a sevenfold increase in real-time data to help it meet its targeted 20- 25 per cent reduction in selected spending areas.

Chatha added that any company that wants to reduce costs by 20-30 per cent 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.

This provided an excellent segue to his next topic for discussion; Collaborative Value Networks. To put this in context, Chatha first discussed ARC’s Collaborative Manufacturing Management (CMM) model, which ARC introduced back in 2000. While the CMM concept provides a meaningful way to visualise and analyse the plant as a node in a supply chain network, it doesn’t go far enough.

"Today’s companies realise that they must become more design- or innovation-centric and supply chain networks don’t incorporate design and engineering departments, which are managed separately by a different department," Chatha commented.

"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 digitise your company, moving your boxes of paperwork to the cloud," Chatha said.

"A few years ago, building this type of platform would have been prohibitively expensive. Today, the information technology is in place to build this platform at a reasonable cost. However, this requires both executive leadership and common standards and processes at all levels."

In closing, Chatha implored Forum attendees to take advantage of the Collaborative Value Network concept to be proactive, effective, and responsible.

[Paul Miller is Senior Editor/Analyst, ARC Advisory Group.]

ARC Advisory Group

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