As the industrial age emerged, it was the marshalling of capital that reigned supreme. Capital-intensive mass production led to such success that the barons, the Carnegies, Fords and Rockefellers, are household names to this day. Then as the making of things became widespread, attracting competitors from across the globe, capital-enabled mass production was no longer sufficient. Market differentiation became the magic sauce of success. Manufacturers began to segment markets and add features to their products to appeal to those market segments. But, still, manufacturers used market research and other techniques to forecast demand. The basic business model was make-to-forecast, and they used advertising and publicity to push their products to customers. Oops, by its very definition, a forecast is wrong.
Fast forward to today. With production overcapacity now the norm, companies are struggling to differentiate themselves in the eyes of customers. Seeing unprecedented choice, consumers have grabbed power from producers, and are now the tail that wags the dog. There is no more room for the errors inherent in the make-to-forecast business model, and companies must now make-to-demand. What makes this new business model viable is the world-wide information network, the Internet, that allows demand signals to be heard (in an instant, in real time) throughout the value chain—from customers to suppliers, to suppliers’ suppliers, component makers and raw material providers—an information chain even more important than the physical supply chain.
In this wired, flat world we now live in, innovation has become the cornerstone of business success. But having real-time information is not enough to engender innovation. All participants in a value chain must be able to act on that information, and that’s where business process management (managing how work gets done) comes in.
In the early 1990s, with the advent of local area networks, companies began to realize that they could gain great efficiency by tearing down information silos to eliminate redundancies, hand-offs and disconnects between the departments in their companies. In the 1990s this movement was called business process reengineering (BPR) and resulted in the overall streamlining of enterprise-wide business processes.
But now, with the advent of the Internet, it’s possible to tear down information silos across an entire value chain, made up of an average of 20+ separate companies. What has all this to do with innovation? Everything. Innovative ideas abound, but it’s the ability to execute on innovation that’s so challenging. Companies can no longer act alone—the aircraft manufacturer in Wichita, Kansas is just as dependent on the daily operations of its suppliers in Shanghai as it is on its internal departments. Thus, to execute on innovation, companies must tear down information silos across the entire value delivery system, and manage the end-to-end business processes that deliver ultimate value to customers.
Today, there’s a new three-letter acronym, BPM, that’s all the rage in technology circles. Just about every IT vendor on the planet is staking its claim on the term, business process management. It’s touted as the next generation of workflow, the new management system for enterprise application integration (EAI), and IT analysts create magic quadrants with feature function comparisons.
What’s wrong with this picture?
The answer is simple, for BPM technology is another example of supply-push, not demand-pull. Executives burned by the dot-bomb don’t want more technology, they want results! While IT vendors are screaming “My BPM is better that yours,” who’s listening? Other technologists.
As long as the BPM conversation is restricted to technologists and BPM insiders, it’s likely to become just another cost-related issue and just another technique for squeezing out IT costs.
It’s only demand-pull from the corner offices that can place BPM in its proper context and lead to its full potential to change the very ways businesses operate.
While the rallying cries for BPR were downsizing and rightsizing within companies to gain a new level of efficiency, the rallying cry for BPM must be “setting the pace of innovation,” for that’s exactly what companies must do if they want to dominate their industries in today’s global economy.
The industrial age was ushered in by a never-ending pursuit of efficiency. The digital, global economy is being ushered in by a never-ending pursuit of innovation. Business executives who are first to recognize BPM as a new capability to ‘execute on innovation,’ will teach some bitter lessons to their competitors. It’s time to change the BPM conversation, for it’s not just a technologists’ discussion, it’s about how the Internet is being forged with a new category of software that gives business people control of their business processes (the way work gets done) to compete for the future—a future that’s certainly not business as usual.
