Features - Enterprise Data Insights:

THE EVOLUTION OF THE ENTERPRISE
By Don Hatcher, Vice President Of Technology Strategies, SAS

Customers today are demanding better service, lower prices and higher-quality goods.

With such a volatile economy in recent years and with so many businesses competing for the same customers, it is imperative for companies to continually improve their customer service or else fall victim to their competitors. For this reason, many organizations are rethinking how they do business. For years, they have accumulated valuable information as a by-product of production while failing to put it to good use. When a company knows its customers' buying patterns, interests and demographics, it provides them a distinct advantage over competitors. This knowledge has become so critical in recent years that the process of managing information has become an industry of its own.

So how does a company manage its strategic information assets in today's rapidly changing business environment? What challenges arise out of that task? Are there any preventive measures that can ease the "growing pains" associated with moving from one information paradigm to the next? No matter how simple or convoluted the current information architecture is, evolving companies' effective use of information can help them achieve a level of sustainable competitive advantage that can be measured on the bottom line.

The Information Evolution Model

Companies evolve through a number of levels in what SAS calls the Information Evolution Model. This maturity model enables an organization to objectively evaluate their use of existing information resources, and to rank itself on one of five levels: operate, consolidate, integrate, optimize or innovate. Once the organization knows where it stands, it can more effectively lay out a roadmap for improvements that optimize business returns. It is not necessary for an organization to achieve the highest level of information evolution to be considered an "Intelligent" enterprise. The only absolute is that an organization's capabilities progress from one level up to the next.

Because the process is highly driven by business objectives, the application of the model will be unique to each organization's business focus. However, there will be similar issues and rewards as any company proactively evolves through the model. But for those that wait for competitors or harmful market experiences to prod them along, the process will be painful. And there is no guarantee the company will survive this transition.

Four key dimensions of any company -- people, process, culture and infrastructure -- must evolve together to avoid an unhealthy tension in the enterprise CASE tools, for example, were considered to be great technology (infrastructure), but quickly became shelfware because the people, process and culture were not ready to effectively use them.

This evolutionary continuum ranges from an operational focus on the low-end, to an extremely innovative focus allowing companies to exploit information creatively on the high-end. Most organizations would rank somewhere in the middle levels today.

Here, then, are the five levels of information maturity:

• Level 1: Operate

  An operational company, Level 1, is one that functions with the most basic information. This company focuses on the "here and now" challenges of operating today's business, and is typically a start-up, struggling or extremely entrepreneurial organization. This environment often exists in companies run by strong leaders and in niche markets. These businesses emphasize activities required to support day-to-day operations and do not have long-range plans. They operate and make decisions in a chaotic information environment that is internally competitive and lacks consistent evaluation and performance criteria. Information costs are high due to redundant and inconsistent data collection processes. Organizations at Level 1 are often successful due to visionary leaders, information mavericks and, more often, luck. Most companies do not stay at this level for very long. Excessive operating costs, data inconsistency, redundancy and missed opportunities hurt a company if it does not further evolve.

• Level 2: Consolidate

  A consolidated company, Level 2, is one that has combined information into departmental or functional databases for decision-making. Individuals now leverage the same information within a department or functional group to make effective decisions. The downside is that there is little control over information from an enterprise perspective.

  Within departments or functional groups, managers and subject matter experts have vested interests in maintaining data and continuing to drive departmental agendas that may not be in the company's best interest. Department heads make more informed decisions, but they may filter out information that is valuable to the enterprise if that information reflects poorly on their department. While the cost of information is lower than in an operational company, it is still high. Although there may be uniform hardware, networks and software in place, they are used inconsistently. Thus, the departmental perspective works against establishing enterprise-wide technology standards beyond the basic infrastructure.

  A company reaches Level 2 when it not only consolidates data around business functions, but also proactively:

  • Manages departments with systems that reflect accountability and can be accumulated later as an enterprise view.
  • Works with information mavericks to understand their greater value to the department as a subject matter expert.
  • Builds information projects that support departmental objectives that can later contribute to an enterprise information environment.
  • Develops the information infrastructure (i.e., platform, tools, procedures) to support departmental efforts with an eye to the future.

  Achieving this transition to a consolidated company reduces information processing costs, increases data analysis efficiency, improves employee motivation by inspiring confidence in the system and allows the company to better address customer needs. To ensure the efforts undertaken here serve as a foundation for future transitions, these efforts must be designed from a long-range perspective. Level 2 is a stepping-stone to the enterprise integration achieved in Level 3.

• Level 3: Integrate

  Level Three is truly a breakthrough level that positions an organization to make business decisions that leverage the full scope of enterprise information and support streamlining.

  An integrated company, Level 3, recognizes the importance of defining data and information consistently across the enterprise. Information is clearly tied to organizational objectives, which ultimately help enhance the company's ability to create value for its customers. A result of having access to enterprise-wide information -- one version of the truth -- is that information is widely accepted as an essential tool to success and competitive advantage.

  At Level 3, companies gain a true awareness of what information can do for them and it generally serves as the catalyst for future change. In addition, company executives can start to see a clear change from the reliance upon operational systems to reliance upon intelligent systems as the corporate memory. This gives the company the flexibility to rapidly change their operational systems to meet market demands.

  Forward-thinking companies quickly recognize the limitations of being a consolidated company and will plan to evolve to an integrated company before they begin to suffer from high costs, missed opportunities and the inability to respond to threats. Moving to Level 3 takes several steps:

  • Define enterprise-wide business measures and strategy.
  • Align existing information management to achieve an integrated approach.
  • Create incentives for employees to attain results between departments.
  • Use infrastructure management to maintain the integrated information environment.

  The advantages of an integrated organization include a larger share of the wallet, and retention of customers and supplier relationships due to an enterprise-wide view of the customer, efficient supply chains, and faster response times to market changes and lower costs for handling information. Here, the company has a clear view of its value creation process -- how it creates value for its customers.

• Level 4: Optimize

  Once a company is integrated, it will begin to look for ways to maximize performance to meet market demands. The scope of an optimized company, Level Four, is to ensure constant alignment with the marketplace and then quickly optimize the entire business and its value creation processes around this new alignment. The company is quicker than its competitors to understand the marketplace and ultimately, better serves its customers.

  The organization can quickly eliminate obvious inefficiencies, but it will leverage deeper analysis to weed out more subtle flaws. The enterprise must examine the entire value chain and create inter-company communities with a shared interest in efficient operations. Part of that examination includes detecting customer-buying patterns and predicting future behavior in order to understand their needs and respond consistently.

  For this to work, the corporate culture must embrace the idea of improving incrementally. Information is so integral to business processes that if a breakdown in the information flow occurs, continued operations are jeopardized; therefore, the infrastructure must be able to tolerate problems. A Level 4 company will use automated rules and pattern detection systems to respond to issues that used to be handled manually and allow decision makers to focus on edge cases.

  Companies moving from Level 3 to Level 4 will realize that being an integrated company was the beginning, not the end, of a journey. The preparation for the journey focused on integrating information (Levels 1-3). Then, the journey actually begins. A company reaches this level by taking these actions:

  • Builds the ability to monitor the marketplace and quickly realigns the company to meet market demands.
  • Views the business model as an extended model, including suppliers, customers and other stakeholders and builds the ability to optimize across the model.
  • Builds the ability and culture required to capture unstructured data as well as explicit quantitative information.
  • Establishes cross-divisional processes and holds stakeholders to them.
  • Provides employees with incentives for helping achieve incremental improvement.

  The company that invests in this level of optimization will see a return on investment through cost savings; lower cycle times for product development and customer acquisition; improved market penetration; and retention of customers, suppliers and partners. Companies also begin to see a constant, incremental increase in revenue generated from new activities.

• Level 5: Innovate

  Companies that are not constantly innovating eventually reach the point that they are in a commoditized marketplace. Forward-looking companies recognize the need to leverage their knowledge in new ways to introduce innovative products and services so as to constantly differentiate their offerings. They are adaptive and build new product and service offerings that leverage their core competencies and information assets. Once new processes are in place, they quickly optimize them to ensure alignment and efficiency. By continually adding new products and service offerings, new revenue stream are created. The innovative company has a significant portion of its profit stream from new products and services.

  The Level 5 environment requires employees, customers and suppliers to contribute and evaluate new ideas. Alignment with enterprise goals is a given, and the organization rewards individuals who take advantage of information in ways that propose new, viable ideas. The company's culture understands that failures are inevitable but should be tolerated as part of the learning process and controlled through risk management. Sharing knowledge gained during trial and error is important to the overall cultural development. Moreover, the company will often look to business concepts established in other industries and technologies to help it define new value.

  When a forward-looking company anticipates the commoditization of a marketplace, it is ready to evolve from Level 4 to level 5. To accomplish this:

  • Proactively facilitate and manage innovative processes.
  • Value intellectual capital as highly as tangible assets.
  • Develop a risk management mentality and apply it to the innovation pipeline.
  • Establish systems to scan information from external sources and use that information to make recommendations for new opportunities.

  Level 5 payoffs include higher profit margins from new products and markets, upsetting the playing field for competitors, greater customer satisfaction and increased market share based on a sustainable competitive advantage.

Conclusions

The need for high quality information has never been greater. Information managers and executives have the task of knowing what information the business needs and having the means to make it readily available. Companies predictably mature in their use of information, though decisions made early on in building an information framework can affect the pace of that maturity. These decisions can either help a company's progress along the Information Evolution continuum or hinder it. The company can face a costly retooling effort if products selected to solve problems at one stage of maturity cannot adapt to a new paradigm.

The Information Evolution Model, by contrast, allows companies to realistically assess the maturity of their current information, providing a clear roadmap for managing their evolution process without ripping the infrastructure apart. A proactive information management strategy can build and maintain a level of competitive advantage that is sustainable. That advantage has a positive impact where it's felt the strongest: on the bottom line.

About The Author

Don Hatcher is vice president of technology strategies for SAS. Hatcher's team shapes the strategic direction of SAS products and technologies. His team works closely with strategic organizations to understand the market pressures being placed upon them and leverages that information to develop a market-driven strategy for all products and technologies, which are the foundational elements for all SAS solutions. Hatcher may be reached via e-mail at Don.Hatcher@sas.com.