Research for impact:

Priorities for the multi-disciplinary dialog for the new generation of e-business, e-government and e-big

(May 2004)

This position paper is intended to open up discussion in the IFIP 8.4 community about the key issues for linking research and practice to help private and public sector organizations and national policy makers and development agencies use “e-capabilities” for economic, social and organizational growth.

The overall dominant concern in business, government and economic development targeted at exploiting the opportunities of information technology has become the design and governance of collaborative relationships. The main targets of opportunity for innovation rather just efficiency are:

1) In industry:

• Supply chain management and logistics: this has become one of the single major differentiating capabilities in industry after industry; it demands new forms of collaboration within companies, at the process integration level, with customers, suppliers and partners, and across many value “webs.” The governance issues here include contracting, cultural incentives, and new levels of operational agility in coordination and responsiveness.
  
  
• Design and end-to-end integration of the customer experience, across products and services and with many value web partners in such areas as distribution, fulfillment and support.
  
  
• Knowledge mobilization, rather than just knowledge “management”: the deployment of knowledge on-demand with mobile technology a key new enabler.

2) In government:

• Inter-agency cooperation and communication – less than collaboration but far more than co-existence.
  
  
• Citizen enablement of Internet access and community-building via broadband, education and local development
  
  

3) In economic and social development, including public-private sector collaboration:

• e-Big: this is perhaps the most far-reaching of all e-capabilities – the city, region and national specializations and workforce combinations of cost, education, age and political regime that are enabling any area, however small, to find a place in the global talent sourcing that underlies what is too loosely called outsourcing.

Underlying all these issues is the worldwide commoditization cycle that is fueling componentization in industry after industry. Componentization is the bounding of products, services, processes and functions that are then accessed by standardized interface. The consumer electronics and personal industries are examples of this historical force that is driven by competitive intensity and rapidly leads to a commodity hell. The car manufacturing industry is moving rapidly to componentization of parts and services, which fuels outsourcing and commoditizes most suppliers. Even in the pharmaceutical industry, R&D is following the same pattern.

Componentization leads to differentiation of processes and functions and the ability to source them across the globe. Their integration and synchronization – the key to making commoditization a source of growth instead of the cost-cutting and retrenchment shown in the diagram below – rests on collaboration as a style of thinking and governance as the contracting, architectures and policy frameworks for fitting the pieces together.

(This diagram is taken from Keen, Sanford and Williams, Let Go to Grow, a business book that will be published in August 2004.)

Manufacturing increasingly builds products on components with standardized interfaces. The USB cable is an instance of how such an interface that is core to the entire digital consumer electronics industry. The dominance of Toyota in car manufacturing reflects its sustained innovation and process edge – collaboration in action – in standardizing its manufacturing platforms.

Web Services in general and XML in particular is now componentizing services and processes. This fuels the e-Big worldwide growth of call centers, ad hoc R&D services, document processing, customer service and IT development shifts from largely fixed-cost, in-house and capital-intensive operations to a variable cost, on-demand expense.

The componentization/commoditization cycle has two major consequences: it makes coordination a key organizational skill and makes collaboration essential for innovation. We are seeing distinctive and consistent patterns in how companies escape the commodity trap by building expansive value webs instead of tightly-controlled and company-owned value chains. There are four main types:

• Coordination webs: These rely on a mix of sourcing options, from outsourcing to co-sourcing to partnership to joint ventures that rely on specialization of skills. Companies like Wal-mart and GE generate their growth and profits in this way. They extend their value chains but still control the terms of collaboration.
  
  
• Collaborator webs establish close relationships with a small number of clients and differentiate commodity products, parts and services through process innovation and relationships. Examples here are Tal and Li and Fung in the apparel market and Timken, Magna and American Axle in manufacturing.
  
  
• Service webs open up their own value webs to wider markets. The most far-reaching instance here is UPS which is the tightly-coupled real-time logistics synchronizer for well over half of all Internet transactions. It coordinates repair services for printers, warehousing and inventory management for many firms’ spare parts, and even collection of payments when goods are delivered.
  
  
• Enabling webs offer a platform that other companies can use in their own innovation. This is the core of Amazon’s strategy in its offers of Web Services development tools to a pool of around 35,000 developers, its links with thousands of firms, its Associates program and many other innovations.

The old Porter value chain was built on control rather than collaboration. Value webs – a competitive inevitability in an era of componentization – demand first coordination then collaboration.

In the government sphere, e-gov has largely been viewed as an efficiency catch-up game where public sector agencies offer basic process, information and citizen service improvements that leading businesses implemented a decade ago. These do not demand collaboration or governance; they are basically a web site implementation. What is changing the agenda is the urgency and complexity of inter-agency governance for collaboration. The U.S. public hearings on what happened before 9/11 have shown very clearly just how little collaboration there has been between the CIA, FBI, Immigration and other agencies. Information did not translate to knowledge and collaboration was at best ad hoc and fragmented. This example shows the extent to which information as such does not produce effective action.

In the wider international sphere, e-Big is the design of platforms for collaboration. The driving forces here are the search for global talent. The education capabilities of the rest of the world have caught up with Europe and North America in key areas of specialization, especially IT and engineering. A striking instance of governance in exploiting the talent opportunity is Eli Lilly’s InnovCenter portal that posts R&D problems to a pool of close to 50,000 scientists in 150n countries. The estimated success rate is 20-50%, far higher than in-house performance, and the cost around a sixth. In early June 2004, the single largest complement of researchers were in the U.S. By June 2004, Chinese researchers are the largest pool.

e-Big is one of the most encouraging forces for development of our age. It has transformed the very nature of the Chinese and Indian economic growth policies and practices and established many other nations and cities within nations as players in the creative economy. It poses many challenges of governance: infrastructures, regulation, technology and social policy, for instance.

Information technology itself – the “e-“ factor – has componentized and commoditized to the degree that there is now a widespread fashionable claim that IT doesn’t matter. What is really happening is that IT has become more and more differentiated. The diagram below shows the three layers of the IT resource: substructure, infrastructure and superstructure.

Substructures are the basic and increasingly commoditized components that are equivalent of utilities and are now being sourced as such. It is this commoditization that is marginalized so many IT organizations and left IT professionals suddenly jobless and their work off-shored.

Infrastructures have shifted from E-business – big E and little b – that were technology-dependent and in many cases defined by technology, such as early e-commerce web sites – to first, E-Business where the challenge is the fusion of both e and b – to, now, e-Business; business that relies on IT as a standard resource. Now, “infrastructure” basically means a process-technology cluster such as supply chain management.

The competitive differentiator is in the superstructure: the collaborative use of infrastructures and reliance on ubiquitous substructures. Wal-mart, Dell and Southwest are winners in intensely commodity industries. They continue to dominate their competitive ecosystem because they fit the process and relationship pieces together better than the other players who have access to the same technology substructures and target very much the same infrastructure capabilities.

This cursory sketch of the new e-landscape highlights the fact that collaboration is the new currency of organizational efficiency and growth. That shapes the agenda for IFIP 8.4’s multi-disciplinary agenda. We must get beyond the mechanistic conceptions of collaboration that underlie business process reengineering, business process management modeling and the IT field’s ethos of automation. We need foundational work built more on scholarship than applied research in conceptualizing collaboration, trust and relationships. We need to conceptualize and operationalize practical principles for governance that go beyond broad policies and vision statements. 

Perhaps the topic that should be highest on the IFIP agenda is a richer multi-disciplinary conceptionalization of trust. Trust is the foundation of collaboration, obviously, but it is not the simple, often mushy commonsense view of it as a value – honesty, sincerity, and general goodness. This is trustworthiness – a value – that differs from trustability – a skill. Trustworthiness is the positive answer to the question “Can I believe in you?” and trustability the answer to “Can I rely on you?” Good people may be untrustable and even untrustworthy crooks can be counted on to deliver. Trust is not always a virtue in the person being trusted but a responsibility on the one looking to trust; on New Year’s Eve when your son asks to borrow the family car while holding two bottles of booze, saying Itrust you is not exactly the best choice. Trust has many cognitive dimensions: reputation, professional certification, and history. It shapes or closed down the space of potential relationships; Kafka hauntingly said that there is nothing more lonely than the loneliness of distrust but equally many victims of con artists know that overtrusting can be as damaging.

Collaboration, trust, relationships….. These are the key factors for the e-world. They are fundamentally, not peripherally multi-disciplinary in nature. They are intellectually very tough subjects to explore. That is why they are so worth the effort.