Platt Perspective on Business and Technology

Leveraging information technology to revitalize mature industries and marketplaces 3: adding the underlying business model into this discussion 1

Posted in business and convergent technologies, strategy and planning by Timothy Platt on January 22, 2014

This is the third installment in a series in which I discuss and analyze businesses as information management systems, and in which I characterize their competitive strength and marketplace capabilities in corresponding information technology implementation terms (see Part 1: reconsidering business evaluations and categorizations and Part 2: rethinking and implementing new and emergent.)

I began discussing information technology as a pool of available options and resources for designing and building an information management infrastructure for a business in Part 2, and ended that posting with a set of open questions:

• As a Chief Technology Officer, a Chief Information Officer, or a senior Information Technology Architect, how do you select from among all of the options available, when designing and assembling a single, coherent overall information technology system
• That can be flexible in the face of pressures to change and evolve?
• That can meet current and anticipatable short and medium-term needs now?
• And that can be secure in the face of cybercriminal or other outside intrusion threat? (And I add to that, the threat of internally arising cybercriminal or other illicit information access and usage activity?)
• And how can you select and build such a system so that it can serve as a source of flexible competitive strength for the overall organization, connecting into and supporting its business model as it is operationally implemented and as it evolves to meet emerging opportunity and challenge?

And I began to address these questions at the end of that posting when I stated that I would focus here on the underlying business model itself and on aligning information technology systems architecture and IT policy and practices with it.

I begin addressing that by flatly stating that none of these questions can be adequately addressed by information technology professionals alone, as if they would seek to do so in vacuo. Strategically and operationally framing these and similar questions and their answers in terms that would make sense for the business and its specific context as a whole, have to be approached as a joint exercise involving the entire overall strategic leadership team, with Information Technology only constituting one voice in that ongoing process. Widening out who would be involved in that process, means recognizing and including a wider range of essential stakeholders. My goal for this series installment is to set a stage for more inclusively thinking about and understanding these questions, starting with the business model as an organizing framework.

Overall business goals and objectives as laid out in the organization’s mission and vision statements, set the basic direction that overall business strategy would pursue. A combination of factors and constraints arising from within the organization and from outside of it, and with both of these basic sources shaping what is possible and what might be cost-effective, go into determining actual strategy pursued. And the specific strategic model arrived at with its specific goals and priorities and planned timelines is actually realized operationally, and primarily through standardized and standardizable processes and procedures; one of the core objectives in initially developing a functioning business strategy should be to identify ad hoc and one-off decisions and to move any that might have to be repeated into operationally standardized forms. And ongoing strategic reviews and updates would continue this process, identifying and through consistent processes operationalizing ad hoc decisions and their follow-throughs as a core due diligence exercise. And this brings me back to the focus point and orientation of this series.

Essentially every ongoing operational process in a business is an information management process, and its overall efficiency can be tracked in terms of its information management efficiencies. Consider a seemingly non-information example as a working case in point.

• Your business manufactures finished machine products, and an array of proprietary design parts and subassemblies that go into producing them. It also outsources production of certain of its required parts to licensed providers who build from its designs and it buys third party-sourced parts of a more generic nature from outside suppliers.
• All of this parts and materials flow goes through their internal warehouse and on-site parts inventory system, and Parts Management as a department operationally consists of a complex series of ongoing, repeated processes for tracking current and anticipated parts requirements, sourcing them, and where there are alternative potential sources for them selecting providers that offer acceptable product quality at a more favorable price, and purchasing them so as to meet delivery date requirements.
• But this much only sources and acquires this flow of parts inventory into the business as a whole. Production has limited room for parts storage that it will be using within a constrained timeframe.
• So everything it needs in order to keep its production lines operating has to be immediately at hand – but there is not going to be room for any more than that. If parts not needed within some constrained upcoming period of time are moved into their immediate needs on-site storage areas that means other parts they do need now are not going to have space available where they can be shelved. And this will create interruptions and inefficiencies in production and negatively impact on the business as a whole.

Everything coming into the business through Parts Management arrives through their central receiving facility, and is entered into their system through a barcode identification process. It is then sent to their warehouse or if immediately or short-term needed, directly to Production and its on-site storage area. And overall inventory flow and numbers of all stock keeping unit (SKU) items held and required is tracked with this data serving as essential input when making further ongoing parts purchasing decisions, and when making decisions as to numbers of in-house manufactured parts to assemble at any given time.

In a fundamental respect this is all about acquiring and moving physical resources – parts and subassemblies produced from them that become identified parts in their own right for subsequent later-stage assembly leading up to final production of finished products. But at the most fundamental level this is all about information and its management. Inventory is about the flow of material items but getting the right items in the right numbers where they are needed, and ensuring continuity in being able to do that is all about information.

And to take this one step further, if it is a strategic goal of the business to improve its efficiency and its cash flow and available liquidity by limiting the amount of value it has tied up in inventory, one way to accomplish this would be to reduce longer-term warehouse requirements with a move towards more of a just in time production line approach. This would reduce fixed operating expenses from having to maintain extra warehouse space. This would reduce the level of monetary resources tied up in the parts and materials stored there. And a just in time approach depends entirely on communications and information management capabilities, and both within the business and between it and its suppliers and other supply chain partners (e.g. businesses that provide shipping services.)

I am going to continue this discussion in a next series installment where I will more fully discuss wider stakeholder involvement, and I will also go on to more fully discuss in-house information management systems, and connecting them into supply chain and other externally connecting contexts. Meanwhile, you can find this and related postings at Business Strategy and Operations – 3 and also at Page 1 and Page 2 of that directory. You can also find this and other related material at Ubiquitous Computing and Communications – everywhere all the time 2 and at the first page to that directory.

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