Net Gains – Real-Time Reality Check

Here we go again. The hype-meisters have discovered the Next Big Thing. It is called the Real-Time Enterprise (RTE).

Here’s exhibit A, from Gartner. Gartner defines the Real-Time Enterprise as an enterprise that “competes by using up-to-date information to progressively remove delays to the management and execution of its critical business processes.” In a recent report, Gartner opines that in all likelihood, more than 20 percent of Global 2000 enterprise CIOs will cite the RTE as one of their top-five investment areas by year’s end.

Gartner has plenty of company on the RTE bandwagon. A Google search in January turned up 14,100 hits. Vendors such as Asera, PeopleSoft and Tibco Software are staking their claims as “enablers” and “creators” of the RTE. Barton Goldenberg, a CRM consultant, declares that the RTE is “a fundamental paradigm shift in the way companies conduct business.”

Really? Is the RTE the greatest thing since sliced bread, or have the vendors and IT consultants, desperate to find something new to sell, created yet another three-letter acronym that claims to take CIOs to the promised land? While the ideas behind the RTE are sound?after all, what company doesn’t want to eliminate delays in management and execution of its business processes?the hype is getting way ahead of its value.

Separating Myth from Reality

What exactly is the vision of the Real-Time Enterprise? The value proposition of the RTE is rooted in the observation that time delays in business processes are the bane of productivity and competitiveness. By harnessing Internet-based technologies to radically reduce the elapsed time in business processes, the RTE can “sense” and “respond” almost instantaneously to any event that affects its business. Commonly cited examples of RTE-like phenomena are Cisco’s ability to close its books daily, Wal-Mart’s continuous ordering and replenishment, and Dell’s rapid order fulfillment process.

It’s a compelling vision, but here are a few myths and misconceptions to keep in mind:

• It’s not new. The notion that enterprises need to become more agile and productive is as old as business itself, while the idea of using elapsed time as a competitive weapon has been in vogue for a couple of decades.

  In an influential 1988 article, George Stalk wrote about Time-Based Competition, an operational strategy that focuses on compressing total throughput time in an organization by changing the processes and structures used to design, manufacture and deliver products. In the 1980s, Japanese companies were using Just-in-Time management, a philosophy that seeks to eliminate all waste in operations to achieve speedy production while using minimal inventories. And the concept of radical reduction in elapsed time of business processes sounds like Business Process Reengineering (BPR), which required “fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in cost, quality, service and speed.”

• It’s not yet real. A wise man once said, “The future ain’t where it used to be.” Don’t count on the RTE becoming a reality soon. Enterprises will slowly chip away at inefficiencies in their systems and business processes by incrementally replacing legacy systems, redesigning workflows and layering on newer Internet-based technologies. In reality, the RTE will evolve far more slowly than IT vendors and consultants might hope. Capital spending constraints, organizational inertia, immature technologies and delays in agreeing upon XML standards will jointly conspire to slow down the evolution of the RTE.
• It’s not only about the enterprise. No critical business process begins and ends within the four walls of the enterprise. The real-time enterprise cannot become real until the enterprise’s suppliers, partners and customers are all connected, and information flows from the suppliers at one end of the extended enterprise to customers at the other. To exploit the true potential of the RTE, you need buy-in from every upstream and downstream entity you do business with. This is a challenging task that involves creating trust, aligning goals, creating incentives for adoption, and educating partners, customers and suppliers.
• It’s not about speed. Reducing delays and speeding up business processes is not an end in itself?it is merely a means for creating additional value for customers. A business case for an RTE initiative needs to be grounded in the value of reducing delays, not merely in terms of time saved. True, time is money. But the exchange rate between time and money should be determined based on how customers, partners and suppliers value the savings. Further, speed comes at a cost. The value of speeding up a business process should be weighed against the cost of speeding up the process so that you aren’t speeding up at any cost.
• It’s not about technology. Just because information is available in real-time does not mean that an enterprise can act instantaneously on it. Latencies and delays have far more to do with business processes that are poorly designed, people who are too busy or incentives that are misaligned. The vision of the RTE cannot be achieved without also addressing inefficiencies and design flaws in business processes and organizational structure. Ignoring the human issues is an invitation to disaster, as the experience with BPR showed.
• It’s not right for everybody. Vendors will often sell you on the Next Big Thing with the justification that everyone else is doing it. The RTE is no exception. While every enterprise can benefit from becoming more agile, agility is only one of the ways to win. Consider the retailing business. Wal-Mart and the Spanish apparel retailer Zara may want to become RTEs because they win on speed and agility. But Nordstrom relies on customer service, and Kohl’s uses store layouts and merchandise selection as its competitive weapons. Nordstrom and Kohl’s should focus their IT investments on technologies that improve customer service and merchandise selection. After all, your business strategy should drive your IT strategy, and not the other way around.

Less Than Great Expectations

A major reason the RTE is a hot topic right now is that new technologies make it more feasible to connect systems, applications and business processes. These developments, which include XML, Web services, data warehousing, middleware and component-oriented enterprise architectures, allow business processes to become speedier and more agile. Agility and responsiveness in turn result in lower operating costs, more targeted offerings and superior customer service.

As with any new technological development, the truth about the RTE is somewhat less than what meets the eye. With that said, I believe that the vision of gradual evolution toward the RTE is laudable, as long as CIOs are pragmatic about the pace of the evolution and remember that technology by itself cannot transform enterprises.

The RTE is just another evolutionary step in the application of technology to improve business productivity. Take your time hopping on this train. It isn’t leaving the station just yet.