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Featured Guest Speaker
Posted: September, 1999

Charan Lohara
President and CEO, EMP Edge., Simi Valley, CA

The Living Enterprise
Copyright 1999 Charan Lohara.


Editor's Note: A living enterprise, like any organism, is self aware and of one mind. A far cry from today's organizations which are managed by monthly performance reports, annual planning sessions, and locally optimizing decision makers. What a dream. At least I thought that's all it was until I saw a demonstration of a real-time enterprise management system that turns wish into reality. This is a management infrastructure unlike anything anywhere, and may be difficult for some to swallow as it leaves no place to hide. It is hard to imagine a truly agile enterprise without this capability. I met Charan Lohara for the first time last month at a conference of the International Council on Systems Engineering, where he impressed quite a few very knowledgeable people with a demonstrated capability clearly driven by his past frustrations as an executive. This article only begins to cover what I saw, but it will give a glimpse into a very real and near future.


Introduction

Both executive and operations managers are under more pressure today than they were a decade ago. Management is being asked to do more with less. The pressures focus on cost reductions, quality improvement and time to market. A few years ago, an advantage in any one of quality, price, new technology, feature function or after sales service could make your enterprise successful. Now you need to be competitive in all of these factors as a pre-requisite to even enter the market place.

One mistake or one missed quarter of meeting the projections is too many as the board of Compaq recently informed Mr. Eckert Pfifer, ex-CEO. Apparently no one remembered that he took the company from 3 billion to 30 billion in sales and profitability. The old saying, 'What have you done for me lately?' now translated to Internet years means "today."

Managing the enterprise management process

Executive and operational management have always been challenged by complexity, communications (formal and informal), decision processes, staff competencies, and change while trying to win at their primary job improving performance in five directions: growth, profitability, employee satisfaction, supplier satisfaction and increasing customer happiness. No small task in trying to produce the desired outcomes even when clearly defined.

The dreaded annual planning and budgeting cycle must now be done more often because the business changes too fast. In the current decade the management process is taking more of management’s time than the production process.

Surprisingly, very little attention has been given to managing the enterprise management process itself; let alone to building a knowledge base and process competencies. A response to this gap is sorely needed. A planning framework would ensure that planning, communicating, and control got done effectively, and allow more time for attention to product, production and customers.

A planning framework has seven important supporting frameworks:

  • value management framework
  • performance management framework
  • strategic management framework
  • virtual organization management framework
  • knowledge and competency management framework
  • operational management framework
  • information technology management framework

When all of these elements are used to guide an integrated assessment, the planning and decision process constantly moves the enterprise towards a state of equilibrium:

  • attending to market growth with profitability
  • maintaining employee satisfaction and customer happiness
  • preparing for a different tomorrow continuously

Diligent and daily execution of the enterprise management process, integrated by the seven frameworks, achieves fidelity of communications throughout the enterprise, and makes visible and explicit the threads that bind all business events and activities in concert toward desired results. This continuous integration guides the executive to correct and timely decisions, an integral part of the management process.

Single point approaches do not work

In the quest to get a handle on the management process, various designs and approaches for integrated business management systems and information management systems have been tried. Put forth by a combination of visionaries, academic researchers, and experienced professionals, these approaches are translated into tools and methodologies with names like strategic planning, change management, organizational structure, TQM (total quality management), BPR (business process reengineering), BPE (business process engineering), ABC (activity based costing), ABM (activity based management), and the balanced scorecard in the business management area. In the area of information systems we find ERP (enterprise resource planning), SFM (sound financial management), HRM (human resource management), supply chain management, and now various approaches to e-Commerce.

These programs designed to help management have shown mixed results, and certainly do not produce the results that are expected, even after valuable time and money are expended. These are all single point solutions trying to solve complex issues which are multifaceted and multipoint.

Your information model should support the business, not define and limit it

During my several years as a manager and an executive, it became quite evident that an effective enterprise management process could neither be built on these point solutions, nor on a mish-mash of cobbled together methodologies and tools; and I found similar sentiment in all of my colleagues. Many had decided to automate the operational processes, with the hope that such a foundation would help to build the enterprise management process they were roundly disappointed.

ERP, HRM, Data Warehouses, Data Marts and other operational implementations have mixed, but generally dismal results. These programs certainly do not delivered the ROI expected, and in some cases have a negative effect on the enterprise. With the ever-changing technology, the implementation of transactional systems for operational process management and other point solutions for business management can even be more costly than expected.

Management, consultants, and technologists have been doggedly trying to make the business model conform to the IS model. The result has only been to highlight and widen the gap between business and IT, and to create the new mantra: "align the business with IT."

Obviously, the action should be the other way around; the business model should be your information model. That is, an integrated business model must be built first, before invoking the tools, technologies, and methodologies for information and decision automation.

After all, when we invest in physical automation, we first decide what we are going to make and how we are going to make it. The same should be true for investing in information and decision automation.

Building a Living Enterprise

The seven frameworks compose a total integrated picture of the business from the various business domains. When decision making and management activities are based on a total integrated real-time picture of the business, the gaps in time and information disappear. Good intentions and great plans no longer fall through the cracks.

It becomes a living enterprise aware of itself, its decisions, its actions, and the consequences at every moment.

Using object-oriented technology in the form of business objects, and the Internet, it is possible to build a support structure to integrate and manage the enterprise management process in real time. Every manager, every decision maker, can see the immediately current state of the business, and the effects of local decisions on other parts of the business and on the integrated picture.

Besides helping deal with the complexity and communication problems, the frameworks also help with change, the third "C" that threatens most managers’ careers. Today the management process must anticipate and prepare for change. That is why the value management framework and the knowledge and competency management framework are necessary.

These frameworks, when properly defined and integrated, represent the enterprise accurately in real time, while driving the operational processes to the desired outcomes. The continuous integration of these frameworks achieves the sought-for objective: your business model becomes your information model. With proper knowledge and competencies, and information systems, these models bring the enterprise into the equilibrium state: growth with profitability, and employee satisfaction with customer happiness, even as everything keeps changing..

Like driving a car down the road, you can't do it with a glance in the rearview mirror once a month. And you can't do it with a a bunch of drivers independently operating gas, brake, steering, transmission, navigation, and such.

Can the living enterprise be built today? I've seen the framework automation that will enable it. I know it can be built today, and so will you if you are ready for it.

A collaborative consortium project is being formed over the next few months to build a fully-functional, proof-of-concept, living enterprise platform for consortium members. Called "Manufacturing Enterprise Management Consortium: Building the Next-Generation Management Enterprise", this project will populate the frameworks, build a knowledge base, create zero-latency "dashboards", develop value and performance management models, and generally provide an operational living enterprise platform for evaluation before full scale-up. Interested parties my contact myself (see below) or Dr. Stan Settles, chair if the Department of Industrial and Systems Engineering at the University of Southern California (settles@usc.edu, 213-740-1120) for details.


Charan Lohara,
President and CEO
EMP Edge,
www.empedge.com
Simi Valley, CA, 805-522-5793


Would you like to offer some thoughts or add to the dialog? Responses of general interest may be posted below. Send your comment to . IMPORTANT: Make sure the subject line of your message contains: Comment on Guest Speaker 9/99.
========= Reply =========================
From:
gsinc@gen-strategies.com (Wojciech M. Jaworski) Date: Sun, 3 Oct 1999
Here are few observations to your very interesting insights.
  1. I agree that "an effective enterprise management process could neither be built on these point solutions, nor on a mish-mash of cobbled together methodologies and tools". To avoid non-effective (non-agile?) systems | programs we need a robust evaluation | modeling technique. Natural language and 2D diagrams are not sufficient.
  2. I also agree that "the seven [management] frameworks [value, performance, strategic, virtual organization, knowledge and competency, operational, information technology], achieves fidelity of communications throughout the enterprise" if aptly implemented.
  3. The enterprise management process with suitable topology is needed to attain fidelity of knowledge communication. Multi-layered, extended state machine topology is required to integrate the seven management frameworks and implement "living enterprise". The top layer of such topology includes states of knowledge exploration, recovery and communication.
  4. "These programs [TQM, BPR, BPE, ABC, ABM, ERP, SFM, HRM, etc.] ... have shown mixed results ..., and ... are all single point solutions ... trying to solve complex issues which are multifaceted and multipoint." All listed programs fail internal and external 'knowledge plug compatibility' test. Plug compatibility is described in the Knowledge in a Flash . . . Cube essay [ http://www.parshift.com/Essays/essay050.htm ].
  5. "ERP, HRM, Data Warehouses, Data Marts and other operational implementations have mixed, but generally dismal results." Knowledge-templates recovered from these "operational implementations" exposes simple and static nature of stored data. Such systems could be effective only for enterprises with a low level of agility.

W. M. Jaworski

PS Enterprise Software website [ http://www.esistrategist.com ]provided additional insight to your paper and was used as source knowledge for a lecture. A draft of the lecture is at http://www.gen-strategies.com/papers/agile/EnterpriseStrategist .

========= Reply =========================


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