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Growth through Business Network Transformation: Profiting from the Knowledge of Others

By Ferri Abolhassan, SAP Germany

By transforming their business networks, companies can tap into new potential for growth, even if they have already optimized all of their processes and value chains. This strategy enables companies to use the knowledge of others.

With business network transformation (BNT), companies can lay the foundations for new business models and set themselves apart from their competitors. Starbucks is an example of this model. Customers listening to the background music played in all Starbucks stores can now use the iTunes music portal to display the current song on their cell phone and download it.

This example demonstrates that continuing globalization, the availability of information in the Internet, and increasingly shorter product cycles are forcing companies to remain innovative and on the lookout for new, unique selling points. Many are well underway in making the transition from being a supplier of products to a provider of solutions; companies distinguish themselves from the competition by the services they offer that complement their core business.

A single company is hardly in a position to develop the knowledge necessary for this transition. Growth models, therefore, are increasingly based on cooperation in networks in which partners exchange knowledge. This way, business networks evolve into collectives.

At first glance, this idea is not new: Companies have long depended on cooperation. They have integrated entire scenarios, such as logistics, to extend their value chain link by link. Now the classic approaches are all but exhausted, with only small improvements possible. The future approach will be for companies to enhance their own business models with the knowledge of others, as illustrated perfectly by the Starbucks example. The synergy arising from coffee and music provides new impetus for sales. By adding this service, Starbucks is expanding its core business while benefiting from Apple’s experience in the music business.

Benefiting from globalization

Companies that have adopted this principle count among the globalization winners. The ultimate aim here is to provide a quality service, exactly where it is wanted and at the lowest price. A company that creates value along these lines can steadily optimize its business model and remain on a course of expansion.

The new ticketing system that Deutsche Bahn, the German railway company, plans to set up with Vodafone also illustrates this strategy. Customers will be able to buy train tickets using their cell phones. The network effect again bears fruit here: Deutsche Bahn is drawing on Vodafone’s billing expertise to improve its own service and become more customer-friendly.

Business network transformation describes the transition from a company’s internal network to an external network among multiple companies. In the past, companies approached partners to outsource parts of their value chain or rationalize secondary processes. With BNT, the aims are different: Music was not part of Starbucks’ original business model, but the coffee chain decided to cooperate with iTunes to participate in the knowledge of the operator behind it. With this model, creative companies can use BNT to either occupy new niches or capture market share from their competitors.

Technical basis

The technical foundation for these networks is IT. SAP’s business process platform, for example, offers process knowledge while providing connections to downstream systems. Applications from the existing systems of the networked companies can be combined as enterprise services to map new, collaborative business processes on the SAP platform.

Crossgate’s business-to-business integration network applies the same concept. Crossgate runs an electronic data interchange (EDI) marketplace and, as a service provider, handles the business communication of its customers by mail, fax, e-mail, SMS, radio frequency identification, GPS, Internet, and EDI. Crossgate connects IT landscapes so that its customers do not need to understand the nitty-gritty of the various communication channels’ technology. Its customers can network more quickly, without possessing in-depth technical knowledge themselves.

Not only large enterprises profit from SAP’s platform concept. Based on the model of service-oriented system architecture, SAP Business ByDesign - the new solution for midsize companies - includes all the tools that midsize companies need for BNT.

Don’t forget your homework

Successful BNT, however, requires companies to take stock of their own situation. Only those that fully understand their business models and are committed to moving them forward can benefit from business networks. If they know their own business, they can more easily find a compatible partner as well as identify and implement the right processes.

The difficulty, though, is the speed at which many companies are growing. The original principles on which processes were based frequently become lost, resulting in poor integration and a lack of standardization. Legal requirements are often not met completely, or there is no enterprise-wide process model. Therefore, companies that are seriously considering business networks and cooperative processes should examine all their processes beforehand, looking not only at completeness and integration but also at reducing complexity.

A process platform calls for standardization and automation. This paves the way for successful expansion and growth in all markets, whether local, regional, international, or global. Solid processes provide the foundation for successful BNT. Companies whose processes are not in order need to do their homework as soon as possible.

Source: SAP INFO

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