IT and Business Process Integration as Competitive Advantage

Introduction

The transformation of enterprises from competing on price, production efficiency, or other traditional means of gaining and sustaining competitive advantage is well underway. The new competitive advantage is knowledge, process integration, interprocess coordination, and the synchronization of entire organizational structures in pursuit of a strategic goal. Information technologies (IT), once seen as ancillary or even as a maintenance function within organizations, are now considered a critical link in strategic growth and plan attainment. The use of information technologies to make processes more efficient, integrated, transparent, and accountable to customers and suppliers is revolutionizing nearly every process within organizations today.

The challenge for organizations is to move beyond seeing IT as the enabler of computing "dial tones" and instead recognize it as the basis for enabling greater interprocess communication, integration, accountability, and speed of response to market factors. Ultimately, the ability of organizations to combine IT, their unique processes, and perpetuate product differentiation is critical. Combining these three factors at a strategic level has the potential to transform process expertise into knowledge as the strongest competitive advantage (Dyer, Nobeoka, 2000). Only through interprocess integration (Chaturvedi, 2005) and the creation of linkages throughout an organization — defined at the process level first — can these strategically critical objectives be attained. This paper analyzes how organizations can make the journey from being myopically focused on just their IT infrastructures (Bhatt, 2000) to becoming more competitive and responsive to market dynamics.

The greatest differentiating factor in global competition today is not the concentration on a single attribute of a given company yielding exceptional results. It is rather the extent to which organizations can synchronize their many processes, product strategies, and systems to achieve a common strategic goal. In aligning systems, processes, and products toward a common strategic goal, the role of IT linkages and interprocess integration becomes critical (Chaturvedi, 2005).

This paper evaluates the approaches companies are taking to transform processes and the knowledge they generate (Dyer, Nobeoka, 2000) into a competitive advantage over time. The interrelationship of IT and Business Process Management (BPM) (Attaran, 2004) and Business Process Re-engineering (BPR) (Broadbent, Weill, St. Clair, 1999) is evaluated through the lens of supply chain linkage concepts as suggested by Chaturvedi (2005).

Process Integration and Improvement as Competitive Advantage

When the factors discussed in this paper are taken into account, it becomes clear that the greater the level of interprocess integration in an organization, the greater the potential to transform process efficiencies into financially measurable results. Detrimental to these efforts, however, is resistance to change on the part of those most impacted by interprocess integration. For lasting process-centric change to occur, change management strategies must be put into place (Broadbent, Weill, St. Clair, 1999) that give affected employees an opportunity to take ownership of the change. Through the use of analytics — including the key performance indicator known as the Perfect Order (Columbus, 2008) — organizations are increasingly looking to quantify the payback of interprocess integration and efficiency.

The financial implications of more efficient interprocess integration can also be measured using the Perfect Order as a metric of how effectively IT is supporting management strategies. The key performance indicators that comprise the Perfect Order are directly correlated to the financial performance of organizations (Columbus, 2008). This provides a means of tracking financial performance over time based on the extent to which organizations attain a high degree of process synchronization and interprocess accuracy.

The reliance on a one-dimensional competitive strategy is actually a competitive weakness today. Competitors in every industry are finding that by concentrating on process integration first and then automating key process areas, strategies are more effective over time. The popularity of BPM and BPR techniques for re-orienting entire customer-facing strategies is a case in point (Eardley, Shah, Radman, 2008). Taking a process-centric view of supply chains — as Toyota Motor Corporation has done — led to the development of the Toyota Production System (TPS) (Towill, 2007). This is a fascinating approach that the automaker has taken to transforming its supply-side and Supplier Relationship Management (SRM) processes into a global competitive advantage.

The concentration on transforming accumulated interprocess integration knowledge into a competitive advantage (Dyer, Nobeoka, 2000) shows in concrete terms how a process-centric view of organizational transformation can turn knowledge into a potent competitive advantage. This supports the findings of other researchers who have noted that competitive strength is dependent on supply chain performance (Chaturvedi, 2005). What is unique about the process-centric integration Toyota accomplishes with its suppliers is that it also seeks to instill its values in them. This interprocess integration with suppliers outside the four walls of the organization carries with it a high degree of accountability and trust (Liker, 2003). The conclusion drawn from this observation is that for interprocess integration to approach its full potential, there must also be accountability, transparency, and trust. All of these factors taken together from a process-centric viewpoint lead to a competitive advantage globally recognized as among the best in any industry.

Toyota's reliance on the TPS as the foundation for transforming SRM strategies into knowledge-based competitive strength — above and beyond price — is considered the most difficult-to-replicate competitive advantage in the company's arsenal (Hoon, 2007). Its use of the TPS as a means to enter new markets has been proven in the U.S. and Europe, where expansion has succeeded against entrenched competitors.

The essence of Toyota's ability to transform interprocess integration into knowledge lies in the judicious use of technology coupled with BPM and BPR strategies that concentrate on continuous improvement (Liker, 2003). What also differentiates Toyota from other companies that have attempted this level of interprocess integration with lesser results is its use of collaboratively based IT technologies (Liao, 2008). What makes this example so powerful is that it shows the long-term, quantifiable impact of successfully combining processes, systems, and meaningful buy-in from employees whose roles changed significantly. The TPS example further underscores the key premises of Chaturvedi (2005), specifically the dispersion of knowledge throughout a supply chain.

Toyota's expertise in optimizing supply chain performance to align with production requirements is considered the foundation of the TPS, specifically including the development of interprocess integration among suppliers (Liao, 2008). This concentration on inter-supplier coordination and knowledge sharing stands in stark contrast to many American car manufacturers, where price discounting and availability of production lines for customized components dominate parts negotiations. Toyota takes a more partner-based approach to supplier relationship development, often spending a year or more bringing a supplier onboard (Liker, 2003). This extended onboarding ensures the supplier gains insight into Toyota's culture and understands the process and system expectations they are required to maintain.

System integration with suppliers is often accomplished using Electronic Data Interchange (EDI) services (Towill, 2007), and Toyota has also begun relying on intranet portals protected via security logins and passwords (Liker, 2003). The use of secured internet applications for coordinating production plans with suppliers and synchronizing them on a global basis occurs around the clock, as Toyota seeks to create a unified manufacturing strategy worldwide. The concentration on having factories at various stages of maturity — as defined by the models of Dr. Kasra Ferdows (2006) in his research on foreign factory strategies — also illustrates that there is no "outlier" effect within Toyota's manufacturing strategy.

Using Business Process Management to Link IT to Business Strategies

Instead, all factories are part of a concerted manufacturing strategy that seeks to optimize the company's global supply chain. Driven by strategic objectives of attaining higher levels of lean manufacturing performance — thereby cutting production time and costs while increasing quality — and simultaneously focusing on how to create a sustainable, stable supplier base, Toyota continually works to balance these two objectives. In conclusion, the TPS exemplifies how layered architectures, when combined with interprocess improvement and integration (Chaturvedi, 2005), can yield financially significant results over time.

Of all the catalysts that enable greater interprocess communication, integration, and synchronization across departments, Business Process Management (BPM) and Business Process Re-engineering (BPR) have emerged as the two most dominant. Seeking higher levels of process performance purely for efficiency's sake misses the point of what is critical in making IT an integral part of strategic linkages. The efficiency gains from BPM and BPR must be oriented toward a specific strategic objective to be effective (Attaran, 2004).

While processes are often continually monitored for cost-saving efficiencies, it has been shown that re-orienting processes to be more customer-centric can transform entire companies. The concept of a Demand-Driven Supply Network (DDSN) (O'Marah, 2004) specifically focuses on this level of interprocess integration and re-orientation. As with the Toyota Production System, the concept of a DDSN in any organizational context is to create higher levels of transparency and trust through shared process ownership. Both the TPS and the DDSN model therefore share the attribute of collaborative workflows that ensure higher levels of adoption and higher levels of accuracy (O'Marah, 2004).

Like the Toyota Production System, DDSNs are capable of becoming learning ecosystems (Dyer, Nobeoka, 2000) due to the intensive level of interprocess and system integration prevalent in these approaches to managing collaboration, often on a global scope. DDSNs as a strategy ensure that customer-centric processes gain the highest priority and attain the highest levels of performance over time. In fact, combining the TPS concept for supply chain integration at the process level with the DDSN concept for demand management and customer-facing processes could be used to define entire value chains within an organization.

Quantifying the extent of interprocess integration on organizational financial performance is a concept introduced earlier in this analysis. The Perfect Order (Novack, Thomas, 2004) is a key performance indicator that companies rely on to verify and measure over time the extent of interprocess and system-level linkages. It captures the performance of supply chains and their ability to remain demand driven. Ultimately, the Perfect Order metric is useful for measuring the accuracy, stability, transparency, and trust generated throughout a supply chain (Columbus, 2008).

Conclusion

In order for any organization to remain financially viable today and into the future, it is critical that processes be viewed not as siloed activities but as strategic assets that can be coordinated and synchronized to attain organizational objectives (Chaturvedi, 2005). The role of IT is to enable greater interprocess coordination and synchronization through BPM and BPR approaches and methodologies, in addition to nurturing knowledge networks (Dyer, Nobeoka, 2000). It has been demonstrated, however, that the most effective knowledge networks are those oriented toward the strategic objective of better serving customers.