IDC Analyst Connection

BOOST CUSTOMER IMPACT BY

 

HARNESSING THE POWER OF

THE BUSINESS NETWORK
Authors:
Mickey North Rizza
Tom Seal

January 2021

Sponsored by

IDC #EUR147354121
Boost Customer Impact by Harnessing the
Power of the Business Network
Questions posed by: SAP

Answers by: Mickey North Rizza, Program Vice-President Enterprise Applications and Digital
Commerce, and Tom Seal, Senior Research Director, European Services

Q1: What is a business network?

Business networks connect groups of organizations working together to accomplish a set of
strategic and operational objectives. For example, buyers on one side of the transaction bring
their requirements and requests to the sellers for fulfilment. The sellers come to the same
network with their products and services for buyers. Together the buyers and sellers transact
business with some common interest such as logistic networks for organizations that want to
collaborate on freight, track their freight, order fulfilment, and traceability of materials; financial
networks that are a collection of entities such as banks and financial exchanges; or other
industry networks such as manufacturing, oil and gas, high tech, and life sciences.

Business networks bring enterprises and ecosystems together because the enterprise can work
closely and in real time with its ecosystem. The ecosystem includes the suppliers, contract
manufacturers, maintenance providers, logistics services providers (carriers and shippers),
distributors, customers, competitors, government agencies, and logistics — all of which tie the
value chain together with the business for the delivery of goods and services. The idea is that
each entity in the ecosystem affects and is affected by the others, creating a constantly evolving
relationship in which each entity must be flexible and adaptable in order to survive.

Q2: Why are business networks important?

The global economy has transformed into a network economy that can take a local business and
economy, quickly catapult it into the global arena, and completely change it overnight. The
network impact on a business, the community it represents, and its business partnerships are all
magnified when attached to a network that brings it into a global economy. When a single
business becomes a part of larger business network, the company immediately moves its
customer base beyond the local market where it resides into a much larger world that continues
to grow as more organizations become part of that business network. Business networks are
multipliers for buyers, sellers, shippers, carriers, and even asset utilization and maintenance.

As companies look to serve their customers better while reducing costs, many of them, across all
industries, have decided to focus on their core competencies and look to partners to provide
complimentary business processes, services, and capabilities. Organizations working together in
this way can serve larger communities and bring more to their clients jointly.

For instance, the growth of contract manufacturers in lower cost areas brings opportunities for
more business to these communities as they work to satisfy supply chain requirements. Supply
 Boost Customer Impact by Harnessing the Power of the Business Network

chains may be local but can also span multiple tiers and multiple continents. The growth in the
use of contingent labor to supplement staffing during peak periods for contract manufacturers
and the supply chain adds even more to the network of businesses, partners, and communities.
And the reliance on logistics service providers to move goods around a complex global supply
chain ensures the success of the community and business network.

By their nature of connecting businesses around the world, business networks also open up
exciting new supply and demand opportunities for organizations so they can not only discover
new pathways but also be discovered by others. Since every transaction has two sides, the
commerce factor of a network is multiplied quickly. Whether it is the buyer and seller or shipper
and carrier, the network quickly expands. When a buyer uses a carrier, that carrier becomes
known to the seller and then this is a new source for both businesses. As these two businesses
transact more with others, the carrier may work for even more of their connections. The network
effect is an excellent means for organizations to broaden their client base and their partnerships,
enabling a multiplication factor for the business and community that is beyond the current locale
and beyond a traditional business selling only locally within the community.

Q3: How does a business network extend the enterprise?

Business networks help to extend the enterprise strategically when there is central trading
partner onboarding, managing, providing insight, and extending process collaboration across
trading partners. Business networks bring value to all types of ecosystems, such as contract
manufacturers and the supply base, logistics, third-party maintenance, distribution, and retailers.
They accelerate time to market by collaborating with contract manufacturers and other key
suppliers on design concepts and the manufacturing bill of materials (BOM) and by leveraging
external manufacturing resources as a less expensive way to manufacture new products and
bring them to market faster.

Ten benefits for every business in the network include:

1. Improve and accelerate time to market. Time to market is shortened by accelerating the
new product development and introduction processes. The network brings increased
collaboration between key suppliers and contract manufacturers on design concepts and the
manufacturing BOM. It helps find alternative sources of supply to support new products. It
leverages external manufacturing resources as a less expensive way to manufacture new
products and bring them to market faster. And it helps downstream suppliers to focus on
distribution and delivery of the products.

2. Focus on core competencies. Organizations in a business network learn to shift their focus
towards their own core competencies and use experts to focus on other areas like logistics and
packaging. "Together is better" becomes the new mantra as organizations engage with their
business network partners, each focused on their own competencies.

3. Enhance customer service. When organizations collaborate in real time, working in parallel,
with the same target and end game, the customer benefits. Customer service is enhanced
because the customer receives the value as the businesses in the network focus on their needs

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 Boost Customer Impact by Harnessing the Power of the Business Network

collectively across the entire fulfilment process. For instance, as an order is received and
processed, the organization fulfilling can work closely with the logistics partners to make sure the
requested item is delivered on the date requested, while also updating the customer throughout
the fulfilment journey.

4. Communicate in real time. With the right information at the right time, trading partners can
work together to respond to variability or disruption and prevent the typical bullwhip effect. For
example, extension efforts to find a carrier that has capacity to pick up goods and ship them
quicker than previously offered can increase customer satisfaction for the shipper's clients and
bring new clients on board for the carrier.

5. Predict risks and opportunities. Leveraging the combined knowledge of the network, such
as by finding maintenance vendors to assist on an equipment repair or to retrofit a machine that
will save production output and extend an asset's life. This leverage can also lead to more
predictive analytics capabilities to identify other potential risks and recommend strategies to
avoid disruption and maximize opportunities.

6. Introduce frictionless role-based collaboration. Enable collaboration based on your job

function or role to drive synchronous action across trading partners and business functions. This
also streamlines processes because you are collaborating freely and securely between your
business and trading partners. It is no longer just about the next step in the network that needs
to occur, but about the larger picture your partners and you need to complete together.

7. Leverage the collective intelligence of the network and learn from past results. Historical
data on shipment types and routes, equipment information, product specifications, and so on,
can be used to identify trends, track KPIs, and benchmark with industry peers. For instance, the
intelligence in the network can improve customer service and delivery performance without
taking on excessive buffer inventory.

8. Act on real-time information and insights. Leverage real-time data, both structured and
unstructured, to sense and respond to real-time events across the network. Port strikes, weather
delays, traffic issues, or fire hazards can cause untimely issues for every player in a business
network. Working together, the network has more insights and knowledge to make better
informed decisions every step of the journey. In addition, business network extensibility can help
organizations integrate more easily with third-party networks for certain industry-specific needs,
supplies, and customs and tax requirements — all reducing disruption and cost to businesses.

9. Discover new partners. Business networks open the organization's visibility into additional
sources of supply that may also compete against the current sources of supply. This new, larger
supply base can open up new relationships and help drive down purchase prices — further
enhancing profitability — and bring new customer channels to light.

10. Work towards common goals and metrics. Organizations have monitored metrics for
quality, diversity, and sustainability, each with their own goals. While each organization needs to
know where it is in the grander scheme of global, regional, and localized compliance, the
network effect combines the larger perspective, yielding insights into the entire unified network.

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 Boost Customer Impact by Harnessing the Power of the Business Network

Each business partner can start to look at their metrics as a part of a larger network, enabling
greater awareness and focus on common goals as part of their trading relationship.
Accountability between trading partners becomes a key factor in the relationship.

Q4: How does a business network bring innovation into the enterprise?
Each company has its own way of conducting business. This singular viewpoint evolves when the
company recognizes it is part of a larger business network such that the combined entity is
greater than each component of it. The combined entity of companies becomes a unified
business network focused on solving one or multiple customer requirements, which can quickly
accelerate time to market. For instance, when one company within an ecosystem coordinates the
movement of goods, such as the sourcing of a component from a new and unique supplier in a
new region of the globe, the networked ecosystem tied to it learns to quickly assimilate that
information and shipment using this new pathway fulfilment. It is in essence a unified business
network dynamically making a difference for the benefit of all partners in real time. This network
effect brings innovation in the form of ideas to the entire network such as changing up business
processes, finding alternative sources of supply, leveraging new trading routes, learning about
IoT devices that can extend the value of a business process or even new cost savings
opportunities.

The business network drives significant value as organizations work together to improve the
customer experience, the community, and the world at large. With a vaccine, for example,
competitors learn to cooperate for the betterment of the community and to expand the
network's benefits for all. Companies that might normally compete, work together with logistics
carriers to find the best routes and ports and through difficult events to ensure the world at
large benefits by receiving their vaccine in a timely manner. Cities, rural communities, hospitals,
doctors, and nurses all come together to make certain the delivered vaccine is administered
safely. This unified network effect innovates on its own for the greater good.

When a unified network enables businesses in the network to learn to work together as a
collective team, the combined team can accelerate time to market, improve customer service
and delivery performance, and reduce working capital and carrying costs by trimming excess
buffer stock. These organizations can also work together towards common sustainability goals.
The collective team of businesses learns to operate for the greater good of the whole business or
even the world at large. This changes the dynamics across the unified business network,
enhancing outcomes and metrics for all.

Q5: What are the best practices for using business networks?
The fundamental best practices with business networks are to unify and connect, while also
understanding the group within the business network. Organizations must have a network
strategy for their business. In much the same way a business strategizes on its IT landscape and
portfolio, it must also strategize its network landscape. The right business network can instantly
propel the business into a new competitive global world that will open up more markets, bring
more clients, and provide greater opportunities for the business.

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 Boost Customer Impact by Harnessing the Power of the Business Network

Scaling to the new global world sounds easy but can also shut down a market if customer
expectations are not met. Organizations must think about how they scale to meet their growing
needs and configure this into their business network experience. Supply chain shortages,
logistics issues, and factory concerns from labor shortages to machine breakdowns can
immediately slow down a desired outcome. Active participation is a key requirement for all
participants in the business network. Managing the information and using the network to
collaborate and increase the likelihood of success are required attributes of organizations using
a business network. With more types of trading partners, business processes, and spend within
the business network, the opportunities are universally limitless. The connectivity of the partners
in the business brings greater value and more opportunities such as the discovery of new
sources of supply, enhanced business processes that streamline work, and the discovery of
additional trading partners that can solve problems as they arise, all creating value in real time.

Organizations that utilize business networks can magnify their business to a broader world, while
also taking advantage of the network to:

 Open the business to new markets and customers.

 Accelerate time to market with new routes and business partners.
 Increase the business exponentially beyond the current known market.
 Collaborate and learn new best practices.
 Discover new sources of supply, capacity, and resource.
 Reduce costs with new and more competitive suppliers, improving profit margins.
 Solve order fulfilment problems in real time, creating higher customer satisfaction scores.
 Work towards common goals and objectives so all business partners can benefit.

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 Boost Customer Impact by Harnessing the Power of the Business Network

A MESSAGE FROM THE SPONSOR 
Creating a Resilient, Agile, and Collaborative Business Network 
SAP is transforming today's fragmented supply chains into a unified, collaborative, and intelligent business 
network that will:  

 Connect with a unified global business community of partners to drive desired business outcomes.

 Collaborate with capabilities that leverage the combined strength, reach, and power of your business
network.

 Leverage the combined intelligence of the network to learn from the past, act in the present, and predict
the future.

Organizations using this unified business network will change the way they work with their partners. The unified 
business network improves everything from how businesses source suppliers and manage supply chain risk to 
how they work together with many different types of organizations to design, manufacture, deliver, and support 
the goods and services the global economy needs. 

About the Analysts

Mickey North Rizza, Program Vice President, Enterprise Applications and Digital
Commerce

Mickey North Rizza is program vice president for IDC's Worldwide Enterprise Applications
and Digital Commerce research practices. She leads a team of analysts responsible for
IDC's coverage of the next generation of enterprise applications including ERP, financial
applications, procurement, supply chain automation project and portfolio management,
enterprise asset management, services resource planning (SRP) and related project-based
solutions software and the digital commerce business network.

Tom Seal, Senior Program Director, European Services

Tom Seal is the senior program director for IDC's European Services Group and has over
20 years' experience as an analyst, consultant, and technology procurement manager. He
leads IDC's European services research, currently focusing on the implications of digital
transformation and emerging technologies for service providers. In addition, he is part of
IDC's Intelligent Process Automation practice building on his experience in business
process design. Tom also writes and presents on the ways in which emerging
technologies are reshaping European businesses and supply chains.

IDC #EUR147354121 Page | 6

About IDC
International Data Corporation (IDC) is the premier global provider of market intelligence,
advisory services, and events for the information technology, telecommunications, and
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technology and industry opportunities and trends in over 110 countries worldwide. For 50 years,
IDC has provided strategic insights to help our clients achieve their key business objectives. IDC
is a subsidiary of IDG, the world's leading technology media, research, and events company.

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