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Point of View
Beyond process-centering: Emerging capability- and alliance-based business models
Martha M. Batorski and William J. Hughes
The considerable rewards of process-centering, as experienced by 15 organizations in the United States, Canada, and Europe, were recently uncovered by the Accenture study, "ProcessCentering: New Relevance for the eEconomy".1 The study shows how these organizations achieved considerable performance improvements and gained access to new competitive opportunities by making the monumental shift required by process-centering. Process-centering is the shift from a vertical orientation with distinct functional areas—such as marketing and manufacturing—to a horizontal orientation with end-to-end, cross-functional business processes—such as order fulfillment and product development. This shift permeates all the components of business process performance—strategy, organization, performance measures, skills, culture, and systems—to create an environment that measures and reinforces process behavior. But this transition—as dramatic as it is—is not the end to the story. Many process-centered organizations discovered that the process-centered organization model, while a worthwhile destination in itself, can also be a stepping stone to emerging capability-based and alliance-based business models. organizations beyond process-centering. In many cases, their continued focus on process resulted in new or greatly improved business capabilities: that is, a collection of interrelated process components that deliver high performance and value. Whereas the replication of an organization's redesigned processes may be simple, the configuration of components that make up a targeted capability is much harder to orchestrate. Consequently, welldesigned capabilities represent the building blocks of competitive advantage. Armed with such an advantage, some capability-driven organizations uncovered new competitive opportunities and began to divest themselves of capabilities that did not create value. These capability-driven organizations were able to form alliances to address market opportunities they would not have been able to address effectively alone. Consider Los Angeles-based New Energy. Following its first year of operations in the deregulated California market, New Energy redesigned its processes to build the business capability of providing reliable, low-cost energy with timely and accurate bills. New Energy's strategy—to maintain a first-mover advantage in providing integrated, high-value energy solutions—prompted it to seek out alliance partners with complementary capabilities. One such alliance partner was Johnson Controls, which has the capability to monitor and switch energy equipment remotely. This capability, combined with New Energy's capability, provides customers with a high-value energy
Emerging capability- and alliance-based business models
Figure 1 represents the typical progression of traditional
Process 1 Process 2 Process 3
Capability 1 Capability 2 Capability 3
Capability 1 Capability 3
Figure 1: The evolution to new organization models enabled by process-centering
Outlook Point of View aims to provide a forum for ongoing discussion between Accenture professionals and their clients.
solution, called "peak shaving." During peak hours, New Energy's customers are automatically switched off the electricity grid onto customer-owned site generators— which New Energy also sells—resulting in total energy savings. New Energy is not only targeting consistently high levels of performance through its redesigned processes, but also creating new markets for its energy solutions by partnering with capabilities that together create previously untapped markets. New Energy is part of a growing number of process-centered organizations competing on capability and attracting alliance partners with complementary capabilities to create value for their customers. For New Energy, an end-to-end process orientation was a prerequisite to delivering high performance as part of its partnership with Johnson Controls. The resulting business model is an alliance-based organization comprising multiple, complementary capabilities. Eastern Electricity (a wholly owned subsidiary of TXU known as TXU-Europe) is another example. Through processcentering, Eastern developed a formidable business capability: the dynamic management of energy production in an environment of fluctuating demand at consistently high performance levels. This capability is so effective, Eastern now performs this service for its competitors. As part of its choice to compete based on capability, Eastern unbundled nonstrategic capabilities. In this way, Eastern Electricity continued its progression from a process-centered organization to a capability-based organization. Eastern is now preparing for entry into the eEconomy by building alliances with companies with complementary capabilities to create new markets for their services via the Internet. Eastern Electricity embraced a process-centered organization model as a means to achieve high performance. For other organizations similarly committed to process-centering, that story is similar: developing process excellence delivers significant, sustainable performance improvement and new competitive opportunities. Of course, these results do not happen overnight; they are a result of a multistage transition.
extend beyond the organization to include these entities, the design and effective implementation of end-to-end processes becomes critical. The eEconomy is challenging traditional and start-up organizations alike to think differently, to find the new fundamentals for success. Alliance-based, complementary capabilities are the building blocks of emerging eCommerce models that require the collaboration of intermediaries (companies that enable delivery), complementors (companies that add value to the product or service), suppliers, and customers. Process-centering—with the opportunity to evolve beyond the process-centered organization to emerging capabilities- and alliance-based models—forms the basis for sustained high performance—a fundamental for developing a competitive advantage that bridges both old and new economies. The trail has already been blazed, and the payoffs continue for the pioneers of process-centering. Organizations stalled on the path toward process excellence can create the foundation for eCommerce success by reviving their commitment to process maturity. If you found this Outlook Point of View of interest, you might also be interested in the Outlook Point of View entitled "Process-centering: New relevance for the eEconomy." Martha M. Batorski, associate partner – Process Excellence, is based in Los Angeles (email@example.com). William J. Hughes, partner – Resources, is based in Houston (firstname.lastname@example.org).
1This Outlook Point of View is based on the study, "ProcessCentering: New Relevance for the eEconomy." The organizations studied represented a sample of energy, chemical, utility, government, consumer products and pharmaceutical organizations at various stages of process-centering.
Bridging the old and new economies
In the eEconomy, previously internal, cross-functional processes, such as order acquisition and order fulfillment, are in full view of customers and suppliers alike, engaging both in an extended, end-to-end process. As processes
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