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Business Process Modeling for E-Business

Eingereicht von:

Albert Rainer

DIPLOMARBEIT

zur Erlangung des akademischen Grades

Magister rerum socialium oeconomicarumque

Magister der Sozial- und Wirtschaftswissenschaften

(Mag. rer. soc. oec.)

Fakultät für Wirtschaftswissenschaften und Informatik,

Universität Wien

Fakultät für Technische Naturwissenschaften und Informatik,

Technische Universität Wien

Studienrichtung: Wirtschaftsinformatik

BegutachterIn:

Univ.-Doz. Dr. Jürgen Dorn

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Abstract: The enormous success of the Internet and the rapid development of information

technology has led to new opportunities for doing business. Formerly unknown business models have emerged and enterprises in the networked world are facing new chances and risks. An enterprise can cope with this changing environment by redesigning its business processes.

This work aims to describe the strategies an enterprise can adopt, the business models it can deploy, and how business process modeling can aid in this transformation process. Two strategies will be identified, the organisational and networking strategies, and a number of business models will be outlined. The focus is on the description of business processes and development of new business solutions. The complexity of business process modeling and the development of process oriented information systems requires a

structured and comprehensive modeling approach. To cope with this complexity an approach will be proposed. The approach consists of three parts: the first part describes a method which divides the problem into smaller portions, the second part comprises procedural and quality aspects with respect to the modeling project and the last part describes a tool which can be applied to help in the modeling project. This modeling approach and the already existing tool ProSpec serve as an input to improve the tool functionality and to give advice for further tool development as well as the feedback to the modeling approach. As a result, a tool prototype has been developed which greatly

improves the usability and functionality of ProSpec and provides an aid in “real world” business process modeling projects.

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Table of Contents

1 Introduction ... 1 1.1 Key Drivers ... 2 1.2 Enterprise Reactions ... 3 2 Business Networking... 4 2.1 Strategic Questions ... 5 2.2 Organisational Strategies ... 5 2.2.1 Outsourcing ... 5 2.2.2 Insourcing ... 6 2.2.3 Virtual Enterprises ... 6 2.3 Networking Strategies ... 9 2.3.1 CRM - Relationship Perspective ... 10 2.3.2 EC - Transaction Perspective ... 11 2.3.3 SCM - Flow Perspective... 11

2.3.4 Summary Business Networking Strategies... 12

2.4 Business models for the Information Society... 12

3 Business Process Modeling ... 18

3.1 Business Processes ... 18

3.2 Modeling the Enterprise ... 21

3.2.1 Reasons for process modeling ... 21

3.2.2 Possible problems concerning modeling ... 22

3.3 Reference Models ... 23

3.4 Business Process Reengineering ... 24

3.5 Business Engineering ... 25

3.5.1 Conceptual strategy design... 28

3.5.2 Conceptual process design... 32

3.5.3 Conceptual system design ... 34

3.5.4 Change management... 36

3.5.5 Summary business engineering ... 36

3.6 Tools for Business (Re)Engineering ... 37

3.6.1 Project management tools... 37

3.6.2 Business process modeling tools ... 38

3.7 Summary Business Process Modeling... 39

4 Modeling Approach... 40

4.1 Method... 40

4.1.1 Architecture, metaphor, metamodel ... 41

4.1.2 Strategic level ... 42

4.1.3 Business process level ... 43

4.1.4 Resource level... 48

4.1.5 Relations between views ... 51

4.2 Procedure ... 53

4.2.1 General principles... 54

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4.3 Tool... 59 4.3.1 Tool architecture... 59 4.3.2 Modeling component ... 60 4.3.3 Administration component ... 61 4.3.4 Evaluation component ... 63 4.3.5 Transformation component ... 63 4.3.6 Repository component ... 65

4.4 Summary Modeling Approach ... 66

5 ProSpec... 67

5.1 Relations of ProSpec to the modeling approach... 68

5.2 Proposed Improvements to ProSpec... 69

6 Model Checking ... 70

6.1 Workflow Patterns... 70

6.1.1 Sequence of activities ... 71

6.1.2 Parallel execution of activities... 71

6.1.3 Alternative execution of activities... 72

6.2 Syntactical and semantical Correctness of Workflows ... 75

6.3 Methods to validate a Process Graph ... 78

7 File Representation of Models... 82

7.1 From XML to Java and back ... 83

7.1.1 SAX ... 83

7.1.2 DOM... 83

7.1.3 Data binding ... 84

7.1.4 The JDOM API... 84

7.2 Separation of Presentation and Implementation... 86

8 GUI Improvements ... 90

8.1 Major Changes to the GUI ... 90

8.2 Minor Changes to the GUI ... 92

9 Summary and Outlook... 93

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List of Figures

Figure 1: Organisation strategies for business networking ... 5

Figure 2: Processes for the networking strategies CRM, EC, SCM... 10

Figure 3: Customer buying cycle. ... 10

Figure 4: Buy-side eProcurement with aggregated suppliers... 11

Figure 5: Networking at Amazon.com ... 14

Figure 6: Generic process flow... 19

Figure 7: Classification of business processes according to suitability for modeling... 19

Figure 8: Classification of processes according to business value and repetition... 20

Figure 9: Three types of business process ... 20

Figure 10: Business engineering framework. ... 26

Figure 11: Customer process vision for travel planning. ... 29

Figure 12: Customer segmentation... 29

Figure 13: Customer process list. ... 29

Figure 14: Travel planning process (situation cultural event)... 30

Figure 15: Supply chain... 30

Figure 16: Business logic. ... 31

Figure 17: Market outputs. ... 31

Figure 18: Business unit for the business traveller information service... 32

Figure 19: Process map ... 32

Figure 20: Outputs list. ... 33

Figure 21: Activity chain for resource planning/booking process ... 33

Figure 22: Activity list for planning/booking process... 34

Figure 23: Performance indicators for resource planning/booking and customer servicing processes... 34

Figure 24: Applications scenario... 35

Figure 25: IT scenario... 35

Figure 26: Application uses... 35

Figure 27: Application structure... 36

Figure 28: Classification of groupware systems. ... 37

Figure 29 :Possible interactions of a process modeling tool ... 38

Figure 30: Method structure ... 41

Figure 31: Meta-metamodel for diagram metamodels ... 42

Figure 32: Goal view metamodel ... 42

Figure 33: Example goal model ... 43

Figure 34: Process view metamodel... 44

Figure 35: Example process model ... 44

Figure 36: Workflow view metamodel... 45

Figure 37: Example showing different kind of coordination ... 47

Figure 38: Example workflow view ... 48

Figure 39: Organisational metamodel ... 49

Figure 40: Example organisation view... 50

Figure 41: Example for passive resource view... 50

Figure 42: Relations between model parts ... 51

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Figure 44: Relations between resources and workflow metamodel ... 53

Figure 45: Role-based model of a project organisation... 54

Figure 46: General approach for modeling... 55

Figure 47: Tool architecture ... 60

Figure 48: Protocol requests for a generic WebDAV client... 63

Figure 49: Repository component ... 65

Figure 50: ProSpec previous version... 67

Figure 51: Relation of ProSpec to the proposed method. ProSpec supports only the workflow view... 68

Figure 52: Relation of ProSpec to the proposed tool. ... 69

Figure 53: Sequential execution of Activities ... 71

Figure 54: Sequential and parallel execution of Activities... 71

Figure 55: Two workflows with equivalent meaning... 72

Figure 56: Concurrency synchronization ... 72

Figure 57: Check pattern ... 73

Figure 58: Option pattern ... 73

Figure 59: Loop pattern ... 74

Figure 60: Ambiguous call of a sub-process ... 75

Figure 61: Unambiguous call of a sub-process (left) and conversion to a single process (right). ... 75

Figure 62: A process graph (left) and its instance subgraphs... 76

Figure 63: Unintentional multiple execution... 77

Figure 64: incomplete termination (left) and correct termination (right)... 77

Figure 65: Non-terminating livelock (left) and a correct version (right) ... 78

Figure 66: Transforming a process graph with multiple start/end events into an equivalent one with one start/end event ... 78

Figure 67: Adjacent reduction rule... 79

Figure 68: Closed reduction rule ... 79

Figure 69: Overlapped reduction rule... 80

Figure 70: Patterns of structural conflicts... 80

Figure 71: Transformation of an XML document to the corresponding DOM... 83

Figure 72: Separation of representation and implementation... 86

Figure 73: Demo application showing the sample XML instance ... 90

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1 Introduction

A lot of buzz words have emerged in the last years and have thrilled the mind and fantasy of shareholders, managers, consumers or entrepreneurs. Amongst these are Business Process Re-engineering, Business Process Integration, Customer Relationship

Management, Virtual Enterprises, E-Commerce, B2B, Supply Chain Management and many more. The recent rise (and partial fall) of the so-called "dot.com" companies has attracted not only the public interest but also the interest of traditional "brick-and-mortar"1 companies to enter into the e-commerce business2.

Key drivers for most of the topics behind these terms are globalisation and deregulation of the markets, changing customer behaviour and the technological innovations made

especially in the information technology. While many enterprises were doing their business in the past in relatively protected markets, e.g. the telecommunication or power supply industry, political and economical changes like the integration process in the European Community have brought more competition as customers are now able to select their supplier with a higher degree of freedom. As a result of this increased pressure present business models and business processes are under question to meet the changed

environmental conditions, for example by the means of business process re-engineering or by disassembling their process infrastructures into independent processes and then

reassemble them as parts of a network. On the other hand, the overwhelming success of the internet has led to new opportunities for doing business and as a result formerly unknown business models like the virtual shopping mall or auction brokerage have emerged.

Formerly separated and poorly informed individual consumers can now take part in digital communities or discussion groups and thus share their knowledge which may support or harm an enterprise. The simplicity of communication and partially of integration generates the opportunity of temporary associations like the set up of a virtual organisation. For example, in the past the integration of customers and suppliers by the means of electronic data interchange (EDI) was an expensive process and only about 10000 companies worldwide have adopted this standard so far. The emerging standard of the extensible markup language (XML) allows to build small and flexible message systems which can handle different message formats and thus give the millions of small and medium enterprises (SME) in the world the ability for more or less easy integration of business documents and processes.

So far, business models and business processes are recurrent terms. Generally speaking, business models describe what an enterprise does to generate revenues by specifying where it is positioned in the value chain and business processes describe how the enterprise does it.

A means to deal with the changing environment is to build a model of the relevant parts like the format of messages, activities which have to be performed or resources which are required for doing business.

1

“Brick and Mortar” describes a traditional company with non-web channels as the sales outlet for its products or services.

2 A study conducted by Subramani [Subramani 1999] indicates that capital markets react positively to firm announcements of e-commerce initiatives, leading to a significant enhancement in the firms' market value.

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This work will focus on the modeling of business processes and a development system will be presented to perform the modeling task, with a strong inclination to some of the new business models originating from the before mentioned technological changes. The first part will question in detail these 'buzz words' and the business models a company can adopt in the inter-networked world. The second part will describe business process modeling, why it should be done, what problems may occur and which methods can be used.

1.1 Key Drivers

The driving forces a company nowadays encounters can be split up into two categories, the economical forces and the technological forces implied by the rapid development of

information technology.

Economical drivers

Shift from seller to buyer market: The seller market is characterised by the scarcity of

products respectively the scarcity of the required input resources. The availability of input resources determine the produced output and access to these resources is a competitive advantage and an entry barrier for other firms. The shift to a buyer market results from increased productivity (with the same amount of input a higher output is achieved), access to global resources, which lowers the entry barrier, and alternative products respective technologies, which use other non-scarce resources. As a result, not the products are scarce but the customers to buy them. The firm has to respond to this trend and to improve the product quality, to pay more attention to the customer and to provide not only a product but a comprehensive solution for the customer’s problems.

Globalisation: Globalisation and deregulation lowers the entry barriers originating

from geographical and national borders. Firms which have prospered within such boundaries are now facing new competitors. For example, the Austrian power supply industry was traditionally divided in a number of federal monopoles, which are now threatened by the deregulation of the power supply market. The same is true for the telecommunication sector, where national monopoles have vanished in the last years. As a result, not the local "best practice" counts but the global one.

Information technology drivers

Decreasing prices for processors, memory and communication: The costs for computing and storing of data has fallen dramatically and so did the

communications costs. The decreasing communication costs generate additional demand for electronic devices and reduces transaction and coordination costs.

Convergence of IT and other products: As IT prices decrease and technology matures,

computers become more and more smaller and less power consuming and

penetrate not only cars or household devices like the refrigerator but also handheld devices or clothing. “Information Appliances” or “Embedded Devices” will make almost every part of the environment to a node in a network.

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1.2 Enterprise Reactions

Flexible organisation structures and a focus on relationship- and knowledge-management are the main reactions a firm can make to cope with these driving forces.

Small and specialized business units: A strategy to cope with complexity is to split a

massive system into smaller sub-systems, which are connected to each other and interact in many ways. The smaller a unit is the quicker it can react to changes in the market. Focus on core competencies, virtual organisations, or outsourcing are typical examples.

Re-assignment of tasks and processes: In a connected business world and the

capability of information systems task like "check order status" or the customisation of products can be outsourced to other business units, e.g. the customer itself.

Relationship: Process orientation and small business units lead to a close relationship

of customers and suppliers. One-to-one marketing, customer self service, virtual communities are terms which reflect these tighter bands.

Knowledge-management: Knowledge is increasingly determining the value of a

company. The value of a company, particularly on the stock exchange, is no longer based on its physical and financial assets but on its ability to operate a particular business profitably in the future. This ability depends on knowledge about technologies, products, services, processes, customers and other market participants. Knowledge structuring, or the utilization of existing knowledge (explicit or implicit) are important tasks for a firm nowadays.

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2 Business Networking

The buzz words of the “New Economy” have one characteristic in common; they are on everyone's lips but not very well defined. As a consequence, the same term is used for different facts, for example 'virtual enterprise' may indicate very different constructs, from a single company which has no 'brick and mortar' shops and is only present on the internet, up to a network of companies which looks like a single entity in appearance. The same goes for 'e-commerce', which one may see as an abstract term that includes all the other terms like virtual enterprise, customer relationship management or business process integration, while others may see it only as one means of business networking.

So the first task is to clarify these terms using business networking as a starting point. This sounds not very fashionable since companies are always in a network of customers,

suppliers or legal authorities. But combined with the opportunities originating from information technology innovations, business networking may lead to significant changes in the economical world.

A brief history of the relationship between organisations and information technology shows, that business networking seems to be a final state in organisational evolution since the introduction of IT-systems about 40 years ago, see for example [Piller 1999].

Individual support: At this level IT is used to support individual functions like

accounting. The results are isolated solutions, i.e. separate information systems to efficiently support individual operations.

Integration within the organisation: An uniform IT-platform is established like for

example local networks. At this level the IT is mapped to existing business processes, so no substantial changes are made to the organisational structure.

Business process re-design: Analysis of the existing and design of new business

processes with regard to the potentials of IT. This may effect in radical changes of the organisational structure.

Integration of the value-chain: This level includes the design of the

inter-organisational value chain, like the exchange of available stock data. This is done by the set-up of 1:1 or 1:n relationships between customers and suppliers. This means that a supplier has a relationship with several customers or a customer communicates with several suppliers. One (1) company sets the rules and the formats (standards), the customers or suppliers (n) have to accept them (or leave them).

New definition of the business domain: This last level describes the possible changes to

the products and services an enterprise offers. For example, the development of a reservation system may change an airline company, because it is now also a player in the market of reservation systems, like the SABRE system created by American Airlines.

A similar classification is done by [Österle et al. 2001] who defines the fifth level as the networked enterprise. The networked enterprise focuses on the coordination of processes within and across companies and the adaptation of companies to meet customer needs and processes.

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2.1 Strategic Questions

Strategic questions in business networking can be organized in three categories, firstly the general approaches, which address the analysis of the existing situation and the

development of future competitive strategies. Secondly, approaches which aim at shaping the cooperation with partners, and thirdly, more technology oriented approaches to support specific business processes, such as, for example, the use of electronic commerce for procurement activities. These three strategic approaches can be combined in two strategy dimensions. The first dimension is the organisational strategy dimension which contains general and cooperation aspects. The second dimension is the networking aspect, which describes the business processes and technological aspects.

2.2 Organisational Strategies

The strategical decisions a company can make depend largely on the core competencies this company has and the business segment the company is doing its business in. Core competencies have three characteristics:

Customer value: The competence must make a disproportionate contribution to

customer-perceived value, although this contribution might not be transparent to customers.

Competitor differentiation: The competence should be difficult to imitate for

competitors.

Extendibility: States that there is a way of imagining an array of new products and

services issuing from the competence.

The different strategies for designing partner relationships are outlined in Figure 1

New Pool resources (VO)

Develop resources (VO, Insourcing) Business

segment

Old Externalise resources (Outsourcing)

Strengthen resources (Insourcing)

No Existing core competence Yes

Figure 1: Organisation strategies for business networking

From these strategic decision three main networking relationships can be derived:

outsourcing of resources in an old business segment with no core competencies, insourcing of resources in an old or new business segment with core competencies, and virtual

organising in a new business segment. The 'develop resources' quadrant has two overlapping strategies – virtual organising and insourcing - and therefore other criteria have to be applied for strategic decisions.

2.2.1 Outsourcing

Traditional business resources which are not part of existing and/or future core

competencies are typical objects of an outsourcing strategy. Outsourcing is the strategic use of outside resources to perform activities traditionally handled by internal staff and resources, a management strategy by which an organisation outsources major, non-core

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functions to specialized, efficient service providers3. Typical functions for outsourcing are: Information technology, distribution and logistics, human resources or finance.

Outsourcing may be global, sectional or transitional. Global means the turnover of resource management to a contractor, for instance of all aspects of IT. In house resources remain only to maintain the contract and provide input on business and technology alignment. Sectional outsourcing involves only certain aspects of resource management, e.g. database maintenance or application development. Transitional outsourcing is the turnover to a contractor as long as the in house competencies are not acquired. Once the in house competencies are available, the resource management is insourced.

2.2.2 Insourcing

Insourcing focuses on the acquisition of resources to strengthen already existing core competencies. This can be done by mergers/acquisitions of companies with the relevant competencies, by assigning more resources like staff or by developing of in-house competencies, for example by staff development. In the context of business networking only the first point is relevant.

2.2.3 Virtual Enterprises

The concept is not as new as it sounds. Already in 1992 Davidow and Malone [Davidow, Malone 1992] described the virtual organisation as a borderless, fluid unit, and a virtual product as the immediate result of an interaction between a customer and a producer. Virtual organisations or enterprises, or virtual organising to emphasize the process nature [Österle et al. 2001] are not very well defined and may describe different types of

organisations.

According to [Scholz et al. 1999] the confusion about “virtual” has three sources:

Lack of conceptional clarity: Due to its closeness to concepts like the strategic alliance

the virtual corporation appeared as a rather vague suggestion.

Lack of theoretical basis: Even though various theoretical connections can be made to

game theory, agency theory and transaction cost theory, and to social

constructivism still no sound and broadly accepted theoretical basis for the concept of virtual corporation exists.

Lack of empirical basis: the phenomenon „virtual organisation“ seems hard to grasp

on a sound empirical basis. Except of several collections of case studies, there seems to be no serious and successful attempt to measure the degree of “virtuality” in virtual organizations.

Österle also states, that neither transaction cost theory, network theory nor any other of the theories examined4 provide a comprehensive help in answering practical questions and presents a practical approach for the modeling of networked enterprises.

3 According to the Outsourcing Institute [Outsourcing 2000]the main reasons for outsourcing are: (1)Reduce and control operating costs, (2)Improve company focus, (3)Access to world-class capabilities, (4)Free resources for other purposes and (5) Resources not available internally.

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A plain and simple definition comes from Mowshowitz [Mowshowitz 1999], who defines a virtual organization as a goal-oriented enterprise (i.e., unit or function within a company) operating under meta-management. Meta-management characterizes the management of a virtually organized task. A virtually organized task is a goal-oriented activity that is implemented by an appropriate assignment or reassignment of concrete satisfiers to the abstract requirements of a task. (Switching is the process of assignment and reassignment.) Three typical organisational structures often found in literature are:

Permanent Virtual Organisations: This is designed, from its inception, as a virtual

organisation to bring together market players and respond to opportunities for both improved revenue-generating activities as well as cost savings.

Virtual Projects: This incarnation of the virtual organisation forms alliances or

consortia to bring complementary organisations together to meet market opportunities. In many cases these are organisations based around similar industries or company types. Examples include new business alliances, industry trade associations, or cooperative activity and buying consortia joined together for the purpose of mutual benefit.

Temporary Virtual Organisations: An extension of the virtual project design is to

establish a temporary virtual organisation to take on multiple projects and develop responses to a specific market opportunity. When the market opportunity has ended, so has the organisation. This is the initial virtual organisational model described by Davidow and Malone.

A taxonomy of virtual organisations based on definitions, characteristics and typology by [Bultje, Wijk 1998] exhibits 27 characteristics of VEs found in literature. These

characteristics are shown in Table 1. The first six characteristics of this exhaustive list are described as 'key factors' in literature, while the remaining are mentioned in literature, but with no particular order of priority. The (small) empirical investigations they made on six enterprises which are described as being VEs in literature showed that only the first two of these 'key factors' were present in all investigated VEs, but also some of the 'non-key-factors'. So they marked these characteristics as 'primary characteristics' (P) which are valid for all VEs. As 'secondary characteristic' (S) they marked these characteristics with four or five matches and as not characteristic those with three or less matches.

Table 1: Characteristics of virtual enterprises

Characteristics Description P/S

Based on core competencies

Partners will only contribute to the VE with their core competencies and determine the necessary business processes. Leads to synergy effects and enables a flexible way to meet the customer demands.

P

Network of independent organisations

Independent organisations connected by semi-stable relations.

P One identity Besides the identity of the VE, the identity of the partner

may also remain visible (soft VE) or is hidden (hard VE). S

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Based on information technology

Information technology is a key factor to help widespread companies to link up and work together.

S No hierarchy The egalitarian structure of VEs enhances efficiency and

responsiveness. Distinction between a

strategical and operational level

The difference between the global and the local level serves as a means to cope with control problems.

S

Small sized partners Part of large companies

Small companies and/or part of large companies bring in their core competencies, which is often not the whole company.

Vague/fluid boundaries

More cooperation between competitors, customers, suppliers, etc. makes it difficult to determine where one organisation begins and another ends.

Semi-stable relations Relations between partners are less formal and less permanent.

P Dependent on opportunism Companies band together to meet a specific market

opportunity and part once the need evaporates. Shared risk

The risks have to be shared by every partner in the VE, for example the risk of losing control when functions are contracted out to other partners.

Based on trust

Because of the semi-stable relationship, the sharing of information and knowledge, and the shared risks the partners are more dependent and therefore a high amount of trust must exist.

S

Shared ownership Every independent partner has its own interests in the VE and parts of the VE can have different owners.

Shared leadership Every partner controls its own resources but not automatically the resources of the whole VE.

Shared loyalty Employees must identify themselves with the VE but also with their own company.

S Dynamic network The companies can enter and leave the network at any

time. Dependent on innovation

Essential for a VE are the market-based incentives and the corresponding responsiveness. To react in an adequate way, innovative products or services are necessary.

P

Geographical dispersed Buildings are separated. P

No organisation chart

Network of all sorts of organisational structures, no particular form of organisation is presupposed, VE more like a kind of umbrella.

Customer based and mass-customisation

Customers with their particular needs ask for individual products, organisations collaborating in a VE produce this mass-customisation (virtual product).

P

Temporary Lifespan of

cooperation Permanent

VEs quickly unit, exploit an opportunity and disband afterwards, but if the customer needs remain the VE may also exist on a long-term base.

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Equality of partners Balance of

power

Core-partners

The high dependency between partners leads to equal relations. The culture of control is replaced by a culture of knowledge and information sharing. On the other hand, VEs with a core-partner or ‘leader’ exist.

Partial P

Mission

overlap Complete

Partners that are also doing business outside the context of the VE have partial overlap, otherwise complete overlap if they are doing all business inside the VE

With these characteristics a virtual organisation is described as a geographical dispersed and semi-stable network of independent organisations, depending on innovations, with partial mission overlap, based on core competencies and mass-customisations. (The last point of this table, partial mission overlap, is questionable, since - although all investigated VEs comply to this fact – this may not be a necessary characteristic of a VE.) Compared to the former definition from Mowshowitz this definition can be used to characterise a VE more detailed.

One reason for the lack of a comprehensive theory is that an organisation may be part of more than one network at the same time. These can be internal, stable or dynamic nets which may influence one another. For instance, an organisation can be a development partner in a dynamic network (virtual project, temporary virtual organisation) and can maintain a stable network with its suppliers via the supply chain. While heavy weighted parties in a stable network may force the smaller ones to a certain information technology and standards, like in the automotive industry, temporary nets and those between equally strong partners have to cope with a multitude of information systems and message formats (balance of power). Although standards like EDI for messages already exist, they have not equally penetrated the economic world as, for example, HTTP did as a communication protocol.

2.3 Networking Strategies

Networking strategies put the focus on the processes between business partners and the supporting applications. Three main networking strategies will be discussed: customer relationship management, electronic commerce and supply chain management.

Customer Relationship Management (CRM): Focuses on the whole relationship with

individual customers and integrates sales, marketing and service activities. To structure these processes the Customer Buying Cycle is used, with the generic processes marketing (awareness), evaluation, buy, and after sales.

Supply Chain Management (SCM): Means the delivery of enhanced customer and

economic values through the synchronized management of the flow of physical goods, the associated information and funds. Four main processes are supported: plan, source, make and deliver.

Electronic Commerce (EC): Focuses on transaction processes and can be applied to the

links of various business processes, such as procurement or auctioning of surplus goods.

The generic business processes for these three networking strategies are shown in Figure 2.

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Figure 2: Processes for the networking strategies CRM, EC, SCM.

2.3.1 CRM - Relationship Perspective

Customer Relationship Management describes the processes which aim to win new

customers and keep the existing ones. In the information age and the shift from a seller’s to a buyer’s market customers want to get everything, everywhere, at any time, they want to be in the centre, want the feeling of being the one and only customer (1:1 relationship) and want their problems to be solved in one stop. The Customer buying cycle (CBC) is a technique to structure and characterize the customer process and prove if information technology may provide new solutions in the customer relationship. In the awareness stage customers form their needs and identify the products/services they consider to buy. In the evaluation phase different suppliers, products or services are compared, followed by the buying phase. The after sales stage proves customer satisfaction. Figure 3 shows the CBC together with some example potential concepts for the improvement of the relationship with customers.

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A disadvantage of the CBC is that it reflects more or less the seller's view and not the view of the customer.

2.3.2 EC - Transaction Perspective

The term Electronic Commerce is often used very colloquially without a reference to its transactional characteristics. For example, commerce.net, an organisation formed of major players of the IT world, defines e-commerce rather vague as “… is the use of

internetworked computers to create and transform business relationships. Applications provide business solutions that improve the quality of goods and services, increase the speed of service delivery, and reduce the cost of business operations”.

The transactional model distinguishes three phases:

Information phase: The relevant partners and products/services are identified and the

conditions are compared, e.g. by the means of product catalogues, search engines, or community pages.

Contracting phase: Establishment of a formal and mutually binding relationship

between the partners. This includes agreeing on term and conditions like terms of delivery, warranty, or payment terms.

Settlement phase: The goods/services are delivered and funds are transferred.

E-commerce can be further characterized by the business context; business-to-business, business-to-consumers and by the underlying processes; sell-side (eSales) and buy-side (eProcurement). A typical e-commerce application is a catalogue for procurement, where several suppliers are aggregated, as in Figure 4.

Figure 4: Buy-side eProcurement with aggregated suppliers.

2.3.3 SCM - Flow Perspective

Supply Chain Management evolved from the logistics discipline and aims to optimise the flow of goods between multiple enterprises. An effect of this improvement in the

coordination of physical and financial flows is the reduction of cash cycles and a quicker reaction to market demand. The SCOR process reference model from the Supply Chain

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Council (SCC)5 defines four core logistic processes (plan, source, make, deliver) and three core management processes (planning, execution, infrastructure). In Table 2 some

examples of supply chain processes in the dimensions management and logistics are outlined.

Table 2: Examples of Supply Chain Processes.

Planning Execution Infrastructure

Plan Supply network planning Supply chain configuration Make-or-buy

Product line planning Long term capacity planning

Source Vendor contracts Demand planning

Purchase Payment

Warehouse mgmt Sourcing quality mgmt. Make Production planning Manufacture:

Make-to-stock, Make-to-order

Product quality mgmt. Equipment maintenance Deliver Order mgmt Pack-Load-Deliver Warehouse mgmt Different supply chain strategies exist, like Continuous Replenishment, a system of supplying materials based on scanner data direct from the point of sale, or Global Supply Chain Visibility, with a centralized database to get performance information and tracking and tracing between multiple business partners, or vendor-managed inventory, where the vendor manages the inventory for the customer.

2.3.4 Summary Business Networking Strategies

The two strategic dimensions, the organisational strategy and the networking strategy build the two dimensions of business networking strategy. Planning and implementing such a strategy requires top-management attention and decisions, due to the long-term nature of organisational strategies.

2.4 Business models for the Information Society

In the most basic sense, a business model is the method of doing business by which a company can sustain itself - that is, generate revenue. The business model spells out how a company makes money by specifying where it is positioned in the value chain. Some models are quite simple. A company produces a good or service and sells it to customers. If all goes well, the revenues from sales exceed the cost of operation and the company realises a profit. Timmers [Timmers 1998] defines a business model as:

An architecture for the product, service and information flows, including a description

of the various business actors and their roles; and

A description of the potential benefits for the various business actors; and A description of the sources of revenues.

Reading the literature one will find business models categorized in different ways. At present there exists not one comprehensive taxonomy of web business models. A review of 16 existing frameworks conducted by Burgess and Cooper [BurCoo 2000] revealed 13 common models which are organized into two classes. The first class comprises models

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which are based on less pervasive and incremental changes representing an extension or adaption of traditional models. The "internetworked" enterprises, which are characterised by dramatic changes in organisational structure and processes, constitute the second class. In order to give a short overview about existing frameworks three approaches are

presented, the first two from a more academic point of view and the third one from the viewpoint of a consulting company.

The classification scheme provided by Blodget [Blodget1999] identifies five main species of business models. The scheme reveals the interesting aspect that an enterprise may adopt more than one model, for example, America Online is not only an access provider but also a content provider and a retailer.

Access: Companies that sell network connections or other network management

services. The typical business model is based on fees.

Content: This is done either by portals which organize and provide access to content

provided by other companies or "destinations" which create specialized content, e.g. sport. The typical business model is based on advertising and sometimes subscription fees.

Commerce: Companies that sell goods or services or facilitate the matching of buyers

and sellers. The typical business model is that of a catalogue retailer or an auctioneer, with advertising in some cases.

Software: Companies that sell software that facilitates inter- or intra-enterprise

communication and commerce. The typical business model is composed of software license fee, consulting services and software maintenance fees.

Services: Companies that provide a variety of services for the online world, like

hosting, consulting, application rental, information retrieval, design and

implementation. The typical business model is based on transaction fees, time and material fees or subscription fees.

This classification is very coarse since it includes the whole networking industry, from hardware and software manufactures to companies which apply software and devices. A classification schema which focuses on the application side is Timmers’ [Tim1998] schema, who identifies ten business models and classifies them using two dimensions - degree of innovation and functional integration. For this classification an "algorithm" is applied to classify existing and to derive new business models.

Value chain de-construction and re-construction together with an identification of information integration can serve as an approach to capture and classify existing or possible business models.

Value chain de-construction: The identification of the value chain elements, for

example by using Porter’s generic value chain. [Porter 1985]. The primary activities (outbound logistics, production, sales and marketing, sales logistics, customer service) are functions which are used directly to create or utilize output, whereas secondary activities (procurement, technology development, human resource management, corporate infrastructure) support primary activities by infrastructure or control measures.

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Interaction patterns: These can be 1-to-1, 1-to-many, many-to-1 or many-to-many and

describe the number of parties involved. The term "many" means that information from several actors is combined.

Value chain re-construction: The integration of information processing across a

number of steps of the value chain.

It is now possible to construct architectures for business models by a combination of value chain integration with an interaction pattern. Figure 5 shows the value chains of the

relevant parties involved in an e-shop business.

Figure 5: Networking at Amazon.com

With a systematic application of this method a huge number of possible business models can be generated. In practise the number is much smaller since not all feasible models make sense in commercial terms. Another source which limits the number of sensible models is the necessary technology for the implementation of a certain model. Although technology enables a wide range of possible models it provides no guidelines in itself to select a certain one. On the other hand a new business model can give guidelines for technological innovations.

E-Shops: Promotes company and its goods and services with the possibility to order

and pay online. Benefits for the company can be increased demand, global

presence, cost reduction for marketing and sales. Benefits for the customers can be lower prices6 compared to traditional offers, better information, wider choice, convenience of selecting, buying and delivery. For recurrent visits one-to-one marketing can increase benefits for both, buyers and sellers.

E-Procurement: Electronic tendering and procurement of goods and services. Benefits

for buyers can be a wider choice of suppliers, reduced procurement cost, increased control or collaborative work in specifications which can lead to time and cost

6 A general discussion of internet market efficiency can be found in Smith et al. [Smith et al. 1999]. The four dimensions (price levels, price elasticity –sensitivity of consumers to price changes, menu costs –finely or more frequently adjustment of prices, price dispersion -spread between the highest and lowest prices) were

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saving. Benefits for the supplier are more tendering opportunities, lower cost of tender submission or collaborative tendering.

E-Auction: Electronic implementation of the bidding mechanism, possibly additional

integration of contracting, payment and delivery. Sources of income for the provider are transaction fees and advertising, benefits for buyers and sellers are increased efficiency which may lead to lower cost due to reduced surplus stock and reduced sales and purchase overhead cost7.

E-Mall: Collection of e-shops usually enhanced by a common umbrella like a

well-known brand and enriched by a guaranteed payment method. When specializing on a certain market segment such malls become more of an industry marketplace, which can add value by virtual community features. Benefits for customer are similar to the e-shop, a common user interface and easy access to other shops8 and, when a brand name is used, trust is increased. Benefits for the e-mall members are lower cost and complexity and additional traffic generated from other e-shops or the attraction of the hosting brand. Revenues for the e-mall operator are from set-up cost and membership fee, advertising and transaction fees.

Third Party Marketplace: Company leaves web marketing to a third party and a user

interface to the suppliers’ product catalogue is provided, additional functionality may be branding, payment, logistics. One-off membership-, transaction-, service fees or percentage of transaction value are the source of revenues.

Virtual Communities: Value is coming from the members who add their information.

Revenues are generated by membership fees and advertising. A virtual community can be an important add-on to other marketing operations in order to build

customer loyalty and receive customer feedback and may enhance the

attractiveness and opportunities for new services of several of the other business models.

Value Chain Service Provider: Specialisation on specific functions for the value chain,

such as electronic payment or logistics. Basis for revenues is a fee- or transaction oriented scheme. Benefit for the customers is cost reduction.

Value Chain Integrator: Integration of multiple steps of the value chain with the

potential to exploit the information flow between those steps as a further added value. Revenues are coming from consultancy or transaction fees.

Collaboration Platforms: Provides a set of tools and information environment between

enterprises, for example to support collaborative design. Business opportunities are in platform managing (membership/usage fees) and in selling the tools for design, document management, workflow and so on. Benefits for the members are cost reduction and improved quality.

Information Brokerage, Trust and other Services: A variety of services for the online

ecosystem, for example information search, customer profiling, business

opportunities brokerage, certification, investment advice. Sources of revenues are consultancy-, subscription-, pay-per-use fees or advertising.

7 The business model for auctions can be arranged after three dimensions: The parties involved (C2C, B2C, B2B), the role of the auctioneers (intermediary or direct seller), the auction rules (English/Yankee,

open/sealed reserve price, Dutch auction, reverse auction).

8 A drawback of the e-mall model is that the concept of „neighbourhood“ within an mall does not translate into physical distance in the WWW, where each location is only one click away, and experienced users are in general able to handle a variety of buyer-seller interfaces.

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The third schema presented does not originate from the academic world but from a

consulting company. The Mercer Management Consulting Group [Mer2000] has classified B2B models into two categories: first and next-generation marketplaces.

First generation marketplaces

The first-generation marketplace models are divided into the categories buyer, buyer/seller, and seller oriented models.

Buyer oriented models:

e-Procurement: same as above.

Customer auction: Customised auctions for buyers involving standardisation and

pre-screening of suppliers, expands list of suppliers, reduces purchase price.

Demand aggregators: Consolidates purchasing requests for small buyers to reduce

purchase price.

Buyer/seller oriented models:

Auction: same as above.

Exchange: Allows buyers and sellers to make bids and offers, in contrast to auctions

the bidding period is not fixed.

Catalogue: Aggregates product information from numerous sellers, buyer purchasing

done at the e-catalogue site, expands customer set for sellers. Seller oriented models:

Integrated Catalogue: Like catalogue, space on the buyers intranet, integrates directly

into customers legacy system, reduces transactions cost and increases control.

Storefront: Vertical communities where small sellers set up e-commerce sites, expands

customer set for sellers.

Several problems of first-generation marketplaces

Most of this initiatives are having difficulty gaining transaction volume and suffer from little revenue and a multitude of competitors.

One problem is that the “minimize the purchase price ” principle may not be the most important economic interest of buyers on the exchange. Price comprises only one element of overall value. Quality, delivery timing, custom specifications, and the need to keep a plant running at full capacity which makes short-term decision making difficult, are other important attributes. This has led many companies in the offline world to forge tight, more strategic relationships with suppliers. The online exchange that focuses simply on price does not fit in this framework.

Moreover, the spot-price may not even be the best method of reducing costs. Lowering costs has traditionally been achieved through high-volume, long-run contracts between buyers and sellers.

Another problem is that most B2B exchanges view the buyer as the key beneficiary. They do not treat sellers and other participants in the value chain as customers. In theory, exchanges offer sellers access to a broader set of buyers with only a modest increase in marketing cost. In practice, however, these exchanges tend to pit sellers against each other in a high-pressure bidding game. An exchange is successful only if buyers choose to buy and sellers choose to sell. One-sided offerings will not achieve significant liquidity, i.e. a critical mass of participants and transactions.

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Finally, most of these exchanges are using off-the-shelf technology platforms to implement a simple market mechanism within a couple of months. The low barriers to building an exchange have led to negative margins for most of the proliferating exchanges, and to the same type of market fragmentation that exchanges were designed to overcome in the first place.

Next-generation market models

Mega-marketplace: Mega-marketplaces are emerging in industries dominated by a

few, large buyers or sellers. They are generally taking two forms: buyer-controlled sites, such as those introduced by automakers GM, Ford, and DaimlerChrysler; and supplier-controlled sites, such as Metalsite, backed by major US steel manufacturers. Cooperation results in larger and more liquid marketplaces. This model fits best for industries with complex supply chains.

Solutions offering: The transaction-oriented exchange focuses on product price while

solution sites combine products and services with information that allows the customer to make more informed decisions, for example by the use of an expert system. Applicable when a product itself represents only a small portion of overall value.

Asset Optimiser: Allows suppliers to swap contracts and capacity to improve the asset

utilisation of the whole industry. This model can be valuable to smaller suppliers lacking a broad geographic or product reach.

Communications Hub: The hub integrates the parties along the value chain. The model

fits for industries with complex supply chains and powerful players who can effectively boycott threatening exchanges.

Choiceboard Customisation: Interactive online system that allows individual

customers to design their own products by choosing from a dynamic menu of attributes, components, prices and delivery options. Applicable for markets where the product or service comes in many variations and customisation creates value. This model threatens the first-generation B2B exchanges, because it makes the breadth of products offered by exchanges redundant and price-comparison more difficult. The marketing information provided by the customer when designing “her/his product” creates additional benefit.

Speculator: Pushed to its extreme, this model implies a negative commission fee for an

marketplace in order to attract order flow and gain valuable information about the market and to speculate afterwards on future prices.. This model fits for markets where the product is a commodity or relatively interchangeable across

manufacturers.

As has been seen with value-chain de- and re-construction, the number of possible business models is countless. Which models make sense in economical terms and which will

disappear, time and investors will decide. The rise and fall of tech-stock indices like the NASDAQ shows, that after an euphoric phase some disillusionment about the profitability has seized the share-holders.

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3 Business Process Modeling

Models are a widely spread and useful method to reason about systems in various domains, like natural science, economics and social sciences, production or financial engineering. An old but yet valid definition of the term “model” is provided by Minsky [Minsky1965] who denotes a model as:

"A model (M) for a System (S) and an experiment (E) is anything to which E can be applied in order to answer questions about S."

As an example a SQL-statement "select * from items" would be an experiment to answer the question about all items in the system. A process model for the business processes in an enterprise can be questioned in various ways. One means is to simply argue about a

graphical representation in a team and ask some questions, i.e. make some experiments. Questions can be, for example, "what would happen if we skipped this activity?" or "is it possible to have these activities performed concurrently?". Another way of investigating a process model is static analysis. Mathematical procedures and algorithms are applied in order to detect the critical path, make activity based costing or compute the resource

utilization. Finally, dynamic analysis by the means of simulation the execution of a process can provide insights about bottlenecks in the process chain or the sensitivity of the process to certain parameters.

3.1 Business Processes

If some employees were asked what they were doing in their job the answers would

probably be like “I am working as a secretary in the sales department of Acme” or “I check the shipments in the warehouse of Acme” and not “I’m employed in the sales fulfilment process of Acme”. So, although the term business process is well established in

management and consulting companies the functional view of processing activities in individual departments still prevails.

All operations of an enterprise are executed within the company’s business processes. Because of the relevance of this topic there is no standard definition for this term. Some quotations may serve as examples to get an insight what business processes are.

“Business processes are defined as objective, temporal and spatial interconnections of activities of a value adding chain. Each process can be thought of as a chain of semi processes and considered separately.” [Scholz et al 1999]

“Is simply a structured measured set of activities designed to produce a specified output for a particular customer or market.” [Davenport 1993]

“A set of one or more linked procedures or activities which collectively realise a business objective or policy goal, normally within the context of an organisational structure defining functional roles and relationships.” [Wfmc1999]

Out of these definitions most of the constituting building blocks of processes can be derived. A Business Process has a set of activities, is value added, produces an output, is

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performed across time and place and (not mentioned in the definitions) has also an identifiable input.

Figure 6 shows a typical generic process flowing through the organisation. It has to be said that this is an rather optimistic view, because processes may fail for various reasons and the output may be a simple "failed because of..." and no value is added. The reason may be not only an exception like supplier default or customer cancellation but a process may also fail because certain requirements are not met, e.g. the highest bid in a seller auction does not lay above a certain reservation price.

Figure 6: Generic process flow.

In [Scholz et al 1999] business processes are arranged in the two dimensions process system, which distinguishes between business processes and support processes, and the reproducibility which expresses the frequency of occurrences.

Business processes illustrate the core competence of the company, they correspond to

the company’s chosen path, have direct consumer relationships, add value and usually occur in more than one area.

Support processes concentrate on satisfying internal customers and supporting

business processes. Usually, they span more than one business process and do not add value.

Creative processes are linked to different customer requirements and normally occur

only once in a specific way. They show strong procedural funds and responsibility variations thus making modeling and comparative considerations difficult. As a consequence modeling such processes in detail doesn’t make much sense and has to take place on a more abstract level.

Repetitive processes show a high level of repetition and always follow similar or

identical patterns. The processes are characterised by a relatively clear apportion of responsibility and funds. Reference models can be defined and specific process parameters can be assigned allowing subsequent comparisons.

From this classification can be derived which processes are suitable for modeling and which are not, as shown in Figure 7.

Repetitive Suitable for modeling

Creative Not suitable for modeling

Core processes Support processes

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For example, in the tourism domain a repetitive core process in an hotel is the

accommodation of customers from check-in to check-out, supported by the reservation process. On the other hand, especially in the hotel business very specific customer needs appear which often cannot been handled in a standardized way and creative solutions have to be found in an ad-hoc manner.

Note that this classification has nothing to do with the business value of processes. Creative processes can add significant value. A classification scheme for business value and repetition is shown in Figure 8.

High Collaborative processes, e.g.

technical documentation creation

Production processes, or the core processes

Business value

Low

Ad-hoc processes with no

predefined structure, e.g. "For Your Information" message routing

Administrative processes, e.g. purchase approvals

Low Repetition High

Figure 8: Classification of processes according to business value and repetition. Ould [Ould 1995] divides processes into three generic types as shown in Figure 9.

Figure 9: Three types of business process

Core processes concentrate on satisfying external customers. They directly add value

in a way perceived by the customer of the business. They respond to a customer request and generate customer satisfaction. An example is the market

communication process.

Support processes concentrate on satisfying internal customers. They might add value

to the customer indirectly by supporting a core business process, or they might add value to the business directly by providing a suitable working environment.

Examples are logistics processes or the personal development and motivation process.

Management processes concern the management of core or support processes, or the

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Porters value chain identifies nine processes. But the number of processes which are appropriate for a corporation has been estimated from only two, very generic like

1)managing the product line and 2)managing the order cycle, up to 140 like IBM had in the 1980s. In Davenport [Davenport 1993] a range of 10 to 20 processes are identified for being appropriate for most enterprises.

3.2 Modeling the Enterprise

The first question one has to answer is why the time and cost consuming task of modeling should be undertaken.

The International Standard Organisation (ISO) defines an enterprise model as "an abstraction that identifies and represents the basic elements of an enterprise and their decomposition to any necessary degree that is used to improve the effectiveness and efficiency of the enterprise. It also specifies the information requirements of these elements, and provides the information needed to define the requirements for integrated information systems" [ISO WG1N4]. The keywords effectiveness and efficiency give a hint why the cost and time consuming modeling effort should be undertaken.

Modeling efforts within a firm are undertaken for different reasons, e.g. data modeling to describe the database structure or the application of pure mathematical option pricing models to evaluate real options for management decisions. This work focuses on process modeling, that means to model the flow of activities inside and outside a companies borders and the various inputs and outputs of these activities, together with the organisational resources involved in performing the activities.

3.2.1 Reasons for process modeling

Modeling to describe a process: This includes defining a process, communicating it to

others, sharing it across a group of people and negotiating about it. For example, a company that seeks ISO 9001 certification for its Quality Management System will define its processes in a Quality Manual as a descriptive process model to serve as a work instruction for the participants. This can be done using solely text, but text can hardly express concurrency or decisions in contrast to diagrams.

Modeling to analyse a process: This refers to the simulation capability of process

models and may answer quantitative or qualitative questions, like the ordering of activities, changing scheduling mechanisms, increasing or decreasing the amount of parallel activities.

Modeling to enact a process: This refers to the possibility to execute a process, for

example in a workflow management system. This requires an unambiguous defined model using a formal language.

In [Ould 1995] six situations are identified where process is important and therefore the need of a process model.

Situations where there is a need of a shared understanding of what the business does

and how it does it.

Simply describing and visualizing the process can provide a perspective on the organisation that transcends parochial views and can promote a more collaborative spirit, for example if a new employee has to be instructed.

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Situations where a common approach is to be adopted and perhaps mandated.

For instance, if a Quality Management System like the ISO9001 standard is used, an organisation will describe how its key processes are carried out. The standard supports the design/development, production, installation and servicing processes and demands that processes are defined in some way so that they are repeatable, measurable, and improvable.

Incremental improvement programmes like Total Quality Management (TQM). This is

a method for a step-by-step improvement of processes, and models may help to identify and gradually eliminate weak points.

Radical change programmes like Business Process Re-engineering. Major themes of

BPR are beside the radical approach process orientation, a top down approach of implementing the processes, cross-functional and cross-organisational thinking and the role of technology in change. Coarse models of possible future processes can serve as a discussion medium.

Situations where the alignment of information technology systems with the needs of

the business is being questioned. For instance in a supply chain there is a strong need for shared data or a standardised message-system like EDI.

Situations where new forms of process technology such as workflow management

systems and computer supported cooperative working (CSCW) systems are to be applied to give active support to the business process.

Apart from these there is one reason for modeling which has emerged in the last years and has to be considered separately: the growing demand for off-the-shelf reference models like the popular SAP reference models or the ADONIS reference models for the insurance domain. These models do not describe the processes in a ‘real’ enterprise but a typical enterprise in a certain industry. Because of this particularity reference models will be discussed later in more detail.

3.2.2 Possible problems concerning modeling

Business process models are supposed to serve as a discussion or communication medium for the people involved and business processes may cross divisions within an enterprise or even the boundary of enterprises. Therefore domain experts or representatives, who are not experienced in modeling, have to be involved in the model construction. And modeling is not for free, modellers and domain experts have to spend time for investigating and describing the processes, tools have to be purchased. When the enterprise changes, this changes have to be reflected in the models.

In [Scholz et al 1999] some problems are outlined:

Most common process modeling symbols are hard to understand unless the viewer has

an engineering or software development background because symbols usually have specific meaning that need to be learnt. This is particularly true if more complex methods are engaged like Petri nets. More or less the models reflect a technical view of the world like entity-relationship diagrams, assignment of applications to activities, the definition of workflows or communication protocols. What cannot be clearly defined is simply ignored.

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Models contain too much information and become chaotic, even for small processes.

Both, computer screens and printed pages have limitations regarding the presentation of complex diagrams. Therefore a modeling tool should have a structuring possibility to allow the hiding of details and good navigation functionality.

Models often do not conform to reality. This problem arises not necessarily from the

inability of the people involved but can be a result of a changing environment.

Because there are so many different types of modeling goals, the purpose of the model

is often not immediately clear.

Systematic maintenance of models requires appropriate resource allocation. Due to this

additional expenses, it is either done poorly or not done at all.

3.3 Reference Models

A reference model (RM) in the context of organisations is a model which describes typical organisational issues and gives recommendations to design an organisation in a certain industry. For example, the SAP/R3 provides RM for the furniture industry or the chemical industry. The success of reference models has at least two reasons: firstly RM provide a proven initial solution which can be customized to meet the specific needs and secondly the bad experiences many companies have made in developing their own software solutions (SW-crisis) has increased the demand for an off-the-shelf solution. RM have certain advantages:

They support semantic standardisation. In analysis and design of information and organisation the diversity of concepts and terms may lead to communication problems. The more heterogeneous the environment is, for instance in a supply chain which spans a lot of enterprises in different countries and different

languages, the more severe problems caused by ambiguous terms may arise. RM can help by presenting a uniform term-structure.

Reduction of risk. The use of RM increases the quality of the developed models. The existence of an initial solution whereof core elements can be taken reduces the danger of an incorrect design. The models are usually validated and have been proven to provide a solution (which is of course mostly not an optimal one). RM have also certain disadvantages

Standardisation of business processes. This problem arises when RMs are used in

areas where the enterprise has strategic comparative9 advantages. If, for instance, a company is using RM in domains like accounting, this may provide a sound solution and it is not very probable that a gain or loss of comparative advantage will occur. But in domains like the sensitive material or sales management comparative advantages can disappear with a standard solution.

9 Three levels of advantages can be distinguished

competitive advantages: IT serves solely to get an advantage against competitors. This advantage disappears

as soon as the competitors catch up.

Cooperative advantages: A group of companies create some benefits, for instance through the introduction of

an online payment standard.

Comparative advantages: By applying IT a hardly imitable position is generated which enables the company

Figure

Figure 2: Processes for the networking strategies CRM, EC, SCM.
Figure 4: Buy-side eProcurement with aggregated suppliers.
Figure 5: Networking at Amazon.com
Figure 10: Business engineering framework.
+7

References

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