Business Strategy

A business strategy for real-time computing initiatives should look beyond the buzz words inherent in many software vendors offerings and attempt to uncover real opportunities for performance improvement within the business. The following industry scenarios, benefits, and challenges may help to shed some light on where the opportunities may occur. Migration toward a real-time business is not only a technical challenge, it is also a process and human challenge. Business processes must support the increased speed of information flow and must be able to react with speed as well. The transactions may span computer and human process steps that need to be tightly orchestrated for real-time response. Candidates processes for real-time initiatives include those that can be streamlined to provide better service to customers and business partners, those that can take advantage of time-dependent opportunities for revenue generation, and those that provide opportunities for cost avoidance by meeting regulatory deadlines or minimizing fines and penalties. Real-time processes that can minimize downtime in operations are also strong candidates.

Industry Scenarios

Telecommunications

In the telecom industry, real-time computing can be applied in order to create digital dashboards for monitoring key business events within provisioning, billing, and usage. This can help to indicate potential problem areas and alert managers so that they can respond in a timely manner.

Energy Trading

In the energy industry, energy traders can benefit from real-time integration between front-office trading applications and back-office financial applications, helping move them toward straight-through processing that minimizes or even eliminates human intervention in complex business processes.

Supply Chain

In the supply chain, real-time computing can be applied to reduce the bull-whip effect by disseminating information across corporate boundaries to improve visibility and reduce inventories. In addition to moving information from business to business within the supply chain, real-time computing can also benefit from wireless technologies for monitoring physical goods and assets. Knowing the location of these items as they move through the supply chain can help to improve logistics and to speed product inventory. For example, American Airlines uses wireless tags and readers from a company called WhereNet in order to keep track of cargo at Dallas Fort Worth airport. Ford also uses technology from WhereNet in order to track its inventory of new cars after they roll off the production lines.

Retail

In the retail industry, demand-based management software can help retailers to better manage their merchandising decisions by providing real-time information instead of dated information from weekly or monthly sales reports. By analyzing retail sales data, and coupling the analysis with real-time feeds, retailers can optimize their over-the-counter pricing strategies in order to maximize profits. Real-time information delivery can help to permit more rapid response to customer preferences and allow closer alignment with fluctuating market demand. In this manner, retailers can experiment with dynamic pricing strategies based upon real-time customer preferences, competitors' prices, and other external events which may affect the optimal price point that consumers will bear.

Consumer Packaged Goods

In the consumer packaged goods industry, customers can be provided with real-time information regarding product deliveries. Order status information can be provided to the customers to not only inform them which day their products will arrive but also to provide an approximate time frame. By using wireless technologies on driver delivery trucks, order status can be made with a much higher degree of accuracy based on driver routes and progress during the day as they make their deliveries. In this example, even moving from a daily view to an hourly view can improve customer satisfaction by providing greater visibility into their order status. An example of this type of application is Office Depot. In addition to providing more granular order status information to customers, their "Office Depot Signature Tracking and Reporting system," O.D. STAR, enables drivers to capture signatures upon delivery and to eliminate proof-of-delivery write-offs.

Financial Services

In the financial services industry, real-time computing can be applied to help speed the integration and syndication of content such as live market data. For example, a financial services company may be able to collect external data feeds such as live market news and information, combine that data with internal analytics and market research, and then deliver to employees or customers. Benefits of the real-time solution may also include the ability to provide a constant live feed into an employee or customer application such as a Web application, client/server application, or even an Excel spreadsheet. Real-time solutions often hold an open data connection with the recipient in order to accomplish the live feed capability and to be able to push out the data to the recipient. This can often be a substantial improvement from traditional Web server and Web browser connections that are typically request-based in terms of their interaction with the browser making contact with the server based on manual requests.

Chemicals

In the chemicals industry, real-time applications can help to reduce costs, increase efficiencies, and increase customer satisfaction. For example, plant operations can be monitored in real time in order to minimize downtime with alerts sent via wireless and mobile devices to key personnel. Logistics operations, such as the shipments of chemical goods via rail or truck, can be optimized via coordination with the schedules and workloads of the providers. Sales staff can be more proactive in responding to customer needs by having access to critical sales information on wireless personal digital assistants. All these scenarios put the right data in the hands of the right people at the right time in order to speed decision making.

Benefits

Competitive advantage

With information available within seconds after it has been captured, businesses are able to make decisions and react more quickly to opportunities that may not exist later on. For example, a retailer with operations on the East and West Coasts of the United States can alter its presentation of merchandise in a West Coast store within minutes after learning how items were received during a new launch at its East Coast store. It can achieve this by capturing data from the East Coast sales registers in close to real time and acting within the three-hour time difference between the two coasts. The Limited is an example of a retailer doing just this. The benefit of real-time computing here is that opportunities can be seized upon that would not be available if the business were slower to sense and respond to its customers' preferences.

Improved responsiveness and customer satisfaction

Real-time information can yield increased customer satisfaction and increased opportunities for generating revenues. For example, wireless and mobile technologies can play a role in sales force automation. Using real-time information routing and wireless devices, a car dealership can process customer inquiries from its Web site and route them to the data-enabled cell phones, pagers, or personal digital assistants of appropriate sales agents for immediate follow-up. The increased responsiveness to the customer can help to close business and improve customer acqusition before the competition has even made contact with the customer.

Increased revenues

Real-time responsiveness can lead directly to revenues when sales staff are notified of incoming sales opportunities or issues and can act accordingly. Additionally, retail stores can use real-time information to better predict demand on a daily basis and to rearrange their merchandise layouts or bring in new merchandise accordingly. Convenience stores such as 7-11 rely upon highly sophisticated applications that even look at factors such as weather conditions which may change customer buying habits on a day-to-day basis.

Increased productivity

Real-time information delivery can streamline processes both in service and product industries. Real-time integration solutions such as those from KnowNow can help organizations to create composite applications that tie together data from a variety of sources. These composite applications can improve productivity by enabling knowledge workers to find the information they need or to conduct various tasks via a single screen instead of taking multiple screens or even multiple applications to achieve the same result.

Cost reduction

Being able to monitor and react to business exceptions can help the business take appropriate actions before the exceptions lead to costly downtime and repair work, increased process steps, or damaged customer relationships. For example, proactive monitoring and remote control of heating, ventilation and air conditioning, or HVAC equipment can help maximize uptime and performance. Service technicians can be dispatched when the equipment starts to operate outside of its limits and prior to more serious issues. Remote monitoring can provide a virtual heartbeat for a variety of industrial automation scenarios. It can help to enable remote servicing and to minimize the number of maintenance visits required by field service personnel.

Challenges

Identification of real-time processes

Some business processes do not require or even support an increase in velocity. Certain processes have natural frequencies that are incapable of accelerating or do not benefit the business even if they are accelerated. For example, sales leads may come in from an external source once per day. Only if the frequency of the source can be increased can the business move to a faster schedule internally. As an analogy, this has a lot do to with digital data processing theory. A certain frequency has a maximum sampling rate where the data is changing enough to be useful. If the frequency is increased, the sampling rate can be increased as well. Too few samples per cycle and you can generate an aliased frequency that is of lower frequency than the original signal, thus giving a false output. The takeaway here is that if you increase the speed of your external business processes, or if your partners increase the speed of their processes, you need to increase your internal business processes to match these frequencies or risk being out of step. The same is true for the opposite case. If your internal processes are faster than their external process dependencies, then they can be held back and their effectiveness can be diminshed. Any major differences between frequencies, either internally or externally, can lead to misinterpretation of the data. The business can be as agile only as its external sources of input to which it can sense and respond. The real-time enterprise is therefore somewhat dependent upon external business partners in terms of their ability to provide real-time data and to accept real-time data.

Re-engineering business processes for real-time computing

Similar to the challenge of identifying processes which are candidates for real-time computing is the challenge of re-engineering those identified processes. The processes may have manual steps between automated tasks that can slow down the process. If these can be eliminated, the business can move toward straight-through processing or "lights-out processing," as it is sometimes termed. If the manual processes cannot be eliminated, it is important to streamline them as much as possible and to seek alternate techniques for encouraging workers to complete the steps in a timely manner. If the manual steps rely on business partners, the incentives can include bonuses for early completion or penalties for late completion. Real-time processes are as good only as the weakest link. When businesses implement real-time processes, they need to be aware of the bottlenecks and have strategies for their resolution.

Faster operations require more precision

Speeding up the enterprise also brings increased visibility and increased responsibility. Problems that were never apparent at slower speeds may come to light such as process bottlenecks where data that should be moving close to real time is stopped due to technical integration issues, human approval process requirements, or multiple data entry requirements. Businesses planning to move toward the real-time enterprise in certain areas of their operations should certainly go into the process with their eyes open, i.e., aware of the additional requirements and responsiveness this may place on their business managers and IT operations and staff.

Managing real-time responses

Being able to detect business events is a small part of the equation when moving to real-time computing. One of the challenges lies in the determination of appropriate responses. Based on a business event such as an exception, there may be a variety of possible responses that are predefined and even some better responses that are currently undefined. A true real-time business needs to be able to detect not only key events that have business implications in real time, but also to be able to analyze the condition and to be able to react accordingly, possibly developing a new solution as part of the response. For the high-value added exceptions where a rapid response yields significant cost savings, there are likely to be considerable human decision points and a variety of what-if scenarios. This highlights the need for real-time software to include an analysis and rules engine layer to support the semiautomation of these decisions.

Strategy Considerations

Some of the key considerations when forming plans around real-time initiatives include the identification of the candidate processes for real-time enablement, the assessment of the amount of re-engineering required, the determination of costs and return on investment, and the determination of new levels of performance required to meet the real-time service levels. First, real-time initiatives should be aligned with business objectives. For example, real-time analysis of customer relationship management data may help customer service representatives to provide better service for their most valuable customers and to determine which customers are less profitable for the business. Real-time analysis of this type of data effectively provides customer service representatives with increased knowledge of their customers, their preferences, and their sales history.

There is also no requirement that says real-time initiatives cannot be completed using existing IT infrastructure and applications. If these applications contain the data that are desired for real-time activities, and if the data can be distributed efficiently for appropriate decision making, then no additional software may be necessary. It is important to understand that much of real-time computing simply involves making the right data available to the right person or application at the right time. This can be accomplished using traditional integration tools and legacy applications. Open standards and Internet protocols can help transport the information and ease integration, but the same results can also be gained via traditional tools. In this manner, real-time technologies are often a desirable feature set within existing tools rather than an add-on solution.

The strategy phase should therefore initially focus on key business processes that can generate business benefits from becoming streamlined. Look for hard-dollar cost-reduction opportunities, productivity improvements, or penalty avoidance in addition to the softer benefits such as improved customer service. Secondly, these initiatives should be assessed in terms of their technical requirements. Determine whether the solution can be implemented with some slight changes to the existing applications and infrastructure or whether a completely new set of tools is required. In general, real-time initiatives can benefit the business if processes have a time-sensitive component or a location-sensitive component to them. The location-sensitive component means that information may be bottlenecked in the field due to lack of technical infrastructure. In this case, real-time enablement via wireless and mobile technologies can help to connect the edges of the organization with the core of the organization at headquarters or other business unit locations.

Estimating Results

The hard-dollar return on investment for real-time computing generally comes from increased productivity and potentially from penalty avoidance, increased revenue generation capabilities, and minimized downtime. Knowing where an item within inventory is located by means of wireless communications can help to reduce search times and to increase worker productivity. Being able to submit data or reports to partners or government agencies within certain timeframes can help to avoid penalties and fines. Being able to react to sales opportunities in real-time computing can help to increase revenues. Being alerted to potential error conditions within equipment or assets can help to reduce costs via minimized downtime. The general formula for return on investment is therefore as follows:

Return on investment (real-time computing) = (Cost savings from increased productivity + Cost savings from penalty avoidance + Increased revenues + Cost savings from minimized downtime) / Cost of real-time initiative

The soft benefits related to real-time computing should also be factored into the results. As we saw in the section on benefits, these can include increased competitive advantage, improved responsiveness, and customer satisfaction. With real-time analysis and rules engines added to the real-time infrastructure, the organization can also increase its business agility by enabling a variety of potential responses to business exceptions. The real-time enterprise undoubtedly requires considerable intelligence and flexibility to become embedded into its computing systems in order to extract the most value from real-time initiatives. When this is accomplished, the sizable investments in upgrading infrastructure to become capable of real-time computing can yield sizable returns for the business. For the most part, real-time computing is a high-cost, high-reward value proposition. It requires process change, technology change, and culture change. Since time-based competition is a main way to achieve competitive advantage, today's real-time computing enablers represent a strategic weapon for the business executive to consider.