Value Chain Management and reference Architectures

1. Business Agility
using
Process Frameworks
Herbert Heinzel
Vice Chairman Value Chain Group
H2O GmbH

2. Overview
• Review our Primary Reference Model, VRM
• What are the Business Needs for use of a Value Chain
Reference Model?
• What have we learned so far?
• How can VCOR be used?
• Vision for Business Frameworks

3. VRM Value Proposition
• Our VCG strategic imperative is to create an industry open standard
reference model for the value chain that gains wide acceptance and
adoption.
– Coverage of all business domains and inter-company Collaboration
– Support the ongoing evolution of business
– Value Chain versus technology focus when introducing a new product to
the market or building a new supply chain

4. What the Value Chain Operations Reference
(VRM) model enables:
– Integration of the three critical domains under one
framework:
• Global Product Development.
• Global Supply Network Integration.
• Global Customer Success.
– Collaboration with a “common language, process-based”
syntax and semantics.
– Global process integration.
– Global “real benchmarking”
– A foundation for a successful Service Oriented Architecture
game plan.

5. The Enterprise Characterized by VRM
Business Mission & Strategy
Corporate Governance
Core Business Processes
Value Value
Collaboration Process Process Process Process Process Process Process Process Process Collaboration
Mang. Mang. Mang. Mang. Mang. Mang. Mang. Mang. Mang.
Suppliers Customers
Market Research Develop Acquire Build Fulfill Brand Sell Support
SRM CRM
Supply Supply
Network Network
Dev. Dev.
Support Business Processes
Information Management
Technology Development
Human Resource Management
Finance & Accounting
Quality & Business Excellence
Safety, Health & Environment

6. Strategic Level - Macro Processes
PLAN
On the Strategic Level Plan is a overarching process aligning strategic
objectives with tactical and execution abilities in the value chain working in a
close relationship with the Strategic Level Govern and Execution Processes
in the model
GOVERN
On the Strategic Level Govern is a overarching process supporting Strategic
objectives and enabling the value chain to operate through rules, policies and
procedures in a close relationship with the Strategic Level Plan and Execute
Processes in the model.
EXECUTE
The Strategic Level Execute Process overarches all the execution processes in
the model in a strategic context to support the value-adding processes related to
a product or service to customer requirements. The Execute Process operates
within the limits of the Management criteria from Govern and to the parameters
defined by the Plan Processes Process.

7. The VRM Tactical Level Processes
The Tactical Level can be described being instituted for “Horizontal Value Chain
Process Re-Engineering” encompassing all critical Business Domains
Market Brand

8. VRM enables a Systems Based Approach
Govern processes support objectives Plan processes balance requirements with
and enable the value chain to operate available resources to align objectives with
through rules, policies and procedures tactical and execution abilities in the value chain
in a close relationship with the Plan and working in a close relationship with the Govern
Execute Processes in the model. and Execution Processes in the model
Govern Goals & Plan
Objectives
Rules, Metrics
& Information
INPUT OUTPUT
Execute
Execute
The Execute processes support value-adding related to a product or service
to customer requirements. The Execute processes operate within the limits
of the management criteria from Govern and to the parameters defined by
the Plan processes.

9. VRM aligns Strategy and ICT Enablers
Organization of Value Chains and
Lines of Business given priorities BUSINESS Goals, Products,
through Priority Dimensions Customers
STRATEGY
Frameworks and methodology for
Filling
Aligned Measures tied to each specific
layer of processes.
Business
defining and improving processes,
sub-processes and activities the
Processes Best Practices Tied to Each
Specific Sub-process or activity
Gap
IT APPLICATIONS
IT APPLICATIONS
Infrastructure Options &
& Specific Applications
INFRASTRUCTURE
INFRASTRUCTURE

10. VRM Methodology Coverage
Strategic Methodology
The ValueCard and all processes in
Govern, Plan, and Execute in VCOR
can be applied for gaining competitive
advantage.
Tactical Methodology
The second level of the model
contains processes supporting the
implementation of strategic goals
through tactical decisions and
configurations.
Operational Methodology
The third level of the model
establishes links between enterprise-
specific activities and the value chain.

11. VRM Value Cards
External Partnerships Developed with the
Network Value Card
Business Strategy
Internal Tactical and Operational Priorities
Developed with the Enterprise Value Card
•Domain Value Cards
•Tactical Configurations
and Improvements
•Operational Improvements

14. Balanced Scorecards for Specific Domains

15. The need for Business Agility
• The world has changed dramatically in recent years
• Organizations in the public and private sector are confronted with an
environment not seen before
• New strategies, structures, and operating practices are required to
manage change and create and sustain advantage
• Companies need to make faster, more informed decisions—
communicating and collaborating immediately and effectively
• Companies need to better understand and serve their customers
globally
– They need to seamlessly interact with suppliers and distributors
– They need to seize market opportunities faster than their competitors
– They need to be more efficient than ever
• Business agility can be achieved if BPM can
– Accelerate new process deployment
– Facilitate changes to existing processes.

16. Industry Challenges
Accelerated
Technology Regulation
Advancement and Activism
Focus Shifting Shorter Product
to End Life Cycles Accelerated
Customers Reduced
time-to-market Quoting Partner Network
Getting More
Complex
Increased
Competition Flexibility and agility to respond
Contractors
to changing business needs and
Customized Solutions OEMs
& Consignment to harness resources across Component Suppliers
global value chain partners Distributors & Resellers
Support / Retention
Outsourced
Globalization manufacturing &
Multiple Sales & fragmented inventory
Distributed
Support
Product
Channels
Design Political
Integration/
Natural Wildcards Disintegration
Resource Low Probability/
Availability High Impact

17. Strategic Alignment Links Organizational
Goals and Activities
Purpose Purpose and Strategies
Drive Operational,
Management and People
System Activities
Business Strategy
Operational Management
Systems Systems
Business Processes Performance Plans
Quality Mgmt. Performance Mgmt. Every Action Taken
Is Linked to Other
“People” Systems Related Senior Goals
and Actions
Results/Feedback

18. Migrating to SOA is an Opportunity
New Usage and New
Solution Architectures
Flourish
Federation
SERVICE SOI Composite Apps
ORIENTATION SOA
Apps as Services
Data as Services
Strategic
Inflection Point
(2005-2008) Legacy
Continues
Globalization, Mobility and Outsourcing Require
Adaptive, Agile Computing & Communications
Architectures

19. Value Streams* modeled in VRM
will help define Services
• Prospect to Customer • Relationship to
• Order to Cash Partnership
• Manufacturing to • Requisition to Payables
Distribution • Resource Availability to
• Request to Service Consumption
• Insight to Strategy • Acquisition to
Obsolescence
• Awareness to Prevention
• Financial Close to
• Concept to Development Reporting
• Initiative to Results • Recruitment to
• Forecast to Plan Retirement
* Taken from Enterprise Business Architecture by Whittle and Myrick, CRC Press, 2005

20. Lessons Learned using VRM
• The common taxonomy minimizes risk of confusion
amongst participants, especially as globalization of business
continues and outsourcing practices grow
• Used as the common definition library for depicting life
cycle process activities to accomplish simultaneous product
and process design
• Used to consistently develop and protect intellectual
property across a diverse and geographically dispersed
supply base
• Used to evaluate competing suppliers using standard
metrics
• Used to identify representative practices and metrics

21. Identifying Value Opportunities using Value
Streams modeled in VRM
• This approach establish the criteria for what should or should not be
considered a Service
– By leveraging the Enterprise Business Architecture to define the enterprise value
streams, their relationships to all external entities and other enterprise value
streams, and the events that trigger instantiation.
• Value is determined both subjectively (non-quantifiable) and
objectively (quantifiable)
• Define value in context of decisions based on costs/benefits i.e.
time, price, quality, innovation; show decision matrix
• Convert subjective knowledge of value into objective knowledge via
data and metrics
• Value chain operations are inherent in the Extended Enterprise
• Understand the relationship between value and process

22. Frameworks to Enable Business Agility
Business Frameworks
Process Reference Model
Framework for Stage-gated
Processes
VC Information Model
Framework to Couple
BPM and SOA
Business Architecture Federated Enterprise
Reference Architecture
Value Streams SOA Information Model
Framework to Establish
Value Opportunities

23. Thank you
Herbert Heinzel