Creating and Sustaining Competitive Advantage in Collaborative ...

Production Planning & Control, Vol.14(5), July-August 2003, p.410-424
Creating and Sustaining Competitive Advantage in Collaborative Systems:
The What? And The How?
Umit Sezer Bititci, Veronica Martinez, Pavel Albores and Kepa Mendible
Centre for Strategic Manufacturing
DMEM, University of Strathclyde, Glasgow
Abstract
This paper starts by asking two questions; In order to create and sustain competitive advantage through
collaborative systems WHAT should we be managing? and HOW should we be managing it?
It introduces the Competitive Business Structure and reviews some of the global trends in
manufacturing and business, which leads to focus on Manage Processes, Value Propositions and
Extended Business Processes. It then goes on to developing a model of the collaborative architecture
for extended enterprises and demonstrates the validity of this architecture through a case study.
It concludes that, in order to create and sustain competitive advantage, collaborative systems should
facilitate the management of; the collaborative architecture of the extended enterprise; the extended
business processes and the value proposition for each extended enterprise through a Meta Level
Management Process. It also identifies areas for further research, such as better understanding of; the
exact nature and interaction of multiple strategies within an enterprise; how to manage people/teams
working along extended business processes; and the nature and prerequisites of the manage processes.
Key Words: Extended, Collaborative, Enterprises, Architecture
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1. INTRODUCTION
The globalisation of commercial and industrial activities is symptom of increasing levels of
collaboration between individual enterprises, examples of these may include supply chains, business
process outsourcing, collaborative product development and so on. The motivation for each individual
enterprise comes not from the fact that they want to collaborate but from the fact that there are
economic advantages to be gained through collaboration. With this focus on collaboration one of the
key issues at the forefront of any chief executive's mind are the questions "how best to mange the
collaborative enterprise?” and “how the individual enterprises operating within the framework of a
collaborative enterprise should be managed?”.
Previous research in strategic, production and operations management developed models and
frameworks to allow us to better-manage single enterprises [Porter M. 1985, Richardson 1985 and
Treacy and Wiersema 1996, Bititci and Turner, 1999]. The research question "what to manage and how
to manage the performance of collaborative/extended enterprises” remains largely unanswered. In this
paper we try to add to this vast body of literature by answering the following set of questions:
1. What is it that we should be managing? - In tackling this question we will take an internal, i.e.
resource based, view of the extended organisation to rationalise the cybernetic structure of the
extended organisation that creates value
2. How should we be managing it? - In tackling this question we will take both an internal, i.e.
extended processed based view, and an external, i.e. market based view, to the extended
enterprise
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In tackling these questions, the paper integrates a number of existing concepts and it demonstrates that
like all businesses, extended enterprises also have a common, cybernetic structure that needs to be
managed. This paper makes a contribution by:
1. Making the complex structure of collaborative enterprises explicit from two points of view:
a. From the point of view of the extended enterprise
b. From the point of view of the individual enterprise who has to manage its participation in
one or more collaborative/extended enterprises
2. Proposing a management systems architecture that would facilitate efficient and effective
management of the collaborative enterprise from both of the viewpoints described above.
3. Outlining a requirements specification for management systems that would support the above
architecture.
4. It also raises further research questions on the management of the collaborative/extended enterprise.
From the methodological perspective, this paper presents two distinctive sections: theory-building and
theory-testing. In the theory-building phase the authors’ experiences in the previous research projects
and with certain industries led them look at literature. In particular the trends in manufacturing and
business were examined. Consequently, theory was built up on a pre-understanding based on personal
experience, which was then backed up by literature as presented on this paper. The theory developed
was then tested through a single but in depth case study. The case data was collected through a series of
semi-structured interviews and workshops with the management team of the case study organisation.
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2. BACKGROUND
The background of the work presented here extends back to the earlier work done by the Centre for
Strategic Manufacturing on Integrated Performance Measurement Systems and The Competitive
Business structure.
The objective of the original R&D programme we embarked on during 1995 was to analyse the
literature in the field of performance measurement, study practices of companies considered good
practice and consolidate the lessons learned into a reference model for integrated performance
measurement systems. This original objective was achieved; a reference model of integrated
performance measurement systems and an audit methodology were developed. The results of this work
have been published in several academic and practitioner journals [Bititci and Carrie 1998, Bititci and
Turner 1999, Bititci 2000a].
In conducting the above research, our research team analysed numerous literature covering
performance measurement, strategic management, operations management, financial management and
business process management. The team also studied the practices of companies worth looking at,
including European Business Excellence Prize Winners and others (such as Texas Instruments, HP,
Rank Xerox, Nortel, TNT and so on). As a result of this initial research, the team developed a list of
good and bad practices for performance measurement.
The next task was to present these factors in a structured and logical manner to create a Reference
Model. In order to achieve this objective, the researchers investigated a number of existing models and
frameworks covering areas, such as Hard Systems, Soft Systems, Systems Dynamics and Cybernetics.
Finally, the research team identified that CIM-OSA business process architecture [Childe et al ,1994
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and 1995, ESPRIT Consortium AMICE, 1991] together with Porters Value Chain Model [Porter, 1985]
and Beer's Viable Systems Model (VSM) [Beer S. 1985] complemented one another, and that their
integration would provide a powerful structure (Figure 1) for planning and managing today’s modern
organisation [Bititci and Turner 1999]. The researchers called this structure the Viable Business
Structure (or the Competitive Business Structure) as it represented the cybernetic structure of the
organisation irrespective of how it was actually organised.
In essence this work has described the competitive structure of any business which needs to be
managed. This structure, which is illustrated in Figure 1b, may be summarised as:
 The business exists to create wealth for its shareholder (or satisfy expectations of its key
stakeholders).
 It achieves this by operating one or more business units that need to remain competitive in their
selected markets in order to satisfy the needs of the business. Here a Business Unit is defined as the
logical part of the business, which exists to service a particular market sector with specific
competitive requirements. In our experience Business Units may be product oriented or market
oriented. In a product-oriented business unit, it is the design characteristic of the product or product
group, which determines how the product competes in that market sector. In a market-oriented
business unit the same product may be subjected to different competitive pressures in different
markets. For a more in-depth explanation on the definition of business units refer to Bititci and
Turner 1999.
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 Each business unit competes by operating a number of value-add processes supported by the support
processes. The efficiency and effectiveness of these processes determines the competitiveness of the
business units.
 The efficiency and effectiveness of each business process is determined by the combined
performance of its critical activities.
The management implication of this is that, in order to create and sustain competitive advantage for
one enterprise, we need to manage this structure… but how does this theory apply in the case of
extended enterprises where collaborative systems are required to co-ordinate and synchronise the
activities of a number of enterprises?
Manage
How are we
Processes
going to satisfy
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a. The Business Process Architecture
b. Integration of business process architecture with
VSM
Figure. 1. The competitive structure of a business (From Bititci and Turner 1999).
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3. TRENDS IN MANUFACTURING AND BUSINESS: COMPETING IN THE 21ST CENTURY
In order to understand "what to manage" and "how to manage it", it is necessary to understand some of
the trends over the 80s, the 90s and into the new millennium. Table 1, which is based on UK's
technology foresight [DTI, 1998] exercise which was then adapted by Bititci [2000b], illustrates these
trends. The foresight exercise was based on an extensive Delphi study involving UK manufacturing
practitioners and academics. The practitioners represented a typical cross section of the manufacturing
industry including UK base multinationals as well as SMEs and consultants. Bititci [2000b] adapted the
results of the foresight study based on survey he conducted of the Electronics Original Equipment
Manufacturers such as (Dell, IBM, Compaq, Sun, HP, Motorola, NCR, and so on)
The contents of Table 1 may be summarised as follows:
 80s had been about the Just-In-Case Enterprise, with highly functionalised organisational
structures, slow and cumbersome processes which were difficult the change, with little strategic
outlook in terms of facilities, information systems and stakeholders
 90s had been about the Lean Enterprise, with flatter organisational structures, emphasis on flexible
manufacturing processes, teamwork, concurrent product and process design, TQM, cellular
manufacturing, more accurate financial control, distributed information systems and partnerships
across the supply chain.
 The millennium is clearly going to be about the Collaborative Agile Enterprise, which will be able
to continuously and quickly change its organisation, process, people, products, facilities,
information systems, performance measures, business partners and so on to adapt in to a
continuously changing business environment [Jagdev and Bourne, 1998].
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1980's
1990's
2000+
Operating philosophy
• Product/process oriented
• Customer service oriented
• Market focused
• Just-in-case
• Just-in-time
• Customer value
• UK / Europe
• Waste min
• Mass customisation
Business processes
• Collaborative
• Responsive
• Easy to adapt and change
Organisation
• Hierarchical
• Flat
•Flexible
• Functional
• Matrix
• High % of indirect
• Min. Indirect
Processes
• Manual
• Manual / automated
• Very flexible
• Stand-alone
• Integrated
• Innovation
• Long set-ups
• Short set-ups
• Environmental
• Flexible
• Sustainable
• Short life-cycle
People
• Individuals
• Teamwork
• Strategic leadership
• Specialists
• Multi-disciplined
• Flexible
• Self-oriented
• Company oriented
• Self managed
 Extended-process oriented
• Social responsibility
Product
• Designed separately from
• Design for manufacture
• Innovation
process
• Simultaneous eng.
• Short life-cycles
• CAD/CAM
• Global
Quality
• Inspected in
• Designed in
• Corporate excellence
• Assured?
• Total
• Habitual
• SPC
• Granted
Facilities
• Use existing space
• Min. space
• Alliances
• Functional
• Cellular
• Global
• Mobility
• Flexible
Finance
• Standard costing
• Actual costs
• Working capital
• Direct labour allocation
• Activity based
• Integrated performance
management
Information
• Mainframe (Slow)
• Distributed (fast)
• Real-time (very fast)
• Batch processing
Networked
Web based/facilitated
• On-line
• Work flow management
• Integrated communication
Materials
• Large inventories
• Minimum inventories
• Max. throughput
• Large batches
• Lot size =1
• Extended partnerships
• Adversarial vendor
• Partnerships
• Flexible value chain
relationships
• Supply chains
Overall posture
Just in case
Lean
Collaborative Agile
Enterprise
Enterprise
Enterprise
Table 1 - Trends in manufacturing and business.
The study presented in Table 1 has led to the identification of a three themes, which are explained in
the following sub-sections.
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3.1. MANAGING PERFORMANCE
In this section we will explore the need for an integrated, dynamic and agile strategy and performance
management process to facilitate the management of the collaborative enterprise. Literature relating to
strategic and performance management of collaborative and extended enterprises are scarce. The
Supply Chain Models such as SCOR [www.supply-chain.org] and CPFR [www.cpfr.com] are well
understood and used but they are too operational and focus on supply chain management rather than
collaborative enterprises, which by definition is much broader. For this reason, in this section we will
first examine the nature of the strategy and performance management in single enterprises and
extrapolate the need for a dynamic and agile strategy and performance management process in
collaborative enterprises.
In the context of business processes, we have already demonstrated earlier in this paper that the
operate-processes create competitive advantage. However, it is the manage-processes which create and
sustain competitive advantage. There are several examples of how manage-processes enable companies
to “maintain and develop a winning business formula” or “identify and change to a new business
formula”.
We do not need to look too far to see evidence in support of this proposition. Examples of how
manage-processes enable companies to “maintain and develop a winning business formula” or
“identify and change to a new business formula” include:
 TNT's and DHL's history provides excellent examples where the manage processes successfully
maintained a winning formula and developed this formula to create further competitive advantage.
Both of these enterprises started with providing a reliable parcel delivery service. However, today
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both of these enterprises offer far more than a parcel delivery service. They provide an integrated
logistics support solution. Today, their clients do no longer use them as a parcel delivery service;
they outsource their logistics and transportation management processes to DHL and TNT. Here it is
clear that, the management teams in these organisations, having recognised a winning formulae
successfully developed this formulae to sustain and develop their competitive advantage in a
particular direction, through efficient and effective manage processes, i.e. setting identifying
development opportunities, setting direction and managing change.
 Tesco, a UK based Supermarket Chain, recently re-deployed their Balanced Scorecard within days
of Wal-Mart’s takeover of Asda (one of their primary competitors), demonstrating real agility in
their ability to react to an external change. By redeploying their Balanced Scorecard Tesco revised
its objectives and deployed a strategy to deal with this new threat. This suggests that the manage
processes which sets the strategic direction and objectives and ensures that the operational
processes are managed to change in that direction were able to react quickly to external change.
 Highland Spring were in the business of producing and selling commodity bottled water with no
real business success. In 1992 they adopted a brand management value proposition and focused on
developing the brand. As a result, they are one of the most successful mineral water companies in
the UK. In this case, the management team at Highland Spring have recognised that the previous
business model was under threat and chose to adopt a new business model based on brand value.
That is, through their manage processes have identified and changed to a winning business formula.
 ICI [Turner, 1998], demonstrated the ability of their manage processes to recognise the need for
radical change, identify and effectively deploy a new business model. As a result, they changed
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