Thursday, March 20, 2008

Networked economies require Services not Processes

Back in the 80s the "Value Chain" was key, this was the series of steps and links that it took to deliver the value. Now the Value Chain really suited a process mentality. It was a pretty linear thing, everyone did their own bits in it and handed on from one place to another.

A Mr Porter created an image to demonstrate the Value Chain

and others have used the value chain approach to explain different markets

The point here is that process made sense in this world, A was followed by B which followed C etc etc. People mapped out simple processes and it just seemed to make sense.

The problem was, and most assuredly is, that Systems Theory was making itself more and more known in the business world. This is where collaboration becomes more about units (services in SOA terms) working together in complex networks than simply a chain which hands over responsibility. This led to the Value Network approach that business schools started pushing out in the late 90s.

Now SOA works very well in a Value Network as its all about the independent elements, their goals, their objectives, their measures and their conditions. A service is able to actively participate in a Value Network as it has a degree of autonomy of action that is not limited to a simple single goal process, a service can make decisions around what should be done across a range of capabilities and take responsibility for the negotiation and participation in a value network as an entity, something processes cannot do.

Unfortunately however IT lags significantly behind the business thinking and is still trying to push a 1980s view of the world, process, as being the important element of business. Now don't Value networks (from Verna Allee) remind you of something?

The current, and next, generation of businesses are about complex collaborations to deliver value, not simply about following a process. This collaboration approach requires a business service approach and a focus on interactions, objectives and KPIs. Its a much harder environment to be working in than simple Value Chains but the potential rewards, and dangers, are much more significant.

SOA can deliver Value Networks, POA cannot.

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1 comment:

Amit said...

Excellent article. Thanks for pointing me to it on the forums.

- Amit Karandikar