Florian Krueger

Does the Recession make Horizontal Integration more Imperative?

In IT on July 2, 2009 at 5:38 pm

When business gurus like Don Tapscott (author of The Naked Corporation, Wikinomics and Grown Up Digital) say that “a recession is too good to waste” what do they mean? When the focus is on a shrinking order book and the need to reduce cost it’s often difficult to see what opportunities a recession offers. But one thing a recession definitely creates is a new context. A new context enables us to see things differently and open up new possibilities that previously were not thought feasible. It creates opportunities to make changes where change is most needed, and prepares our business for when we get back to managing growth — the next new context.

One such opportunity is to give more focus to ‘horizontal‘ integration. For all the good work that has been done over the years through process reengineering and implementation of enterprise systems, the reality is that most organisations remain siloed. In many corporations their divisions and business units operate largely autonomously with little or no sharing of processes, systems or solutions. Yet today’s customers expect the introduction of faultless new products, rapid order fulfilment and responsive customer service. They do not care — nor should they need to — about how their supplier is organised internally. Even if the functional silos are operating efficiently and meeting their Key Performance Indicators, it is the performance of the cross-functional processes that ultimately determines the customer experience.

The approach of many organisations to horizontal integration has been to create back-office shared service centres that provide a range of ‘services’ to customer-facing business units. Some of these have worked exceptionally well, but many less so because they have not addressed the fundamental problem of diversity. It is impossible for a shared service centre to provide ever-increasing superior service at lower cost if the ‘requirements’ of its customers are so diverse. Equally, the argument should not be for total standardisation, and one size does not fit all. The goal should be a greater degree of common and shared solutions, business processes and systems whilst recognising the need for authentic differences. The key words are authentic differences, and not differences that have evolved over time with no benefit to the customer.

Our colleague Robert Morison, and his thought partners James Cash and Michael Earl, argue in their HBR article Teaming Up to Crack Innovation and Enterprise Integration the need for Enterprise Integration Groups (EIGs) whose role is to establish the architecture and management practices essential for business integration. Furthermore they make the case that the EIG should:

  • Manage the corporate portfolio of integration initiatives
  • Serve as the corporation’s centre of expertise in process management and improvement
  • Provide staff to major business integration initiatives
  • Be responsible for enterprise architecture
  • Anticipate how operations might work in a more integrated fashion in the future

Whether the creation of an Enterprise Integration Group is the best approach for your organisation or not, one thing is for certain, there are significant benefits to be gained from driving for greater horizontal integration. The question is has the recession created the context to do so?

You can comment on this article or ask a question on the nGenera Community.

You can download a copy of the Harvard Business Review article Teaming Up to Crack Innovation and Enterprise Integration from our website.

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