1. Peter Schooff
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  3. Thursday, 28 June 2018
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From Dr. Alexander Samarin: Thus, to achieve the particular goal an enterprise will combine (e.g via the BPM technology) their own “internal” core business capabilities with “external” core business capabilities obtained from other enterprises?
Jonathan Yarmis Accepted Answer Pending Moderation
Before they do that, they need to figure out what their core business capabilities are. Amazing how many companies fail to understand that.
Stuart Chandler Accepted Answer Pending Moderation
Blog Writer
This main question is too broad. What is the definition of business? So many organizations out there with so many different value propositions, so many different competencies and different business models. what is the core competency of a business? Some businesses only do one thing great while others do a lot of things well. Is an aggregator of services not viable because they know how to encapsulate other businesses' "core" competency offerings? Or the opposite, an organization that does one thing well can't compete. The argument of MBAs, big consultancies etc. in general is for companies to build business models that make money and remove losing ventures/business units. I think the better question is how DPA plays in shaping business models and enabling organizations to delivery excellence in a very connected world. Looking at Dr. Samarin's clarifying statement, I believe some organizations will seek a connected set of enterprises like Amazon and in other situations, organizations will hone down into a very specific product or service and only deliver that. For the former, DPA is a critical foundation to succeed while the latter is just how you connect into the buying channels.
Jim Sinur Accepted Answer Pending Moderation
Blog Writer
In an Industry 4.0 scenario, implying dynamic supply or value chains, organizations will be called upon to execute their core capabilities to add to the desired outcomes. I'm not sure organizations will be limited to a few of these dynamic chains, but I think commodity capabilities are great candidates for outsourcing. I think the net is that organizations will be able to prioritize on their core capabilities based on market demand. Just my two cents.
Right, an organization that produces a commodity capability is likely to have a better offering (lower upkeep cost, vast experience gained), relative a corporation that thinks it can do a better job at a better price.

  1. Karl Walter Keirstead
  2. 3 weeks ago
Bogdan Nafornita Accepted Answer Pending Moderation
I concur with Jonathan.
I wish it were true that companies nowadays focus on their core capabilities.
But this requires a strategic mindset and disciplined strategic execution.
So very few companies are able to just do that.
CEO, Co-founder, profluo.com
Dr Alexander Samarin Accepted Answer Pending Moderation
A bit of terminology as requested.

Any enterprise or company or firm or organisation has its one or more purposes (purpose – reason for being or existing). Let us consider only one purpose, also called mission, i.e. by completing its mission an enterprise should disappear. Usually, a mission is the problem the enterprise is setting out to solve, typically including who the enterprise is solving it for. For example, eradicate poverty in Africa. The economical or social domain in which an enterprise operates is business. For example, eradicating poverty is a humanitarian business.

Capability is WHAT an enterprise must be able to do to achieve its mission. In other words, a capability is a unit-of-mission. Core-business capabilities are mission-critical capabilities which are specific for the enterprise business.

@Dr Alexander Samarin, The idea looks tempting. But somehow, I suspect that there are far too many companies, which don't have any other mission in mind, except for making the money.
  1. Boris Zinchenko
  2. 3 weeks ago
@Boris, Making money is a perfect mission. For example, the mission of one of the famous car manufacturer is "We make cars to earn money".
  1. Dr Alexander Samarin
  2. 3 weeks ago
Karl Walter Keirstead Accepted Answer Pending Moderation
Seems to be a recommendation that companies "stick to their knitting" ?

In other words, "do what they do well".

Makes sense to me for a range of reasons:
- outsourcing may cost less
- outsourcing minimizes distractions (providing your contractual arrangements are solid and you have a plan B)

danger of reaching a state of complacency in managing the outsourcing
reduced agility if the organization has to take over (supplier quits, no replacement can be found)

Kai Laamanen Accepted Answer Pending Moderation
I like Alexader's definition of capability... WHAT organization needs to do well to be to execute it's mission (and achieve vision and aligned to the values/key beliefs). The difficulty here is that it is easy to categorize tens or hundreds of such capabilities. The more comprehensive capability (such as sales, delivery or billing) we choose the less valuable it is to help business to be successful and improve.

The capability approach is mostly used by IT-people. In IT-systems capabilities play a special role. When we build with IT-system a needed capability (such as internet billing or digital features of services) it easy to manage, verify, use and copy when ever it is needed..... when the capability has human component (such sales competence or agility) the situation is much more complex.... it is not so easy to define tacit knowledge or organization culture.

To my understanding it is far more easy to improve the business and value creation based on process approach (=human action) than capability approach....In good business management you may use both approaches.

br. Kai
"based on process approach (=human action) than capability approach" - actually, "bigger" (more powerful) capabilities are assembled from "smaller" capabilities via processes.
  1. Dr Alexander Samarin
  2. 3 weeks ago
Kay Winkler Accepted Answer Pending Moderation
Great question, Alexander!

From what we have seen at NSI, there is a definitive trend towards specializations, and trending technologies do facilitate the movement into this direction.
BPM in particular enable the creation as well as the connection of vertical solutions, which in turn allows for the focus of a company to identify and continuously enhance its competitive advantages. The more mature and competitive the markets, the more visible are core focused operations.
While in many developing countries governmental influences, entry barriers and contracts skew that picture somewhat (as, on the other extreme, do Oligopolies and Monopolies), there is measurable and irreversible tendency for all companies to specialize and to improve their specialties. While BPM and RPA may not be the cause of that situation, they sure are accelerators.
NSI Soluciones - ABPMP PTY
John Morris Accepted Answer Pending Moderation
The question of an evolution of capitalist enterprises to a core focus model, supported by "outsourced everything else", is a fantastic and timely question. One might say that the question is much bigger than what is normally addressed on BPM.com, even in discussions of Enterprise Architecture.

However, the question of enterprise evolution to core is rightly at home on BPM.com because BPM software technology is a key enabler of any disaggregating economic process. As economist Ronald Coase famously defined in 1937, enterprises exist at the size they are very much because of transactions costs. Specifically, Coase highlighted the on-going choice of any enterprise to in-source or out-source any business function. Contracting out has the advantage that one is likely benefiting from the economies of scale of a specialist. At the same time, the overhead of contracting is expensive. Contracting out is expensive in terms of procurement management costs, legal services, accounting management and especially the work of coordination across organizational boundaries. A lot of the time, it's just easier to do it yourself. Except over the past few generations, we've seen the rise of specialist firms, such that even things like accounts receivable management are regularly outsourced. What's left after all the outsourcing, and what one keeps inside the boundaries of the enterprise, is very much about core competency and enterprise mission, at which one is likely to be very good, even best-in-class.

But what has out-sourcing vs in-sourcing to do with BPM.com and our usual topic of BPM?

BPM software technology, and associated technologies such as ecommerce transaction protocols and products, make cross-boundary business relationships much more affordable. From an economic perspective, if the overhead cost of outsourcing goes down -- due to technology -- then by definition (if demand is at least somewhat elastic) we will find more and more outsourcing activity. Software generally and BPM in particular change the economics of what is the best boundary of an organization. (It's not for nothing that Ronald Coase is the favourite economist of BPO providers.)

A parallel process will happen inside the firm too. Again, applying BPM and related automation technologies, the benefits of narrower focus on "core competencies" grow steadily - especially due to economies of scale. And thus business executive leadership is faced with a constantly evolving requirement to balance the outsourcing of non-core functions and support for continuous improvement of core functions. (Execs must also manage strategic calculations to balance core and outsourced work in the context of a given business sector ecosystem.)

For more discussion about the link between economist Coase, outsourcing and the role of BPM software, see this article on BPM.com: Why BPM Is Unique & Important: Part 3 - Link Work Of Business And BPM Software Technology (see esp. "BPM And The Economics of Repetition".)

* I've used the term "core competency" above because it resonates with the discussion. However, the it's more correct to refer to "core capability", wherein capability includes both competency and capacity.
David Chassels Accepted Answer Pending Moderation
Nothing new in this thinking see the title for the book The Process Edge: Creating Value Where It Counts by Peter G.W. Keen..published in 1997. Where it counts the salient processes where the core to business lies. However the non salient are ones which have the legitimate option to "outsource" something that again has been done over decades for such as wage processing. However we have seen government in particular decide to outsource some key processes and with some very expensive consequences.

The historical evolution of IT systems in the vertical silos has possibly resulted loss of focus on those core value adding processes. Perhaps now as digital brings focus to core capabilities so it becomes more apparent to identify those important processes and those which can be handled externally. This becomes easier as secure communications improve? However what is much more important is the need to focus on those salient processes which are real assets which need to be in ownership of the business and of course be flexible in control of the business.

On a slightly different angle the move to "cloud" or outsource infrastructure which is not core to most businesses is a sensible move but ownership and control of those salient processes is vital which needs to avoid "lock in"....some challenges which need to be addressed over the coming years?
Boris Zinchenko Accepted Answer Pending Moderation
Due recognition of strengths and weaknesses, ability to focus on primary directions and outsource side activities are crucial for efficient development of any business. It is manifestation of universal principle of separation of labor, which dominates economical development for past centuries.

Further deepening of specialization became even more essential with formation of global market and rapid digitization of economy, which progressively eliminates few yet existing boundaries. The ability to optimally delegate secondary tasks becomes a key in achieving business efficiency.

However, this established global trend also bears substantial dangers. A company may easily loose competitive advantage and even corporate identity by improperly outsourcing its core technologies and know-how. Proper recognition of relevant delegation scope is a crucial factor for survival and balanced development of an organization.

BPM plays especially important role in evaluation and planning of outsourcing strategies because it provides clear and detailed vision of all business aspects and facilitates management decisions on potential segregation of business functions for external operations. Without an established business model a company is not capable to determine what is the core of its business.
@Boris.. For sure BPM flowgraphs are excellent at de-composing work so everyone understands the work.

Strategic decisions re what to outsource can benefit from RBV (what are our resources/capabilities,? which ones are core?, which ones can reasonably be outsourced,? which ones should be outsourced?)

Therefore a proper outsourcing study should have management using both RBV and BPM and ,as for the steps to actually outsourcea scope of activity, perhaps CPM can help as well.
  1. Karl Walter Keirstead
  2. 3 weeks ago
@Karl Walter, thank you. You've just translated my abstract outline into precise practical steps to take. Ready guide on outsourcing! Perhaps, just one warning to outsourcing zealots.. When outsourcing everything around, always take care not to outsource own brain :)

  1. Boris Zinchenko
  2. 2 weeks ago
+1 and bravo @Boris for highlighting the risk associated with "outsourcing one's brain". A witty comment for sure, but also a real risk. Financial engineering and "managerialism", both of which discount domain knowledge, especially uncodified tacit domain knowledge, can put valued organizational assets at risk. By all means outsource non-core (by following @Samarin's recipe) organizational functions. But for longevity, carefully tend and nurture one's core competencies and capabilities.
  1. John Morris
  2. 2 weeks ago
The USA is struggling with the effects of prior outsourcing right now.

At the time entire industries outsourced, the skilled staff moved on, demand decreased, educational facility student enrollment decreased, educational facilities dropped some courses.

Now, as import tariffs are being introduced, and companies are re-shoring, finding staff is going to be difficult, finding mentors to train new staff is going to be difficult and educational facilities will take a few years to re-instate courses.
  1. Karl Walter Keirstead
  2. 2 weeks ago
@Karl Walter, thank you. I suppose that the issue of lost skills is far more fundamental. Not all lost competences can be quickly recovered in an education. Most of strategic directions do not confine to a single expert but require established departments with own know-how and decades, if no centuries, of collective experience. Discarding these allegedly expensive and exorbitant elements may well yield unrecoverable damage for an organization.
  1. Boris Zinchenko
  2. 1 week ago
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