Adaptive technologies and business integration

Detailed Table of Contents ...vi Preface ...xii Acknowledgments ...xviiiSection I Business Requirements and Organizational Modeling Chapter I Enterprise Reconfiguration Dynamics and Busi

and Business Integration: Social, Managerial,

and Organizational

Dimensions

Maria Manuela Cunha

Polytechnic Institute of Cavado and Ave, Portugal

Bruno Conceição Cortes

Business Objects, Portugal

Goran D Putnik

University of Minho, Portugal

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Library of Congress Cataloging-in-Publication Data Adaptive technologies and business integration : social, managerial and organizational dimensions / Maria Manuela Cunha, Bruno Conceicao Cortes and Goran D Putnik, editors.

p cm.

Summary: “This book provides inter-organizational aspects in business integration including managerial and organizational integration, social integration, and technology integration, along with the resources to accomplish this competitive advantage” Provided by publisher.

Includes bibliographical references and index.

ISBN 1-59904-048-4 (hardcover) ISBN 1-59904-050-6 (ebook)

1 Industrial organization I Cunha, Maria Manuela, 1964- II Cortes, Bruno Conceicao, 1976- III Putnik, Goran, 1954-

HD31.A296 2007

658.4’02 dc22

2006027729

British Cataloguing in Publication Data

A Cataloguing in Publication record for this book is available from the British Library.

Detailed Table of Contents .vi Preface .xii Acknowledgments .xviii

Section I Business Requirements and Organizational Modeling Chapter I

Enterprise Reconfiguration Dynamics and Business Alignment / Goran D Putnik,

Maria Manuela Cunha, Bruno Conceição Cortes, and Paulo Silva Ávila 1

Chapter II

Co-Engineering Business, Information Use, and Operations Systems for IT-Enabled

Adaptation / Jay Ramanathan and Rajiv Ramnath 33

Chapter III

Dynamic Enterprise Modeling for Knowledge Worker Industries / Ian McKeachie and

Ljubo Vlacic 59

Chapter IV

Enterprise Systems: Innovation, Development, and Advantages / Kevin E Voges and

Manuel Fernando Duarte Romero 82

Section II Integration Models and Architectures Chapter V

Competence Management for Business Integration / Raymond Houe, Bernard Grabot,

and Laurent Geneste 104

Chapter VI

Business Integration in the Insurance Industry: The Intermediary Side of the Question /

Vitor Amorim and Silvina Santana 118

Section III Business Integration Management Chapter VIII

Holistic Approach to Align ICT Capabilities with Business Integration / Marc Rabaey,

Herman Tromp, and Koenraad Vandenborre 160

Chapter IX

Managing Information Systems Integration in Corporate Mergers and Acquisitions /

Sven A Carlsson and Stefan Henningsson 174

Chapter X

The Impact of the Process Integration on Business Management: Case Studies using Six Sigma

Methodology / F Aggogeri, E Gentili, and M Mazzola 189

Section IV Knowledge Management for Business Integration Chapter XI

New Business Requirements in the Knowledge-Based Society / Anca Draghici and

George Draghici 211

Chapter XII

Intelligent Organizations: Knowledge Computing Management / Gustavo Daniel Tripodi and

Roberto Gustavo Illescas 244

Chapter XIII

Integration of Knowledge Resources in R&D Organizations: The Case of Mihajlo Pupin Institute /

Valentina Janev and Sanja Vraneš 263

Section V Technologies and Infrastructures Chapter XIV

Business Information Integration from XML and Relational Databases Sources /

Ana María Fermoso Garcia and Roberto Berjón Gallinas 282

Chapter XVI

Integration Platform for De-Centralized Investment Projects Appraisal / Mladen Stanojević,

Violeta Tomašević, and Sanja Vraneš 329

About the Authors 350 Index 359

Preface .xii Acknowledgments .xviii

Section I Business Requirements and Organizational Modeling Chapter I

Enterprise Reconfiguration Dynamics and Business Alignment / Goran D Putnik,

Maria Manuela Cunha, Bruno Conceição Cortes, and Paulo Silva Ávila 1

Chapter I discusses the phenomenon of the enterprise organizational reconfiguration and its dynamics

as a business alignment enabler By business alignment it is understood the enterprise’s actions taken to gain synergy between a market opportunity and the provision or delivery of the product claimed

under-by the market The enterprise’s organization “fast reconfiguration,” either as a proactive or as a tive action, is seen as the main enabler of business alignment and the main requirement for achieving competitiveness The need to keep a close alignment with dynamic market environment in permanent change implies the high dynamics of the organizational structure—reconfiguration The text presents enterprise’s requirements for competitiveness and business alignment, discusses the phenomenon of the enterprise reconfigurability and finally analyses some organizational and management approaches, from the reconfigurability point of view

reac-Chapter II

Co-Engineering Business, Information Use, and Operations Systems for IT-Enabled

Adaptation / Jay Ramanathan and Rajiv Ramnath 33

Chapter II introduces the Adaptive Complex Enterprise architecture, an enabler to deal with an nally-driven environment and with increasing complexity among entities Adaptive Complex Enterprise architecture is a holistic architecture based on complete dynamic performance traceability of interacting

in real enterprises It presents the successful integration of standard theoretical frameworks with pirical business and management models, including areas that have previously not been covered in an integrated fashion.

em-Chapter IV

Enterprise Systems: Innovation, Development, and Advantages / Kevin E Voges and

Manuel Fernando Duarte Romero 82

Information technology development has, in many cases, not been balanced by an enhancement of information management competences within organizations Chapter IV discusses the relevance of information management capacity and its impact on organizations’ development and competitiveness The chapter discusses how to successfully exploiting opportunities, through the business philosophy of Enterprise Systems which have helped streamline business processes and improve the overall perfor-mance of organizations, introduces and discusses the development of Enterprise Systems and its role

in creating competitive advantage

Section II Integration Models and Architectures Chapter V

Competence Management for Business Integration / Raymond Houe, Bernard Grabot,

and Laurent Geneste 104

Business integration requires that each partner can guarantee not only the quality of its products, but also the qualification and competence of its workforce The usual models such as those included in the Human Resource Management modules of ERP systems, are not sufficient in highly constrained domains like aeronautics Chapter V discusses how a generic competence management model was modified and

Chapter VI

Business Integration in the Insurance Industry: The Intermediary Side of the Question /

Vitor Amorim and Silvina Santana 118

Chapter VI introduces the main concerns and constraints felt in the insurance industry and exposes the problems faced by intermediaries and insurance companies in this industry all over the world, when trying to integrate their business, and how they can be overcome Information and Communication Technologies and Information Systems can provide that connectivity, both intra- and inter-organiza-tions, making it possible for the participants to come closer and dialog better, reducing response times and costs, improving the service to their clients and, possibly, creating new business opportunities It also includes a case study about how an intermediary integrates with other entities, using an electronic business platform

Chapter VII

SCOntology: A Formal Approach Toward a Unified and Integrated View of the Supply Chain /

Silvio Gonnet, Marcela Vegetti, Horacio Leone, and Gabriela Henning 137

Chapter VII identifies the various challenges associated to the Supply Chain Management, which involves coordinating and integrating material and immaterial flows, both within and across several companies The integration of these flows is perceived in quite distinct ways by different communities, raising some semantics related problems The chapter introduces a new ontology, named SCOntology, to describe a supply chain at various abstraction levels, by sharing a precise meaning of the information exchanged during the communication among the many stakeholders involved It also provides a foundation for the specification of information logistics processes and sets the grounds for measuring and evaluating

a supply chain

Section III Business Integration Management Chapter VIII

Holistic Approach to Align ICT Capabilities with Business Integration / Marc Rabaey,

Herman Tromp, and Koenraad Vandenborre 160

Chapter VIII proposes a holistic approach for the alignment of the business integration with the necessary ICT capabilities This holistic approach encompasses the set up of an Interdisciplinary Forum whose task is to align the business strategy with the resource strategy The chapter discusses the authors’ view

Chapter IX

Managing Information Systems Integration in Corporate Mergers and Acquisitions /

Sven A Carlsson and Stefan Henningsson 174

Chapter IX focuses the role of information systems integration in the context of corporate mergers and acquisitions The topic is addressed from a management perspective and targets especially the conse-quences that information systems integration has for the acquisition initiative Based on a literature review, the chapter presents a framework for describing, explaining, and managing information systems integration in mergers and acquisitions The usefulness and validity of this framework is shown by a case study on acquisition and information systems integration

Chapter X

The Impact of the Process Integration on Business Management: Case Studies using Six Sigma

Methodology / F Aggogeri, E Gentili, and M Mazzola 189

Chapter X demonstrates the power of the process integration in increasing the performance level of industrial systems using the Six Sigma methodology Six Sigma methodology is the solution proposed

by the authors to manage processes in order to achieve customer satisfaction, focusing on an integrated management of their functions This methodology can be applied to every industrial field, anywhere the need for a global, shared objective and for improvement is advised Additionally, three case studies are discussed, in order to better illustrate the opportunities and the advantages associated to the imple-mentation of Six Sigma

Section IV Knowledge Management for Business Integration Chapter XI

New Business Requirements in the Knowledge-Based Society / Anca Draghici and

George Draghici 211

Chapter XI explains the knowledge management’s role for competitive advantage as a means of new business requirement in the knowledge based society It argues that knowledge management, combined with new Information Technologies, determinates new approaches of the business strategy, knowledge leadership, culture, management content, organizational structure, technology and innovation, which are

Chapter XII

Intelligent Organizations: Knowledge Computing Management / Gustavo Daniel Tripodi and

Roberto Gustavo Illescas 244

Chapter XII is concerned with conceptualizing and getting results on topics that contribute to the derstanding of the Knowledge Society, focusing the area of Computer Administration of Knowledge, with the purpose of obtaining sustainable Intelligent Organizations The chapter introduces an approach for organizations to carry out methodologically a diagnostic and outline of solutions and for obtaining

un-of knowledge through tools un-of Business Intelligence and Technology Management The purpose is to facilitate the tools and concepts to recognize the strategic value of information, as an effective form

to achieve the prospective results, by an appropriate structure of Knowledge, Human Resources and Technology, that crosses the Organization in an integral and integrated form

Chapter XIII

Integration of Knowledge Resources in R&D Organizations: The Case of Mihajlo Pupin Institute /

Valentina Janev and Sanja Vraneš 263

Chapter XIII introduces a business integration framework suitable for knowledge management in R&D organizations in the high technology sector, supported by a knowledge management platform Two main constituents of the proposed system are: the document warehouse layer, based on data warehous-ing methodology, and the semantic layer based on ontologies and Web Services The initial results of introducing such a platform in a R&D institute (the Mihajlo Pupin Institute) in accordance with ISO

9001 Quality Assurance standard are presented and discussed Its utilization in the Institute will facilitate reusability of knowledge items and enhance creativity and innovation

Section V Technologies and Infrastructures Chapter XIV

Business Information Integration from XML and Relational Databases Sources /

Ana María Fermoso Garcia and Roberto Berjón Gallinas 282

Chapter XIV introduces different alternatives to store and manage jointly relational and XML data sources Database Management Systems continue to be one of the most used tools to manage large amounts of information, and the most extended model is the relational one On the other side, XML has reached the de facto standard to present and exchange information between businesses in the web

map-Chapter XVI

Integration Platform for De-Centralized Investment Projects Appraisal / Mladen Stanojević,

Violeta Tomašević, and Sanja Vraneš 329

Chapter XVI discusses a few software architectures and platforms in relation with their ability to cope with Business Integration problems in large and geographically dispersed companies Of these archi-tectures the three-tier architecture has reached the maturity and proved its usefulness in solving these problems For solving more complex Business Integration Problems, Service Oriented Architecture, based on agent or Web services approach, is recommended This chapter provides concise information about architectures and platforms, and an insight into two complex applications based on them

About the Authors 350 Index 359

About the subject

Business integration is an emerging need of every organization, with increased importance, as tion and communication technologies (ICT) advance, efficiency and competitiveness are a must, and collaboration becomes indispensable Business integration is becoming more and more complex due to the increased complexity of products and processes, increased incorporation of knowledge and skills, fast technological change, globalization and competition It is, thus, a main organizational challenge gaining increased relevance during recent years If in the past integration was associated mainly with engineering (processes and operations) integration, today it pervades from the engineering level to the whole organization and inter-organizational aspects

informa-Organizations integrate resources: people, equipment, software tools, knowledge, skills, technology, opportunities, markets, suppliers, partners Resources used by organizations, besides being heterogeneous, are supposed to work together effectively and efficiently The correct orchestration of their integration determines the ability of producing the goods and services that dictate the organization’s competitiveness

In this context, business integration is one of the most important, if not the most important, requirements for making any business truly competitive Business integration assures that all the resources propel increased performance

Integration between any sort of process, product or technology, means the ability of two or more systems to work together When thinking about business integration, it means also the management of human, information and technology resources that together support the organization itself and its rela-tion with partners, suppliers, supply chain … whatever organizational model by which the organization

is structured

But integration is difficult, challenging and, many times, a failure! Adaptive technologies for tion and application integration, like Webservices, SOAP, WML and so forth, appear as a robust solution

informa-and readily available, but de per si do not solve current needs Integration models informa-and architectures,

technology management and knowledge management are also technologies that must be specially derstood and managed to fully achieve business integration objectives

un-During recent years we have assisted a huge development effort, addressing the need to share mation between processes or within enterprise systems, the need to make information available through

infor-the Web, infor-the need to participate in electronic marketplaces, to integrate infor-the supply chain and so forth

The importance of these developments is widely known; however, their implementation is not ate, as it requires an information technology strategic activity of planning and coordination involving performance management, business processes management, business intelligence, knowledge manage-ment, database integrity, workflow, accountability and many other fields of knowledge

immedi-inter-orgAnizAtionAl levels

This book addresses the development of adaptive strategies and technologies to enable business integration, covering both intra- and inter-organizational integration levels, from three dimensions: managerial, social and organizational It presents a collection of different but complementary aspects, from business integration models and architectures, knowledge management, socio-technical approaches, and standards and integration protocols, all of these contributing to make intra- and inter-organizational integration possible

In 16 chapters authored by 40 internationally renowned and experienced researchers and professionals of the business integration world, this book collects the recent models and solutions advanced both by academe and business It addresses the following four dimensions (or perspectives) of business integration:

1 The organizational dimension, which includes ontological and organizational approaches—concepts, ganizational models and business integration models

or-2 The management dimension, which includes integration management, relationship management, process integration, knowledge management, technology integration management and information integration

3 The technological dimension, which includes application integration and integration technologies, logical infrastructure and standards

techno-4 The human resources dimension, which includes human resources management, human resources tion, competence management and so forth

integra-The mission of this book is to discuss the main issues, trends and opportunities related to business integration from the above-mentioned dimensions, and to disseminate practical solutions

This book is both for an academic audience (teachers, researchers and students, mainly of post-graduate studies) and professionals (managers, organizational and system developers, and information technology (IT) specialists in terms of explaining requirements and frameworks for the development of solutions)

orgAnizAtion of the book

The book contains 16 chapters written by a group of internationally renowned and experienced authors in the business integration field, as well as a set of younger authors showing a high potential for research and devel-opment Contributions came from the United States, Latin America, several countries of Eastern and Western Europe, Australia, and New Zealand At the same time, the book integrates contributions from academe, research institutions and industry, representing a good and comprehensive representation of the state-of-the-art adaptive technologies to address the several dimensions of this fast evolutionary problem of business integration.The chapters are organized in five sections:

Section I, Business Requirements and Organizational Modeling, introduces current business requirements and organizational models as requirements for business integration Why integrate? What to integrate? Which are the integration enablers? The first four chapters of the book contribute to answering to these questions

Chapter I, Enterprise Reconfiguration Dynamics and Business Alignment, discusses the phenomenon of the enterprise organizational reconfiguration and its dynamics as a business alignment enabler By business align-

ment, it will be understood the enterprise’s actions undertaken to gain synergy between the business—that is,

the market opportunity and the provision of the required, or innovative, product—with the required, or designed, specifications at the required, or proper, time with the lowest cost and best possible return (financial or other) The enterprise’s organization “fast reconfiguration,” either as a proactive or reactive action, or “fast adaptation”

reconfiguration The first part of the text presents an enterprise’s requirements for competitiveness and business alignment, while the second part discusses the phenomenon of enterprise reconfigurability as the business align-ment enabler In the third part, an analysis of some organizational and management approaches is presented from the reconfigurability point of view.

Chapter II, Co-Engineering the Business, Information Use, and Operations Systems for IT-Enabled Adaptation,

introduces the Adaptive Complex Enterprise architecture, an enabler to deal with an externally driven ment and increasing complexity among entities This holistic Adaptive Complex Enterprise architecture is based

environ-on complete dynamic performance traceability of interacting entities as they produce value The architecture is

operationalized through the related co-engineering methodology introduced in this chapter Traceability enables business agents to accede the information for decision-making and adaptation, using IT as needed The unified business-IT architecture approach introduced is easier than applying a plethora of disconnected business, system engineering and IT frameworks

Chapter III, Dynamic Enterprise Modeling for Knowledge Worker Industries, presents a case study of the

empirical development and implementation of a commercially successful enterprise modeling framework and associated constructs The chapter discusses the objectives from a practical business and management view-point and provides a guide for the implementation of the empirical framework in real enterprises It presents the successful integration of standard theoretical frameworks with empirical business and management models, including areas that previously have not been covered in an integrated fashion, such as strategic management capability, the ability to integrate the framework with various management paradigms and partial automation

of model data capture

Chapter IV, Enterprise Systems: Innovation, Development, and Advantages, discusses the relevance of

infor-mation management capacity and its impact on organizations’ development and competitiveness The current increase in information management capacity generates new opportunities, making it critical for companies to significantly increase information, intelligence and technology management competences to successfully exploit these new opportunities However, IT development has, in many cases, not been balanced by an enhancement of

information management competences within organizations This chapter discusses how to successfully exploit

opportunities through the business philosophy of Enterprise Systems, which has helped streamline business processes and improve the overall performance of organizations; and introduces and discusses the development

of Enterprise Systems and its role in creating competitive advantage

Section II, Integration Models and Architectures, is composed of three chapters that contribute through dressing the specification and development of models and architectures to support business integration These chapters discuss the questions: How to efficiently and effectively integrate? and How can integration bring competitive advantages?

ad-Chapter V, Competence Management for Business Integration, discusses that business integration requires

that each partner can guarantee not only the quality of its products, but also the qualification and competence of its workforce The usual models, such as those included in the human resource management modules of Enter-prise Resource Planning (ERP) systems, are not sufficient in highly constrained domains like aeronautics The chapter discusses how a generic competence management model needed to be modified and enlarged to satisfy such constraints, introducing a model based on a software application, which may ensure that only competent people have been involved in the various steps of the manufacturing process and also may improve the way operational competences are managed in the company

Chapter VI, Business Integration in the Insurance Industry: The Intermediary Side of the Question, introduces

the main concerns and constraints felt in the insurance industry, which is heavily based on data, information and knowledge processing and requires a large connectivity and articulation between the entities in the business

to their clients and, possibly, creating new business opportunities The chapter exposes the problems faced by intermediaries and insurance companies in this industry all over the world when trying to integrate their business and how they can be overcome It also explains, by using a case study, how far the business of an intermediary integrates with other entities, using an electronic business platform built on Internet technologies

Chapter VII, SCOntology: A Formal Approach Toward a Unified and Integrated View of the Supply Chain,

points out the various challenges associated with supply chain management, which involves coordinating and integrating material, information and money flows both within and across several companies The integration

of these flows is perceived in quite distinct ways by different communities, raising some semantics-related

problems The chapter introduces a new ontology, SCOntology, to describe a supply chain at various

abstrac-tion levels by sharing a precise meaning of the informaabstrac-tion exchanged during the communicaabstrac-tion among the

many stakeholders involved Moreover, SCOntology provides a foundation for the specification of information

logistics processes and also sets the grounds for measuring and evaluating a supply chain by stating different metrics and performance-related concepts

Section III, Business Integration Management, addresses the organizational and managerial tools to enable business integration implementation (or integration processes) The three chapters of this section present several organizational and managerial solutions and contribute to the answer of these questions: How to enable business integration? How to manage to fully exploit business integration opportunities and advantages?

Chapter VIII, Holistic Approach to Align ICT Capabilities with Business Integration, proposes a holistic

approach for the alignment of business integration with necessary ICT capabilities This holistic approach compasses the setup of an interdisciplinary forum, whose task is to align the business strategy with the resource strategy The chapter discusses the authors’ view on Enterprise Architecture (integrating a business architecture, information architecture, application architecture and infrastructure architecture), how it relates to the interdis-ciplinary forum, and the impact of business integration on Enterprise Architecture

en-Chapter IX, Managing Information Systems Integration in Corporate Mergers and Acquisition, focuses the role

of information systems integration in the context of corporate mergers and acquisitions The topic is addressed from a management perspective and especially targets the consequences that information systems integration has for the acquisition initiative Based on a literature review, the chapter presents a framework for describing, explaining and managing information systems integration in mergers and acquisitions The usefulness and valid-ity of this framework is shown by a case study on acquisition and information systems integration

Chapter X, The Impact of the Process Integration on Business Management: Case Studies using Six Sigma

Methodology, shows the power of the process integration in increasing the performance level of industrial

systems using the Six Sigma methodology The chapter explains how successful theories about process tion can be implemented in different industrial fields by introducing a rigorous methodology Starting from the consideration that processes must be managed in order to achieve customer satisfaction, the companies need to change their old paradigms and focus on an integrated management of their functions Six Sigma methodology

integra-is the solution proposed by the authors, which can be applied to every industrial field, anywhere there integra-is a need for a global, shared objective and improvement Additionally, three case studies are discussed to better illustrate the opportunities and advantages associated with implementation of Six Sigma

Section IV, Knowledge Management for Business Integration, presents three contributions to this pensable technology for business integration, covered by three chapters that discuss: What is the knowledge management role? What is the impact of knowledge management? How can knowledge resources be integrated

indis-in organizations?

argues that knowledge management, combined with new IT, determines new approaches of the business strategy, knowledge leadership, culture, management content, organizational structure, technology and innovation, which are key enablers for competitive advantage In addition, these are discussed in the case of a virtual organization (Network of Excellence) for building the knowledge-sharing culture, based on the interaction of management functions and stages of the knowledge creation process To the authors, understanding the main issues and trends

of knowledge management, as an essential element of business integration, will assist in developing new proaches for attending efficiency in the new global virtual organizations

ap-Chapter XII, Intelligent Organizations: Knowledge Computing Management, is concerned with

conceptual-izing and getting results on topics that contribute to the understanding of the Knowledge Society we are going through, focusing the area of computer administration of knowledge, with the purpose of obtaining sustainable intelligent organizations The chapter introduces an approach for organizations to carry out methodologically a diagnostic and outline of solutions The contents are related with the information and obtaining of knowledge through tools of business intelligence of and technology management The purpose is to facilitate the tools and concepts to recognize the strategic value of information as an effective form to achieve the prospective results This purpose is achieved by an appropriate structure of knowledge, human resources and technology that crosses the organization in an integral and integrated form

Chapter XIII, Integration of Knowledge Resources in R&D Organizations: The Case of Mihajlo Pupin Institute,

introduces a business integration framework suitable for knowledge management in R&D organizations in the high technology sector The knowledge management platform design is based on the latest technological trends and standards Two main constituents of the proposed system are: the document warehouse layer, based on data warehousing methodology, and the semantic layer, based on the latest semantic technologies of ontologies and

Web services The initial results of introducing such a platform in an R&D institute (the Mihajlo Pupin Institute)

in accordance with ISO 9001 Quality Assurance standards, are presented and discussed Its utilization at the Mihajlo Pupin Institute will facilitate reusability of knowledge items and enhance creativity and innovation.Section V, Technologies and Infrastructures, consists of three chapters describing and discussing the develop-ment of solutions for information and application integration It helps answer the question: Which are the main infrastructures enabling information and application integration?

Chapter XIV, Business Information Integration from XML and Relational Databases Sources, introduces

different alternatives to storing and managing jointly relational and XML data sources Today, businesses are transformed in e-business and have to manage large data volumes and from heterogeneous sources To manage large amounts of information, satabase management systems continue to be one of the most used tools, and the

most extended model is the relational one On the other side, XML has reached the de facto standard to present

and exchange information between businesses on the Web Therefore, it could be necessary to use tools as mediators to integrate these two different data to a common format like XML, since it is the main data format

on the Web The chapter makes a classification of the main tools and systems where this problem is handled,

presenting their advantages and disadvantages; and proposes a new system to solve the integration business information problem

Chapter XV, Ontology Mapping Techniques in Information Integration, provides an overview of the

ap-proaches to information integration developed by researchers in the community of ontology mapping Besides introducing the background and concepts of ontology mapping, it presents a comprehensive and detailed treatment

of different ontology mapping schemes Closely related aspects of ontology mapping, such as mapping result description, similarity measures, algorithm performance evaluation and so forth, are also addressed Ontologies are means to conceptualize and structure knowledge; however, ontologies themselves do not provide semantic interoperability, since a single ontology cannot be used to represent all kinds of domains and applications Ontol-ogy mapping, therefore, is introduced to achieve knowledge sharing and semantic integration in an environment

Chapter XVI, Integration Platform for De-Centralized Investment Projects Appraisal, discusses a few

software architectures and platforms in relation with their ability to cope with business integration problems

in large and geographically dispersed companies Of these architectures, the three-tier architecture has reached maturity and proved its usefulness in solving these problems For solving more complex business integration problems, Service Oriented Architecture (SOA), based on an agent or Web services approach, is recommended This chapter provides concise information about architectures and platforms, and an insight into two complex applications based on them, that will be useful in developing other complex applications that face similar busi-ness integration problems

expectAtions

The book provides researchers, scholars and professionals with some of the most advanced research ments, solutions and implementations It is expected to provide a better understanding of business integration and its adaptive technologies from an organizational and technological perspective We expect the book to be read by academics (i.e., teachers, researchers and students), technology solutions developers and enterprise managers (including top-level managers) The book is also expected to help and support teachers of graduate and postgraduate courses from management to IT

develop-Maria Manuela Cunha

Bruno Conceição Cortes

Goran D Putnik

Editors

Guimarães, March 2006

Editing a book is a hard, but compensating and enriching, task, as it involves an array of different ties, like contacts with authors and reviewers; exchanges of ideas and experiences; process management; organization and integration of contents; and many others, with the permanent objective of creating a book that meets public expectations And this task cannot be accomplished without great help and sup-port from many sources The authors would like to acknowledge the help, support and confidence of all who made this creation possible

activi-First of all, this book would not have been possible without the ongoing professional support of the team of professionals of Idea Group Inc., whose contributions throughout the process of making this book available all over the world was invaluable We are most grateful to Mehdi Khosrow-Pour, senior acquisitions editor, and Jan Travers, managing director, for the opportunity A special word of gratitude

is due to Kristin Roth, development editor, for her guidance and friendly words of advice, ment and prompt help Special thanks go also to Sara Reed and all the staff at Idea Group Inc., whose contributions throughout the process of making this book available all over the world was invaluable

encourage-We are grateful to all authors—who simultaneously served as referees for chapters written by other authors—for their insights, valuable contributions, prompt collaboration and constructive comments The communication and exchange of views within this truly global group of recognized individuals from the scientific domain and industry was an enriching and exciting experience for us, the editors

We wish to thank all the authors for their insights and excellent contributions, which made this book into the book we wanted

We also are grateful to all who acceded to contribute to this book, some of them with high-quality chapter proposals, but unfortunately, due to size limitations, could not see their work published

The authors would like to acknowledge the support of the Network of Excellence

I*PROMS—In-novative Production Machines and Systems (www.iproms.org/), an EU FP6 project, Nº

NMP2-CT-2004-500273, whose partner is University of Minho

A special thanks goes to our institutions, the University of Minho and the Polytechnic Institute of Cávado and Ave, in Portugal, for providing the material resources and all necessary logistics

Thank you

Maria Manuela Cunha

Bruno Conceição Cortes

Goran D Putnik

Editors

Guimarães, March 2006

Section I

Business Requirements and

Organizational Modeling

Chapter I

Enterprise Reconfiguration Dynamics and Business

Alignment

Goran D Putnik

University of Minho, Portugal

Maria Manuela Cunha

Polytecnic Institute of Cávado and Ave, Portugal

Bruno Conceição Cortes

Business Objects, UK

Paulo Silva Ávila

Polytechnic Institute of Porto, Portugal

AbstrAct

The phenomenon of the enterprise organizational reconfiguration and its dynamics as a business ment enabler is discussed Business alignment means the enterprise’s actions undertaken to gain synergy between the business; that is, the market opportunity and the provision of the required, or innovative, product, with the required, or designed, specifications at the required, or proper, time, with the lowest cost and best possible return (financial or other) The enterprise’s organization “fast reconfiguration,” either

align-as a proactive or align-as a reactive action, or “falign-ast adaptation” or “flexibility” (align-as a “reactive” action), is seen as the main enabler of business alignment and the main requirement for achieving competitiveness The need to keep a close alignment with the dynamic market environment in permanent change implies the high dynamics of the organizations’ organization, or organizational structure, reconfiguration The first part of the text presents enterprise’s requirements for competitiveness and business alignment, while the second part discusses the phenomenon of the enterprise reconfigurability as the business alignment enabler In the third part, an analysis of some organizational and management approaches, from the reconfigurability point of view, is presented The text ends with a conclusion and references.

Global competition has dramatically increased

throughout the last two decades A number of

factors made it happen We refer two of these—if

not the most important, then surely among the

most important: (1) the great developments in

information and communication technologies

(ICT) that provide unprecedented easy-to-reach

immediacy and the ability to communicate in

real time at any point in the world (of course, we

think of the Internet), as well as unprecedented

efficiency in design, management, information

and decision making processes; and (2) the global

geopolitical changes—that is, the business, social,

and political environment changes that, from the

business point of view, provided a global free

market and a controversial process of

“globaliza-tion.” The “globalization,” or business “global”

processes, experience has been known for a long

time; in the past few decades, however, the

vol-ume of international trade has risen dramatically

Increasingly, managers in industries ranging

from telecommunications, pharmaceuticals and

apparel to retailing, copiers and automobiles are

looking abroad for resources and sales, even as

they daily face overseas businesses entering their

own markets (Prahalad & Doz, 1987) Today, the

number of worldwide products and services is

continuing to grow, together with the growing

number of global enterprises and global brands

(this happens for manufacturing as well as the

service sector) Major global manufacturers and

suppliers internationalize to give fast response

at the best price to the products required by the

market, or to explore the window of the market

opportunity Most current products integrate

components originating from different parts in the

world, while manufacturers (Original Equipment

Manufacturers, or OEM) specialize in designing,

assembling and marketing, and manage a network

of suppliers

From the other side, the customer has become

the third most important business driving force

The driving force of today’s business is to fully satisfy customers, each time more demanding, each time more global, with products each time more customized to their individual needs, at the right time, at the right price and with the required quality At the same time, although the constant stream of innovations in goods and services al-lows manufacturers and service providers to offer higher quality products, it increases customers’ expectations, and thus requires higher levels of competition

In other words, the global competition has strengthened the significance of a company’s ability to introduce new products, whether while responding to increasingly dynamic markets with customers’ rapidly changing needs; handling demands to shorten the time required to design, develop and manufacture, as well as to reduce cost and increase quality; or to act proactively to explore the “window” of opportunity

As mentioned in the Iacocca Institute report

“21st Century Manufacturing Enterprise egy” (Nagel & Dove, 1992), the main trends of the actual economical context are: (1) meet the rapidly changing needs of the marketplace; (2) shift quickly between product models or between product lines; in order to (3) respond in real time

Strat-to cusStrat-tomer demands

In this context, the enterprise’s actions dertaken to gain synergy between the business, that is, the market opportunity and the provision

un-of the required, or innovative, product, with the required, or designed, specifications at the required, or proper, time, with the lowest cost and best possible return (financial or other), are called business alignment To fulfil this objective, additionally, the strategic alignment between any business policy or strategy and any kind

of technology is essential In their quest for an

“ideal” business alignment, in the dynamically changing market where business and product life cycles and time to market tend to shorten, enterprises are implementing a wide variety of

different techniques, management processes and

development strategies

In this chapter, the phenomenon of the

en-terprise organizational reconfiguration and its

dynamics as a business alignment enabler is

discussed Putnik (2001) presents “fast

reconfigu-ration,” either as a proactive or reactive action, or

“fast adaptation” or “flexibility” (as a “reactive”

action), as the main enablers of business

align-ment and the main requirealign-ments for achieving

competitiveness The need to keep a close

align-ment with the dynamic market environalign-ment in

permanent change implies the high dynamics of

the organizations’ structure reconfiguration

In the first part of this chapter, a presentation

of requirements for competitiveness and business

alignment is given, while the second part discusses

the phenomenon of the enterprise

reconfigurabil-ity as the business alignment enabler Next, an

analysis of some organizational and management

approaches, from the reconfigurability point of

view, is presented The chapter finishes with a

conclusion and references

This next part of the chapter is based on the

text recently published in the book by Cunha and

Decreasing product development cycle time has

been an important issue for several years,

ac-cording to research by Griffin (1993), based on a

number of citations of speed to market Research

in this domain also found evidence that product

life cycles were shrinking, while product

obso-lescence occurs more quickly than in the past

Companies are responding by bringing more

products to market more frequently and, as a

consequence, competition has intensified To keep

up with competition and continue to grow in the face of shorter product life cycles, companies are driven to introduce more products to market faster and to submit the product to changes (redesigns) more frequently

In the past, a product could exist without great changes; faced with the challenges of today, be-sides the shorter duration of a product, it suffers several redesigns to be competitive (i.e., aligned with the market demands See Figure 1)

Changes are usually measures undertaken to improve either products or processes Virtually, the main factors that can lead to product changes are:

or producer must be responsive in answering to the market “Time-based competition” makes companies try to be very fast in introducing new products and to have very short production lead times to manufacture and deliver products

to customers (Blackburn, 1991; Stalk Jr., 1988; Stalk Jr & Hout, 1990)

The driving force of business is to fully satisfy customers—each time more demanding, each time more global, with products each time more customized to their individual needs, at the right time, at the right price and with the required

quality At the same time, although the constant

stream of innovations in goods and services

al-lows manufacturers and service providers to offer

higher quality products, it increases customers’

expectations, and thus requires higher levels of

competition

Competition is in the core of the success of failure

of firms (Porter, 1985, p 1)

Competition determines the appropriateness

of a firm’s activities that can contribute to its

per-formance In fact, the pressure on manufacturing

has always been dictated by the market (Yusuf,

Sarhadi, & Gunasekaran, 1999) Every period of

technological change is a period of opportunity

Indeed, risk taking and entrepreneurial activity

feed on change, but also drive it

Competitiveness is a main requisite of

en-terprises, nowadays requiring extremely high

performances, strongly time oriented while highly

focused on cost and quality

The combination of the shorter life span of new

products, increasing product diversity over time,

rapid technological developments, increased

tech-nological complexity and market globalization, as

well as frequent changes in demand, increases the

need for different approaches, consisting of more

efficient enterprise (or manufacturing) systems to

keep competitiveness

A number of requirements that a competitive

enterprise should satisfy is identified

Conse-quently, a number of approaches (or strategies, management models or organizational models) has been developed to satisfy the corresponded requirements and achieve the required perfor-mance, whether on a general/strategic level or tactical level Some of these requirements (ri) and corresponded approaches are (Putnik, 1997, adapted from Yoshikawa, 1984; Milacic; 1990; Guimaraes, 1994):

materials and space; reduce costs

MS) should perform highly complex tasks with a high degree of reliability and quality, and emphasize the value-added elements

of high creative personnel

man-power is separated from machines in time and space

the ability to respond quickly to market demands

weapon; reduce production times; innovative technology

end results and objectives; redesign end processes; operate across organizational units

end-to-Figure 1 Evolution of product life cycle (Cunha & Putnik, 2002)

Product Life Cycle in the past

1st version

Design manufacture, exploitation, Redesign

2nd version

manufacture, exploitation,

1st version 2nd version 3rd version nth vers.

Product Life Cycle today

• Process improvements should be based on

the capabilities of information technology

(IT)

All of the approaches mentioned, as well as

many others, contribute in a way to enterprise

competitiveness In other words, we could say

that competitiveness is a function of the

satis-faction of the requirements ri, or in function of

the implemented organizational or management

approaches listed above:

Competitiveness = f ( r1, r2, …, rn )

However, virtually the most important

require-ment, or organizational or management approach

to implement—that is, the most important

fac-tor for achieving the required performance—is

flexibility This is because if we have the highest

flexibility, it is sure that we could quickly adapt

to satisfy any requirements So, we say that the

flexibility is one of the most important

require-ments, if not the most important That is:

ri = f (rflexibility), i ≠ flexibility

For almost two decades, authors converged

on the idea that the solution to the trends in the

global competitive environment today relies on

flexibility, the most important organizational

in-novation that the future deserves to enterprises,

as Donovan and Wonder (1993) describe it

But, what is flexibility?

Many authors say that flexibility is equal to

adaptability A system is said to be adaptable if it

can continue to operate in the face of disturbances

changing its structure, properties and behavior,

according to new situations it encounters,

consid-ering as a disturbance any event not previously

specified Adaptability implies the search and

selection of new resources (substitute resources) to

be allocated to the task to be performed, in order

to satisfy the new circumstances (the new tasks,

optimization of old tasks, “deadlocks,” etc.) When some elements, or resources, are substituted by other elements/resources in the system, or new elements/resources are simply added or removed,

we say that the system reconfigures This way, we could say that adaptation implies reconfiguration and, consequently, that the adaptability implies reconfigurability

Although adaptability is one of the required determinants, we must disagree with the approach that adaptability and flexibility are equal Accord-ing to many other authors, with whom we agree, flexibility is not equal to adaptability Within the concept of Flexible Manufacturing Systems (FMS), flexibility is defined as

A capability of the (enterprise or turing) system to adapt to the new tasks (i.e., to reconfigure, or to re-program itself, in order to satisfy the demand in an optimal way) without interruption of the production process (i.e., busi-ness or manufacturing process)

manufac-The condition “without interruption” means

“fast.” So “adaptability” or “reconfigurability”

is a necessary but not sufficient condition for flexibility Virtually, any system is possible to adapt, but we seek for adaptation of the system

so fast that the production process will be not affected That is,

Flexibility = f (adaptability, adaptation_time) or Flexibility = f (reconfigurability, reconfigura- tion_time)

As well as:

adaptability ⊂ flexibility reconfugurability ⊂ flexibility

Therefore, flexibility is the MS’ capability of fast adaptability or fast reconfigurability

In other words, also, flexibility is the ability a system exhibits during operation that allows it to change processes easily and rapidly in a predefined set of possibilities, each one specified as a routine

defined ahead of time so that when it is needed,

it is put in place (Silva, 1998)

In manufacturing, flexibility is related to

physical flexible machinery; flexible in the sense

that the machines or cells are able to execute

several operations and they can quickly change

between different production plans at a given

point in time

In any case, enterprise systems or MS today,

already implemented or as the concepts proposed,

more or less satisfy some or all of the requirements

for competitiveness mentioned We could say also

that the enterprise systems or MS have flexibility,

too, as any system can adapt and, in principle, we

can measure the adaptation time However, the

problem is with which performances satisfy the

requirements for competitiveness; or what are

the performances of the implemented flexibility

in the enterprise systems or MS? In other words,

what is the degree of the enterprise systems or

MS’ flexibility?

To respond to this question, we have to have

a capability to measure the enterprise’s

recon-figurability performance; that is, to measure the

enterprise’s flexibility Further, measurement

implies a reference system or reference value

Concerning the flexibility, as flexibility is the

function of reconfiguration time, we could

es-tablish, or adopt, the reference reconfiguration

time For our research and design purposes, we

will establish the reference reconfiguration time,

pushing the concept of flexibility to the limit

Im-mediately, this emerges a question about the value

of the limit The absolute limit is 0 reconfiguration

time, but we know that it is physically impossible

(besides the inconvenience of dividing by zero)

For that reason, it would be practical to adopt some

non-zero value of the reference reconfiguration

time Kim (1990) provided us with an idea for

characterizing an “ideal” (target, future) flexible

An interpretation of point number 3, ing the enterprise’s flexibility, is that the enterprise should be capable to re-organize (or to reconfigure,

concern-to re-program, …) itself within 1 second.Although this description seems to be a meta-phor, at the same time, despite how fantastic it seems, it is a real task for the future Additionally,

in the least, it can serve as the reference figuration time

recon-After positive and explicit identification of flexibility as the competitiveness factor, a new important factor of competitiveness has been

identified: agility Curiously, agility is related to

flexibility

To be agile means to be “quick-moving, nimble, active” (Oxford Dictionary, 1995) Agility is a property of an object or system We can talk about agility of the enterprise as well as agility

of an individual The enterprise, or individual, can be agile or not; or better, it can have a certain degree of agility, higher or lower Concerning the enterprise agility, in Goldman, Nagel, and Preiss (1995, p 3) we can find the following description:

“For a company, to be agile is to be capable of operating profitably in a competitive environ-ment of continually, and unpredictably, changing customer opportunities For an individual, to be agile is to be capable of contributing to the bottom line of a company that is constantly reorganiz-

ing its human and technological resources in

response2 to unpredictably, changing customer opportunities.” Also, in Kidd (1994, p 23), the agile manufacturing or enterprise is characterized

as follows: “the competitive foundations (of the agile manufacturing or enterprise) are continuous

change, rapid response3, quality improvement, social responsibility and total customer focus.” Many other authors share this perspective

Considering “rapid response,” or “rapid

adaptability,” which is equal, as the premise

of the agility, then agility is equal to flexibility

(as the flexibility implies “rapid adaptation” in

“response” to the market requirements, too)

Consequently, if the previous is true, we could

say that “rapid adaptability” flexibility and agility

are synonyms4 And, further, if flexibility and

agility are synonyms, the question that emerges

is, why, then, we have introduced the concept of

agility, when the concept of flexibility has been

already introduced

Almost immediately emerges the comparison

with FMS Considering that the concept of

flex-ibility has emerged historically as the underlying

concept of FMS, we could say that flexibility

is referring to processes in the manufacturing

workshop environment On contrary, agility as

a concept has emerged considering the wider

environment; that is, considering the processes

within the whole enterprise; that is, the processes

in the enterprise and/or business environment

This way, we could say that: flexibility is a concept

defined for the factory workshop, while agility is

defined for the enterprise as a whole, or for the

business environment (However, this criteria

for distinguishing flexibility and agility does not

seem too “strong” or convincing.)

Fortunately, some “stronger” criteria are

pos-sible to find from other authors who presented

other perspectives on agility and, consequently,

other definitions of agility One good example of

a comprehensive definition of agility is given by

Yusuf et al (1999, p 37):

Agility is the successful exploration of competitive

bases (speed, flexibility, innovation, proactivity5,

quality and profitability) through the integration

of reconfigurable resources and best practices in a

knowledge-rich environment to provide

customer-driven products and services in a fast-changing

market environment.

In this definition, we should note the nations “innovation” and “proactivity.” By our interpretation, these two designations are not present in the definitions of flexibility and, in fact, make the difference between flexibility and agility Therefore, we will assume the following:

desig-• Flexibility is a “reactive” concept; that is,

the concept based on reactivity, implying a rapid response to changes after recognition (detection, identification) of these (changes), whether the changes are of the market or internal (workshop, enterprise) conditions,while

• agility is a “proactive” concept; that is,

the concept based on proactivity, implying anticipating actions, innovation, with the desirable capability of prevision of changes acting whether of the market or internally

in the enterprise (or workshop)

In this way, introducing the characteristic of proactivity, we will assume to consider flexibility

as a part of agility That is:

flexibility ⊂ agility

Consequently, in referring to agility, flexibility

is referred to implicitly, too

In other words, resuming and “translating” the above considerations, we could say that:

• Agility, is a capability for fast ity, including the pro-activity and the reac-tivity (fast adaptability), with the objective

reconfigurabil-to explore rapidly the market opportunities and changes or internal innovation potentials (for new products, processes, initiatives), while the flexibility is a capability for fast adaptability, implying at the first place the reactivity, in order to respond rapidly to the

market changes (or e.g customer demands)

or to the internal conditions Agility includes

flexibility, that is, includes the high

respon-siveness feature too Agility refers, too, to

production facilities reconfiguration and

scalability, workforce that has the

incen-tive and flexibility to respond creaincen-tively to

customer needs (Agility_Forum, 1995)

So, we came to fast reconfugurability as one of

the most important and indispensable enterprise

competitiveness factors

To enable fast reconfigurability—that is, to

make it effective—there is a number of other

essential, fundamental underlying factors, or

requirements They are part of or complementary

to agility/flexibility or fast reconfigurability Most

important are:

• Distributiveness, considering that today’s

competitive pressures are forcing

compa-nies to abandon the traditional approach of

product development and manufacturing

and to adopt new forms of sharing risks and

taking profit from opportunities on a

com-petitive basis, by an effective and efficient

access and operation of spatially distributed

objects (components or subsystems) (Putnik,

2001) This corresponds to the concepts

of Distributed Enterprise and Distributed

Manufacturing Systems, defined by Putnik

et al (1998) as enterprises or

manufactur-ing systems whose performance does not

depend on the physical distance between

the enterprise elements

Implementing and managing

“distributive-ness” means eliminating the physical (i.e.,

geo-graphical) distance as the enterprise

competitive-ness disabling factor

• Integratibility, meaning that heterogeneous

environments should interoperate efficiently

Defending the new organizational models

as possibly integrating resources from the global set of distributed resources (compo-nents or subsystems), integratibility means the capability for efficient access, negotiation and interoperation with the set of resources selected with which to cooperate Petrie (1992) defines enterprise integration as the task of improving the performance of large complex processes

by managing the interactions among pants Enterprise integration is both inter- and intra-organizational, where the goals and processes of functions or departments within

partici-an enterprise must be mpartici-anaged partici-and integrated along with those of different enterprises in a customer supply chain

Implementing and managing “integratibility” means eliminating the heterogeneity of resources, which makes difficult or even impossible their interoperability, as the enterprise competitiveness disabling factor

production capacity13, implying that the structure of resources is not static, and can

be permanently subject to alignment with business requirements This requirement directly addresses the enterprise systems

or MS reconfigurability

• Evolutionary capability, meaning the ability

to learn with history, analyzing the nesses and strengths of the past

the structure of resources is not static, and can be permanently subject to alignment with business requirements This requirement is intimately associated with the requirement for fast adaptability or reconfigurability

business Alignment and Reconfigurability

Another important factor of competitiveness is the ability of aligning enterprise capabilities and

performance with the market or internal

require-ments, or market or internal potential6 which,

in an interpretation, means to put in the market

the exact product that the market wishes or may

wish, with the best possible return (financial

and/or other)

The concept of alignment was initially

in-troduced in the field of information systems and

technology It is widely accepted that the effective

use of ICT, to leverage the skill and knowledge

base of the organization, can provide competitive

advantage in the marketplace (McFarlan, 1984)

The potential benefits to be gained from the

ef-fective deployment of ICT obliges organizations

to consider the alignment of their ICT and their

business (Shams & Wheeler, 2000) In this sense,

alignment refers to actions by management to gain

synergy between ICT and the enterprise’s

infor-mation systems, products, markets and business

administration by ensuring that internal policies

match external policies in this area

According to Henderson and Venkatraman

(1993), quoted by Shams and Wheeler (2000),

there are two definitions of alignment: traditional

linkage, defined as, “ensuring that information

systems activities are linked to business

require-ments”; and strategic alignment, defined as

“se-lecting the appropriate alignment perspectives for

achieving business objectives.” In this chapter,

we address the perspective based on the second

definition

The concept of strategic alignment between

any business policy or strategy and any kind of

technology is an essential one The driving force

of business is to fully satisfy customers, each

time more demanding, each time more global,

with products each time more customized to

individual needs, in an extremely competitive

environment At the same time, although the

con-stant stream of innovations in goods and services

allows manufacturers and service providers to

offer better/higher-quality products, it increases

customers’ expectations, and thus requires high

levels of competition In this framework, by

aligning, or business alignment, we mean “the actions to be undertaken to gain synergy between the business; that is, the market opportunity and the provision of the required product, with the required specifications at the required time, with the lowest cost and the best possible return (financial or other).”

To keep the enterprise aligned with the market, reconfigurability is a requirement the enterprise must present Enterprises are not static, and the fast reconfigurability previously mentioned must happen within a minimum setup time, without disruption

Resuming the above, we could say that several factors appear as supreme factors of competitiveness, namely: (1) the organizations’ capability to achieve and explore competitive advantages in synergy, by using or integrating the optimal available resources and technologies for the functions the organization undertakes, (2) the capability of fast reconfigurability of the organization structure or model (reactively or proactively “against” the market); that is, agility, together with (3) the capability of managing all business processes independently of distance, (4) the capability of integrating heterogeneous resources, providing their effective and efficient interoperability, (5) the capability of scalability, (6) business dynamic alignment, meaning that the structure of the enterprise resources should

be the subject of permanent alignment with the business, as well as (7) evolutionary capability

as the ability to learn7

reconfigurAtion dYnAMics And business AlignMent system dynamics

A system consists of elements, relations and erations among them If elements are variables, one defines the state of the system as totality of the values assumed by the variables at some moment

op-of time … A dynamic theory considers primarily

a succession of system’s states … (while) a static

theory assumes that the state remains constant8”

(Rapaport, 1972, p 49)

Webster’s dictionary (Merriam-Webster Online

dictionary, 2006) defines it as follows: “Dynamics

consists of a pattern or process of change, growth,

or activity.”

In other words, “the dynamical system is a

system with the set of states, in which the

tran-sition from state to state is occurring along the

time …The dynamical system’s states depend on

system’s inputs.”

Enterprise Reconfiguration

dynamics

In our context, dynamics means precisely the

intensity of change an enterprise is subject of

Enterprise organizational dynamics considers a

succession of enterprise’s states along the time;

that is, the enterprise reconfiguration dynamics

Its basics could be represented as in Figure 2

There are two functions for which alignment

implies the organizational dynamics

The first function is a “market function,” or

“objective function”, along the time9 This function

is a “continuous” function, of which parameters

could be market demand (e.g., client’s

require-ments), supplier’s requirements, requirements

for manufacturing improvement, cost reduction, productivity, agility, quality, product defect elimi-nation and so forth The “market function” (e.g., market demand) could be understood within the

“reactive” context, when the enterprise “responds”

to the market demand as well as to other external or internal requirements, while the “objective func-tion” could be understood within the “proactive” context, when the enterprise “project” “antici-pates” its action on the market; that is, when the enterprise is agile The “objective function” is not necessarily related to the “market demand,” but more the hidden market potential This function changes dynamically along time10

The second function is the enterprise tion function, along time, too The parameters of this function are the enterprise’s organizational measures, including performance measures that depend on the organization They could be, for example, an enterprise’s production capacity, production productivity, number of machines, number of personnel, number of products, degree

organiza-of product changes (improvements, innovations), competitiveness, quality, turnover, NPV and so forth In a networked enterprise, the parameters could be, for example, the number of partners and other measures that characterize the network or the networked enterprise The enterprise organiza-tion function is a “piecewise” continuous function (with so-called C0 continuity; also: polyline) with alternate intervals of the constant functions and some polynomial function (approximated by linear

Figure 2 Enterprise reconfiguration dynamics—basic concept (1)

t

F(t), M(t)

t R – Reconfiguration time period

t S – Stable configuration time period

function); see Figure 2 The time intervals with

the constant functions represent the time

inter-vals when the enterprise organization is “fixed,”

or constant, or stable This period is designated

by t S However, as the enterprise may want to

align with the market function, which changes

along time, the enterprise reorganizes; that is,

reconfigures its organization The organization

reconfiguration takes some time This time is

designated by t R, (reconfiguration time period)

During this period, the enterprise’s observed,

or analyzed, organization parameter changes its

value Graphically, it is represented by

chang-ing the “level,” or (constant) value, of the actual

constant enterprise organization function to the

new “level,” or value, of enterprise organization

function After change is finished, the new

en-terprise organization function will continue as a

constant with the value that corresponds to the

new “level” until new change occurs It means

that the enterprise organization changes from

one state (e.g., state i) to another state (state i+1)

The reconfiguration process is, in fact, the

(enter-prise organization) state transition; see Figure 3

Analyzing the reconfiguration (i.e., organization

“state” transition process) on Figure 3, we could

say that it is characterized by the reconfiguration

time t R , the reconfiguration “amplitude” a R, which

means how “big” the organizational change is,

and, as the function of the previous two change parameters, the reconfiguration “velocity,” or reconfiguration “rapidness,” designated by (of course, velocity is not equal to the angle but

to its tangent … (tan value)) In Figure 3, the organization reconfiguration is represented as a line, but only as an approximation In reality, the

“change” function is a complex function, and for sure it is not linear11

In accordance with the above, as the tional dynamics (i.e., the enterprise reconfigura-tion dynamics) means the intensity of change of the enterprise organization in terms of the succession

organiza-of enterprise’s states along the time, two main parameters of the reconfiguration dynamics would

be the number of (requested) reconfigurations per unit of time, and the time to reconfigure; that is, reconfiguration dynamics is a function of

Figure 3 Enterprise reconfiguration dynamics—basic concept (2)

Enterprise (organization) state i

Enterprise (organization) state i+1

t R – Reconfiguration time period

a R – Reconfuguration amplitude

– Reconfiguration “velocity”, (rapidness)

Figure 4 (a) Lower reconfiguration (request) frequency and bigger reconfiguration time mean lower reconfiguration dynamics; (b) Higher reconfiguration (request) frequency and shorter reconfiguration time mean higher reconfiguration dynamics

Figure 5 (a) Acyclic, or aperiodic, pattern of reconfiguration dynamics; (b) Cyclic, or periodic, pattern

t

F(t)

t F(t)

t F(t

t F(t

In other words, as higher the reconfiguration

(request) frequency and as shorter the

reconfigura-tion time, the reconfigurareconfigura-tion dynamics is higher

(see Figure 4) We can talk also about aperiodic,

or acyclic (see Figure 5a), or periodic, or cyclic,

patterns of reconfiguration dynamics (see

Fig-ure 5b) On the contrary, if the reconfiguration

(request) frequency is low, or very low, and/or

the reconfiguration time is too long, we could

consider the enterprise organization as a

quasi-static, pseudo-dynamic (conceptually irrelevant if

cyclic or acyclic), or even just a static organization

(see Figure 6a) In the limit, the (absolutely) static

organization is represented as a horizontal line;

that is, a constant function, independent of time

(see Figure 6c)12

Dynamic Reconfiguration as

Business Alignment Enabler

In this section, we discuss on phenomenology

how enterprise dynamic reconfiguration enables

business alignment

The market function (e.g., market demand),

or business objective function, is not constant

It changes, fluctuates along time, due to an

im-mensity of possible factors It is represented as

a dotted line in Figures 7a and 7b Contrarily,

a traditional enterprise has, usually, a constant production capacity , represented as a full line in Figures 7a and 7b Due to market fluctuation, there

is always an over- or under-capacity (implied by the static organization) During an over-capacity period, the enterprise may suffer direct losses, proportional to the dashed (A) area in Figure 7b, while during under-capacity periods, represented

by the (B) area, income opportunities are lost.The business alignment requirement means that the capacity of the enterprise should be as close as possible of the market function, to reduce the (A) and (B) areas, and this should happen as fast as possible

In Figure 8a, it is represented as an attempt to adjust the enterprise capacity to the market func-tion In this situation, the areas corresponding to excessive capacity and under capacity, which are represented in Figure 8a, are smaller than those for constant capacity, represented in Figure 7b

Ideally, reconfiguration time (t R in Figures 2 and 3) should tend toward zero, and stable con-

figuration durations (t S) should be dictated by business alignment needs, to keep the enterprise performance at its maximum level This situation

Figure 7 Network capacity and market demand as a function of time

(a)

(b)

corresponds to the dynamic business alignment

represented in Figure 8b and, on the limit, the

curves should overlap (see Figure 8c, the “ideal”

alignment)

Actually, in the limit, there is no stable period;

that is, the time period of stable organization The

enterprise organization reconfiguration dynamics

in the limit implies a “fluid” (Eijnatten & Putnik,

2005) organization in permanent continuous

change However, as it is impossible in its limit

values, the engineering and management task is

to design and manage the enterprise and its

orga-nization, including development and employment

of the supporting technologies, leading it towards

the limit values as close as possible (as close as

possible to the “ideal” model)

need for new orgAnizAtionAl

Models And reconfigurAtion

dYnAMics doMAin

When competitiveness relies on the ability of

dy-namic reconfiguration and permanent alignment

of the enterprise with the market environment,

as happens today, the organizational models

must address the above set of requirements for

competitiveness

A “traditional” enterprise is characterized by the production of a set of products We could call the “traditional” paradigm Multi-Product-Inte-grated-Manufacturing of Enterprise (MPIM/E) (systems) (Putnik, 1977) The problem with this paradigm, concerning maximizing competitive-ness, is that, conceptually, the enterprise can-not ever use its resources (machines, software, personnel …) with the maximum of efficiency,

or maximum performance, for a whole set of product but only for a relatively small subset of the product set, or even only for one or a couple

of products This is shown graphically in Figure

9 On the diagram (P i , F), the curve is the curve

of the single factory, or enterprise, efficiency F in function of products P i Only one or a couple of products the factory, or enterprise, can perform with the maximum efficiency (i.e., performance) For all other products, the factory, or enterprise, performs with lower efficiency/performance The area between the constant, “horizontal” line that represents 100% of efficiency/perfor-

mance for each one product P i and the curve that

represents factory, or enterprise, efficiency F is

“proportional” to the enterprise’s competitiveness loss based on underutilization of resources As big

as this area is, the bigger is loss of competitiveness (or loss of potential, or loss of opportunity) Thus,

Figure 8 Alignment of enterprise capacity with market function

F(t)

t

the objective is to eliminate this area, which is an

ideal case, or to minimize it

(Conceptually, elimination of the area (A) of

the resources sub-utilization in Figure 9 is the

underlying reason of the Focused Factory

ap-proach [Skinner, 1974]) By this apap-proach, the

enterprise specializes (i.e., focuses) in the limit

for only one product or for the core processes

that represent the enterprise’s competitive base

All other processes are subcontracted if

neces-sary, or the enterprise becomes only a provider

of the limited number or (in the limit) single

processes or products—components for which

it has the maximum competitiveness Another

attempt towards elimination (i.e., minimization)

of area (A) was the concept of Lean

Manufactur-ing (Womack & Jones, 1994; Womack, Roos, &

Jones, 1990) By this approach, the objective is

exactly to eliminate any loss

Elimination or minimization of this area could

be seen as the process of the business alignment;

for example, as the alignment between the

enter-prise’s capacity and products’ requirements

(However, for the MPIM/E systems, this area

cannot ever be eliminated with the enterprise

having fixed resources This is because the

re-sources are the issue of [capital] investment The consequence is that the enterprise has a fixed set of resources that do not change as frequently as the products change; that is, as the market demands change It means that the enterprise has to change among products, and their production, using the same resources [as, in principle, acquiring new resources, which are better aligned with new products, mean new investments, which at the moment of investment could be a factor of loss

of competitiveness or, simply impossible]).The elimination or minimization of this area (i.e., the business alignment) implies some organi-zational reconfiguration The reconfiguration, as

a part of agility, or flexibility, implies the new sources search, which will be allocated to the task

re-to be performed re-to satisfy the new circumstances The set of resources within which the company searches for alignment improvement represents the resources selection domain If the enterprise searches for resources “within the company boundaries,” then we talk about intra-company reconfiguration This is the case of the “tradi-tional” organizational paradigm which, for the problem of reconfiguration, uses resources exist-ing within the organization; thus “intra-company

Figure 9 Performance function of a multi-product integrated enterprise (Cunha & Putnik, 2006a)

reconfiguration” or “intra-enterprise

reconfigura-tion.” On the contrary, if the enterprise searches

for resources “across company boundaries,” then

we talk about inter-company reconfiguration, or

“inter-enterprise reconfiguration.”

To address the problem of organizational

(dynamic) reconfigurability as one of the

com-petitiveness enablers, a number of organizational

approaches and tools have been developed

In the next sections, we will present some

of these approaches, classifying them into two

groups: by organizational approaches (or models)

to the intra-enterprise reconfiguration dynamics,

and the organizational approaches (or models)

to the inter-enterprise reconfiguration dynamics

(see Figure 10)

ApproAches to

intrA-enterprise reconfigurAtion

dYnAMics

Development of mechanisms for enabling

recon-figuration has followed, in a way, the development

of perception of competitive factors

Organiza-tional approaches and concepts for (dynamic)

reconfiguration actually emerged when the

sat-isfaction of the main functional requirements of

the “traditional” taylorism, that was lowering

the production cost, the best implementation

through the “transfer-line” type production, was

stopping to be the main competitive factor—that

happened when the characteristic mass production

products have stopping to satisfy the customers; that is, when the customers started to appreci-ate product’s features other then simply cost (which was in function of the production cost), for example, how rapidly the producers offer the required product

On the other hand, it is interesting to follow changes (or “evolution”) of the enterprise’s (sub-) domains for the reconfigurability implementation along time We have identified four periods that succeed each other, each one characterized by a specific enterprise’s (functional, operational or or-ganizational) sub-domain where major effort has been made for reconfigurability implementation These sub-domains were corresponding to those sub-domains where, in the observed period, the major part of the added value was created, or that represented the domains of the main competitive factors (at that time)

In the first period, the implementation of the reconfigurability started in the enterprise/factory workshop, as at the “sunset” of the “traditional” taylorism production was still the domain of the most important part of the added value produced This period, concerning reconfigurability imple-mentation, was characterized by the concept,

or approach, of FMS14 with mechanics (the new generation of machine tools were developed), coupled with information processing (workshop operations scheduling) as the underlying technol-ogy, for reconfigurability implementation The second period, with the newly identified main competitive factors and, consequently, the new enterprise (sub-) domains for implementation

of the reconfigurability (as one of the ness enablers), started shortly after, or in parallel with, the “reign” of FMS The computer and com-munication technology were starting to develop at

competitive-an incredible rate This development brought new competitive factors and the new domain for creat-ing the most important part of the added value, and it was the domain of information, based on the shift in capability of information processing This period was characterized by fast-growing

Figure 10 Enterprise reconfiguration domains

Enterprise reconfiguration domain

Intra-Enterprise Inter-Enterprise

disciplines, such as CAD, CAM, MRP, MRP II,

MIS and similar; in general: information systems

We could say that for this period, the underlying

technology for implementation of

reconfigurabil-ity was information processing The representative

concept, or approach, concerning

reconfigurabil-ity implementation in this period was Computer

Integrated Manufacturing (CIM)15 Later, the

related Enterprise Resource Planning (ERP)16

systems gained the leadership in popularity and

opportunity creation

As it was possible to expect, the third period

started after, or in parallel with, the establishment

of CIM as the generally accepted competitive

approach The search for new competitive

fac-tors and the new domain for creating new added

value have continued As a result of this effort,

the new competitive factors were found in new

sophisticated management models that focus no

more on the technology but on business processes

and strategies This period was characterized by

approaches such as Total Quality Management

(TQM), Business Process Re-engineering (BPR)

and, later, Change Management (CM)17

Finally, the fourth period came, characterized

again by the new enterprise domain where new

competitive factors were found The new

competi-tive factor identified was knowledge Knowledge

is identified as a major enterprise’s asset New

disciplines and approaches emerged; for example,

knowledge management, knowledge-based

economy, organizational learning and similar

Virtually, the most important organizational

con-cept for this period was the concon-cept of Learning

Organization (LO) (Senge, 1990) Therefore, the

reconfigurability domain was, simply, knowledge

The underlying technology was learning; that is,

human-based, individual or collective, learning

Actually, it is expected that this approach will

contribute and improve actions in companies with

adoption and management of other (previously

mentioned) reconfiguration domains In that term,

it would be possible to say that the LO is a kind of

meta-approach to improve other approaches for

(dynamic) enterprise reconfigurability In other words, by improving knowledge and learning,

it will be possible to improve reconfigurability

in domains of management, information and mechanical (and other physical) objects

It is important to notice that the new tiveness factors, and corresponding organizational concepts, did not “eliminate” the previous ones but, rather, changed the “weight” of different tech-nologies that contribute to the overall enterprise’s competitiveness as well as increase the complex-ity and, therefore, the competitiveness potentials (and threats when applied by competitors) The technologies and organizational models for im-provement of competitiveness factors in each one

competi-of the enterprise’s (sub-) domains were continuing

to develop For example:

Metamorphic and/or Reconfigurable Manufacturing Systems (or Enterprises) (RMS)18

Fractal Factory (or Manufacturing Systems

or Enterprises)19, Holonic Manufacturing Systems (or Enterprises) (HMS) and Intel-ligent Manufacturing Systems (IMS)20, Enterprise Integration (EI)21

towards Lean Manufacturing (LM) and Agile Manufacturing (AM) In relation with these approaches is CM discipline

Chaordic Enterprise (CE)22.Besides the models and approaches selected, many others have been developed The above

“list” does not represent an exhaustive and complete list, but rather one that tried to put more “light” on the phenomenon of enterprise dynamic reconfiguration through presentation

of some relevant approaches that have marked the community’s efforts towards enterprise or system reconfiguration

ApproAches to inter-

enterprise reconfigurAtion

dYnAMics

For the problem of reconfigurability, the traditional

organizational model uses resources existing

within the organization The set of resources of

the company itself represents the resources

selec-tion domain As this selecselec-tion domain is relatively

limited and of small size, even applying very

sophisticated strategies, models and approaches

(referred in the previous section), it cannot, in

gen-eral, provide the desired competitive performances

for actual products nor for new products

To solve the problem of lack of resources

“intra-muros”—that is, “within company

bound-aries”—that could bring to the enterprise a

com-petitive advantage, the enterprise searches for

cooperation with other enterprises simply buying

components, subcontracting other enterprises or

creating strategic or joint-venture associations

This experience has been known for a long

time The growth of outsourcing in the 1980s

was the first signal that the traditional

hierarchi-cal corporate model (mega enterprises that were

vertically integrated) was breaking down

(Skin-ner, 2001) Initially, outsourcing was generally

used with relatively simple products and services,

mostly because of transaction costs, where the

costs of coordination of activities between

orga-nizations were significant

The recent developments of ICT that allow

organizations to be integrated electronically has

significantly reduced transaction costs, enabling

organizations to focus on their core activities

or core competencies and buy from the exterior

non-core products and services

This gave rise to the opportunity for flexible

and reconfigurable partnerships or networks,

cor-responding, for example, to the Virtual Enterprise

(VE) model

The new production enterprise is a network

that shares experience, knowledge, capabilities

and resources, created with the objective to

facilitate enterprise alignment with the ment (market)

environ-In fact, one of the most widely discussed areas

in business literature since the 1980s is that of organizational network structures as the basic principle to achieve flexibility, adaptability to the market and quick response in a highly complex environment, as proposed, for example, by Miles and Snow (1986)

According to Yusuf et al (1999), a successful enterprise must acquire the capability to achieve and explore the competitive advantage in syn-ergy; that is, using the best resources (available internally or externally on the market) to an organization (Cunha, Putnik, & Ávila, 2000), which requires a shift from “self-centered, closed enterprises” (Browne & Zhang, 1999) to collabora-tive networked structures and, recently gaining more recognition, dynamically reconfigurable collaborative networked and virtual structures (Camarinha-Matos & Afsarmanesh, 2004b; Cunha & Putnik, 2002, 2006a, 2006b, 2006c; Putnik, Cunha, Sousa, & Ávila, 2005a, 2005b)

We interpret the underlying idea, which leads

us further to the idea of a networked enterprise,

as follows: If the “multi-product” enterprises (MPIM/E) cannot ever eliminate the underper-forming zone “A” (see Figure 9), which minimizes the maximum competitive potential, then we could think of constituting a specialized optimized en-terprise, dedicated to one product, that will be the most competitive for that product As mentioned above, that enterprise could be a single monolithic focused enterprise (factory) However, for the context of the changing business environment, the idea of a monolithic focused factory is not good, because of the investment, which would require a longer period of return while the envi-ronment is changing much more rapidly, requiring virtually completely new products for which the focused enterprise is not any more competitive

In this situation, we would need a new enterprise The problem is the cost of “switching” from the actual monolithic focused enterprise to the new

monolithic focused enterprise So we came to this

basic idea: Instead of investing in a self-centered

monolithic focused enterprise, we will invest in

creation of a network of enterprises; that is, in a

network of independent partners, making a

net-worked enterprise, or a virtual enterprise, in which

every partner will bring its core competencies by

which the partner is the competitive on the market,

making the constituted network, or VE, the most

competitive organization or (virtual) enterprise

for the product in case (in the context of

environ-ment, or market) When the product finishes its

life cycle, the cost of the network, or VE,

dissolu-tion, or “closing”, or reconfiguration in terms of

termination, is much cheaper then dissolution or

“closing” of the self-centred monolithic focused

enterprise Consequently, to eliminate the

under-performing zone “A” (see Figure 9) for each new

product, the new optimized and, consequently, the most competitive, networked/VE will be con-stituted (or integrated; see Figure 11) When the product finishes its life-cycle, the networked/VE will dissolve Therefore, (fast) reconfigurability

or (fast) adaptability is an essential characteristic

of these networked structures

The process described means in fact the cess of the network, or VE, reconfiguration23 The network or VE changes from state to state (a succession of network’s states); that is, of the network or VE instances, along time every time when the actual product terminates its life cycle and a new product appears In other words, we are

pro-in presence of the network or VE reconfiguration dynamics that consider a succession of network’s

or VE’s states along time in function of ance of a new product (see Figure 12)

appear-Figure 11 Performance analysis of multi-product company (a) and (c); network structure (b) and (d) (Cunha & Putnik, 2005a)

(b) (a)

Legend: F = single factory for all products

Pi = Product i opi = operation i Net i = Network for product Pi (a different structure for each Pi)