Why the Business Whole is Greater Than the Sum of Its Parts

March 9, 2012 by SAP News

As I put this blog together, asking team members and social media experts for their valuable input and advice, I was reminded of a critical theme that holds true for just about any industry: the whole can be greater than the sum of its parts when the strengths brought to the table are leveraged appropriately.

We see these qualities very often in business models like franchise systems, co-operatives and group purchasing organizations, which I will categorize as ‘professional business networks’ (PBN).

What differentiates a professional business network from an ‘unprofessional’ one? It is the understood need and willingness to work together toward a joint business goal. A franchise, for example, has the franchisor focus on concept, brand and product management, while the franchisees build on this and execute on it.

Many of these business relationships are built on a contractual framework geared toward the benefit of all participants. This framework ensures relevant data like resale or point-of-sale (POS) information is exchanged and business planning for new product and service introductions are made jointly. Everyone participates which is critical to ensure mutual success. In uncertain times like these, it’s not surprising that there is tremendous interest around creating and participating in this type of network.

Building the Right IT Foundation

But a framework that defines the overall PBN concept and ensures business process alignment can bring you only so far if it is not built on the right technological foundation.

As a critical enabler for collaborative efforts, IT can significantly reduce administration efforts and boost the orchestration of the whole business network. If leveraged appropriately, it grants access to a wealth of information available within the group to better understand the purchasing volumes with which they are dealing, and to negotiate more favorable contracts realizing better economies of scale.

If a PBN lead represents their members on the marketing side, the right use of information technology helps craft more impactful campaigns or to cover larger sales territories. A franchisor can analyze POS and resale data from franchisees, providing the additional insight needed to identify trends at an early stage and make buying and pricing recommendations to their members, thus increasing inventory turnover and freeing up cash.

Naturally, legacy systems that were put in place in the past are at risk to be quickly outmatched when an evolving PBN goes through their next phase of growth. New technical requirements like mobile device integration, the need to offer IT services to members, or real-time analytic requirements paired with a rapidly growing number of members can put a strain on home grown ERP systems and even the best technical teams.

If an organization’s IT infrastructure is not able to keep up, new cross-business network collaboration initiatives will quickly reach their limitations and as a result be challenged by key stakeholders on both the PBN lead and member side.

Successful PBNs turn to a best of breed ERP system – one that is proven to be scalable and can to stand up to the latest business requirements, allowing PBN participants to take their mind off technical concerns. Instead they can focus on their particular strengths in the business network, so the whole can indeed be bigger than the sum of its parts.

Magnus Meier is director in the Wholesale Distribution Industry Business Unit working closely with our partners and customers to drive innovation and to enable their unique business models. Magnus joined SAP Germany in 1998, worked in Tokyo, Japan for three years managing the Regional Industry Group for Retail and Consumer Product. In 2003 he transferred to the U.S. as one of the founding members of the Wholesale Distribution IBU. Magnus can be reached at magnus.meier@sap.com. 

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