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All that jazz Featured

6:06am EDT June 30, 2005

Two of the United States' most significant contributions to the world -- maximizing of the potential of capitalism and inventing jazz -- may not, at first blush, seem closely related.

But to Mathias Kirchmer, CEO of North American and Japanese operations for IDS Scheer, they're in perfect harmony. Like a jazz ensemble, each of the company's four managing directors operates within the general framework of the company's goals, but has plenty of room to elaborate on a theme.

Kirchmer, a jazz aficionado in a company full of the same, believes that the freedom to improvise is part of the company's formula for success.

"If you have a jazz band, it doesn't work like a symphony orchestra, where everybody gets sheet music and plays exactly what the conductor wants," says Kirchmer.

But the Berwyn-based unit of the German company hit some sour notes when it first reached North America in 1996. Few businesses were ready to accept the kind of business process management solutions that the company offered. Most potential American customers rejected IDS Scheer because it "wasn't made here" or because they didn't see the need for it.

The tune has changed in the last five years, says Kirchmer, because the company made a concerted effort to put its name and its ideas in front of industry analysts and academia, kept the research community up to speed with the company's progress and provided curricula to university business and IT departments.

Its big break came when it landed a deal with aerospace giant Lockheed Martin, a development that brought credibility and a prestigious reference.

Kirchmer spoke with Smart Business about how IDS Scheer overcame market resistance. after a slow start in capturing the U.S. market.

Why did IDS Scheer select Philadelphia as its North American headquarters?

First, our location is very well-suited to our business. It's very close to New York. Many of our customers in the financial area are in New York. Second, it's only an hour-and-a-half from Washington, and in Washington are all of our public sector clients, especially the Army and the Navy.

Another key area is chemicals and pharmaceuticals; many are in the Philadelphia and New Jersey area. It was also important that SAP America had their headquarters here, too, and we have a lot of collaboration with them, so it simplifies things by being close to each other. We have been working with SAP for more than 20 years; we have a lot of joint development and joint business initiatives that started in Europe and were later transferred here.

What was the source of the initial resistance to your IT solutions?

First, it was a philosophical thing. Business process management means that you don't just improve and optimize individual functions in an organization but that you check how things fit together and how you can improve business by improving integration.

For example, we would not just look at the finance department and then the shipping department, but we would check how an order goes from sales to production to shipping, and how can we make it faster? So that way of looking at things and analyzing and improving them is a bit more complex than people were accustomed to.

The supporting methods and technologies were not as mature as they are now. And the economic ups and downs of the last years helped us because they were very good motivation for companies to think about [business process management's] value. The real acceptance of the idea came when all the e-business hype developed; then, suddenly, companies had to talk to each other about how to work together and how to organize that work between companies.

So they were basically forced to talk about business processes. Suddenly, all these business process ideas were widely accepted and sought after.

How did you overcome that resistance?

When I came over here to the States almost 10 years ago, I had read the books by our founder (Dr. August-Wilhelm Scheer) and by Michael Hammer, an expert in business process management. I came here very enthusiastic and thought everybody here would work with our business processes.

It was really kind of a shock when I visited the first business prospect and they looked at me and said, that's a nice academic topic, however, don't waste our time with that; get this ERP system installed or get us some costs reduced, but please leave your business process topics at the university.

So we had to, in the first four years here, [do] a lot of educational groundwork, and we did that in three fields. On one hand, we started with organizations we thought would be receptive to that message and we worked on them to make them reference clients. The first in North America was Lockheed Martin. They are very engineering-minded, so they understood quickly that you can design and engineer your business processes just as you can design an airplane.

We started working with them and built them as a reference so that we could use that to enter other industries.

What are the other two fields in which you needed to educate people?

We started working very closely with industry analysts like Gartner Inc., Forrester Research, AMR and a half-dozen others, so they knew what we were about. They recognized very quickly our capabilities in our field. That's why Gartner has been ranking us for more than seven years as the clear market leader in the business process and design area.

Third, we started working with universities. IDS Scheer had been founded as a spin-off from a German university, so we had a natural touch point there. So we started floating this idea and approach to business process management in the universities.

Now there are 16 universities in North America that teach based on our ARIS [Architecture of Integrated Information Systems] architecture. So the combination of having the industry analysts aware of us and having the academic mindshare behind us, that was the basis for when, about five years ago, when the notion of business process management was generally accepted, we could benefit from all of this groundwork and suddenly, business just exploded.

In the last three years, in our core business, we have doubled our revenue every year.

Which industries are you most actively pursuing?

In the U.S., we have six industry segments where we are the most active. The first and largest one is consumer packaged goods. We have split it into food and beverages, consumer packaged durable goods and consumer packaged cosmetics, where we really have very specialized solutions.

Second, we have chemicals and pharmaceuticals. Third, we have pulp and paper and related industries, and fourth, we have the homebuilding industry. These four are where we offer process improvement and software implementation systems.

In addition, we are very active in the finance industry and in the public sector. In those areas, we focus more on the business process management and less on the technical implementation.

Which are has the most potential for business process management IT?

I think there's a huge potential in the financial area and in the public sector. In the financial sector, until about five years ago, they had so much money they could afford to be inefficient. They started inefficient organizations, they developed all their own software products, and now they're in a position where nobody can maintain those software products, nobody can improve the organization.

So that's a perfect field for us to enter. We attack that by explaining to those organizations our process approach and showing them how they can learn from other industries, especially manufacturing. Even banks and insurance companies are using more expressions that come from manufacturing.

Banks talk about 'loan factories' because they organize the way they create and provide loans just like a factory, or they talk about service engineering because you design a service just the way you would design a car or a machine.

How are you pursuing opportunities i n the mid-sized market?

We saw about three or four years ago that there were a lot of big companies and, of course, you can make a lot of money with them. But there are also lots of small and medium-sized organizations that have similar needs, just that they are smaller and have smaller budgets. But there are so many of them that it's worth creating a special approach.

We created a special solution for mid-market companies we call ARIS SmartPath that is a combination of software that can come from either Microsoft or SAP, some best-practice process service models and a service component. They get the business process management environment, they get the services needed to put that in place. So they get one fixed price for the whole package, and basically that helps them to move their business to the next level.

We have solutions that are consistent with our industry focus, so we have ARIS SmartPath for beverages, foods, cosmetics, one for chemicals, so we have very narrow industry solutions for those small and medium companies. They can basically leverage the same software and the same ideas that are available to much larger businesses.

How to reach: IDS Scheer, www.ids-scheer.com