Will Next Generation IT Finally Transform Business
New IT Value Propositions – Moving from Operations to Customers and Innovation
Throughout everything I do as a consultant I try to categorize my activities into the three key value proposition areas of business–, operations, customers, or innovation. Even though I have been working primarily in the supply chain areas of SAP since 1994 (SD – Sales and Distribution, MM – Materials Management, and PP – Production Planning) I have been focusing more and more on the key value areas of customers and innovation. The big driver for my focus on customers and innovation is because that is where business is done.
By focusing only on processes, operations, and cost reductions business and IT efforts result in mass commoditization.
Certainly every company must contain, control, and reduce costs to stay competitive in the marketplace. More and more however the companies who are able to ensure long term success are those with a more balanced focus on retaining and acquiring customers while innovating new products or services.
Where IT has been and Where IT is Going
The last 30+ years the business and technology “revolution” has focused on operations and done little to directly address the customer or innovation. It is almost as if technology organizations only understand Henry Ford’s assembly line mentality with business processes. The operations focus can be seen in ERP applications (like SAP), EDI or interfaces, machine logic controllers, wired and then wireless data transfer, the Internet, or any other number of technological advances.
Today’s leading companies are integrating their IT operations into the fabric of the business. Today’s leading companies are focused on innovation and customers.
Today, innovation is about much more than new products. It is about reinventing business processes and building entirely new markets that meet untapped customer needs. Most important, as the Internet and globalization widen the pool of new ideas, it’s about selecting and executing the right ideas and bringing them to market in record time.
In the 1990s, innovation was about technology and control of quality and cost. Today, it’s about taking corporate organizations built for efficiency and rewiring them for creativity and growth. [FN1 - excerpted from "The World's Most Innovative Companies," see the footnote link below.]
In announcing the recent list of innovative companies, MIT noted these companies are “setting the agenda in an increasingly important market, on the verge of disrupting an established market, or creating an entirely new market.” (BostInnovation Feb 22, 2011 citing an MIT study of innovative companies).
The Operations IT Focus Has Turned All Products Into Commodities
This better, faster, cheaper automation paradigm has worked well when processes were mostly manual and labor intensive. As more and more processes have been automated and streamlined further technological advances provide less and less return at higher costs. Along with that, the cost-cutting chase, and the speed of automation and process improvement has dramatically accelerated the rate of commoditization of products and services.
As just one example of how dramatic this transformation is, I personally own an iPhone. On that iPhone I have a free application that: a) uses the phone camera to capture and process product bar codes, and then b) goes online to immediately price-compare that product to local and online sources. My wife loves it. She can be out shopping and do real-time price comparisons. What does this mean?
Every major product seller is now a commodity outlet. Every product can be comparison shopped in real time making it a commodity also.
As a product supplier, your customer does not have the option of you re-numbering, or using a different SKU. Why? Because the very same ability to search for the lowest price is the same tool that finds your product to begin with. Changing the SKU would be more counterproductive to sales than engaging in the commodity-based price wars.
The future of technology and business integration provides the two areas of business most neglected by IT or ERP or technology to focus on–, innovation and direct customer interaction. While I personally believe we are in the early “Wild West” era of social media tools, their hype and popularity is proof enough that the marketplace as a whole recognizes a gap in customer interaction that must be filled. The real question is what will tomorrow’s successful social media business models look like after all of the hype and snake oil sales are finished.
Next Generation Enterprises – Will They Transform Business?
Already we are beginning to see seeds of transformation being sown. All around the globe companies are beginning to focus more directly on innovation and customer focus through technology integration.
The hype around social media and Web 2.0 is beginning to give way to a few practical applications. The same can be said for “cloud” computing even though it is still heavily immersed in the “hype” phase.
These are all IT solutions.
What about business integration?
What are the details of how technology and social media will bring about a revolution in customer focus and innovation?
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[FN1] The World’s Most Innovative Companies (Bloomberg)
http://www.businessweek.com/magazine/content/06_17/b3981401.htm
Studies have shown that there is a critical disconnect between projected benefits in business cases for IT investments and actual value achieved, because so many firms focus on going live with a project rather than its value delivery. An SAP / ASUG best-practice survey on the ability to capture the projected benefits of an IT project found that 73% of companies do not quantitatively measure value post-implementation. (SAP Executive Insight Series, pg. 7, 2009).