Corporate Chief Information Officers and computer executives are on board a new bandwagon nowadays – that of managing corporate information resources for greater productivity and competitiveness. And part of this bandwagon is a frenzy of growth and consolidation among the large information service companies and consultancies – ones like Computer Sciences, EDS, Anderson Consulting, and IBM World Services.
In this commentary I set out to explain in fairly simple terms what this bandwagon is about, focusing specifically on the new opportunities offered by Internet.
The first question I ask is: What
does it take in today’s competitive and international environment
to succeed in business and
commerce?
To examine this question, I start
by listing characteristics of traditional industrial companies (Table 1), and
then compare these to characteristics of successful new companies and
traditional companies that have fundamentally restructured themselves to take
into account the conditions of the current times (Table 2).
TABLE 1: Traditional
industrial companies – typical pattern
|
- Appeal to mass markets |
- Make
standard products that do not change
|
- Have
rigid hierarchical organizations
|
- Focus
on manufacturing
|
- Work
on a production line basis
|
- Think
in terms of their products instead of the needs their products meet
|
- Change
very slowly - are reactive rather than proactive
|
- Rarely
examine themselves or what they were doing
|
- Do
not fully empower their employees
|
- Focus
on cost reduction
|
- Tend
to appealed to older users
|
- Are
loosing market share to competition
|
- See
their competition as coming from traditional competitors, when it is really
coming from new forms of competition that meet the customer needs. For example:
- Internet
services are competing with newspapers
- Internet
services are competing with retail stores
- Virtual
corporations on the Internet are competing with traditional ones
|
During the last 15 years and especially recently, more and more companies
fitting in the above pattern have found themselves losing market share and/or
profitability – sometimes to foreign competitors, sometimes to more-nimble
domestic competitors, and sometimes because the markets for the products they
make are declining as users shift to newer products and services.
There is a 20-foot long bookshelf in my nearest Barnes and Nobel
bookstore with books on how companies fitting this kind of pattern have
more-or-less successfully set out to re-invent themselves.
large and small companies, to be competitive, have renewed themselves to
become more competitive.
TABLE 2: Typical characteristics of highly competitive
new or renewed organizations:
- Have
adopted techniques
such as Total Quality Management, Process Re-Engineering, Enterprise
Integration, and Knowledge Management.
|
- Are
knowledge-focused
|
- Are
aimed at specialized and changing markets
|
- Focus
on providing services and information as well as physical products
|
- Make
customer-specific products
|
- Make
small products lots or customize each one for a customer’s desires
|
- Listen
very carefully to their customers
|
- Have
flatter organizational structures that empower employees and are flexible
|
- Are
accustomed and welcome rapid change
|
- Have
flexible production organizations
|
- Use
the latest technologies
|
- Are
constantly in a process of examining themselves, learning, improving,
evolving
|
- Are
proactive, and often create their own markets
|
- Carefully
track social and societal changes
|
- Focused
on adding value instead of cost reduction
|
- Appealed
to younger affluent users
|
- Are
highly successful
|
- Work
on the basis of multiple alliances, even with competitors
|
- See
their competition as coming from other developments, not in their own
industries
|
- Are
highly competitive and making money
|
Organizations with these characteristics exist
and are thriving today, not just tomorrow - and they typically make many uses
of Internet.
To show the relevance of Internet
to these shifts, TABLE 3 exhibits a line-by-line comparison of the two kinds of
organizations
Traditional manufacturing company
|
New knowledge-based organizations
|
- Long
production runs
|
- Short
or custom production
|
- Standard
uniform physical products
|
- Highly
differentiated service and physical products
|
- built to market forecasts
|
- Built
to customer needs
|
- Passive
workers
|
- Motivated and empowered
workers
|
- Highly
centralized control
|
- Widely
distributed authority and responsibility
|
- Local
or national markets
|
- International
markets
|
- Corporations
|
- Alliances
|
- Weak
use of information technology
|
- Very
strong use of information technology
|
An example of this shift can
be found in the
-
Few standard designs
-
Immense variety in design
-
Shoe manufacturing outsourced to
Some of the old shoe
manufacturing buildings in
Now, let’s look at the role of
Internet in facilitating the kind of industrial transformation described above.
TABLE 4: How Internet Relates
to needs for Organizational Transformation
THE NEED
|
WHAT INTERNET DOES
|
- Short or custom production
- Highly differentiated service/physical/information
products
-
Built to customer needs
|
- Internet research facilitates rapidly changing markets
- Electronic mail and dedicated networks can allow constant
monitoring of customer needs
-
Extranets can link producers,
suppliers and customers, so a common information system can enable customized
production
-
Extranets can directly control
production machinery
- Many new products are information products and can be delivered directly over the
Internet
|
-
Motivated and empowered workers
-
Widely distributed authority
-
|
-
E-mail offers a many-to-many communication channel facilitating team
communications
-
E-mail and voice conferencing facilitate operations of small
decentralized work units
|
-
International markets
-
Alliances
-
Very strong use of
information technology |
-
Distance-independence of Internet communication facilitates
international communications
- Internet facilitates
operations of virtual corporations, based on multi-party temporary alliances
|
Extranets are private networks
on Internet that extend beyond a single company to multiple organizations that
must collaborate, communicate and exchange information, documents, and
transactions in order to achieve joint goals.
Companies now investing in Extranets include Caterpillar, National
Semiconductor, John Deere, Olivetti, Sun Microsystems, Mobile Oil, McDonnell
Douglas's, Marshall Industries, Lockheed Martin, as examples.
Extranets make possible new industrial communities of companies
worldwide. Many extranets are operated by third parties and involve hundreds or
thousands of industrial members and users.
For example:
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