Infrastructure
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1/28/2005
02:51 PM
Bob Evans
Bob Evans
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Business Technology: Defining The Business You Want To Be In

Concluding our three-part series on a new way of thinking about business technology, Bob Evans warns, "Companies that profess that IT doesn't matter or is simply wasteful overhead that needs to be gutted will grow increasingly isolated, sluggish, backward, and irrelevant."

"Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning." -- Sir Winston Churchill, November 1942

Part 3 of a three-part series:
Part I and Part II

Quick--what's Exxon's hottest new product line: High-end motor oil? Low-priced engine coolant? Windshield wipers? Tires? Transmission fluid?

None of those; instead, it's gourmet coffee, under the brand "Bengal Trader."

Coffee, huh? Well, then, what's the hottest new product line over at ubiquitous coffee retailer Starbucks--diesel fuel? No, it's not petrochemical, but neither is it coffee--rather, it's music. In Starbucks stores, you can now burn CDs while slurping a frap, thanks to its own online music library and increasingly sophisticated in-store technology infrastructure.

Then we have a recent challenger to Bank of America, Citibank, Wachovia, and other stalwarts in the consumer banking business: Volkswagen.

And should we still call Boeing an "aircraft manufacturer" as it builds a substantial business as a provider of wireless broadband communications? Do you think Dell and HP should be concerned about one of the newest entrants into the PC business--Disney? Or if you're looking to retain a consulting company to help you evaluate RFID strategies, did you know that one the solid players in this rapidly emerging field is International Paper? Or that 3M--long regarded as a world leader in bringing innovative new products to market--bought a supply-chain software company last year? Which isn't such a far cry from a terrific growth business for "Brown," aka UPS: supply-chain consulting and services.

Speaking of service: As huge percentages of car buyers begin to use Web sites to spec out precisely what car they want, and what features it will have, and what exact price it will carry, what will become of car dealerships when the majority of customers begin to view them as merely fulfillment centers, places to pick up what's already been shopped for, specified, and priced out? Gee--maybe those car dealership/fulfillment centers will have to focus on service instead of sales, and maybe that will precipitate sweeping changes like having their service centers open when it's convenient for customers (say, evenings and weekends) rather than being convenient for the mechanics who want to work nothing but 8 a.m. to 4 p.m.?

All of these beg more questions, with this being the most important: What business are you in today? In addition: Which technology companies are playing increasingly important roles in helping you understand that question, answer it, and create new growth opportunities? And are you exploring new and deeper relationships with those companies? Mercury Interactive chief marketing officer Christopher Lochhead puts it this way: Businesses are expressed by their processes, and technology automates 90% of the processes, ergo the applications are the business.

Is this the context in which you and your company view business technology? Or is it in this sublimely retro--not to mention disastrous--model stated by Kmart after it agreed to buy Sears: "The companies expect to save at least $300 million within three years, and [Sears Chairman Alan] Lacy added that 'in the areas of supply chain, IT, and administration, we also see some opportunity there' to cut costs."

Let's take a closer look at the first example cited above. Exxon used to be an oil company because it pumped or bought oil and refined it into gasoline and other products that it sold to independent relics called "gas stations" that sold gas and fixed cars. "Oil company" was a perfect description for what Exxon was and what it had been. But as most of those gas stations gave way to always-open convenience stores and mini-marts that happen to sell gas, and as companies like Exxon began to acquire these independent retailers, the new owners were suddenly able to establish direct relationships with their end-consumers. In the old days, Exxon's customers were its independent dealers, and Exxon probably had very little or no contact with the millions of people who ultimately purchased its refined products. But it has such contact now, and is using technology like its Speedpass credit card to learn more about those customers and build a broader, deeper relationship with them. And one of the things Exxon learned from owning the convenience stores that sell its gasoline--and this is something it would never had known under the old model--is that consumers were buying millions of cups of coffee at those Exxon stores, but it was someone else's coffee. Enter Exxon's Bengal Trader in-house brand, which enhances the Exxon brand with consumers and enhances profits for Exxon. Could it be said that Exxon is capitalizing more on the convenience it offers than on the gas and oil that it sells? Is convenience the new business that Exxon's in?

There's a thread there to another company that has been ambitiously redefining who it is and what its unique values to customers are: FedEx. About a year ago, I asked FedEx CIO Rob Carter what business his company is in, and his answer was this: "We're in the business of engineering time." He didn't say they were in the overnight delivery business or the package-delivery business or the logistics business; rather, he reached into the customer experience and defined FedEx's expanding objectives in terms of customer value. If FedEx can help his customers squeeze latency out of their processes, if it can help them be quicker and nimbler, isn't that more important than just delivering packages? And Carter has emphasized repeatedly--as has FedEx founder and CEO Fred Smith--that the company's current and future transformations simply wouldn't be possible if it didn't view IT as an indispensable and deeply strategic component of everything the company does.

OTHER VOICES
"Hewlett-Packard Co. Chief Executive Carly Fiorina said Thursday she expects 2005 technology spending growth in the United States to be about twice the expansion of the broader economy. ... She said HP has taken steps to try to avoid letting its PCs and other products become commodities with low profit margins. The company has expanded its research and development efforts, now obtaining an average of 11 patents per day, up from three daily in 2001, she said."

-- The Associated Press, Jan. 27


Look at your own company: what were its key objectives five years ago, and what are they today? Look five years into the future: Is there any reason to think that the rate of change for the rest of this decade will not be significantly steeper than its been in the past five years? With the emergence of a true global economy and round-the-clock, round-the-world commerce, with China's explosive growth, with many millions more people around the world using the Web and wireless technology for an ever-growing range of activities, with technological innovation continuing to enable significant upheaval and disruptions in every industry, can any company afford to take a passive approach in trying to envision what transformations it needs to undertake to remain relevant, valuable, and forward-looking?

One final example: Another massive force in the technology-based business transformations that will affect all of us in the next several years will be the aggressive move into the United States of global sourcing and services companies such as Tata, Wipro, Infosys, and Satyam. As these companies begin to build organizations here that offer business-process-outsourcing and business services and technology consulting with deep domain expertise and vertical-market knowledge, their work will accelerate the pace of evolution of not only their clients but also their clients' competitors. They will bring change and speed and innovation to the automotive, entertainment, financial-services, health-care, and other industries, and they'll do it in a compressed span of time that from our vantage point here in 2005 is hard to conceive. They will act as accelerators to the already tumultuous business world we're in today, where oil companies sell coffee and coffee companies sell music and computer companies sell music and music companies sell computers and car companies become banks and nothing will be as it was.

But this is surely what we've all asked for, and have worked for. Better and more-affordable products and services, customized and personalized to suit the tastes of customers who are no longer willing to merely settle for what someone happens to have made. Amid the excitement will be substantial difficulty and pain for companies that for some reason believe their industry or their company will be immune from these dramatic changes. For companies unwilling to boldly imagine what they need to become, there will be no safe havens. Companies that profess that IT doesn't matter or is simply wasteful overhead that needs to be gutted will grow increasingly isolated, sluggish, backward, and irrelevant.

Thanks to all of you who've shared your ideas during this three-part series, and please keep the feedback coming, particularly with regard to this question: What business are you in today?

Bob Evans
Editorial Director
bevans@cmp.com


To discuss this column with other readers, please visit Bob Evans's forum on the Listening Post.

To find out more about Bob Evans, please visit his page on the Listening Post.

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