"Life Inside the Tornado": Clients, Customers and eCom

© The Du Mar Corporation Ltd

Life Inside the Tornado:Clients, Customers and eCom

Richard Martin10 February 2000

[email protected]


Tornado- or just a gust? 1995 watershed - for competition based on ‘Operational Efficiency’

Zero net competitive advantage from existing technical implementations

IT had automated number-crunching, or repetitive tasks. Little assistance with running a complex business or producing distinct, quality products.

Length of time to market for good ideas

Industries in over-capacity offered indistinct products.

In any situation a revolution was going to occur. Traditional industry response is usually in the direction of size / concentration.

But industry has been caught with a double-whammy. What happened?


Tornado- What happened?

Whammy 1: The existing ‘problems’ remain: overcapacity, lack of product differentiation and players headed for increased concentration.

Whammy 2: The rules have changed.1. Technology - a cost of entry, not a source of competitive advantage. It is now very cheap and development times are very rapid. Cheap, rapid entry.

2. ‘Open’ flexible technical architectures had been piloted by previous ‘revolution’ in client-server (this means any machine, anywhere, any time)

3. Emergence of a global Wide Area Network or routing mechanism (and by coincidence a repository of huge knowledge and ‘virtual’ real-estate)- THE INTERNET!

4. A plethora of devices that can now conduct business. PC, TV, Telephone, Laptop, mobile phone, hand-held.


Tornado- So what?

‘Costs’ didn’t just lessen at the margin - they could literally cease to ‘be’.

The proliferation of end-user devices can support ‘business’ transactions anywhere.

It is very cheap and fast to get started.

Location is irrelevant

So you just need a good proposition to compete.

…and this has been seized by new players.

The ease of entry of total newcomers to previously inviolate industry domainsmeans that our existing organisation and business models face radical change -over and beyond traditional ‘coping’ mechanisms.


Tornado sound-bites

“Its like re-wiring a 747 in flight” - David Evans, former CIO of AON

“People don’t need banks, they need banking” - MD Citibank

“Business is facing the biggest revolution in the past 2 or 3 hundred years. I mean... think about it!” - Tom Peters

We have experienced a greater pace of change in last decade than in last 50 years. We will experience more in next decade than in last 200.

Here’s the hype…

Where’s the substance?


Our structure - Leavitt’s Diamond

I am going to use Leavitt’s diamond to structure your journey, so we look at the tornado as it hits:

Strategy Business Technology People

and….

TOTAL INTERACTION of all four.

Strategy

Business

Technology

PeopleTotal

Interaction


Strategy- what is on a CEO’s mind?

Shareholder value

Costs too high

Oversupplied commodity product

Inefficient existing operating model

Mergers/Acquisitions to absorb

New Competition

Impact of Technology

David Evans - former CIO of AON


Strategy- what can he do?

Merge/Acquire

Reposition

Start new model business parallel to old

Reduced Costs, increased market share, more complex business

(Is this the way ahead? - cf ‘Egg’)

Internal/external reorganisation; repositioning; probable acquisition strategy. High risk, low guarantees if it fails to exploit new technology.

Cannibalise some existing business; converge old model into new. No guarantees, (no choice?)

…or he can go


Strategy- the proposition Operational Efficiency? This exploits the provision of technology, but ignores the

demands of their customers and their likely longevity using this business model. The wise man puts his money on revenue generation, customer retention and process

re-engineering.

US:UK evidence shows, UK has still not made this cognitive leap. That decreases our competitive position relative to US and increases the pressure and effort to catch up.

0

10

20

30

40

50

Increase Revenues Customer Retention Operational Efficiency

US

UK

Source: Ernst & Young


Strategy- the challenge

The CEO MUST define the firm’s positioning

Get the right mix of ‘clicks and mortar’ - Andy Grove CEO Intel.

They must protect the legacy while making the transition. Convergence of old with new will be one of the great challenges.

They need support, skills, budget

They must grab control of all change initiatives to focus innovation and ‘me too’ products within the legacy

STRATEGY is now the ability to implement. Have an idea: implement it: see what’s working. See what’s not. And adjust, adjust, adjust.


Business- customer proposition

Product led recovery. How? By customer-focussed strategy. If customer is key - what does this

mean?

Identification of customer types and their value to the company

Identification of customer group ‘prime desire’ objectives that company can fulfil (“I don’t want to buy a mortgage, I want to buy a house”)

Identification of distribution channels (Inc legacy) to service

Implementation of products and outstanding 24 hour service.

Goal: NOT “We are the best at what we do”, but “We are the only ones who do what we do”!

Result: a move from mass production to mass personalisation


Business- Operational modelOld business model:

Supply chain

Buy

EnterpriseProduce

Suppliers Demand chain CustomersSell

Source: Understanding the Net Economy Revolution - Sun/Netscape Alliance

New Business Model

Enterprise

Customer

Supplier

PartnerDist

ributor

RetailerComplem

entor

Enterprise

Customer

Supplier

Partner Distrib

utor

RetailerComplem

entor

Enterprise

Customer

Supplier

Partner Distrib

utor

RetailerComplem

entor

Enterprise

Customer

Supplier

Partner Distrib

utor

RetailerComplem

entor

Enterprise

Customer

Supplier

Partner Distrib

utor

RetailerComplem

entor


Business- Competitive position

Local/Physical market to Global/Virtual

Mass production becomes mass customisation

‘Change’ disappears. Continuous discontinuity replaces it.

Tangible assets (goods, property) give way to intangible(knowledge, intellectual property)

Valid drivers: survival, drive to increase revenue, ‘neat’ proposition. Invalid drivers: Cost cutting, keeping up appearances.

Do it. “No major switch is bug-free unless it is twenty years obsolete” (Tom Peters)


Technology- what are the enablers?

Customer / Supplier / Salesman/Employee

Mobile Phone PC LaptopDigital TV

Internet

Satellite

Firewalls

Middleware

Legacy Application Wrappers

Legacy systems

Company Intranet

Call Centre

Telephony

Front-end operators/staff

Back-end specialists

Workflow


Technology- what are the implications?

Technology is available, but solutions largely similar. The trick is to catch customers through savvy marketing and understanding.

Legacy integration is a major hurdle for existing players Vs ‘Bank in a box’.

Security Open nature of interfaces increases opportunity for component-ised

business - changes nature of our corporate reality and business-to-business relationships.

Quick development times due to plug and go capabilities & open standards facilitate ability to bring ideas to market quickly (Internet year is 3 months). No longer lose a half-life our your ideas during your implementation (e.g. unlike client-server).

BUT! Paradoxical that now that we have the technology to achieve our vision of ‘data intensification’, survivors in the new era will be those that master Creation Intensification!


People- Organisation

Establish a sense of urgency

Create a powerful, guiding coalition

Ensure coalition understands 'vision’

Communicate TEN TIMES more than you are

Remove obstacles to the vision

Plan and create short-term wins

Do not declare victory too soon

Anchor the changes into corporate culture, not vice-versa

Source: Prof. John P. Kotter H.B.R. Mar/Apr 1995


People- Organisation 2

Control of transition:

Evolution - not revolution - protect the legacy!(Juggle skills, budgets, politics)

Customer must still see company as one entity

Control ‘me too’ - opportunism

Everyone in the same choir

Continuous discontinuity - embeds change, maintains focus, kills politics.


People- Staff

Communicate: especially to those supporting legacy

Learning to manage flux - and constant pressure

Skills, rewards

Job gains / Job losses

Management: Management of Uncertainty. Critical Thinking.


People- Customers

Customer centric organisations:

We have identified their role in shaping the new proposition

Manage their journey (e.g. Security, usability, service)

Look out of the box for those prime-desire statements

Get out of ‘old-think’ (the Insurance Broker who said to me “I don’t care about claims” has got it wrong).


People- Suppliers

From Category ToCustomer/Vendor Relationship Partner/Team

Know-it-all Skills Curiosity-drivenFixed Solution Variable/Scalable

Lowest Budget ValueAbsolute/Governing Contracts Mutual/Guiding

Package Product LifecycleInternal resources Delivery Multi-sourced

Family name Longevity Only as good as lastcustomer

Local Reach Global


People- Suppliers - Consultants

A revolution of their own. Large Consultancies are one step behind their clients on the change-curve. Implications on proposition, structure etc.

For all consultants: No silver bullet solutions! eCom projects require clients to get all the basics right - that is your role. Rigour, discipline at speed!

A shift to ‘advising then doing’, not just ‘advising’.

Teach partners how to be “service firm” employees. (Noone at their desk, never do the same thing twice, understand exactly what benefit you bring every day, ‘grow or go’).

Objectivity / Integrity. The last words in this topsy-turvy world.


People- Society - Work

Daily business life - what is virtual reality? Where is work?

Usage of the term ‘Career’ will change - not the vertical heights possible, but breadth of ‘neat stuff’ accomplished.

Full eCom rollout when the current generation of 15 year-olds has a voice and purchasing power.

“Job loss” Vs “Reallocation”? Society has to reconcile how it views this.

Security, data protection.

Education, Invention and Emotional Quotient are key.


People- Society - Domestic

Technology explosion in homes - convergence of certain technologies (fax, phone, PC, TV, Stereo) and divergence of others (smart fridge etc).

Radically altered leisure time - what is virtual reality?

Security / data protection.

Integration of legislation, monetary, fiscal measures, policies.

Increasing influence of Business Managers over role of politician in determining outcome of topical issues (Euro is a good example).

Funding of public services to keep pace with technology

Other coincident changes not related with eCommerce


Tornado or just a gust?

"Life Inside the Tornado": Clients, Customers and eCom

Business

Transcript of "Life Inside the Tornado": Clients, Customers and eCom