UK: CONNECT IT UP.

UK: CONNECT IT UP. - With IT power at everyone's fingertips, the message is clear: the future lies in the opportunities it provides for companies to communicate with customers, suppliers and stakeholders outside rather than inside the organisation.

by Jane Bird.
Last Updated: 31 Aug 2010

With IT power at everyone's fingertips, the message is clear: the future lies in the opportunities it provides for companies to communicate with customers, suppliers and stakeholders outside rather than inside the organisation.

Everyone uses computers these days. If you haven't got a PC on your desktop, you'd better have a very good reason why not. Whether your organisation is large or small, public or private, in products or services, IT is an essential tool for business in the 1990s.

But now that everyone has easy access to the computer club, membership confers no special privileges. Technology, argues Marc Demarest, principal strategist at Sequent Computer, a US-based supplier of mid-range computers, is disappearing as a source of competitive advantage. Merely owning an impressive array of computers is a poor strategy for success in the next millennium. Finding ways to harness IT's considerable power in ways which serve a business is the far better bet.

IT's potential to transform business lies in its capacity to connect people both within and outside organisations. At present, however, very little of this potential is used. Within organisations, the march of the PC should have provided strong support to flatter management structures and employee empowerment by making information easy to share. Yet few organisations make the most of their now readily accessible pools of information. Rather, says a recent survey of 1,300 members of the Chartered Institute of Management Accountants (CIMA), information hoarding and a reluctance to share data with professional colleagues is the order of the day.

More than half (52%) of the management accountants surveyed did not provide other departments with on-line access to accounting data. Company bosses were only marginally more open to the idea with 38% of board members (and 30% of departmental managers) keen to open up on-line information access to a wider audience. 'The survey shows that people are still very worried about losing their power base if they share information,' says Simon Edwards, general manager of Systems Union, co-sponsors of the survey.

While employees are clearly not that eager to share the benefits of the IT revolution, technology itself has not always helped that information exchange. Though many computer manufacturers may claim their machines conform to industry standards, boxes from different suppliers that fit together like Lego are still far away. Nor do they all operate in the same way. Indeed, the computer industry at present is still rather like the car industry of the 1930s - the clutch, gearbox and brakes were all in different positions on different cars. Four out of 10 managers in the CIMA survey entered spreadsheet data by hand even when it could have been transferred automatically from source files. The reason they gave for this restricted use of technology was the amount of time it takes to set up and learn certain procedures.

If the future strategy for IT means persuading managers to share information, clearly the first step in that process is to make data easier to access. The idea that merely capturing and storing information is enough was one of the many fallacies of the old approach to IT. As Demarest puts it: 'Data is no good stored in vaults. It needs to be delivered as the raw material for making decisions.' His view is echoed in a report published in March by Zenith Data Systems (ZDS), a division of the Paris-based computer giant Groupe Bull.

The report, entitled The Coming of the Third Age, identifies the next phase of technology as one focused on helping human thinking, rather than simply imitating it as artificial intelligence has tried to do in the past. In the Third Age, the report says, it is the 'thinkers' rather than the 'doers' who will be most in demand from business. And the quality and availability of data at their fingertips will determine their success. With easy access to data, for example, the 'thinkers' can begin to mine the rich seams of opportunity that are undoubtedly buried in, say, customer files. Using 'data-mining' software they will be able to excavate more details about customers than previously dreamed of - slicing and dicing it in different ways to pinpoint sales opportunities and areas for new business.

Of course, the key characteristic of the 'thinkers' is that they will not work in isolation - they will need to collaborate with others. Hence the value of the recent advances in the information superhighway which will let them see, hear and work with colleagues who may be thousands of miles away using voice-mail, video-conferencing, information-sharing and high-speed data transmission.

The future of IT lies not, however, in its power to connect all employees within a company to the right information at the right time but in the opportunity it provides to communicate with customers and suppliers and other stakeholders outside the organisation. In 1993, the average company spent 85% of its IT budget on automating internally, 15% or less on connecting to customers or business partners. By the end of the century, communications outside the organisation are expected to account for 60% of expenditure.

Direct, high-speed access to a worldwide audience will identify customers and create new markets. The information superhighway will enable companies to focus on individual customers and to tailor products for them. That, says Demarest, is the most exciting opportunity it provides. Since the Industrial Revolution, companies have concentrated on trying to make more and more of the same types of products, he explains. Now IT lets them tailor a relatively small range of products to a potentially vast set of individual specifications - choosing the paint, sun roof and hi-fi you want for your new car, for example.

The information superhighway will enable small companies, even one-man bands, to carve out niches in specialist sectors. Take Demarest's wife, for example. As a herbalist, she has a fairly narrow market. 'Even in the Pacific North West, the home of hippie ideas, there is not really much of a geographical market for the specialised skills of a herbalist,' Demarest says. Yet using the Internet his wife has managed to find six or seven dozen customers, scattered throughout North America, Western Europe and even some parts of Asia, who are willing to pay for and receive her services electronically. 'The market is sparse' says Demarest. 'If we had to use the road infrastructure to reach these people we could not profitably serve them.' Today in the US there are machine-tooling companies that conduct their entire sales cycle electronically. Orders are delivered over the Internet and fed directly into the computer-integrated machinery. Parts are produced in a matter of hours, shipped in Federal Express boxes, and delivered to the customers' doors 72 hours later, payment having been dealt with electronically.

The superhighway not only creates new markets, it also opens new avenues in customer care. Rather than be passed from one person to another when you phone a company with a query, your call can be dealt with by whoever picks up the receiver. Thanks to Caller Line Identification, you don't even have to give your name - the person who takes your call will see it on the screen a split second before picking up the phone. Call a mail-order company to ask what happened to the shoes you ordered two weeks ago, and, in addition to finding out the answer to your query, you might be sold a present for your partner's birthday next week (the customer representative will have been informed of the forthcoming birthday on the screen). LL Bean in the US has implemented such a system and the truly personal service creates wonderful customer appeal, says Demarest. 'You might have been taken for $200 by the end of the phone call, yet rather than having a bad feeling about it, you feel ecstatic.' But IT in the 21st century promises problems as well as panaceas. Not all customers, for example, will want to surf in cyberspace. Geoff Clark, systems controller at Dorothy Perkins, part of the Burton Group, is one of many retailers wary of the idea. 'Shop shopping' is part of the consumer culture, says Clark in the ZDS report. Home shopping, he believes, is a behavioural change that may not be widely accepted by the public for a long time. 'People do not necessarily want to do everything from one room.' Nor, too, may mankind wish to wallow in oceans of data. We soon suffer from information overload, points out Clive Holtham, professor of information management at City University Business School. The more information we have access to, the harder it becomes to pick out what is useful and relevant. Other worries about the superhighway in its present form include: the commercial domination of the Internet by the US; the inadequacy of its data security systems; and that the privacy of individuals may be under threat. The hype surrounding it as a mega commercial opportunity has obscured the hazards, Holtham says. 'The Internet faces a growing crisis of data quality.' There are also financial issues, such as how people pay for things bought over the line, especially when they are purchasing something as intangible as information. Then there is the risk of catastrophic failure, Holtham warns. The danger of this may be increased as telecoms suppliers are privatised, he believes. 'Under deregulation and competition from the IT sector, telecoms companies may not be able to retain all their traditional strengths of universal service, very high reliability levels, technical conservatism, and internationally agreed standards.' Another problem with the superhighway is that it won't be available to all who want it. The cable companies currently laying optical fibre in city streets will not be so keen to dig up country by-ways in rural areas - so not everyone will be able to browse the electronic shopping-malls.

The challenge for companies planning IT strategy then is to decide where IT's opportunities and limitations lie, both within and outside the company. So far, there has been little coherent discussion about the global information superhighway. 'The great bulk of the comment on it has been too technological,' says Holtham. 'The history of new technologies tells us they frequently end up serving very different needs than originally envisaged.' One fairly widely accepted view, however, is that the superhighway will serve the interests not only of corporate big boys but small companies as well. Communications between small businesses will be carried by the superhighway linked in a web of partnership and collaboration - the virtual company. In his book, Global Paradox, John Naisbitt outlines the possible scenario: corporate society will move away from the amorphous and large to the finite, the small, the specialist. From the customers' viewpoint, it will not matter how many sub-contractors or business associates are involved behind the scenes. What will matter is getting individualised products or services that meet their requirements. Much of the success in using technology in this way will hinge on hiring and keeping staff. Here again, many organisations are still getting it wrong. One problem is that company bosses, panicked by the fast pace of technological change, tend to dismiss people with skills in last year's programming language and hire young people out of college with the latest technical skills. This is a serious mistake. Experience of your business is far more valuable than knowing how to program in the latest language. 'It's relatively easy to acquire technical skills,' says Demarest. 'But knowledge of your business is absolutely indispensable. That's increasingly hard to hang on to these days and very difficult to replace.' Even at the top of organisations there are acute IT staffing problems. In the US, the average tenure of a chief information officer has fallen from more than five years in 1985 to 14-24 months today. In the UK the picture is similar. This is a disturbing trend, especially considering that most major IT projects last 18-24 months. IT directors feel torn between senior business managers who want access to new markets, and finance directors who want cost-containment. IT directors often avoid high-risk projects for fear of things going wrong.

Amid the recent welter of speeches and industry reports produced by IT gurus, a few clear messages emerge.

One is that to get ahead you need to focus on communicating outside your company rather than within it, to empower staff at the coal-face, and to make the most of your data in focusing closely on customers. 'It's about the ability to treat every customer as the only customer, to achieve an organisation among firms by bytes instead of bricks,' says Demarest.

But there is still far to go, especially in the service sector which, although it accounts for 80% of the IT spend in the developed world, has the lowest productivity growth at 0.8%. To get the full benefits of IT, companies will have to involve their technical people in business goals and long-term strategic planning. And be prepared for some radical changes. 'In the virtual reality world of the future, you'll be able to put on gloves and a headset for a meeting,' says Stephen Robinson of the London Borough of Kensington & Chelsea. 'It frightens people now, but kids will do it - it's only half to one generation away.' Fear is understandable. The potential of technology in business is awesome. But remember, there are no threats, only opportunities. Grab them while you can.

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