Technology Innovation and Job Interviews

What if you could use TiVo for a job interview? The candidate does the interview at the place and time of his/her choosing. The interviewer reviews responses from multiple candidates when and where convenient.

HireVue is facilitating just that. They work with the recruiting company to develop a list of questions. Consistent questions for each candidate. Each candidate has 30 seconds to read the question, 2 minutes to answer; no opportunity to rewind or re-answer - simulating a real interview. The interview can be done wherever (HireVue sends them a high quality webcam - which the candidate is allowed to keep). Or at the employment office or increasingly at a campus recruiting office.

Once the interviews are on the HireVue server, the employer can post comments on each candidate. Fast forward or rewind. It's ideal for first round interviews. HireVue estimates it saves between 50 and 75% of costs to have people fly or drive in.

They have allowed candidates from Chile and China to be reviewed by employers in France and New Zealand. Mark Newman, VP of Operations, tells me they expect to be running 4,000 interviews a month by the end of the year. With little brick and mortar!

Florence during the Renaissance

Welcome to my new blog. Some of you may have read my Deal Architect blog.

I spend much of my time helping CIOs reduce their “utility” spend with large, incumbent vendors and started my Deal Architect blog to focus on efficiencies and savings opportunities. But the more I work with CIOs the more I realize, for an amazingly new set of economics, they can leverage innovation from many new sources, often from completely unexpected places around the world.  While there is so much noise around “consolidation and the death of innovation” and “IT doesn't matter”. If you cut through the fog and the noise, we are really in the midst of a revolutionary time. And so I also started to write posts on the blog about innovative CIOs and business applications.

Florence_1I  believe all this innovation deserves its own blog - so I am starting a "spin-off".

This is what Florence must have felt like during the Renaissance with so much happening in so many technology areas:

“Mobile Internet” - see this fascinating presentation by Mary Meeker of Morgan Stanley as she generates renewed excitement this time around the “new Web”

Open Source - when Kleiner Perkins shows excitement, it is usually a pretty solid endorsement for a sector as this BusinessWeek article describes

BPO - a growing recognition in corporations business processes need to be “commoditized” and the wide array of call center, transaction processing and knowledge work that is being done in India and elsewhere

Sensor Telemetry - somewhat high-faluting term used by Accenture to describe all the neat payback companies are seeing from combining RFID, GPS and wireless technologies

Software as a service - the excitement being generated by AppExchange from salesforce.com and the growing understanding of operational and financial success factors for the model

Digital content and new media - the realities of the on-demand, blogging and podcasting world and how Madison Avenue is changing - and changing us along the way

Analytics - a growing focus on the challenge of master data management and the promise of next generation predictive analytics

Security and Surveillance: All the stuff from biometrics to other sensors to basic security for fraud detection and intrusion management

I did not even mention web services, mesh networks, collaboration, storage and server technologies and a whole bunch more.

Here’s what’s really exciting. This time “Florence” is virtual. Open source excitement from Scandinavia, mobile commerce excitement from Japan, BPO from India. New media in the US. Telemetry payback in utilities and healthcare. Security payback in financial services and government. BPO in insurance claims and mortgage processing.

And for a change, many of the technology initiatives do not require 8 or 9 digit budgets. You see this is why CIOs send me emails like this one ” ..more power to your elbow in driving out waste and excessive premia in our industry”. They all want the “innovation dividend” so they can book that trip to the new Florence. Exciting times!

Over the next few weeks, I will be moving many of the innovation focused posts from the Deal Architect blog .The Deal Architect blog will continue to focus on technology negotiation, process efficiencies and reducing “utility” spend. Look forward to your comments on both blogs.

Technology Innovation and T&E Processing

BusinessWeek has a nice article on how travel and expense management is evolving. Airfares being flagged BEFORE a trip is taken. Trendspotting. Flagging of unauthorized upgrades. BPO of T&E processing.

From an employee perspective, smaller portable scanners, electronic airline tickets, electronic statements, procurement cards have all made expense submission much more digitized. Vendors like Concur even allow old fashioned faxing of the shrinking number of cash receipts to a server. For a while I used to fax my receipts to my efax number and they would email it back in an attachment  much more compressed than scanners could. And with the way digital cameras are going,  every receipt should be digitized, except maybe tips and mileage.

Well, let's not give the IRS ideas. It is nice they do not need receipts below a certain threshold. That way we can all play a few games.

Technology Innovation and Netflix mailers

The humble envelope as competitive advantage? Impressive in this Business 2.0 article to see how Netflix has tweaked its DVD mailer over the last 7 years. Go to bottom of article and click through a gallery of the 13 iterations.

Innovation Season

BusinessWeek has a series of articles on the most innovative companies and its list (along with Boston Consulting Group) of the top 25 most innovative here.

Business 2.0 on the other hand has a list of 25 great ideas at a number of innovative companies.

Nice reads both. Interestingly, Southwest Airlines shows up in both lists. Home Depot and Wal-Mart show up in one of the lists. Proof that you can be operationally efficient and innovative at the same time. Indeed, as I wrote in The Discipline of Market Leaders, it is no longer an either-or.


Busyness = Bad Business Innovation

Annie Fisher at Fortune recommends we "slack off" more. We are multi-tasking too much and "the "time cost" of refocusing your attention may be only a few seconds with each switch, but the researchers found that, over time, it reduced people's total efficiency by 20% to 40%."

Cancel as many meetings as possible. Throw away that Blackberry. Free up time for creative, innovative thinking.

Of course she has to include mandatory mention of innovations at Google

"We want to take as much hurry and worry out of people's lives as we can, because a relaxed state of mind unleashes creativity," says Stacy Sullivan, the company's HR director. "And everybody's on flextime here, so we don't reward face time or working super-long hours. We just measure results."

But overall a good read...

Speed Demons

BusinessWeek talks about the speed of new product introduction. In industries like publishing. And with neat little tech companies like 37signals.

In tech in general though, we like to think we are agile and innovative. Not by some of the new benchmarks that are emerging.  Let's look at enterprise SOA as currently being defined against this lens. And what we are getting for the $ 90+ billion we spend with IBM. And Oracle, and EDS and...

Next generation enterprise applications

"I believe that it is only a matter of time before enterprise software consists of only four types of application: publishing, search, fulfilment and conversation."

" How we can prevent the unintended consequences of walled-garden approaches to content. How we can avoid DRM holding up innovation. Why identity and presence and authentication and permissioning are important. Why emergence theories and “democratized innovation” matter. How we can take advantage of the opportunities that mobile devices offer us."

This from the new (personal) blog of JP Rangaswami, CIO of the bank, Dresdner Kleinwort Wasserstein. I saw it courtesy of Ross Mayfield and have previously commented about his vision here.

Five comments:

Great to see a CIO blog

Refreshing to see a taxonomy at much higher level abstraction than current noise around Web 2.0, SOA, SaaS ...

To banks, information is lifeblood and they spend upwards of 10% of revenues on IT. In other sectors, the CIO is lucky to have 1 or 2%. So, he gets to "play" and innovate a lot more. Hopefully, other CIOs will get jealous and find the innovation money by squeezing their utility spend.

In addition to the usual barrage of cold calls, emails, snail mail, golf invitations - he has bravely opened himself to another channel of selling - or at least attempts at selling. I am already scheming!

Great to see a CIO blog.

Technology Innovation and Organization Charts

W. Edwards Deming, the famous management philosopher used to say that the organization chart was a flow chart.  It depicted a flow of blame. He helped the Japenese think about customer driven flows which mattered a lot more.

The reality is there are social networks within companies and they represent how most important work gets done - and innovation happens. BusinessWeek (subscription required) has a neat article on how companies are - quietly - mapping such networks within organizations. I say quietly because we persist in having formal organization charts even 50 years after Deming made his famous observation. If anything with Microsoft Visio and other tools we have glamorized the traditional organization chart even more - when we should be using them to map social network charts - "corporate X-Rays" as the article describes.

Also, see  here how SAP is innovating with its own internal social networks.

Ten Types of Innovation

Doblin is an "Innovation Strategy" firm headquartered in Chicago. I like their classification of 10 innovation areas and landscapes. They provide areas where companies can innovate and examples in each area (click on each). I like the fact that they talk about innovation not just in product design, or just in premium priced products.

Argue about Google not being on any of the lists or snicker about Martha Stewart considered a channel innovator, but it is, well, an innovative way to look at innovation.

Business Model e.g Businessweek.com
Networks and Alliances  - Sara Lee
Enabling Process - Starbucks
Core Processes - Wal-Mart
Product Performance - VW Beetle
Product System - Steelcase
Service - Lenscrafters
Channel - Niketown
Brand - Ben and Jerry's
Customer Experience - Disney Cruises

Technology Innovation and Knowledge Networks

I have written before about IBM's innovative Electronic Workplace.  SAP has been investing heavily in its own knowledge and collaboration networks as Jeff Nolan writes using more contemporary blogs and wikis. It is good to see these tech vendors innovate internally - as we know quite often the shoemaker's children get the torn shoes.

Technology Innovation and Law Firms

They come up with the maddening language that is influencing open source licensing, privacy and compliance debates, intellectual property protection. But lawyers themselves can be pretty conservative when it comes to using technology.

Or are they? I spent some time this weekend with Walter Aye, who runs a small law firm in Tampa. His son plays chess with my kids. And he was complaining about laptop batteries running out during court. Hard drives not being fast enough. His customizing his PCs with specific hard drive brands. Heat generated by chips. Failure rate of motherboards. I had to double check he had not taken up a part time job as a service technician. 

This survey shows law firms have been investing heavily in technology - the dramatic shift from WordPerfect to MS Word to the leverage of electronic document management.

The survey does not even cover law firm blogging (as this San Francisco firm is), podcasting for lawyers, web based depositions.

Of course, this ABA web site on technology for law firms appears to mostly have articles pre-2002. Yellow pads will continue to still be very popular.

Technology Innovation and Valentine's Day

NASA just released this picture of a heart shaped mesa on Mars.

Electronic matchmaking,
greeting cards,
instant messaging,
ordering of flowers and chocolates ...

Not your mom and dad's Valentine...Cupid now has Treo, blogs.

Chief Process Innovation Officer

Courtesy of James Governor, I saw this post by Joe McKendrick at ZDNet.

I like the theme.. but the post is a little too technology/SOA focused. Process innovation - or angioplasty - as I call it - involves revisting technology, people, compliance and security. From a customer perspective inwards. From that lens, SOA (and other technologies)  may actually be more "plaque" than relief in some scenarios. .

Technology Innovation and the Salvage business

Salvage to me always brings images from the Jim Croce hit "Leroy Brown ...meaner than a junkyard dog". So, when I sat next to Jim Reilly on a flight recently and he said he was in the salvage business the conversation almost ended. Then he told me he ran a B2B site. And I figured it was near death like most marketplaces. But when he told me they held the record for the largest single biggest auctioned on-line item (over $ 25 m for 4 turbines) - bigger then anything ebay has ever sold, I started to show some more interest.

Jim is COO of a Houston based company called SalvageSale. They work with insurance companies, risk and asset managers. He has been spending considerable time in Florida recently with hurricane affected asset business owners.

2 stories he told were fascinating. One was about frozen shrimp which was rejected by a large retail chain because the batch had gone over its stringent temperature specifications. But only marginally so. In the past, the supplier would have sold it to a local salvage shop for may be 5% of sale price. But with the reach of an electronic marketplace - both in thousands of potential buyers around the world and "re-furbish" service providers - the merchandise was checked and certified free of e coli and other flaws, re-packaged and sold for almost 40c on the dollar.

The other was around an expensive server damaged in transit. Instead of going through the reverse logistics of sending it back to manufacturer, local "re-furbishers" re-certified the box and re-packaged it. While the original warranty was void, the asset sold for a lot more than it would have  - not to mention the reverse shipping and insurance costs were avoided. Again recovery was many times what it would have been a few years ago.

His site is filled with other case studies similar to this. What he was describing was the emergence of a "good enough" marketplace - where bargain hunters, but not real bottom fishers, can now get access to less than perfect assets. His site has stringent rules on deposits in to escrow accounts and dispute resolution - controls to satisfy wiring $ 25 million to someone you only know from the Internet.

The quality of the assets and the trust factor are bringing more professional buyers and sellers in to the salvage market. Leroy Brown would not begin to understand the word "dis-intermediation" - but he has to behave and pay a fairer price to win in this marketplace.

Gartner Survey of CIO Priorities

Gartner's annual survey of CIOs (1,400 surveyed with average IT budget of $ 71 million and staff of 300 IT employees) shows Business Process Improvement as the highest priority for 2006. Not surprising based on comments I got back from a few of them as they read my "process angioplasty" post.

Many of the innovative CIOs I have written about in the last year - Steelcase, Starbucks, others have focused on mobility, telemetry, predictive analytics, biometrics and collaboration applications. They have found huge paybacks from relatively small investments in those areas. Not surprisingly, those technologies get high priority. While the software industry keeps hyping up SOA as the silver bullet, CIOs rated that 6th in importance on technology priority. Another buzzword "virtualization" shows up 9th.

Monster Mashup

Courtesy of Dave Berlind I saw this definition of "mashup artists" using ubiquitous APIs to build new applications on what Dave calls the "uncomputer".  I then saw this "Mashup Camp" (already sold out).  The creative prospects are unbelievable -and I was marveling at how far we have come from the initial APIs in the enterprise world and the ambitious Open Applications Group attempted in 1995.

But why just stop at APIs? It would be great to see other building blocks - RFIP, GPS, open source, predictive analytics - being similarly being mashed up to create enterprise applications.

Any one care to join me to think about a Monster Mashup camp on the lines above? Say, around Halloween?

Frederick Taylor and Technology Services

In 1911, Frederick Taylor wrote his seminal The Principles of Scientific Management. It changed the way work was done and influenced thinking around specialization and productivity measurement. And it has allowed many efficiency and process improvement consultants to develop lucrative practices along the way.

Technology services (systems integration, outsourcing, contract staffing) valued annually at over $ 500 billion worldwide are procured with the promise of making corporations even more efficient. As the services market morphs (HP may be looking to acquire CSC, private equity funds looking at ACS, BPO deals becoming bigger than ITO deals, offshore vendors continuing their market share grab), the industry should take a hard look at its own delivery models - and apply Taylor's concepts to itself.

While most of these practices I list below are in use in the industry, their usage tend to be spotty:

a) Geographic optimization - Offshore vendors have shown they can perform 70 to 80% of work in remote locations. But remote does not always mean thousands of miles away. It could be low cost, rural locations. On the flip side, staff that need to be assigned to client site should, to the extent possible, be local. The tech services business keeps the airline industry alive. Long-term travel is not only expensive, it also saps staff and project productivity

b) Functional optimization: Through use of shared service centers e.g.  specialists servicing multiple clients at the same time - e.g. DBAs monitoring performance of multiple client databases. And factories for coding, data conversion, testing, documentation etc with specialists armed with specialized tools.

c) Capacity optimization: Through sub-contracting arrangements, just-in-time recruiting/ training capabilities, use of "shadow" teams, "buffer zones" - concepts widely used in production and inventory management provide clients the ability to rapidly ramp up or down capacity. One of their biggest selling points to CIOs is the ability to turn their fixed staff costs in to variable - but services vendors promise that but seem to just end up being another, often higher fixed cost.

d) Continuous improvement - Expect more from each staff  and your teams each year. It was considered inhuman a century ago when Taylor designed time and motion studies. It is still considered inhuman - but the brutal economic reality is pay raises without productivity improvement equals inflation. The 5th Siebel project should take less effort than the 1st, the 50th should take even less and so on. The second year of an outsourcing contract should show improvements, the third year even more. Offshore vendors cite continuous improvement around their CMM, Six Sigma initiatives - but even there you have to push them for tangible productivity improvement metrics to offset their growing wage inflation.

e) Automation: It is starting to happen gradually around systems management, it needs to happen more around systems integration. While services firms talk about selling "solutions", they really are still very driven to sell bodies and time. Man and machine need to be packaged - and optimized - in solutions. The key word is optimized - it is infuriating to have an IVR go through security questions, then have the call center rep ask the same ones. The other advantage services companies can pass along to their customers is time shared software licenses - much lower than each company licensing its own, wide array of testing, conversion and infrastructure management tools.

Optimizing across geographic, functional, time zone. man-machine and other constraints is complex . But, over the last century the industry has taught its clients about the theory of constraints, economies of scale, lean manufacturing. As they say at Microsoft - the industry needs to eat more of its own dog food. With the seismic changes in the industry that will be the only way to survive and thrive.

Web, Schweb - Enterprise Predictions for 2006

Whatever we remember 2005 for, we can all agree it was the year blogs exploded in numbers. And bloggers, shy as we are, are not hesitant to look ahead. But scanning the many blog projections for technology in 2006 we see a majority focused on Web 2.0 - Google this, Flickr that. Of course, with Apple and amazon.com enjoying a bumper holiday season, the focus on consumer technologies is only accented.

Much as I love Google, it cannot process BOMs for the average manufacturing company. Much as my daughter loves her iPod, it will not process insurance claims. Whoever does whatever with AOL will not improve supply chain logistics at UPS.

As we did in the last Internet Bubble, we risk making the Web and consumer technologies the center of the technology world. It's the Gates/Plattner scenario again I wrote about earlier. As I wrote in Florence during the Renaissance, innovation is happening in a number of other areas which CIOs are actually much more excited about - especially at amazing new price points. But as I have written in several columns this year, many elements of enterprise technology spend are also grossly overpriced.

So, here's my forecast for next year - good and bad - with more of an enterprise focus, unsexy as that may be relative to Web 2.0:

1) SAP, Oracle and Microsoft (around enterprise software) will have tough years as pricing pressure intensifies on core products, particularly on maintenance revenue streams. SAP will de-emphasize its web services talk and go back to focusing on applications and business payback. Oracle will go the other way and talk more about architectures as it masks the enormity of rationalizing its various application acquisitions. CIOs will increasingly question if all they are doing is subsidizing Microsoft's intense focus on Google. It is behind its own schedule or its competition in so many areas CIOs want to hear about - from Vista to Business Solutions (Dynamics)

2) We will see version 2.0 definitions of CRM, SCM, HRM etc - almost every software category - emerge which will a) redefine process coverage (e.g. CRM is more than SFA and call centers, SCM is much more than planning and optimization) that the market leaders have chosen to define the categories as and b) utilize appropriate, newer technology building blocks - GPS, RFID, RSS, predictive analytics in the category re-definition process.

3) CIOs in many non-manufacturing verticals will tire of waiting for robust software solutions for their major engines (claims processing, trading systems) and more aggressively look at BPO options to support these processes. These CIOs, especially in financial services verticals, will also pioneer attempts to leverage web 2.0 driven discovery and social networking tools with their enterprise applications.

4) An infrastructure vendor - likely Dell (or Sun as it tries to redefine itself and if it can get over its allergy of labor intensive products) - will introduce infrastructure outsourcing at aggressive, "utility" price points to cover a wide range of network, database, desktop and other services. In its hype cycle for outsourcing Gartner defines infrastructure outsourcing as one of the most mature. As systems management automation and offsite, shared labor models mature, an efficient services "supply chain" becomes much more viable.

5) A generation of "appligators" will emerge - small systems integrators which specialize in innovation areas like web services or telemetry and willing to work with clients in small, intense teams. We will not be able to tell till 2007 if they are of a more modest breed than their predecessors, the Scients, Viants around the ebiz boom in late 90s.

6) Large US and European outsourcers (EDS, Accenture and by extension IBM, HP etc) will find themselves squeezed between a) private equity firms who want to take their valuations from 1 or 2X revenues to close to 10X many of the Indian vendors enjoy and b) CIOs who want price points much closer to what Indian vendors can quote. This will force these outsourcers to finally get serious about becoming much more efficient with automation, shared services, global delivery models etc. They will find Indian vendors expanding into horizontal process consulting and BPO (finance, HR) beyond their traditional IT competencies.

7) An emerging truism in global sourcing circles is to look to China for low cost manufactured products, but to India for services. We will see China start this year to challenge this assumption and also flex its muscle around software and services. The Chinese GDP was recently "updated" by another $ 300 billion. Apparently they had "forgotten" to count their growing services sector.

8) SaaS models will come under increased scrutiny from buyers about stringent SLAs and business continuity plans. In 2001, after the India/Pakistan nuclear war threat, Indian vendors went through a similar spike in scrutiny. After last week's well publicized outage at salesforce.com, this will become a required due diligence step in evaluating SaaS options. The scrutiny helped Indian vendors mature - it will similarly increase corporate confidence in SaaS.

9) CIOs will do serious "spend management" around storage (due to proliferation of volume demand) and telecommunications (due to proliferation of mobile, broadband and other products) investments. For all the promise of VoIP and free municipal WI-FI, the reality is telecomm services are still the single largest category in IT budgets. Most CIOs would also love to avail of Google Mail's 2.7 gigabytes of storage for free!

10) Finally, one more of a prayer for the US economy than a prediction. Realize 2006 is an election year and Enron's Ken Lay will finally go on trial - but Gartner predicts 15% of 2006 IT budgets will be related to compliance with Sarbanes-Oxley. And as we know in different industries we have other compliance expenses related to FDA Validation, HIPAA etc. This is a tax American corporations have to pay that most of our global competitors do not. So, I predict CEOs will start lobbying Congress to back off on the compliance burden. It has been 4 years since the Enron scandal. Today global competitiveness in a "flat" world is a far more compelling issue than compliance.. So I predict the SOX gravy train for many software vendors and auditors will slow down in 2006.

This plus 6 quarters may buy you a cup of coffee at Starbucks! Today plus 4 fiscal quarters out, a version customized by Zodiac signs is planned if a fraction of these predictions come true...

Technology Innovation and Santa

Over the holidays I got from a couple of different sources a cartoon which showed kids in line to make a phone call to a Santa "outsourced" to Bangalore. Cute, but Santa knows better. All he has done is outsourced his sleigh to UPS and his elves to amazon.com

Amazing the logistics and technologies going in to the gift order taking and delivery business.

The core technology infrastructure at UPS is massive  - 14 mainframes representing over 30,000 MIPS, over 125,000 PCs, and over 80,000 DIADs (Delivery Information Acquisition Device the drivers carry). The UPS.com site gets over 145 million hits a day.  The infrastructure processes 20 million packages a day between Thanksgiving and Christmas - most of them gifts. As this interview with CIO David Barnes shows, UPS is big on package flow process improvement and relevant technology like finger scanners to make their drivers ever so efficient. As this interview shows the payback is impressive - reduction of 100 million miles just in the US (they could use hybrids!), or 14 million gallons of fuel, not to mention labor and overtime.

amazon.com has moved ways past books (it sold a $ 94,000 set of diamond earrings this year!) This BusinessWeek story and photo gallery shows the order tracking and fulfillment process.  Scanners, sorting machines - pretty efficient. Interesting that gift wrapping and shipping is still fairly manual.   But the company's Delight-O-Meter - a metric tracking holiday sales shows pretty lofty numbers- 108 million orders this year.

Of course, it is not just UPS - Santa also uses Fedex, DHL, USPS. And it's not just amazon - it's L.L. Bean and so many other e-tailers. And Santa is even becoming good about taking "lumps of coal" back. Returns and reverse logistics are starting to get quite a bit of attention.

UPS has been running commercials where this guy enters a room titled "Oracle" and tells the goddess she is no longer needed for logistics and has been re-assigned to accounting. Not sure if it is a swipe at our friends in Redwood Shores, but UPS can afford to feel pretty good about its technological prowess. Santa agrees.

Technology Innovation and Steelcase

This continues a category of posts focused on Innovative Uses of Technology for Business Benefit.  As I wrote in The Giant Crunching Sound, CIOs are crunching incumbent, utility technology spend and freeing up dollars for innovations.

While it modestly describes itself as "..a company dedicated to helping people work more effectively while helping organizations use space more efficiently", as you walk through Steelcase's campus in Grand Rapids, Michigan or any of its "work-life" centers around the world, you see innovation and creativity everywhere.  Steelcase is a global leader around ergonomic and great looking office furniture (its LEAP chair won a number of design awards when introduced in 1999). It also owns a stake in IDEO, an innovation "machine" I have written about here. Even its trucks are considered innovative and show up in photo collections like this one

So, it is fitting that Steelcase's CIO, John Dean is passionate about innovative IT projects. I recently asked him about projects over the last couple of years he is most proud of. He identified four:

a) WI-FI everywhere.  All of Steelcase's major buildings and plants have coverage.  Has had a huge impact on knowledge worker productivity - employees can carry network based and local content and tools to every place, including the cafe, through their laptop or tablet (John has been using a tablet for several years now).  Discussions are enriched with the content, decisions are accelerated.

b) Generating marketing graphics and manufacturing instructions from PRO/E. Steelcase wrote the modules using the integration APIs provided by PTC.  Impact?  Removal of manual replication of graphics and Numerical Control (NC) programs dramatically improving speed and quality

c) An early implementation of SAP's Supplier Relationship Management (SRM) functionality. The payback due to standardized processes, self-service and negotiated deals enabled by the technology has been impressive.

d) Putting GPS technology on the company's  fleet of trucks  (yes the ones  popular with kids and photographers) to speed customs clearance, improve traffic planning and tracking of delivery metrics

John's team has to support a business which offers its customers a huge amount of choice - Steelcase processes 40,000 order lines per week across its 60,000 product codes each of which has unique BOMs.   

That much complexity could easily result in bloated processes and technology. A big believer in "lean" techniques, John manages to find money for innovations by "crunching" his utility IT spend. Other than the SRM project, the other three projects above were small investments with huge payback. And SRM leveraged a previous investment in an SAP backbone implementation.

Crunching utility IT spend? It is fitting that Steelcase offers its customers a product called a "Crushed Can"....

Business Process "Angioplasty"

Ross Mayfield's post The end of process last week has stirred quite a bit of commentary around process.  I had a book proposal last year with the title of this post and the outline is still gathering dust. Hopefully, I can more gradually express my thoughts over a series of blogs.

Business processes are arteries, highways, rivers. They keep corporations and cities running - but need to be kept clean of different types of "plaque". They periodically need dredging and angioplasty.

In 1990, Michael Hammer wrote a seminal Harvard Business Review article "Reengineering Work: Don't Automate, Obliterate". It was powerful - a look at business process from a customer's eyes. Hammer wrote what Ford Motor did after studying Mazda's accounts payable process. If a customer would not pay for a task in a process, consider eliminating it. To a customer, process is like spell checking software. He can tell when you did not utilize it, but he is unwilling to pay much for it. In that sense Ross is right. Process should be un-intrusive. But look what we have made it.

Somehow, Hammer's work got mixed up with ERP software (he himself did a series of seminars with SAP and Deloitte). The thinking was the emerging client/server ERP software reflected best practice processes. Did not matter that it mostly changed the user interface and the database from previous generation transaction engines - the check processing, the credit approval and other steps did not change much. Implement it and magically you became "world class" was the thinking. It would get you Toyota's Lean and GE's Six Sigma - without the discipline and the investment. It was a fad diet. After ERP, we moved to SCM, CRM and other business applications.  Technology is like cholesterol - the good kind and not so good kind. As I have written throughout my blog, "tiger teams" are showing huge payback from small, creative technology deployments. On the other hand, the payback from large enterprise applications in many cases has been questionable.  Not too many companies did what Ford did - obliterated the process, not just automate it. We allowed software vendors and consultants to define what process should be - not the customer.

Worse, the technology created a bubble of demand for a new category of worker who could speak SAP, Siebel and wanted to be paid for that special skill.

Then post 2001, we have been burdening our processes with security steps. Security is clearly important but you just have to see TSA at airports to know that some types just adds cost and time to processes. I do not feel any safer when driver's licenses and boarding passes are checked 3 times within a distance of 500 feet.  The ratio of hangers-on to screeners is way too high. Do you feel any better about security around financial records just because the credit card call center asks you 5 personal data points before they answer a basic account question? We are letting a different kind of consultant - the Giuliani kind - define process, not the customer. Much as I admired him as mayor, I am more cautious about him as a security consultant.

Then we have compliance. SOX across the board. By industry - HIPAA, FDA validation and others. Most reflect opportunistic laws from politicians.  OK, so Enron got clever. There were plenty of opportunities for politicians and auditors to lasso it not just enact SOX as a reaction. The laws then get converted in to half-baked guidelines from bureaucrats. They are interpreted by auditors who really do not understand the impact on supply chain and other non-financial business processes they are asked to opine on.  We are letting a different kind of consultant - the Big 5 audit kind - define process based on internal controls,  not the customer.

So between 1990 when Hammer wrote his classic and now, we have clogged various processes with 4 types of "plaque" - questionable technology, people costs tied to that technology, over-zealous security and opportunistic compliance.

And while we have been clogging our processes, we have been patting ourselves on the back. Many corporations benchmark themselves using data like that found in Hackett Group's databases. Hackett has some of the best process benchmarks around but till recently mostly had data on Western corporations and Western labor rates - not the new economics emerging from China and India. Even the first-quartile performers in Hackett's benchmarks look sluggish in this global race.

Some companies have seen the light and are looking at business process outsourcing (BPO) options to lighten their processes and lower transaction costs. But even there many tie the BPO provider's hands - make sure your transaction engines are of the Oracle 11i variety. The results are what should matter, not the brand of the technology.

Time to go back to the customer's POV. He/she will pay a premium for product innovation or customer intimacy, but not for the prettiness of your checks or your credit approval process.  When the Chinese and the Indians catch up with us on product innovation/customer intimacy over the next decade, we can only pray they will have learned bad process habits. Otherwise, we may have to obliterate our processes in a hurry.

Better to start now...with a "why" attitude. We should be asking that early and often of our software vendors, our systems integrators, our auditors and our politicians. Don't Accept. Obliterate.

Author's Note: a couple of readers  read my BPO comment as my "solution".  Actually, my preferred solution would not be BPO. I pointed it out as a path companies are choosing but even then not letting go of their technology platform.

Having seen IT outsourcing for 2 decades, I firmly believe in the adage  "make a process efficient before you outsource". With many business processes so broken just handing over to BPO provider will not magically fix them. Besides, the economics of many western BPO providers would burden the processes even more.

Technology Innovation and Prince Charles

Prince Charles in an interview with ABC News  said this about technology, "If you make everything overefficient, you suck out, it seems to me, every last drop of what, up to now, has been known as culture,"

"We are not the technology. It should be our ... slave, the technology. But it's rapidly becoming our master in many areas, I think," he said.

May be he does not realize how many classical composers are now downloaded in MP3 format. How many period pieces are available in DVD format. How museums and libraries are benefiting from technology. How WI-FI and WI-MAX will allow rural living to continue and get richer.  How even his beloved polo is being helped along.

The tech world needs to win him over. As part of the first generation of royalty to have grown with television and computers we need him as a fan...

Tom " Passion" Peters

If you have ever seen "Mr. Excellence", Tom Peters present on stage you understand the meaning of the word passion. The man who made "Management by Walking Around" mandatory corporate behavior walks so much around the stage, you worry about his exhaustion.  So it was great to see this inspirational post from him. Even when you are dog tired (and God who would not be after a 76,000 mile trip)  what you are working on may be the most important thing for your client or customer...find that extra ounce of energy.

I posted this blog under the Innovative Uses of Business Technology category because Tom continues to exhort excellence, creativity, breakout performance. As I have written before CIOs should be pushing to get an Innovation Dividend and then doing their own applied innovation as Hertz, Starbucks. Jetblue and others have done. As they do so, Tom's zany, think out of the box concepts are just as important as building blocks of emerging technology.

Tom  is also a very generous blogger. Many of his prolific presentations and publications are free for download on his blog under resources.

I find it ironic that the Forbes tirade against blogs recommended publishers sue bloggers for copyright violations. Pretty soon - it may be the other way round. Tom (and many other bloggers) offer the world so much for free.

Keeping on walking, Tom!

Innovation by Re-organization?

3M has long been known as an innovator

But as this Business 2.0 article mentions "A little over five years ago, several top executives at 3M called together their senior managers in R&D to show them the not-so-rosy writing on the wall. The company’s annual revenues were stalled, and the new-product pipeline was inefficient and unpredictable. Groups of researchers had become too fragmented to develop ideas that led to breakthroughs or blockbusters. In short, innovation at the century-old American icon needed a reorg. Soon thereafter, newly hired CEO James McNerney -- a Jack Welch protégé who had been a finalist for the top job at GE -- tapped Larry Wendling, the vice president in charge of 3M’s central R&D lab, to rev up the company’s invention machine."

Reorg as the solution? Too many corporations reorg every few months. What is interesting about this story is how the re-org  re-energized innovation - the relevant kind that yields new revenues and profits. Read on...

Fortune Innovation Summit

In keeping with the spirt of Florence during the Renaissance I have recently written about, I just received an invitation to the Fortune Innovation Summit

As I read the agenda, I felt pretty good that I have already written about many of the companies/individuals being discussed (see links I have embedded in the  text below) and more - like  Hertz, Jetblue, NFL, US-Mexico Border and others.

So, dear reader just read about them here and send me the check instead! No, seriously this should be a neat conference:

"A practical look at the strategies, tactics, models, and mindsets top brands in a variety of companies—Adobe, FedEx, Genentech, HBO, IBM, Target, and more—are using to innovate their way to profitability, growth, and value.

Innovation case studies focused on categories of excellence: Products-Scott Cook, Intuit; Partnerships-Ken Lombard, Starbucks Entertainment; Branding-Horst Schulze, Ritz-Carlton, West Paces; Talent-Billy Beane, Oakland A's.

Remarkable insights into how visionaries from outside the business world—including LAPD chief William Bratton, philanthropist Mike Milken and SpaceShipOne's Burt Rutan—have found new ways to solve old problems.

Strategies from business transformation experts such as Blue Ocean Strategy co-author Chan Kim, MIT's Eric von Hippel, and Stone Yamashita's Keith Yamashita"

Technology Innovation and Xcel Energy

I am fascinated by how different companies are using technology to solve their "last mile" issues - laying cables, delivering boxes, scheduling field engineers etc. so I enjoyed this article about how Xcel Energy is using technology for its dispatch function ...but there is more.

What is interesting here is how the company pushed 5 of its vendors - IBM, Indus, SPL, Mercury and Itron - to more than deliver their packaged solutions but instead to work with each other and innovate.

This is encouraging because as I have been writing my innovation series and talking to a number of CIOs,  the feedback has mostly been the innovation teams have been internal and those teams have taken off the shelf (though early) technology like WI-FI or RFID and run with it. When I asked one executive what role a certain systems integrator played on his innovation project, his answer was very direct - "We are the brains, they are the hands".

If vendors expect innovation v/s utility pricing, they will have to step up like these vendors did for Xcel.

Hertz and Customer Service Innovations

Ask most travelers what the least hassling aspect of a business trip is, and the likely answer is that related to their rental car.  That may seem like a left handed compliment but given the joys of travel these days, it is a compliment. Hertz Rent-a-Car, now part of Ford, but soon to go IPO, is one major reason for driving customer service that the rest of the industry has to emulate. And a lot of that service comes from leveraging one technology innovation after another.

While most Hertz employees are pleasant, I love the fact that on most rentals, I can get away with a total of 4 interactions each averaging a minute or two with them.  I get on their courtesy bus and tell them my name. I show my driver's license when I exit the garage. I tell the attendant the mileage and fuel level when I return the car. I tell the shuttle driver the airline I am flying. Every thing else is automated or uses self-service technology.

Start with the web-site for reservations.  First introduced in 1996,  the site has evolved to support multi-lingual customers in over 7.000 locations around the world.  Given one way drop-offs, weekend rates, corporate discounts and an amazing range of cars and options, the site is pretty easy to navigate. You can print driving directions from the site (uses Microsoft Mappoint) or from a kiosk when you land. The kiosk computerized directions were introduced way back in 1984. Most competitors still only hand out paper maps, so I must admit I have cheated and availed of the Hertz kiosk if I happen to be renting from a competitor.   Of course, with the on-board option on many of their cars called NeverLost you can get GPS navigation, first introduced in 1995.

When you get on their courtesy bus, the driver has an Intermec handheld computer which allows him to relay on an AT&T wireless network to the garage which customers are en-route. That way, you could be coming in at an unplanned time and they still make sure the car is assigned and ready to go.  At the garage canopy, there are electronic boards pointing the customer to the assigned parking space - handy given the bigger locations have hundreds of such parking slots. They have the contract printed out and in the car. The garage attendant at the exit verifies your license, asks if you want to prepay for gas and lets you on your way. Many of the competitors still make even their frequent fliers sign contracts at 5 places in triplicates. Of course, they also try to sell you more insurance and upgrades you do not want.  From entering their bus to out of their garage averages 15 minutes, compared to twice or three times with many competitors. Of course, with WI-FI at Hertz garages, you can choose to stay and work on your laptop as long as you want - but it's your choice.

The cars themselves are loaded with technology (if you choose the options). In addition to the GPS mentioned above, Hertz has Sirius satellite radio (and likely soon satellite TV - Avis already has an arrangement with DirecTV), and DVD players handy for family trips.  (Caveat:  see growing privacy and law-enforcement concerns with tracking devices).

It is the streamlined return process which has always impressed me, and allowed me to catch a few flights I should have missed.  Attendants with their wireless devices and printers can process returns in the parking lot in seconds and allow you to jump on the courtesy bus. While most of the competition now offers something similar, Hertz pioneered this in 1987. The bus in turn is wired to tell you what gate your flight is scheduled for take-off.

Back to the web site.  Each rental receipt is available on-line for 6 months. Frequent flier mile requests can be processed on-line. Try getting retroactive credits with other travel companies  without calls and paperwork!

This is all the technology a customer interacts with. Behind the scenes is a sophisticated reservation and inventory management system, scheduling technology to optimize the pick up routes across various terminals at airports, maintenance record keeping for over 500,000 cars and so on - a pretty complex network.

Post 9/11, a number of airports have moved car rental garages away from terminals and also mandated shared shuttle service. Some of Hertz's innovations have been negated with this supposedly "equitable" treatment of all rental companies.  But given its track record of "firsts" in the industry, Hertz still is a shining example of how technology can dramatically improve customer service - in this case. by dramatically reducing the "face time" your employees need to have with your customer.

IBM's Innovative Electronic Workplace

This continues a  category of posts focused on Innovative Uses of Technology for Business Benefit.  As I wrote in The Giant Crunching Sound, CIOs are crunching incumbent, utility technology spend and freeing up dollars for innovations.

First a caveat. This is a post about a technology vendor. The webcast I link to below has sales slides for IBM Global Services. I am not endorsing their capabilities - more how IBM internally has leveraged technology to create an innovative workplace environment.

I first saw an IBM presentation in 1996 on how they had re-engineered their employee travel expense processing.  They had taken a very manual, paper based process around approvals, receipts, audits, reimbursements and automated it using fax, workflow, digital imaging and archiving and neural networks (for exception analysis). While those technologies seem ancient today and there are many packaged solutions today,  10 years ago, the  innovative use of technology had helped reduce their travel accounting staff 80% from 1993 to 1995. "Innovation" used to squeeze their "utility" spend.

Recently, IBM presented its "On-Demand Workplace" at an Information Week conference I attended.  It is interesting to see to see how IBM has evolved over the decade several similar employee focused applications covering collaboration to training to provisioning. IBM says it has realized over $ 680 m in annual savings. The slide below shows some of their "savings" areas.

What is innovative is the mesh of self-service, portal and other software and hardware which has been leveraged in creating this electronic workplace. In a lot of ways it brings together its global work force of 300,000 + employees, almost half of which are almost constantly mobile - their sales and consulting staff. The payback from that common cultural and communication tool is, of course, much harder to quantify.

Technology Innovation and Starbucks

This continues a  new category of posts focused on Innovative Uses of Technology for Business Benefit.  As I wrote in The Giant Crunching Sound, CIOs are crunching incumbent, utility technology spend and freeing up dollars for innovations.

Starbuck's HQ in Seattle and proximity to Microsoft and amazon.com must help, but I am impressed at the number of technology innovations they have taken advantage of over the years to keep up with all the product innovation their stores showcase.

The most visible, of course, is  the availability of WI-FI in most of their stores. What is impressive is how far back it made its decision to do an aggressive roll out. Has it helped revenues? Numbers are hard to come by - though this post would suggest mom-and-pop coffee shops are also under pressure to offer similar services and the number of providers have grown significantly. Using my personal sample size of one - I looked up my T-Mobile Hotspot usage and in the last 9 months I accessed their network over 30 times at Starbucks in different cities. I am a one-coffee-cup-a-day person and probably would  not have stopped at Starbucks without the WI-FI.

It fits in with Howard Schultz, the Chairman's vision of Starbucks as the Third Place (the home and work being the other two) where you spend much of your time. And if you do spend time there, you invite friends, colleagues, you try teas, pastries, maybe linger for your second or third cup  - traffic and business increases.  McDonald's has the same vision - but its "store of the future" is still in concept mode.  Starbucks has a few years lead over every other chain.  Another payback from the WI-FI network -  the employee base in the retail chain is "connected". 

Not just coffee or snacks  - it allows Starbucks to diversify in to other product areas. Starbucks  is now offering music downloads at its locations and  by extension its music collection through an XM channel. Some day you may be able to order your favorite Grisham book custom printed while you enjoy the java.

Then there was the decision to roll out its prepaid/debit card in 2003 to migrate an already loyal, frequent customer base.  Also, the  use of RFID not just to track shipments but to validate supplier employees making deliveries at its stores.

None of this is "break the company" stuff -  the technology is relatively well tested and Starbucks has partnered well for most deployments with the likes of HP and Bank One.  It is, however, so well aligned with the company's overall innovation culture...

GE and Offshoring

Till the Wall Street Journal wrote on March 23 about GE’s role in India’s IT and BPO success, few in the US appeared to know the extent of offshoring at GE.

4 years ago I took a client from a major non-US GE competitor on a due diligence trip to India. As we visited various vendors I started to add up likely GE project staffing at each of the vendors and did some rough calculations. By my estimation GE had a $ 1 billion dollar a year advantage over this company through its sophisticated use of offshoring.

GE has been masterful in its offshore program and vendor management – going through waves of preferred vendors to keep rates in check, astutely picking up equity stakes in these  vendors to lower long term investment, tying its business unit CIO bonuses to specific offshore (v/s onsite) team metrics,  pushing its Six Sigma philosophies through its offshore vendor ecosystem, building parallel captive units in addition to outsourcing and so on. 

It is a remarkable story. GE’s offshoring rigor is a best practice other companies should emulate. Of course, there are people who take a narrow view of such offshoring. They need to see the other side of the coin - GE recently announced that 60% of its growth will come from developing countries in the next decade versus about 20% for the past ten years.

Software's New Menace: BPO

When Ray Lane speaks, the technology industry listens. I read his SandHill.com column on a trip to India. There, the fast-growing business process outsourcing (BPO) market thinks Ray did not go far enough in his advice to the software industry. Vendors need to provide software as a service ? a BPO service.

The Indian view is corporations increasingly want ?cooked food? whereas the software industry still wants to sell raw food and Weber grills to customers so they can cook at home. And of course, many Indian vendors do not feel obligated to use currently available software platforms for their offerings. Still other vendors are on the lookout for software platforms to acquire and transform into services plays.

We all know that India (and other offshore markets) has become a hive for software development and support. In the coming BPO wave, existing offshore IT vendors and other offshore start ups are offering to take over horizontal business processes (finance and accounting, human resources), vertical processes (mortgage processing, media animation), and knowledge-based activities (analytics, market intelligence) for their customers. In doing so, they are cannibalizing the need for licensed software either in implemented or ASP mode. So even if software vendors move to subscription and other service-based offerings as Ray recommends, many may find themselves increasingly locked out.

Somewhat reminiscent of vertical marketplaces we saw in the late 90s like Neoforma and PlasticsNet, a number of BPO offerings aimed at ?micro-markets? - mid-sized CPAs, logistics services, debt collection services ? are being spawned. And if you roll your eyes at the VC money that was sunk in to those marketplaces, this time around most of the BPO offerings are customer funded ? many by blue chip companies.

Recently, I partnered with ValueNotes, an Indian market research firm, to conduct a study of 50 Indian BPO firms. We found the average revenue of the firms surveyed was approximately $27 million after an average of four and one-half years in operation. In other words, these BPO providers are just about to hit their stride.

While larger vendors may not feel intimidated by this, a number of focused software vendors should be concerned. I was not around Florence during the Renaissance, but I suspect the creative energy then resembled what you see in the BPO market today.

Of course, BPO is not just an offshore phenomenon. EDS, Accenture, HP, IBM ? all of them offer their own variants. ADP and Hewitt have offered HR/payroll outsourcing for decades, UPS supply chain outsourcing and so on. What is scary (or exciting depending on your perspective) is the price points, the ?micro-market? focus and the performance standards of the offshore vendors.

Benefits of BPO Offerings
The BPO providers deliver many of the product characteristics that software vendors have struggled with for years. Here is what corporations will increasingly be able to buy from these firms, and software vendors will have to compete against:

? Genuine SLAs. Not just a 30 day warranty, but a defined, multi-year, high threshold service level agreement with specific penalty clauses for non-performance.
? Freedom. Insulation from the - software license, implement, upgrade, bug/fix, pay annual maintenance, train/retain unique software talent - cycle.
? Budget predictability. Customers can count on a defined budget rather than that amorphous word most software vendors offer ? TCO. (Okay, so I was guilty of building ERP TCO models while at Gartner, but in the decade since, TCO is still wildly divergent from customer to customer?)
? Demand-driven capacity. More variable sourcing tied closer to demand metrics ? not just pricing based on secondary metrics like revenue or users that the software industry commonly uses.
? ?Everyday? low pricing. New price points which will make even world class leaders in Hackett Group?s benchmark of white collar processes (e.g., the cost to cut an AP check) look inefficient.

Tactics for Software Vendors
Although the BPO value equation is compelling, software vendors still have several defensive and offensive tactics they can adopt to ward off the BPO threat:

? Adopt a new mindset. To many software executives and financiers, ?services? is still a dirty word. In the last decade, well-managed services firms like Infosys and Cognizant have shown they can consistently deliver high margins and scale linearly ? two traditional criticisms of services. And Wall Street is rewarding these companies with valuations of more than 10-times revenues. And its not just BPO - there are opportunities for new sets of services e.g. bundle annual maintenance (the vendor portion) with application maintenance outsourcing (the user portion) to take over the entire support supply chain. To do this, software companies need to learn employee ?re-badging? and knowledge capture/playback techniques ? skills service providers like Accenture and Wipro have honed for years now.
? Get serious about process benchmarking. How many software executives can cite with authority key business metrics (inventory turns, closing cycles, rejection rates etc) at even their largest customers? There are too many ?ROI? case studies in the industry today masquerading (poorly) as serious customer benchmarking efforts. These are the metrics the BPO vendors are focused on ? so should software executives.
? Protect your channel. As we know, product development is far easier than customer acquisition. The offshore BPO vendors are still in the early stages of customer acquisition. Go back to your existing customer base and offer them your own BPO services (with your own offshore delivery capability or BPO partner). As an alternative, CEOs and VCs should increasingly view BPO firms as attractive ?exits.?
? Use BPO to enter new markets. Instead of a software offering for a new vertical or functional area, enter with a service offering, and let the early adopters fund a software offering as a result. This is somewhat the reverse of the typical, long and expensive software development and customer maturation lifecycle common in the industry today.
? Re-evaluate your partners. Are there enough process engineers - not just technicians - in your service partner/reseller ecosystem? And do they expect a premium for that process skill set? I asked an Indian BPO executive about EDS? recent announcement to partner with SAP, Oracle and Siebel for its BPO offerings. He smiled like the Cheshire Cat, clearly relishing the prospect of competing against those multiple, premium-priced offerings. (Of course, he had not focused on the channel power of these brands, but he was right to be confident he could price much more competitively.)
? Differentiate even more. Continuing the prepared food analogy, the proliferation of restaurants has not eliminated home cooking. However, folks seek more convenient, organic or other differentiated products and often pay a premium for that. The same will apply in the software industry.

In India, a major topic of conversation continues to be the recent tragic tsunami. While I was there it occurred to me, that in the tech world, software and services are adjacent ?tectonic plates?. They periodically encroach each other (remember Accenture with Mac-Pac?), but generally have stayed as distinct cultures and business models. I could not help but think that in the next couple of years, these two ?plates? are going to become much more abrasive and eventually produce a quake which will power a different kind of tidal wave. And it is headed straight at the software industry. Fortunately, we have a few years of warning before the BPO wave hits us.