Who wins from revolutions? The answer is simple: those who lead the revolution and win power. The losers are those who stick with the status quo and who get dethroned. Their followers also suffer as the revolution rumbles on. But the revolution now hitting business all over the world is not rumbling on. It is racing ahead. Those businesses that fall behind the revolutionary pace will not last long into the next Millennium.
The public sector is being affected, too, because of the new insistence that non-profit organisations should be run as effectively as commercial operations, and on the same principles. These non-profits are being affected by the same forces as the profit-makers: those of the Triple Revolution. The Information Revolution goes hand-in-hand with the Management Revolution, which likewise goes hand-in-hand with the Global Revolution. The three interact in the same way that Moore's Law (chip density and thus computing power double at constant cost every 18 months) with the lesser-known Metcalfe's Law.
This holds that networks (of phones, computers, humans or anything else) 'dramatically increase in value with each additional node or user'. Either Law by itself would have profound effects. Feeding off each other, they are producing an exponential increase in the power of electronics to transform businesses by the introduction of 'killer apps'. The quote is from Unleashing the Killer App (Harvard), in which Larry Downes and Chunka Mui describe how firms are creating 'digital strategies for market dominance' by inventing and using applications ahead of their would-be competitors.
It's the killer app in its broadest sense that is putting increasing pressure on management. The applications of new technologies - primarily those involved with the Internet - are expanding at amazing speed and working to change the way in which businesses communicate, the way they are managed, the way they win so-called competitive advantage and the way in which they do business, in an age in which companies large and small are going triumphantly global. That globalism, too, hinges to a very important degree on the Management and Information Revolutions
NEW CORPORATE MODEL
An extraordinary example of exploiting these trends is Cisco, the leading supplier of equipment for the Internet. It epitomises the new 4F corporate model pioneered in Silicon Valley - Fast, Friendly, Focussed and Flat. Cisco has achieved some astonishing reductions in processing times. Seven out of ten customer requests for technical support are now dealt with electronically. That has increased speed, eliminated 1,000 engineering jobs and enhanced customer satisfaction.
Speed has also been enhanced by being Friendly. That refers externally to relations with suppliers and partners: Business Week cites a case where working with partners cut down development time from four years to 18 months. Friendly also applies internally - John Chambers, the CEO of Cisco, breakfasts with every person in the company in their birth month. He's also friendly with customers, with whom he spends half his time.
Like every other hi-tech electronics star, Cisco is highly focused. It concentrates on its Internet business and expands in concentric circles round that core. The company is divided into many units - many of them acquisitions - which of itself demands a Flat structure. Vertical management is obsolete. Horizontal management has become obligatory for any company that wants to ride the revolution and to take advantage of what the latter has made possible:
'The new technology will create the new office, a place animated by "electronic text" - a portable powerhouse whose users can tap, amplify and use its information resources, alone or with colleagues, anywhere in the world'.
That was written by me as long ago as 1989 (hence the 'will') at a time when computer networks were spreading fast, but before the Internet had made its breathtaking commercial debut. By the time my book (Culture Shock: The Office Revolution) was published in 1990, the future tense was redundant: the number of host computers on the Internet was five million. Six years later it was 25 million. There were no Websites as recently as 1993 - now nearly every self-respecting company has one (of a sort - many are virtually useless).
Those who are completely site-less (and sightless), though, are numerous. In 1997, over half of all British companies with turnovers exceeding £100 million had no intention of ever having a site. That, of course, is nonsense. They will all have sites eventually, and those sites will be interactive - one day. But the present state of denial in these companies poses very real dangers of being left behind - let alone failing to exploit a crucial fact: that getting in early has powerful advantages.
FIRST COME, FIRST SERVED
First, the competitor who gets in first with the 'killer app' will use his mastery of information and communications technology to change the rules of the competitive game to his benefit. The most cited example is Amazon.com. What is now the world's largest bookseller, worth more money on the stock market than the next two put together, is a mere start-up. But it's not a wonderful example, in my view, because it's still losing money.
But don't use those losses as an excuse for ignoring the Net. I have often stressed that management once had three options when confronted by change: not to change, to change as and when forced, or to seek to take advantage of change. In the age of the killer app, the first two options have disappeared. Trying to stand still is bound to fail in a rapidly changing environment, because the company's relative position is changing - or rather, being changed by others.
To return to bookselling, that relative and losing change is why the former world leader, Barnes & Noble, had to start its own Web bookshop to compete with Amazon.com. The wise betting, however, is that those joining the bandwagon will never catch up with the pioneer. Waiting for others to lead and then piling in with might and main was once a wise strategy - that was Konosuke Matsushita's basic principle. As he lamanted before his death, the pace of technological change has speeded up too much for 'wait-and-see' to be tenable. By the time your vision has cleared, you have been condemned to following the leader - probably for ever.
The leaders are joining the Triple Revolution with a will. In fact, many companies, including start-ups, are making excellent money from the Web - especially in business-to-business selling. Forrester research found that a third of 50 companies that had installed an extranet, linking them with the outside world, did so for the sake of on-line ordering. After the extranets had been installed, on-line ordering rose to 46% - while two-thirds of the companies, against only 20% before, were using their extranets for marketing and product information.
EXPANDING USE
That brings up the second reason for starting as soon as possible. Once intranets, extranets and Web Sites are installed, their use and utility expand hugely. In the Forrester research, companies were also using extranets for inventory management, collaborative R & D, training policies and standards, and 'e-mail and chat'. In every case, usage was far greater than anticipated, sometimes enormously so: 30% compared to 4% for training is a convincing example.
Billing and account history hadn't been included by any company at first. It now ranked level with on-line ordering in usage. The sooner you install the system, the sooner the benefits start to multiply. They are real benefits, too: 'We save one million dollars in toll charges per year because our resellers use the extranet'. That's one of the examples (a computer supplier) given by Forrester, which says that on purchasing alone, a hard copy order that costs $45 to process can be replaced by an automatic extranet replenishment system for only $1.25.
The attraction of all these potential gains has been an amazing boom in business-to-business commerce that shows the enormous power of Moore's and Metcalfe's Law in combination. The $8 billion of 1996 is being left far behind in the US; by 2000, it will be eight times bigger; the next two years will take it to $327 billion. Europe, while a laggard in most respects, is riding fast in the American wake: the current $1.2 billion should be $64.4 billion in 2001.
But the cost savings and the commercial potential are only part of the contribution which the Information Revolution can make to the Management Revolution. In its study of Cisco, Business Week has an elegant summary of where that revolution is heading. The new kind of organisation is one built on change, not stability; round networks, not hierarchy; on interdependencies, not self-sufficiency; on technological advantage, not fixed assets. This has a good fit with the 'six new mindsets', previously mentioned in Thinking Managers, which Geoffrey James proposed in Giant Killers (Orion):
1. Business = Ecosystem. 'The business world is made up of symbiotic relationships formed to exploit market niches'.
2. Corporation = Community. 'A company is a collection of individuals with individual hopes and dreams that are connected to their organisation's higher purpose'.
3. Management = Service. 'A manager's job is to set a direction and to obtain the resources that employees need to get the job done'.
4. Employee = Peer. 'Every employee is hired - regardless of position - as if he or she were the most important person in the company'.
5. Motivation = Vision. 'People know where they're going and are amply rewarded when they get there, so the process of working is filled with energy, enthusiasm and humour'.
6. Change = Growth. 'Change is a desirable thing because it's part of adapting to new market conditions and growing into new levels of success'.
James derived these mindsets from his study of giant-killing electronics companies and the way they win 'business results' like pushing decisions down to 'the lowest feasible level within the company; teams form their own rules and direction without interference from corporate headquarters'. You need the new mindsets to exploit the new technology, which in turn helps you to create the new mind-sets. The chief means is the intranet which links all your people, wherever they are in the world or the company, and which can also be tied into the 'eco-system' of suppliers, customers and partners outside.
THE DIY MISTAKE
Major companies, after a hesitant start, are now installing intranets as fast as they can. Many are adopting a do-it-yourself approach, which is probably a mistake. Buying solutions from outside suppliers is quicker, cheaper and liable to be better - if only because the outsider has amassed plentiful experience with other customers. The IT specialists may try to make the internet their last frontier where they stage their final stand for control of the Revolution. Don't let them stand in the way of progress - or you may miss the full advantages of the new model company. Business Week's formula for the latter, derived from Cisco and others, makes the point forcefully:
1. Network, network, network.
2. Focus on the customer.
3. Buy smart (meaning acquisitions).
4. Team up for success.
5. Share the wealth.
6. Apply that personal touch.
Note, again, the close fit with James's giant-killing recipe. In the context of arming yourself for the Information Revolution, though, points 1 and 4 are vital. 'Technology allows links with customers, suppliers, business partners and employees. So take advantage of the speed and productivity it affords'. And teaming-up with IT suppliers meets this prescription: 'Create alliances with partners based on trust and the potential for achieving mutual short and long-term wins'.
If their alliances are smart enough, companies can get the same advantages as those provided by smart acquisitions. Faster growth and higher market share are less important that capturing 'intellectual assets and next-generation products'. At Cisco, as one executive says, if corporate buys produce 'no results in three to six months, people begin to question the acquisition'. That quotation in itself sums up the new climate that the Triple Revolution is engendering. It faces every management in every kind of organisation with the same overweening question: What am I going to do about it?
In one client organisation, a great financial services company, the chairman confessed to nightmares about the possible answer: spending a billion or so to replace a miscellany of 'legacy' systems, once leading-edge technology, but now, he feared, obsolescent. Investigation showed that his night fears were absolutely justified by the cold light of day. Users and suppliers were unanimous in condemning the IT set-up - defended only by its guardians.
By good fortune, the intranet solution had just arrived; by equal fortune, the company had a visionary on the board who understood the Information Revolution. After spending a couple of million with an outside supplier, the company had a new system enabling people, for the first time, to move customer files all over the organisation at the click of a mouse and in total security. The chief executive was thrilled by this - but in a year's time, for sure, many other applications will be bearing a rich harvest.
So that's the answer to the question, What do I do? The most you can, as fast as you can. Start with linking the computers and the people over the net or other networks. Accept that you won't manage the organisation as in the past, but must move towards the future, new model company. Act accordingly - talk achieves nothing. Be absolutely sure about your strategic and tactical objectives, and manage the transition yourself to achieve precisely what the users want from the Triple Revolution.
NO FINAL BILL
Finally, accept that the revolution will neither stop nor slow down. Changes in circumstances and technology will demand continuous change in the system. There's no final state-of-the-art solution. To an extent, this means signing a blank cheque when forming a partnership with IT and communications suppliers. You will never know the size of the final bill, because there will never be one. But you will know the size of the benefits, like these examples from Forrester and Business Week:
• An electronics company which built an R&D site linking its joint venture partners - one of whom won $100 million of new business because of the greater efficiencies achieved via the extranet.
• Two brothers who three years ago started a Website to connect buyers and sellers of plastics materials and equipment, taking a 5% cut. Sales have soared to $7.5 million, up fourfold this year.
• An aerospace company which gets 5,000 enquiries and 300 purchases daily over its extranet, which has reduced the workload by 25%.
• A mortgage broker who deals direct with housebuyers and has processed up to $70 million of loans in a single month, with a 25% monthly growth rate.
Waiting for measurable results, though, is too dangerous. As Forrester says, 'by the time the results are in, the game will be over'. What will separate winners from losers? The Forrester view is that 'ultimately it will be corporate culture'. Companies which are stuck in the old model, with its insistence on financial returns, 'will delay... while aggressive companies are investing' in the future. 'This time the bean counters will lose'. That sums up the Triple Revolution and its inescapable meaning. Act now. Later is too late.
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