No company has exploited the trends of the Triple Revolution more remarkably than Cisco, the leading supplier of routers and much other equipment for the Internet. It epitomises the new 4S corporate model pioneered in Silicon Valley - Speedy, Sociable, Single-minded and Shallow. When it comes to Speedy, 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 Sociable. 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. Sociable also applies internally - John Edwards, the creator 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 truly Single-Minded. 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 Shallow 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 Vertical management is obsolete.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 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. A year later, the future tense was redundant: the number of host computers on the Internet was five million. Six years later it was 25 million. By then the first Websites were only two years old: now nearly every self-respecting company has one (of a sort - many are virtually useless).
Companies which are completely site-less (and sightless) remain 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, the competitor who is first with the killer app will use his mastery of information and communications technology to change the basis of competition game to his benefit. The most cited example is Amazon.com. While a mere start-up, what is now the world's largest bookseller became worth more money on the stock market than the two conventional chains put together. Amazon is perhaps not the most wonderful example, however, because (though its cash flow is ecxellent) it was still not profitable in 1999.
Conservatives were nevertheless wrong to use Amazon's losses as an excuse for ignoring e-commerce. 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, and not to its advantage.
The 'wait and see' policy of following change used to be highly effective. You could let others pioneer new products, before unleashing the power of your production and distribution machine to overtake the pioneers. IBM waited 14 years before tackling the mini-computer market pioneered by Digital Equipment, four years before entering the personal computer lists against the Apple II. In both cases, enormously successful products resulted in the AS-400 and the PC family.
Brand strength, heavy muscle among large corporates, and a tightly controlled sales army carried IBM through. It didn't need to repeat the gamble of the 360 mainframe series, which revolutionised corporate computing at the price of terrible technological, personal and financial stresses within the company. So when its first portables flopped, IBM simply withdrew and left the market to Toshiba. Five years on, with the market worth $6 billion, IBM joined battle - and lost.
LEADERS LEAD OR LOSE
The strategy of being a market leader who behaves like a follower is no longer viable. Leaders either lead, or lose. IBM's world market share of computing has fallen from over 80% at its zenith to single figures. A 4I company - Inert, Introverted, Inattentive and Isolationist - has no hope against the totally opposed 4S model. Leaders are learning that they have to react to attack, as opposed to the time-dishonoured technique of wishfully dismissing the new-fangled competition.
To return to bookselling, store-based competitors, including the former world leader, Barnes & Noble, started their own Web bookshops to compete with Amazon.com. The wise betting, however, is that those joining the bandwagon will find it desperately hard to catch up with the pioneer. Example after example shows that today the laggard never catches up. First come is first served, and goes on enjoying the largest and lushest meal.
That makes waiting for others to lead a dangerous strategy, riskier than seeking to lead and piling in with might and main to reinforce success. Even the great Konosuke Matsushita was compelled to recognise that he could no longer grow his electrical and electronics empire in the old follow-my-leader way. As he lamented shortly 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 true leaders are joining the Triple Revolution with a will. Many companies, including start-ups, are making excellent money from the Web - especially in business-to-business selling. Many more are saving money. Forrester's 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, economic on-line ordering rose to 46% - while two-thirds of the companies, against only 20% in the pre-planning, were using their Extranets to communicate marketing and product information far more economically.
That brings up the second reason for starting as soon as possible. Once Intranets, Extranets and Websites 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. The item now ranked level in usage with on-line ordering. 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. It demonstrates the magic benefits of accelerating power and multiplying networks 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.
SIX NEW MINDSETS
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' which Geoffrey James proposed in Giant Killers:
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 mind-sets from his study of giant-killing electronics companies and the way they win 'business results'. The methods include 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 mind-sets 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.
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 mostly 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. Some IT specialists have been tempted to make the Internet their last frontier where they stage their final stand for control of the Revolution.
If you let them stand in the way of progress, you may well miss the full advantages of the new model company. Business Week's formula for the latter, derived from Cisco and others, describes its imperatives succinctly:
1. Network, network, network.
2. Focus on the customer.
3. Buy smart [make clever acquisitions].
4. Team up for success.
5. Share the wealth.
6. Apply the 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. For these, faster growth and higher market share are less important than 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 and speed (three to six months!) 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?
THE CHAIRMAN'S NIGHTMARE
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 an IT set-up which was defended only by its guardians.
By good fortune, the IP solution had just arrived: by equal fortune, the company had a visionary on the board who understood the Information Revolution. The chief executive was thrilled by the swift and effective solution of his immediate problems - but it was certain that in a year's time many other applications would 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 in the company (all of them) want from the Triple Revolution.
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 your chosen IT and communications supplier. 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, as in these examples:
• 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 after starting a Website to connect buyers and sellers of plastics materials and equipment, taking a 5% cut against an industry norm of 50%, had a booming business. Sales had soared to $7.5 million, up fourfold in a 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 to be sure of 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'.
So they will. But bean-counters, too, have a place in the 4S formula. Their counting is as vital as ever when it comes to measurement and assessment. But they also have to adopt 4S principles, using the technology to produce financial reports in real time - Speedily: attaching themselves to the line managers in supportive, Sociable fashion: stepping out of the hierarchy and into the Shallow team structures that implement the strategy: and helping greatly to maintain Single-Minded focus on results and concentric expansion. Developing a 4S bean-counter sums up the Triple Revolution and its inescapable meaning. Act now. Later is too late.
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