There is a UK radio programme that describes itself as ‘the antidote to panel shows’, those weary radio programmes where a panel of experts debate the answers to complex questions and whose answers seldom, if ever, really provide a new light on the question. The antidote programme called ‘Any Answers?’, mocks this approach by light heartedly taking a completely different view of any topic than the conventional one.
We have had Nicholas Carr asked ‘Does IT Matter?’, and endless debates on the ‘commoditisation’ of IT brought on by multiple factors, most of which stem from simplification of IT products, and lower offshore costs of delivery. All of these debates assume one thing; IT cannot make a difference to a business other than in the ability to reduce the business costs against competitors.
I disagree on two counts; the first is a small correction to the argument; but the second is a true look at this issue from a different perspective. In the first case I am using other people’s research; Nicholas Carr researched the topic based on the expenditure companies made on IT versus their actual revenue growth and on this basis could prove his argument; i.e. large sums being spent did not have any correlation to improved revenues, or for that matter margins. Marco Isanti, also a Harvard Professor, repeated the research with one vital difference, he used a series of factors to access the efficiency with which a business deployed IT, rather than the total cost.
The results were very different, an almost absolute correlation between the upper quartile of efficiency leaders and the upper quartile of Businesses with the highest revenue growth. Put another way, what matters is how you use IT within your business, this should not be a surprise as there are probably similar correlations to all other aspects of managing the use of resources well. Now let’s change the direction of looking at IT, let’s stop looking at IT as an inward facing business tool and look at it as an overall factor of society, or the markets we are selling to.
The first question to address is whether an I Pod, a Smart Phone, a home media centre, a games console, or any one of the myriad devices which are becoming ubiquitous in homes in many countries is IT? Silly question really, of course it isn’t, so therefore I will refer to it as ‘technology’. The individual effect of each technology has been to produce a new market for products and services, however the cumulative effect of these technologies is to create a shift in society towards pervasive technology literacy, and that’s the big point. Just as the printing revolution ended up by ensuring universal literacy in reading, and writing, therefore creating the platform for communicating about products and services, or instruction manuals etc, so this is the platform for business change.
It was the introduction of newspapers that created the advertising industry, and the ability to create ‘brands’, a key aspect in the creation of modern business. The web has already made the first step in changing business by opening up choice from being based on physical location, but you would argue it has resulted in lowering of prices and this runs counter to the argument of increasing margins. True, but successful web businesses who use the web ‘efficiently’, (the point made by Marco Isanti), by redesigning their business model, and using IT well, have lower costs so this is not necessarily true for them. But what of those who have used the web to differentiate around value?
The definition of ‘value’ is goods, or services, that the purchaser chooses to pay more for, on the basis of perceived increased value. There are an increasing number of businesses achieving this, by providing a better tailored or more individual product, what was called some years ago in the hype of the Internet economy ‘mass customisation’. Actually it’s not mass customisation at all, that termed applies to the old model of mass produced product ‘pushed’ to the market with some degree of options in build. Think of the car industry. Well keep thinking of the car industry and go to www.scion.com and see what one of the most respected car makers in the world has done to reposition the sales of cars to the ‘I pod’ generation.
It’s not a ‘push’ model based on mass production selling, it’s a ‘pull’ model based on using communities and ecosystems in cooperation to create individual products. The manner in which this is achieved redefines the role of a car as a lifestyle accessory to a new generation of customers who probably would not buy the existing brand, around its ‘pushed’ mainstream manufactured models.
That’s why I think starting with the ‘antidote’ of existing thinking around IT shows a route to higher revenues and margins in a world where the skills and expectations for engagement with your customers has been redefined by ubiquitous technology, and their changed perceptions and capabilities.