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comment briefs

Questioning the
IT Arms Race
Briefs
relationship management software
packages are available, along with
tools designed to make the most of
them. But if, after interacting with
gy project doesn’t mean it can’t be
handled more efficiently and just as
effectively outside your company.
There are always functions that can
Technology was the great liberator of your online tools, your customers be outsourced — especially offshore
the 1990s. It opened new spheres of still call your 800 number, then — where the time and financial sav-
competition. It taught every compa- either you haven’t implemented the ings can be substantial, and there is
ny to reconsider the way it did busi- technology correctly, or it’s the wrong no intellectual property threat.
ness. It made doing business faster, technology for you. Companies should be eager to
smarter, and more personalized. But 2. Is this overkill? Wireless tech- ship legacy systems maintenance
today, many companies have discov- nology is the most exciting technolo- abroad. At home, a company should
ered that keeping pace with the gy frontier, and it has the capacity to not be reluctant to find a good strate-
technology “arms race” can be an transform business. But don’t make gic partner for peripheral but valuable
unwieldy proposition. the common mistake of assuming a technology projects. Then the more
Most technology managers are wireless device is simply a mobile ver- important, future-oriented projects
understandably torn: Should I invest sion of a PC. Many companies are can be kept in-house and receive a lot
in a promising new product? How bringing the same cumbersome pro- more attention and more “manage-
can I afford to invest in the future cesses designed for PC-based Web ment bandwidth.”
and support my current technology access to the new generation of wire- These three questions don’t com-
base? For executives struggling with less devices. This is overkill. Much of pletely relieve all the strains on today’s
such decisions, I recommend three what businesses offer customers on IT departments. But they point to
simple questions to ask before spend- the Web is redundant or unnecessary the best way to keep focused on pri-
ing more technology dollars. on wireless. Most wireless customers orities and ensure that technology
1. Do my customers really want want easy access to basic real-time investments stay strategic.
this? Letting your customers drive information. Excessive data and Dawn Lapore
technology, rather than the reverse, is functions only makes wireless less
one of the most important but most helpful and more difficult to manage.
neglected principles of New Economy 3. Do we have to do it here? Online
management. Every good technology Most technology executives feel pro-
strategy + business issue 23

department ought to be doing dozens prietary about their best products Aggregation: The
of far-flung IT experiments. and services. As a result, they’re loath Battle Ahead
But do new ideas — as brilliant to outsource what they rightly regard
as they may be — make things easier as the heart and lungs of their busi- People eager to check up on their
for the customer? Many customer- ness. But just because it’s a technolo- bank, brokerage, and credit card
comment briefs

Dawn Lapore is chief informa- Anju Simon David Y. Choi (dchoi@hbs.edu) Doug Albert
tion officer for the Charles (simon_anju@bah.com) is a is a fellow with the Global (douglas.albert@cho.ge.com),
Schwab Corporation, a position principal with Booz-Allen & Leadership Institute at Harvard vice president of market and
she has held since 1993, and Hamilton in New York, serving Business School. Mr. Choi has business development for
serves on the board of directors in the Financial and Health published articles on marketing the GE Fanuc Automation
for eBay Inc. Services Practice. and strategic management, and Corporation in Charlottesville,
was a consultant with Boston Va., plays a key role in creating
Larry Altman Zaki Hyatt-Shaw (hyatt- Consulting Group. new value propositions
(altman_larry@bah.com) is a vice shaw_zaki@bah.com) is a for industrial automation
president in Booz-Allen & consultant with Booz-Allen & Liisa Välikangas customers.
Hamilton’s Financial and Health Hamilton based in New York. (lvalikangas@strategos.com)
Services Practice. He focuses on is director of research at the
helping retail financial service Strategos Institute, an organiza-
companies grow. tion founded by the business
thought-leader Gary Hamel to
develop new management prac-
tices in the area of innovation.

accounts can go to the Web to see sites of banks where they have check- assembling information. Smart por-
where they stand. But there’s a prob- ing, brokerage, and other accounts tals could parlay these factors into a
lem: They can’t make financial deci- than they did previously, and 9 per- brand position as an independent
sions based on a complete picture of cent stop visiting these sites entirely. “trusted advisor” that gives customers
all their accounts, because statements Thus, once customers aggregate advice and offers from third-party
scattered across many different Web elsewhere, their connection to their companies.
sites can’t be viewed, much less ana- financial institution slips, and they Financial institutions can win
lyzed, at the same time. become targets for competitive offers. aggregation business based on their
In response, the Web sites of Still, the survey also showed existing checking, savings, invest-
major banks and brokerages, such as banks have an advantage. Sixty-eight ment, and mortgage relationships.
Citigroup Inc. and Merrill Lynch & percent of respondents said they Their bricks-and-mortar assets give
Company Inc., now offer a remedy would be inclined to try an aggrega- them a reassuring physical presence,
called aggregation. But so do personal tion service offered by a financial unlike virtual services. The big ques-
finance portals, such as Yahoo institution if they already had a rela- tion is whether they should market
Finance, OnMoney, and MSN’s tionship with it. By contrast, no sin- third-party services or stick with
MoneyCentral. A recent Booz-Allen gle factor steered people to portals; 26 house brands. Should Citibank, for
& Hamilton/e-Rewards study of con- percent of portal users said they example, offer only Travelers insur-
sumers who aggregate shows financial signed up at the first site they found ance? Carrying external products
portals are jockeying to give banks, that offered aggregation. (even from competitors) promotes an
brokerages, and other traditional In one sense, both financial insti- impartial image and might keep users
players a run for their money, and tutions and personal finance portals from shopping at other sites.
their customers. are supplying a commodity service, Whether Internet portals or
Aggregators collect data from an since most license the underlying bricks-and-clicks institutions, all on-
individual’s multiple accounts and technology from a single provider, line aggregation services will need to
upload it to a single Web location. Yodlee.com Inc. But the game will get deal with similar issues. The first is
Customers get one-click access to all more interesting for both portals and security and privacy, since users are
their financial information, while traditional institutions as they sur- putting multiple accounts on one site
service providers get a deep look at round their core offering with distinc- and providing their user names and
customers’ money situation, which tive services, branding, and incentives. passwords to those accounts. Sites
strategy + business issue 23

they can use to create individually tai- Portals can turn themselves into also will need to be innovative —
lored offers. independent advisors. By definition, developing and exploiting new mar-
Our survey showed that 36 per- portals don’t offer their own financial ket opportunities with enhancements
cent of personal finance portal cus- services. They do, however, have such as fund transfers and bill pay-
tomers spend less time at the Web strong brands and strong skills at ment. Finally, skillful customer rela-
comment briefs
Tim Laseter
(laseter_timothy@bah.com),
based in McLean, Va., is a vice
president in Booz-Allen &
Hamilton’s Operations
Practice and serves on the
firm’s e-Business Core Team.

Steve Vielmetti
(steve.vielmetti@ztango.com),
director of business develop-
ment for Ztango Inc. in
Herndon, Va., travels the globe
to secure alliance partners in
the ever-changing world of the
wireless Web.

tionship management will be critical, from cost-driven operational meas- among companies and the channels
especially for traditional financial ures such as total quality manage- of distribution they use.
institutions as they lose control over ment (TQM) and Six Sigma, or from 1. Consolidation (rolling up
what was once proprietary customer management fads, like the short-lived competitors into a bigger, more pow-
data. In the rush to mine data, both New Economy notion that a high erful company). John D. Rockefeller
banks and portals had better be valuation is a substitute for profits. merged 40 allied companies in the
mindful that the customer relation- This is not to say that TQM and 1880s to create the Standard Oil
ship comes first. Six Sigma are not important compet- Trust, a monopoly that controlled
Larry Altman, Anju Simon, itive tools, but they cannot create sus- exploration, production, distribution,
and Zaki Hyatt-Shaw tainable value unless coupled with and marketing.
more innovative and forward-looking 2. Bypassing (or cutting out the
strategies. Consider the plight of the middlemen). Dell’s direct-to-con-
Top 10 Innovation Xerox Corporation, a company that sumer model, for example, bypasses
Themes spent millions in the 1980s on TQM, computer retailers. Stephen King
and won the Malcolm Baldrige Na- ignored booksellers and publishers
Does history repeat itself when com- tional Quality award in 1989, but alike when he self-published his novel
panies seek ways to innovate? Are never hit its strategic stride in the ’90s Riding the Bullet on the Internet.
there patterns among the business and is now struggling to survive. 3. Value migration (shifting to a
strategies chosen by successful com- We suggest executives use the fol- related but more profitable industry
panies from one decade to the next? lowing 10 innovation themes as a or niche). Consider Monsanto Com-
To find out, we studied nearly checklist to assess strategic options. pany, which has transformed itself
200 business strategies, most from The first five relate primarily to from a chemical concern to a life sci-
the past 20 years, but some from a industry structure — relationships ences company that competes against
century ago. From this research we
identified 10 essential “innovation
themes,” which are repeated and
proven over time. Six Sigma and TQM cannot
We believe these themes are
building blocks that companies, create sustainable value
across industries, can use to achieve
long-term success through business unless coupled with a more
innovation. Innovation themes help
executives to distinguish growth-
oriented strategies with staying power
innovative strategy.
comment briefs

see all the information they need at a


glance, with no switching between
PC windows. Built-in analytic capa-
bilities allowed for rapid financial cal-
culations, eliminating the hassles of
data downloads and paper-and-calcu-
lator analyses.
4
How can you decide whether
your company or industry is ripe for
pharmaceutical leaders. code to send the first “instant mes- innovation? Which themes may be
4. Teaming up (replacing vertical sage” via telegraph on May 24, 1844, appropriate for your company? To
integration with alliances to create an on a line connecting Washington, answer these questions, start by look-
end product). Auto manufacturers D.C., and Baltimore. Wells Fargo ing for innovative approaches inside
have allied with suppliers that provide Bank, a leader in online banking, per- your industry, or within a company
entire “modules” for vehicles — formed the first recorded online — your own or another. If you are
engines, interiors, doors, electronics transaction via the telegraph in 1864. considering a strategy theme that is
— which the manufacturers assemble 8. Customization (letting cus- not being utilized, ask yourself why it
and market. Magna International tomers design the end product to is not. Is it because of uninterested
Inc. is one such supplier. their specifications). Mass personal- customers? Overly cautious execu-
5. Digital delivery (providing ization is associated with diverse tives? Lack of infrastructure?
online shopping, purchasing, and products — computers, cars, cosmet- Look at other industries, too.
access to goods and services). Soft- ics, clothing, and more. Levi’s Origi- Often, an innovation will jump from
ware companies like Adobe and nal Spin program, for example, lets one industry to another as its value
Microsoft let customers buy and shoppers choose from 1.7 million becomes obvious. Mass personaliza-
immediately download programs to variations of fit, style, and color to tion strategies are moving from cloth-
their PCs. Online music distributors create their distinctly personal jeans. ing and computers to automobiles
provide digital delivery and eliminate 9. Mass-market (extending avail- and even to foods such as cereal.
retailers and manufacturers. ability of a product from the elite to If an innovation theme is present
The other five themes, overall, the average consumer). The average in your industry, consider driving it to
focus on the customer experience. consumer was liberated from daily the next level. Can you shake up
6. Deep connections (encourag- food shopping in 1918, when Kelvina- industry structures or make high-
ing emotional attachments to prod- tor marketed the first truly practical value consumer products broadly
ucts that go beyond the functional home refrigerator. Frigidaire’s model available, customized, or emotionally
value to the consumer). The home- followed in 1919, and General Electric appealing? Push the scenarios; howev-
furnishing retailer Restoration Hard- offered the first hermetically sealed er implausible they may be at first, see
ware exploited a niche in the home- refrigerator compressor in 1926. if they really make economic sense.
improvement market, where instead 10. Fix-it-for-me (solving a And never assume you have
of prosaic housewares, it sells nostal- pressing customer problem with a reached the end of the line with a
strategy + business issue 23

gia for an imagined, simpler lifestyle. comprehensive solution or break- theme. Based on historical evidence,
7. ASAP (delivering information through product). Michael Bloomberg we believe it is much more likely that
or end products faster). Inventor designed a total hardware/software your imagination will run dry before
Samuel F.B. Morse revolutionized system with Wall Street traders in the theme does.
communications by using his Morse mind. Thus, two monitors let traders David Y. Choi and Liisa Välikangas
may offer the solution. the slots. But even as you noticed the
M2M — The Next According to ARC Advisory machines, you probably didn’t con-
Wireless Frontier Group, a leading analyst of industrial sider the complexity of managing
automation and e-business, sales of these devices. Pub gaming machines
Today’s hype around the wireless Web cellular engines — the “guts” of a cell offer a range of features, but eventual-
typically centers on consumer applica- phone, without key pads, micro- ly regular users tire of playing the
tions. Witness the phenomenal popu- phones, and power chargers — will same games, so machine owners must
larity, especially among teens, of NTT outsell cellular phones within the physically rotate the machines among
DoCoMo Inc.’s i-mode wireless serv- next few years. These cellular engines pubs to keep up user interest. The
ices in Japan. According to research by will provide M2M links among sta- machines must also be serviced, and
Nissan Motor Company, many Jap- tionary and mobile machines to cen- the coin boxes must be emptied regu-
anese kids pay more each month than tral enterprise systems. In many cases, larly to secure the profits. M2M com-
the cost of a car payment to send mes- field operators will have direct access merce can dramatically simplify the
sages and play interactive games. to remote devices to gain critical process, increasing revenues and
But wireless service companies operating information. In other cases, operating efficiency.
elsewhere in the world fret about the machines will interact directly Ztango Inc., a pioneer among
whether they can find the true “killer during the night when wireless net- M2M wireless service providers, has
app” to yield returns on the billions of works are less congested from con- developed technology specifically for
dollars they’ve invested in new licenses sumer use. gaming machines that can simplify or
and third-generation (3G) infrastruc- If you have ever visited an Eng- eliminate these tasks, and more.
ture. We think a shift in focus from lish pub, you have surely noticed the When problems occur, remote diag-
consumer-to-consumer to machine- gaming machines in a corner and nostic technology built into the
to-machine (M2M) communications patrons happily clunking £1 coins in machines instantly connects to central
comment briefs

The device can be configured to link


The greatest challenge to directly to the supplier sales and
logistics systems to enable vendor-

the expansion of M2M is managed inventory, creating a differ-


entiated service for an otherwise
commoditized business.
change management. As these examples indicate,
M2M applies in a variety of contexts.
operations with information about typically hold 40,000 to 60,000 With the expansion of the wireless
the failure. Repair technicians can pounds of resin and need refilling infrastructure, there will be many
then get the machine back online — every five to 30 days. Programmable new cost-effective applications. The
and earning profits — far faster than Logic Controllers (PLCs), special- greatest challenge to the expansion of
in the past. purpose industrial computers, moni- M2M comes from the traditional
Wireless connectivity will also tor and control many storage tanks, barrier to innovation: change man-
allow the machine operator to track but few resin tanks are linked into a agement. Although end-users imme-
daily yields and better plan field visits central control system for quality diately see the quantifiable benefit of
to collect the coins, reducing the cost assurance or materials management. M2M communications, IT profes-
of collection. Most importantly, Accordingly, most materials managers sionals, unfamiliar with wireless tech-
machines can be remotely reconfig- send a technician to bang a wrench nology, fear the unknown. The task
ured with new software to create a on the side of the tank or plunge a of putting in place and managing
new user experience, rather than relo- stick in from the top to determine comprehensive M2M wireless data
cating an entire machine. Plus, infor- inventory levels and plan replenish- solutions requires expertise in many
mation on daily activity is collected ment orders. areas, from machine interface and
via the wireless network each night, Enter a new offering that com- equipment installation to managing
which allows the fleet owner to accu- bines industrial systems and Internet complex integration with carrier net-
rately assess the popularity of each technology expertise, from a joint works and enterprise systems. But
game and rotate the mix without ever venture between the GE Fanuc many companies are now blazing a
setting foot in the pub. Automation Corporation and Cisco trail that others will inevitably follow
M2M also has huge potential in Systems Inc. By adding a cellular — the newest fast lane on the infor-
strategy + business issue 23

industrial settings. Take the remote module with unique wireless software mation superhighway.
monitoring of plastic resin storage reporting data to a central host com- Doug Albert, Tim Laseter,
tanks located outside the thousands puter, materials managers can re- and Steve Vielmetti
of factories around the world manu- motely monitor inventory levels to
facturing plastic parts. These silos ensure just-in-time replenishments.