A recent visit to an Amazon Fulfillment Center was eye-opening. They have completely redefined the old warehouse pick, pack, ship mindset. It’s now stow, pick, pack, verify, and in their lingo, SLAM and “chaotic storage”. Kiva robots and miles of conveyor belts bring work to employees not the other way round. Scanners, scales, sensors monitor and facilitate the worker – what size box to assemble, cut right length of packing tape, apply shipping labels etc. Read more about my visit here.
I was recounting the visit to a software CEO. He said “Amazon is amazing”. And I responded – “it’s not just Amazon”. I told him about companies I have worked with and written about that have dramatically rethought their processes with all kinds of modern technology – shop floors, cashierless stores, return logistics, transportation routing, payment processing and on and on. He asked me which vendors they work with. And I named a few then stopped and said “In the end, these customers are themselves driving the vision about the new process with a wide range of technologies. Rarely is there a single vendor or product”.
The realization sunk in that true process innovation is not really being bought “shrink wrapped”. Companies which are taking a “systems approach” – adding sensors, robots, flexible workflow, RPA at front, center, back of any process – are getting stunningly better results.
Of course, plenty of SIs will continue to talk about “best practices” embodied in packaged software, and many customers will say they are satisfied with “good enough” processes.
Most software vendors have in the move to cloud computing hired good architects who have helped them think about multi-tenancy and platform technology. They have not invested similarly in business process experts, especially those unique to individual industries or geographies. And even with the underlying technology they have waited for consumer tech to innovate with UX, AI etc. A few of their “good enough processes” added together could translate to several basis points of margin lost every year.
Jeff Bezos, CEO of Amazon has been known to say “your margin is my opportunity”. I used to think it was his way of targeting fat, dumb, high-margin competitors. After visiting his warehouse, I think he also means to target companies which are not focused enough on margins and instead waste them in process inefficiencies.
(Cross-posted @ Deal Architect)