Most companies have a number of enterprise systems, whether that’s financial, human resources, payroll, warehouse management, customer service or any number of other transaction based software products. The point of those systems is to provide a way to automate and create repeatable process around the business workflows and execute transactions. For Industrial Age businesses creating predictable and repeatable processes was the key to operational efficiency and operational efficiency was competitive advantage. In the information age operational efficiency is not a key competitive advantage, in fact it is directly tied to rigidity and inability to adapt to change, which are a huge disadvantage in the new global, connected economy. Flexibility, agility and adaptability are the new competitive advantage in a business environment where change and unpredictability are the norm.
So transaction systems are a holdover from the Industrial Age and do not in themselves provide what a business needs to grow and prosper in this world of business change. Not that they are not still valuable to business, in fact automating and providing the business foundation is still very important. They are the base “operating system” for the business. In the past though, automation accompanied by rigid process, was an integral part of competitive advantage, manifest mostly in increased efficiency. In a “make – sell” business model that makes sense, automation leads to efficiency which leads to increased profits. So why is this not still true?
There are a few factors at play in this new business environment. First is the simple idea that we are at the automation limit, that is, for many businesses we have automated most of all that today’s technology will allow. This means that productivity, which is to the new economy as was efficiency to the last age, cannot be significantly increased by new transaction systems that automate processes. This is not universally true of course, mostly because we’re in the transition period, but also because new technology, particularly in connected devices / Internet of Things (IoT) are adding new opportunities to automate and free up employees to focus on other, more information intensive tasks. However that change is providing small incremental gains, not the broad increase in efficiency that automation in general brought in the past. People, or “information workers” as they have been called, are the key to increased productivity in the information age.
The second is the change in competition and innovation. In many industries the source of competition and the geographic component have been removed from the competitive equation. The Internet enables new business models and opportunities but also opens up new sources of competition and new types of innovation. Innovation that is tied to the product or service is still extremely important but business model innovation that leverages new technologies like the Internet, mobility, cloud, etc. are in many cases as disruptive if not more so. Both these issues combine to create a very dynamic environment that necessitates quick adaptation to rapidly changing situations in an almost continuous fashion. Rigid processes and systems cannot support this level of strategic flexibility and agility.
The third is the change in the amount and types of business data that is created in mountains every minute of every day. Now again, this is a double edged sword, the increased information and data flow can be overwhelming to systems and people, but if harnessed offers incredible opportunities to operate in a new way. In other words, utilizing more and better data at the right moment or moment of need could provide the needed competitive advantage and radically increase employee productivity. The problem though, is unlocking this pile of big data and turning it into actionable insight, or smart data.
There are other new ways to increase productivity particularly ways that utilize cloud and mobile in unique ways. Mobile, or the ability to be connected and productive from anywhere, offers significant productivity gains. Add in cloud, which is really a key enabler for mobile, and that increase is substantial. This post isn’t really about mobile and cloud though, so I’ll leave it at that for now.
So that brings us back to the concept of making better business decisions, which as you can se, I believe is a key competitive advantage of the information age company. It’s about moving beyond “make – sell” to a “sense – respond” model (which I wrote about here). In this sense and respond model, big data must be transformed into smart data, or data in the right business context and in the hands of the right individual or group at the proper time. In truth the new found agility and flexibility has quite a lot to do with this smart data and it’s timely delivery to the right employees. Making business decisions with more accurate data and in real time is competitive advantage. The new applications platform has to move beyond transactions and incorporate decisions and relationships to facilitate the effective decision process.
In part two to this series I’ll look at how these decision and relationship systems can add the needed flexibility and competitive advantage.
(Cross-posted @ Michael Fauscette)