Leaders Space: Bill Gates - Business @ the Speed of Thought
Business @ the Speed of Thought
Summary
The twenty-first century will be about velocity: the speed of business and the speed of change. To stay up with and anticipate change, businesses need radically better information flow. To get a better flow of information to develop the right processes and strategies, they need a digital nervous system. Most organizations don't have enough data to understand key aspects of their business well enough. A digital nervous system will help you understand your business better and then act more effectively on that understanding. An infrastructure designed around information flow will be the "killer application" for the twenty-first century.
Excerpts
If the 1980s were about quality and the 1990s were about reengineering, then the 2000s will be about velocity. About how quickly the nature of business will change. About how quickly business itself will be transacted. About how information access will alter the lifestyle of consumers and their expectations of business. Quality improvements and business process improvements will occur far faster.
We have infused our organization with a new level of electronic-based intelligence. I'm not talking about anything metaphysical or about some weird cyborg episode out of Star Trek. But it is something new and important. To function in the digital age, we have developed a new digital infrastructure. It's like the human nervous system. The biological nervous system triggers your reflexes so that you can react quickly to danger or need. It gives you the information you need as you ponder issues and make choices. You're alert to the most important things, and your nervous system blocks out the information that isn't important to you. Companies need to have that same kind of nervous system-the ability to run smoothly and efficiently, to respond quickly to emergencies and opportunities, to quickly get valuable information to the people in the company who need it, the ability to quickly make decisions and interact with customers.
The successful companies of the next decade will be the ones that use digital tools to reinvent the way they work. These companies will make decisions quickly, act efficiently and directly touch their customers in positive ways. I hope you'll come away excited by the possibilities of positive change in the next ten years. Going digital will put you on the leading edge of a shock wave of change that will shatter the old way of doing business. A digital nervous system will let you do business at the speed of thought-the key to success in the twenty-first century
I. Information Flow Is Your Lifeblood
Chapter 1. Manage with the Force of Facts
Summary
Information flow is the major differentiator for every business-the lifeblood of your company. Information first and foremost can help you determine what business you should be in. An historical GM example shows the importance of information in a traditional smokestack industry. A digital nervous system enables "Information Work" by providing digital processes that empower better decision making. Middle managers as well as high-level executives need access to the numbers, uniformly reported. Examples include how Microsoft consolidated different financial reporting formats among foreign subsidiaries, and the evolution of Executive Information Systems.
Excerpts
This book will help you use information technology to both ask and answer the hard questions about what your business should be and where it should go. Information technology gives you access to the data that leads to insights into your business. Information technology enables you to act quickly. And it provides solutions to business problems that simply weren't available before. Information technology and business are becoming inextricably interwoven. I don't think anybody can talk meaningfully about one without talking about the other.
Information work is thinking work. And, when thinking and collaboration are significantly assisted by computer technology, you have a digital nervous system. It consists of the advanced digital processes that knowledge workers use to make better decisions. To think, act, react, and adapt.
A company's middle managers and line employees, not just its high-level executives, need to see business data. It's important for me as a CEO to understand how the company is doing across regions or product lines or customer segments, and I take pride in staying on top of those things. However, it's the middle managers in every company who need to understand where their profits and losses lie, what marketing programs are working or not, and what expenses are in line or out of whack. They're the people who need precise, actionable data because they're the ones who need to act. They need an immediate, constant flow and rich views of the right information. These employees shouldn't have to wait for upper management to bring information to them. Companies should spend less time protecting financial data from employees and more time teaching them to analyze and act on it.
Chapter 2. Can Your Digital Nervous System Do This?
Summary
A parallel is drawn between the three major aspects of the human nervous system and the business nervous system. In addition, the four chief benefits of a digital nervous system are discussed. This chapter raises the question: Why is it that companies go to a lot of trouble to make data available for special uses, such as analysis by outside consultants, but do not make the same effort to provide better data about the company to its middle managers every day? Examples include Microsoft's investment in data gathering and how the digital tool, MS Sales, has enabled the creation and monitoring of specific marketing programs and has changed role of district sales managers.
Excerpts
Like a human being, a company has to have an internal communication mechanism, a "nervous system," to coordinate its actions. All businesses focus on a few basic elements: customers; products and services; revenues; costs; competitors; delivery; and employees. A company has to carry out and coordinate the business processes in each area, especially activities that cross department lines. Sales needs to quickly find out whether the company has the inventory or can get it quickly before promising delivery on a big order. Manufacturing needs to know what product is selling like gangbusters so that it can shift production priorities. Business managers throughout the company need to know about both and a whole lot more.
If consultants get more insight from your systems than you do, it should be because of their unique abilities, not because you prepare information especially for the consultants that isn't otherwise available to your staff. ...Not all of your managers will have the expertise or breadth of knowledge that a consultant brings to your business, but your managers should have access to data of the same quality. They should be able to walk into work every day and see the freshest data and be able to analyze it in numerous instructive ways.
If you're a district manager at Microsoft today, you ...have numbers to help you run your business. ...Now, you can look at sales figures and evaluate where your business is strong, where your business is weak, and where your business has its greatest potential, product by product, relative to other districts. You can try out new programs and see the impact... .Being a district sales manager in our organization is a much broader role than what it was five years ago because of the digital tools we've developed and their ease of use.
You know you have built an excellent digital nervous system when information flows through your organization as quickly and naturally as thought in a human being, and when you can use technology to marshal and coordinate teams of people as quickly as you can focus an individual on an issue. It's business at the speed of thought.
Chapter 3. Create a Paperless Office
Summary
Electronic forms make life easier for every employee, enable process breakthroughs and reduce costs. Process breakthroughs require people to redefine their roles while using technology for new solutions. A "day in the life" section demonstrates how Microsoft is streamlining administrative processes and business planning. A campaign to improve charitable giving led to the first electronic form at Microsoft, which has exploded into a fully developed Intranet. Read about how Bill uses the Intranet himself.
Excerpts
Digital technology can transform your production processes and your business processes. It can also free workers from slow and inflexible paper processes. Replacing paper processes with digital processes liberates knowledge workers to do productive work. The all-digital workplace is usually called "the paperless office," a phrase that goes back to at least 1973. It's a great vision. No more stacks of paper in which you can't find what you need. No more pawing through piles of books and reports to find marketing information or a sales number. No more misrouted forms, lost invoices, redundant entries, missing checks, or delays caused by incomplete paperwork.
Using our intranet to replace paper forms has produced striking results for us. As this book goes to press, we have reduced the number of paper forms from more than a thousand to a company-wide total of 60 forms... .Of the 60 remaining paper forms, 10 are required by law and 40 are required by outside parties because their systems are still based on paper. The last 10 paper forms are used so seldom that we haven't bothered to make them electronic, yet. Businesses have an incentive to persuade partners and governments to accept information electronically so that everybody can get to a fully digital approach with no paper.
Once in place, a digital nervous system is easy to build on. A good network, a good e-mail system, easy-to-build Web pages are everything you need for eliminating internal paper forms, too. You can add any number of intranet applications easily once this infrastructure is in place.
II. Commerce: The Internet Changes Everything
Chapter 4. Ride the Inflection Rocket
Summary
Bill's experience with a bank leads him to summarize the major inflection points that are just now beginning to happen as we enter the digital age. This chapter includes a discussion of the major business and technical points distilling from the book. Understand how to get your business or organization focused on a digital approach.
Excerpts
Complex customer-service and business problems will require powerful computers on both sides of the relationship-customer and employee. The new relationships will be augmented by various electronic means such as voice, video, interactive use of the same computer screen and so on. We'll see a world in which fairly simple personal companion devices proliferate side by side with incredibly powerful general-purpose PCs that support knowledge work at home or the office. Life's going to be pretty exciting as these changes come about … and within a decade it's likely that most of them will occur. This world will be radically different than the one we live in today.
If you're going to lead the digital age, you need to become familiar enough with the Internet to be able to imagine what the Web lifestyle will mean for your industry -- even if the change is going to take years. You should find ways to immerse yourself and your other executives in these new approaches and have retreats where you can determine the right strategy for applying them to your own business.
For years and years enthusiasts have been saying that the Internet will happen "tomorrow." You're going to keep reading prognostications that the big change will happen in the next twelve months. This is just baloney. The social adaptations that have to occur take years and the infrastructure has to be built out. But when the social and technical changes reach critical mass, the change will be quick and irreversible. The point will come where the Web lifestyle really will take off, and I believe that's sometime in the next five years. As I said in The Road Ahead, we always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten. Don't let yourself be lulled into inaction.
Chapter 5. The Middleman Must Add Value
Summary
The Internet is driving down transaction costs and value of distribution. The Web is moving us toward friction-free capitalism. The middleman must respond or suffer. Only a few will win the "volume" game, so almost every entrant has to have a service strategy for differentiation. You must define your value-add and use technology to deliver it. Merrill Lynch responded by using digital tools to empower its knowledge workers and ended up empowering its customers.
Excerpts
Here on the edge of the twenty-first century, a fundamental new rule of business is that the Internet changes everything. At minimum, Internet technologies are altering the way every company, even a small one, deals with its employees, partners and suppliers. Not every company needs to use the Internet to interact with its customers right now, but someday soon a corporate Web site where customers can do business with a company will be as essential as the telephone and a mailing address have been.
In 1995, in The Road Ahead, I used the term "friction-free capitalism" to describe how the Internet was helping create Adam Smith's ideal marketplace in which buyers and sellers can easily find one another without taking much time or spending much money. Achieving Smith's "perfect price" comes not just from eliminating the middleman but also from the additional information available online. The Internet makes it easy for a buyer to get background information about a product-how it's rated by consumer organizations or other independent reviews-and to compare prices easily. Buyers can also tell sellers more about their requirements, and sellers will be able to target their wares to the people most interested and to cross-sell related products.
Many Web sites ask users for registration information, including name, address, demographic data and credit information. While this data enables businesses to offer better services and support for customers and do more targeted marketing, consumers should be able to approve in advance the use of any personal data and whether that data can be passed on to other entities. Today, e-commerce runs on the honor system, with vendors asking users their permission for information use. We're working on technology that would let consumers predefine the type of data that their PCs would make available to other systems over a network. The software will put the control with the user, where it belongs, while also eliminating the need for the user to reenter the same data over and over.
Now that customers can deal directly with manufacturers and service providers, there is little value added in simply transferring goods or information. Various commentators have predicted "the death of the middleman." Certainly the value of a "pass-through" middleman's work is quickly falling to zero. Travel agents who simply book plane fares will disappear. This kind of high-volume, low-value transaction is perfect for a self-service Internet travel reservation site. In the future, travel agents will need to do more than book tickets; they will need to create a total travel adventure. A travel agent who provides highly personalized tours of, say, Italy or the California wine country will still be in great demand.
Chapter 6. Touch Your Customers
Summary
Electronic commerce is rising but a breakthrough requires much more than just digital sales. Smart companies find that "transactions" more often involve service and support rather than sales. Dell is the leading e-commerce company and one day expects to be doing half of its business on the Web. Its online strength is personalized corporate pages. Marriott began with an online reservation system and ultimately provided a highly customized, highly personalized site focused on destination information. The key to success is internal corporate support of Internet strategies, interactive sites for customers, and a service focus.
Excerpts
Some companies will use the Internet to interact with their customers in ways that haven't been possible before and make the sale part of a sequence of customer services for which the Internet has unique strengths.
Rapidly growing categories for online commerce include finance and insurance, travel, online auctions and computer sales. Today's Internet customers are the technically savvy.… Tomorrow's customers will be the mainstream. Even the most conservative estimates project an annual growth rate of about 45 percent for online sales. The highest projections are for more than $1.6 trillion dollars in business by the year 2000. I think this number is too low.
In the future, hotels will integrate the Internet into more than just the process of learning about travel and accommodations. They will also make Internet access far more of a feature of the rooms themselves. Most major hotels now make modem connections reasonably simple from the room, and they usually have business centers where guests can get more computer-related facilities. In the future, hotels catering to business travelers will make high-speed connections a standard in every room, and leading hotels will offer docking stations and large easy-to-read screens so that business travelers can plug in their portable devices and be as productive on the road as they are in their office.
You want to move pure transactions to the Internet, use online communication for information sharing and routine communication and reserve face-to-face interaction for the activities that add the most value. In addition to using the Internet to simply make reservations or place product orders, customers find the Internet the perfect medium for gathering information, assessing product value and price/performance, checking order status, diagnosing and solving simple problems and other relatively straightforward tasks. More and more, in this scenario, sales personnel become consultants.
Chapter 7. Adopt the Web Lifestyle
Summary
This chapter explores the relatively revolutionary advance of "the Web lifestyle" vs. the more evolutionary progress of "the electrical lifestyle." Gates explores the many ways that our lifestyle will benefit from technology. The Web lifestyle's critical mass is tied to improvements in devices and software, but bandwidth availability is the biggest factor. The Web will change boundaries around communities, too, dramatically increasing the number of organizations you take part in. The Web is also creating more personal service, not less, and will throw off existing limitations.
Excerpts
Because the Internet is a worldwide communications infrastructure that depends on electricity, you could say that its popular acceptance is an extension of the "electricity lifestyle." But the Internet is enabling a new way of life that I call "the Web lifestyle." The Web lifestyle, like the "electricity lifestyle," will be characterized by rapid innovations in applications. Because the infrastructure for high-speed connectivity has reached critical mass it is giving rise to new software and hardware that will reshape people's lives. Intelligent devices such as the PC are becoming more powerful and less expensive. Since they are programmable they can be used for many different applications. Within a decade, most Americans and many other people around the world will be living the Web lifestyle. It will be a reflex for these people to turn to the Web to get news, to learn, to be entertained and to communicate. It will be just as natural as picking up the phone to talk to somebody or ordering something from a catalog is today.
As consumers rapidly move online, one of the most fundamental shifts will be the degree to which consumers will manage their finances, including banking, mortgage, utilities and credit cards online. In 1998, only about one million of the fifteen billion total bills in the U.S. were paid electronically. Little online customer service was available. In fact, though consumers can pay some bills online, in almost every case they still receive them on paper. When consumers are able to pay online, the U.S. Commerce Department estimates, processing costs will drop more than $20 billion annually.
Using speech to interact with the TV, PC or other personal companions will be common within ten years. The technology will combine speech recognition and natural language understanding, so that the computer can determine your intent. Speech synthesis will improve dramatically from the robot-sounding voices you hear today. Your TV and PC will include a camera so they can recognize gestures and facial expressions. They will be able to tell whether you're talking to the device or someone else (or another device) and determine your emotional reaction... .Computers that "see, listen and learn" will extend digital technology into many new areas where the keyboard or mouse interface makes interaction impractical.
Community building is going to be one of the biggest growth areas in the next few years on the Web. The Web dramatically increases the number of communities you can bond to. In the past, you might have had time to be a part of your neighborhood community and one or two social organizations you took the trouble to join. In the Web lifestyle, you are limited only by your interests. One of the most powerful socializing aspects of the Web is its ability to connect groups of like-minded people independent of geography or time zones. If you want to get together a group of avid bridge players, or talk issues with people who share your political views or stay in touch with your ethnic group scattered all over the world, the Web makes it easy to do. If you want to keep up with the goings-on in your hometown, the Web can help. ...A Web site such as Third Age, which offers an electronic community space for seniors, illustrates the power of electronic community building. The site provides advice on family, health, technology, warnings about scams targeting seniors and discussion groups on topical issues.
Chapter 8. Change the Boundaries of Business
Summary
The "Web workstyle" of using digital tools and processes enables both organizations and individuals to redefine their roles. Web technologies mean that a company can, for many projects, create a web of partnerships and take a "studio" approach in a general trend toward smaller internal workforces. Larger companies will use the Web workstyle to carry out core competencies better. Smaller companies will use the Web to assemble a virtual large company bid on business unavailable to them before. The Web offers new choices for workers that weren't available before, and many will become freelancers. The worker can change from cog to empowered employee or free agent. The Web workstyle will ease geographic constraints.
Excerpts
The Web workstyle makes it possible to deal better with unpredictable demand. Because you have an intense need for a skill, and then you don't, for some areas you want flexible staffing to deal with peaks and valleys. The Internet means that more companies can take a "studio" approach to running major parts of their businesses. Big Hollywood studios have regular employees to handle finance, marketing and distribution and other ongoing projects, but the creative side of the business, the full-time moviemaking staff, isn't very big at all. When a movie concept is agreed upon, the director assembles a large group of people to create the film. When they're done, they disband. Everyone, from the director to the actors to the cinematographer to the key grip, goes on to other projects.
The Web lifestyle will increasingly equalize opportunities for skilled people around the world. If you had to guess someone's approximate income today and were limited to a single polite question, a good one would be: "What country do you live in?" The reason is the huge disparity in average wages from country to country. In twenty years, if you want to guess somebody's income, the most telling question will be: "What's your education?"
As a business manager, it's critical to take a hard look at your core competencies. Revisit the areas of your company that aren't directly involved in those competencies, and consider whether Web technologies can enable you to spin those tasks off. Let another company take over the management responsibilities for that work and use modern communications technology to work closely with the people-now partners instead of employees-doing the work.
Chapter 9. Get to Market First
Summary
This chapter offers a survey of time to market in various industries. Automakers cut time to market and defects in half from 1990 to 1998. Intel keeps production cycle at 90 days and reduces defects as chips become astronomically more complex. Book publishing cuts 18-month publishing cycle in half. The Banco Bradesco example shows how an anything-but-staid bank uses technology to get to market quickly with a variety of new services from kiosks, and smart cards to Internet banking. Compaq's ERP system enables the company to cut its planning cycle from months to a week.
Excerpts
Information technology has become a major contributor to the faster turnaround, the higher quality and the low inflation that have characterized business in the last decade.
In some industries, the issue is not so much faster time to market as it is maintaining time to market in the face of astronomically rising complexity. The Intel Corporation, for instance, has consistently had a 90-day production cycle for its chips, which power most PCs. Intel expects to maintain this 90-day production rate despite the increasing complexity of the microprocessor. The number of transistors in the chip has increased from 29,000 in the 8086 in 1978 to 7.5 million in the Pentium in 1998, and the microprocessor's capability has grown ten thousand-fold over the same twenty years. By 2011, Intel expects to deliver chips that have 1 billion transistors. This exponential improvement stems from Moore's Law, which says that the power of microchips doubles every eighteen to twenty-four months. To put Moore's Law in perspective, if products such as cars and cereal followed the same trend as the PC, a mid-sized car would cost $27 and a box of cereal would cost one cent.
Ultimately, the most important "speed" issue for companies is cultural. It's changing the perceptions within a company about the rapidity with which everybody has to move. Everybody must realize that if you don't meet customer demand quickly enough, without sacrificing quality, a competitor will. Once the mindset adapts to the need for action, digital technology enables fast reflexes.
III. Manage Knowledge to Improve Strategic Thought
Chapter 10. Bad News Must Travel Fast
Summary
The best companies always worry and seek out bad news, as a way of staying on their toes. Microsoft's reaction to the rise of the Internet shows how a digital nervous system helped to respond to bad news as a company. Historical examples establish that leaders must encourage, listen to, and act on bad news: Intel Pentium chip story; Digital Equipment Corporation; Wang; Ford; Douglas Aircraft; and Pearl Harbor. A competitive company must maintain an underdog attitude.
Excerpts
An essential quality of a good manager is a determination to deal with any kind of bad news head on, to seek it out rather than deny it. An effective manager wants to hear about what's going wrong before he or she hears about what's going right. You can't react appropriately to disappointing news in any situation if it doesn't reach you soon enough.
The impetus for Microsoft's response to the Internet didn't come from me or from our other senior executives. It came from a small number of dedicated employees who saw events unfolding. Through our electronic systems, they were able to rally everybody to their cause. Their story exemplifies our policy, from Day 1, that smart people anywhere in the company should have the power to drive an initiative. It's an obvious, common sense policy for Information Age companies, where all the knowledge workers should be part of setting the strategy. We could not pull off such a policy without the technology we use. In many ways, technology has shaped the policy. Do people all over my company feel free to send me e-mail because we believe in a flat organization? Or do we have a flat organization because people have always been able to send e-mail directly to me? For years, everybody at Microsoft has had a PC and e-mail access. It's a famous part of our corporate culture, and it's shaped the way we think and act.
I like good news as much as the next person, but it also puts me in a skeptical frame of mind. I wonder what bad news I'm not hearing. When somebody sends me an e-mail about an account we've won, I always think, "There are a lot of accounts nobody has sent mail about. Does that mean we've lost all of those?" This reaction may seem unwarranted, but I've found there's a psychological impulse in people to send good news when there's bad news brewing. It's as if they want to lessen the shock. A good e-mail system ensures that bad news can travel fast, but your people have to be willing to send you the news. You have to be consistently receptive to bad news, and then you have to act on it. Sometimes I think my most important job as a CEO is to listen for bad news. If you don't act on it, your people will eventually stop bringing bad news to your attention. And that's the beginning of the end.
Chapter 11. Convert Bad News to Good
Summary
Use technology to convert bad news to good. Read a history of Microsoft failures and how it learned from them to improve its products. Promus Hotels uses a digital nervous system to support service guarantees that convert customer complaints into meaningful action by the hotels. Microsoft Technical Support uses a digital nervous system to understand customer complaints and issues and rapidly convert them into product improvements, new features and better tools. Fewer but more substantive phone calls result as a website handles easy customer problems.
Excerpts
Once you embrace unpleasant news not as a negative but as evidence of a need for change, you aren't defeated by it. You're learning from it. It's all in how you approach failures.
Unhappy customers are always a concern. They're also your greatest opportunity. Adopting a learning posture rather than a negative defensive posture can make customer complaints your best source of significant quality improvements. Adopting the right technology will give you the power to capture and convert complaints into better products and services fast.
Listen to your customers and take their bad news as an opportunity to turn your failures into the concrete improvements they want. Companies that invest early in digital nervous systems to capture, analyze and capitalize on customer input will differentiate themselves from competition. You should examine customer complaints more often than company financials. And your digital systems should help you convert bad news to improved products and services.
Chapter 12. Know Your Numbers
Summary
Capturing data digitally at the outset and driving the use of digital data through a company will speed processes and reduce errors. Jiffy Lube, Siemens, and Marks & Spencer use numbers to change their sales and marketing processes and their interactaction with customers and partners. Digital technology is enabling the creation of virtual companies through a web of partnerships. Using computers for routine processes frees people to do more productive things. Line managers must know their numbers in order to impact their business, which requires accurate numbers and insightful analysis of them.
Excerpts
"Know your numbers" is a fundamental precept of business. You need to gather your business's data at every step of the way and in every interaction with your customers and with your partners, too. Then you need to understand what the data means. I'm not saying that you should be single-mindedly driven by bottom-line concerns. I'm saying that you should objectively understand every aspect of your business that you can. If you're considering trading off short-term profits for long-term gains, for instance, you need to know as precisely as possible the cost of that tradeoff. Companies can use the data they collect to improve the efficiency of their core businesses, strengthen their relationships with both customers and partners, extend their businesses in new ways and develop better service and new products.
There's no substitute for understanding your numbers at a working level. Sometimes my friend Steve Ballmer, Microsoft's president, surprises the members of a product group by knowing their pricing schemes and sales numbers-and the competitors'-better than the people presenting a plan to him. He has a way of striding into a room and immediately asking the one question the team doesn't have an answer to. He's done his homework, and he's thought hard about the issues that come out of the numbers. He sets a high priority on fact-based decisions.
Not enough people are using digital data in the office. Existing paper systems lead people to assume that data is hard to get and customize. Because their data isn't digital, they have to work with stacks of paper they can't navigate or analyze. They can't find patterns in their data. They can't turn their paper information into action. Because so few companies are using digital tools internally or with partners today, those firms that act quickly to create a digital nervous system have the opportunity to jump ahead of their competitors.
Chapter 13. Shift People Into Thinking Work
Summary
Smart systems will shift people from non-thinking work to more productive activities. Data mining is defined and explored, including its importance in marketing and in determining pricing for both hard goods and financial industries. The powerful capabilities of data mining will help companies to be more profitable and efficient. PCs makes data mining available to all companies at reasonable cost. This intelligent software won't replace people. A good knowledge worker will add value to the work of a computer. This chapter demonstrates how HarperCollins uses OLAP to track sales and meet demand just in time, thereby reducing returns.
Excerpts
Using software to handle routine data chores gives you the opportunity to provide the human touch where it really matters. There's a pretty dramatic difference between getting a note that was clearly written by a person vs. a computer-generated form letter, or receiving a phone call about some new product or special event from a person vs. a computer. It's of incredible value to have a person working with a customer who is unhappy about something really important or who has special needs. In a hotel, for instance, smart software can dramatically shorten the check-in and checkout time and solicit routine feedback, freeing up staff time. How much more would people enjoy their hotel stay if there were half a dozen additional people acting as a concierge instead of as a clerk?
Using software algorithms to find useful patterns in large amounts of data is called data mining. ...Among the challenges that data mining can help with are these: Predicting the likelihood of customers buying a specific item based on their ages, gender, demographics and other affinities. Identifying customers with similar browsing behaviors. Identifying specific customer preferences in order to provide improved individual service. Identifying the date and times involved in sequences of frequently visited web pages or frequent episodes of phone calling patterns. Finding all groups of items that are bought together with high frequency. This final technique is usually valuable for merchants to uncover buying patterns, but a correlation between two billing codes for the same procedure enabled an Australian healthcare provider to uncover more than $10 million in double-billing fraud.
The greatest value of data mining will be to help companies determine the right products to build and the right way to price them. Companies will be able to evaluate a variety of packaging options and price points to see which ones are most appealing to customers and profitable to themselves. Such capabilities are of special interest to companies that sell information products. Unlike a car or chair, products such as insurance, financial services and books have far more cost tied up in development than in production and have a value determined more by the customer than by the physical of cost of goods. The secret to success with information products is understanding the profile and buying habits of your most likely customer.
Chapter 14. Raise Your Corporate IQ
Summary
Microsoft's campus blueprints expose the need of a central knowledge base of construction-related data, one of many forms of "knowledge management" that every company needs. The goal of knowledge management is to increase corporate IQ by sharing history and current knowledge. Executives must lead the way, establishing open communications and proper tools. Market analysis replaced cost analysis as the biggest user of technology at Coca-Cola. Yamanouchi Pharmaceuticals and Microsoft use Web tools to ensure timely responses to complex product questions. Digital systems improve collaboration in product development at Nabisco. Online tools solve training problems. Sharing information is key to recruiting and retaining smart people. Global access to information doesn't mean centralized management. The CEO must foster a collaborative, knowledge-sharing corporate culture, provide the digital tools, and reward knowledge sharing.
Excerpts
Knowledge management as I use it here is not a software product or a software category. Knowledge management doesn't even start with technology. It starts with business objectives and processes and a recognition of the need to share information. Knowledge management is nothing more than managing information flow, getting the right information to the people who need it so that they can act on it quickly. It goes back to Michael Dertouzos' idea that information is a verb, not a static noun. And knowledge management is a means, not an end.
The workers in a company with a high corporate IQ collaborate effectively so that all of the key people on a project are well informed and energized. The ultimate goal is to have a team develop the best ideas from throughout an organization and then act with the same unity of purpose and focus that a single, well-motivated person would bring to bear on a situation. Digital information flow can bring about this group cohesiveness.
To recruit and retain smart people, you need to make it easy for them to collaborate with other smart people. That makes for a stimulating, energized workplace. A collaborative culture, reinforced by information flow, makes it possible for smart people all over a company to be in touch with each other. When you get a critical mass of high-IQ people working in concert, the energy level shoots way up. Cross-stimulation brings on new ideas-and less experienced employees are pulled along to a higher level. The company as a whole works smarter.
Chapter 15. Big Wins Take Big Risks
Summary
Companies need to risk big or they risk losing their edge. What do aircraft design projects and DNA research projects have in common? Both the need to take big risks in order to succeed and need good information flow to advance modern scientific research. Both industries require the best in knowledge management and modern production techniques.
Excerpts
To be a market leader, you have to have what business writer and consultant Jim Collins calls "Big Hairy Audacious Goals." You can't just look at the past or current state of the market. You have to also look at where it's likely to go, and where it might go under certain circumstances, and then navigate your company based on your best predictions. To win big, sometimes you have to take big risks.
Information technology in science is about getting the most out of the brains of talented scientists. In the past, scientists-even more than other knowledge workers-have spent the vast majority of their time collecting data and only a small part of their time analyzing it. As better tools enable researchers to apply most of their brainpower to the tough problems rather than to data collection and verification, it's exciting to think how much more progress there will be.
Because of the nature of the people they hire and the nature of their work, biotech companies are great examples of the application of the Web workstyle. And since many of them are new, the firms have been able to start from scratch with digital tools. If you ask the employees what's unique about their workstyle, they'll shrug and say they're not doing anything special-just using PCs and LANs and the Internet. Employees take electronic tools for granted.
IV. Bring Insight to Business Operations
Chapter 16. Develop Processes That Empower People
Summary
A business has the equivalent of autonomic processes, those processes that simply have to run efficiently in order for the company to survive. Even previously automated processes can use information technology to better understand and improve the inner workings of the production process. Feeding the data from your production process to your line workers enables them to improve the quality of the product itself. Extracting data from the production process to inform your other business systems improves the company's overall efficiency. Workers are no longer a cog in a machine but rather are an intelligent part of the overall process.
Excerpts
An automated production process is necessary but not sufficient if a company is to be competitive today. A good digital nervous system can help you develop your line employees into knowledge workers, transforming your company's core production processes into a competitive advantage.
In the new organization, the worker is no longer a cog in a machine but is an intelligent part of the overall process. Welders at some steel jobs now have to know algebra and geometry to figure weld angles from computer-generated designs. Water-treatment companies train assembly-line workers in computerized production measurements and math. New digital photocopiers require the service personnel to have an understanding of computers and the Internet, not just skill with a screwdriver.
Having people focus on whole processes will allow them to tackle more interesting, challenging work. A one-dimensional job (a task) will be eliminated, automated, or rolled into a bigger process. One-dimensional, repetitive work is exactly what computers, robots and other machines are best at-and what human workers are poorly suited to and almost uniformly despise. Managing a process instead of executing tasks makes someone a knowledge worker. And it is good digital information flow that enables knowledge workers to play their unique roles.
Chapter 17. Information Technology Enables Reengineering
Summary
Reengineering principles combined with digital processes can lead to dramatic breakthroughs in speed, efficiency and corporate intelligence. An important rule is to create simple processes and link them rather than try to create one huge, complex process. Microsoft's use of HeadTrax personnel approval application shows the symbiosis between process and technology. Dayton Hudson significantly reduces its merchandising cycle. Business leader ownership is necessary for new technology to succeed.
Excerpts
Creating a new process is a major project. You should have a specific definition of success, a specific beginning and end in terms of time and tasks, intermediate milestones and a budget. The best projects are those in which people have the customer scenario clearly in mind. That's true of process projects, too. The customer may be outside the company or inside, but the idea is the same: how will the person use the product or the process you're developing? How will it be better than the one before?
We avoid long development cycles for internal applications. Too much time often nullifies any benefits because business needs change along the way. Smaller, decentralized processes are usually best. Only a few applications, such as our financial reporting system, require centralization. As we have undertaken other business solutions internally, we have kept teams and projects small, keeping in mind the motto of our product development teams: "Shipping is a feature."
It's impossible to properly reengineer a process using technology without the oversight of someone who can bridge the business and technical teams. This business process owner doesn't have to be the most senior or the most technical person on the business side of your organization, but the person does have to understand the business need and how the technology will be used in actual work. The person must be respected enough in the organization to make decisions stick. That's the person most likely to have insight into developing newer, simpler processes and negotiating tradeoffs between business and technical requirements.
Chapter 18. Treat IT As A Strategic Resource
Summary
The CEO should become as engaged in IT as in any other important business function. The CEO needs a baseline understanding of technology. CEO and CIO need to regard technology not as a cost but as a strategic resource for the business side. CIO needs to participate in business strategy sessions and should report to the business side rather than to the financial side. The chapter includes guidelines for assessing infrastructure and making IT purchasing decisions, advocating a modern infrastructure based on PC and Internet standards.
Excerpts
Since the founding of Microsoft, I've always applied technology before applying labor to try to solve business problems. Integration of our IT world with our business objectives begins with the business, marketing and sales plans of the senior executives-Steve Ballmer, Bob Herbold, Jeff Raikes and others. After reviewing their plans, John Connors, the Microsoft CIO, creates an initial IT plan. John further develops his plan through a series of meetings with COO Bob Herbold, the VPs of all the lines of business and John's IT heads. This plan, which now contains all the technology initiatives and financial costs, goes to Steve for review, and a consensus plan then comes to me.
You should measure IT costs carefully, of course, but ultimately you should judge your infrastructure in terms of the business value it gives you. If you're going to spend the money anyway, wouldn't you rather spend it on solutions than on simply keeping the engine running? A good infrastructure will cut baseline costs, but a CEO should always be asking what the infrastructure enables rather than what costs it reduces. It's a matter of emphasis. Each year, the company should strive to spend a smaller percentage of resources on routine functions and a greater percentage on new business solutions.
It's not a coincidence that most of the companies I've described in this book have taken the approach of driving IT to undertake specific projects that help increase revenue through improved products, reduced product costs, faster delivery and improved customer service. These companies have learned a valuable lesson: the purpose of IT is to make money!
V. Special Enterprises Provide General Lessons
Chapter 19. No Health Care System Is an Island
Summary
Health care organizations spend large amounts of money on specialized diagnostic systems but little on information flow, which is why paperwork absorbs as much as 30 percent of all healthcare spending. Approaches built on information flow and standards demonstrate the potential for building a low-cost, integrated health care systems that will improve diagnosis and patient care through the entire cycle of care: emergency services, hospital care, follow-up, and long-term trend analysis. Examples include Acadian Ambulance and Air Med Services, Sentara Health System, Children's Hospital in Seattle and the U.S. Air Force.
Excerpts
Curiously enough, the managed care that many physicians love to hate may turn out to be the primary driver that extends information systems into patient care and returns control of patient care to doctors. When you get enough clinically helpful information in front of physicians they see the benefits and ask for more. Patients, meanwhile, are recognizing how much more information is available to them on the Web and the sense of control and responsibility that better information gives them in the maintenance of their own health.
I've personally spent many hours on the Web reading information about health issues facing my friends and family. The degree of detail in medical information on the Web is stunning. But there's lots of quackery out on the Internet, too, so don't believe everything you find there. Evaluate the credentials of the people or organization providing the information.
The Internet is also being used to broadcast important medical conferences for people who can't attend in person. The first broadcasts, in the spring of 1998, were of a pair of Johns Hopkins conferences on clinical care and issues for patients with HIV. Thousands of online participants sent positive feedback, encouraging Johns Hopkins to schedule video coverage of several upcoming AIDS conferences-one of which will be broadcast in three languages-as well as other conferences.
Chapter 20. Take Government to the People
Summary
Government can benefit more from digital processes than probably any other organization, but in general governments have done less. Governments must think beyond internal organizational issues and view problems from the point of view of overall information flow and designing integrated systems that provide better service to citizens. Examples show innovative government agencies at all levels reducing paper flow and streamlining processes through digital systems.
Excerpts
Just as businesses can make better use of productivity tools and e-mail to get far more benefits from technology investments, so too can government. In developed nations, many government employees and public officials already have PCs on their desks. And developing nations can put in a PC infrastructure for a modest cost. The use of e-mail alone promotes inter-agency cooperation and enables public officials to be more responsive.
Less developed countries may assume that a digital approach to government is out of reach, but countries without systems can start fresh with new systems, which will be less expensive than manual approaches. Developed countries have older systems that often must be integrated to manage a transition. Leadership examples around the world make it clear that much of the innovation is happening in smaller governments-smaller nations and municipalities, counties and provinces, and the state levels of larger nations. Smaller governments, being less fragmented and less complex, can experiment and deploy solutions on a smaller scale.
Deregulation of telecommunications is probably the single greatest step that a country can take to create a digital economy. Replacing telecommunications monopolies with open competition around the world will stimulate innovation in Internet service delivery and reduce rates, which are high and discourage use in many countries.
Chapter 21. When Reflex Is a Matter of Life and Death
Summary
Examples from the military (U.S. Air Force, Marines, and Navy) demonstrate that corporate reflex is a matter of life or death. Digital systems change the nature of warfare and the speed of training, as well as improving the conduct of routine business that supports a military effort. Many of the lessons apply to other organizations as well.
Excerpts
After the Gulf War, the U.S. Air Force, like all the services, held a lessons-learned conference. High on the Air Force list for running a future high-intensity air war was better flight planning for pilots flying into harm's way. While some active-duty Air Force personnel wanted to address this need with the military's traditional computer systems, members of the U.S. Air Force Reserve and the Air National Guard, who had civilian experience, immediately said, "We gotta do this on a PC."
Another exciting aspect of a digital military is its ability to dramatically increase rates of learning. Instead of having to fight three wars and lose hundreds of planes and thousands of men to learn which procedures and tactics work, the Air Force can now examine the records of a few missions and learn the same kinds of lessons a lot sooner. In earlier air wars, including the Gulf War, debriefing was often inconclusive. Combatants in debriefing sessions tended to remember the action through only their narrow views of the situation, and their recollections were usually blurred by the fog of battle. It was hard for commanders to reconstruct the overall battle in order to understand how to improve next time.
With declining military budgets, the possibility of continual outbreaks in hot spots around the world and the unwillingness of the American public to accept high casualty rates, the United States is counting on technology to win wars. Technology doesn't mean simply smart weapons. It means smart soldiers. The rules of war haven't changed. The victory goes to the side that can strike the quickest with the best intelligence. Whether the intelligence is gleaned from spy satellites, unmanned reconnaissance drones or operatives on the ground, information must get to the warriors in action. And first-hand, site-specific information from the battlefield must get back to the strategists as the battle flows back and forth.
Chapter 22. Create Connected Learning Communities
Summary
A digital nervous system will empower teachers and students more than any other group of knowledge workers. Teacher involvement is a necessity and community involvement is vital. A connected school can become the basis for a connected learning community that encourages lifelong learning and training for all citizens.
Excerpts
The success of PCs as educational tools requires teacher involvement. Without teacher training and integration into the curriculum, PCs will not have a big impact. Many PCs have gone into computer "labs" where they sit, seldom used. Schools need to shift from treating the PC as a subject unto itself-teaching about technology-to integrating the PC throughout the curriculum, teaching with technology. More and more school districts are now demonstrating that with the involvement of teachers, PCs used as learning tools can have a profound effect.
Most school systems around the world are just beginning to bring PCs into the classroom. To get started requires leadership at the school board and superintendent level and a technology plan that provides a blueprint for developing and managing the technical infrastructure, for integrating technology with curriculum and for training teachers. Finally, rallying community support is critical. Voters have proven willing to vote for measures to fund concrete, well-fashioned plans. Communities should think of connecting the schools as the start of a broader effort to create a connected learning community among all civic organizations and to think of technology-enhanced education as a lifelong activity not restricted by age or to schools.
Web connectivity builds on the PC's capabilities by enabling students to find other people who are exploring the same topics or to find approaches to a subject that might be more helpful or interesting to them than the approach used in class. They may find a nugget of information that they enjoy bringing back to the class, or one that confused them and the teacher can address for the benefit of everybody. A common assignment will be for students to go out and explore a topic on the Internet, then come back together in a group to discuss what they learned.
VI. Expect the Unexpected
Chapter 23. Prepare for the Digital Future
Summary
A new way of doing business is based on moving information. Empower individuals with new technology. Make every aspect of business digital. Embrace the digital age.
Excerpts
Business leaders who succeed will take advantage of a new way of doing business, a way based on the increasing velocity of information. The new way is not to apply technology for its own sake but to use it to reshape how companies act. To get the full benefit of technology, business leaders will streamline and modernize their processes and their organization. The goal is to make business reflex nearly instantaneous and to make strategic thought an ongoing, iterative process-not something done every twelve to eighteen months, separate from the daily flow of business.
A belief in empowerment is key to getting the most out of a digital nervous system. It's knowledge workers and business managers who benefit from more and better information, not just senior management. When employees get a couple of good tools that deliver better results, they demand more. It's another positive cycle.
Empowerment of employees on the line requires smart machines at their fingertips. A system built on the concept of "central" vs. "personal" computing is insufficient for a widespread and mobile work force. Such a system also represents a hostile view of the worker. It says that employees are still industrial-age cogs, that they should be doing repetitive, single-task jobs. It says that workers should not step outside the box to do their job-the tool, in fact, will prevent them from stepping outside the box.
Build Digital Processes on Standards
Summary
The appendix describes how to build a digital nervous system using the new hardware and software standards. The appendix describes a framework for how to develop a digital nervous system; what phases of development are; and how to decide what to buy and build. Special emphasis is placed on PCs and the rate of technological advance created by the new horizontally integrated computer industry.
Excerpts
In the old vertically integrated computer industry, a customer would buy almost all of the elements of a solution from a single company-the chips, the computer systems built on the chips, the operating system, the network hardware and service. Every vendor had its own vertical solution. Sales volumes were low and prices were high. Integration between different vendors was difficult and expensive. Switching costs for customers were very high since every piece of the solution would have to change. These vertically integrated vendor solutions are being displaced by the PC approach, in which specialized companies give customers a choice in each of the infrastructure layers: chips, computer systems, system software, business applications, networking, systems integration and service. If packaged software does not solve your business needs out of the box, look for software products that are easy to customize. It's better to start with commercial software and customize the package than to build a custom application from scratch. A three-tier architectural blueprint combined with commercial software that uses a component approach makes customization much more possible.
Scale economics for research and development in the PC industry dwarf what any one company can do in an old vertical approach. . . . By staying in the mainstream, businesses can ride the massive R&D investments and the innovation that is concentrated in the horizontal model. Quite simply, the high-volume world is beating the low-volume world in the speed of technological advance. Over the years, more and more of the traditional vendors have taken an increasing PC focus, including Fujitsu, HP, ICL, NEC, Unisys and others. IBM is not purely in either camp, continuing its vertical strategy with mainframes and minicomputers while also developing a business around the horizontal PC model.