Businesses are coping with difficult times. The current economic condition of moderating growth and increasing costs is creating deep structural shifts at both the macro and the micro levels.
The business imperatives are gradually transiting
from
an old combination of high business growth (from fewer user segments, products and services), organizational slack (positive difference between resources available and resources needed) and linear business expansion,
to
a new combination of business agility (with lowering growth and that too expected to come from many fleeting opportunities from many user segments, products and services), risk management (due to uncertainties of the success of the multiple initiatives, products and services) and cost control (as funds are not easily available).
The three business imperatives in the earlier combination fed into each other i.e. they supported and complemented each other. The three business imperatives of the new combination, however, will work against each other. E.g. if agility is enhanced, risk also increases; when risk is managed it impacts both cost control and business agility; when costs are controlled it impacts business agility and the ability to spend towards risk management. The play of the new combination is very challenging and that’s what will drive new relevance for IT.
In the earlier combination, IT’s role was limited to automating the existing business processes in order to make them more efficient and drive productivity The relevance of IT, however, has to be very different in the emerging business imperatives. Here, IT has to enable a business to become more agile, manage the risks of agility and enable it do this in a cost effective manner.
With this premise of structural shifts, new business imperatives and a new relevance for IT emerging, many businesses and their leaders are looking at a deeper role for IT in four areas of customer intimacy, supply chain digitization, people partnership, and institutionalized risk alertness. These four areas may sound similar to the existing practices of CRM, SCM, HCM and RM, but they are not just applications and technology solutions as represented by the four acronyms. These four areas are the initiatives of the business and functional leaders in an organization and can be enabled by many type of technology in many different ways. Here I am not talking about the specific technologies.
Let’s understand what exactly these four initiatives are.
Customer Intimacy
Being constantly in touch with the customers, knowing their needs and tastes is not new but doing so in a continuous and almost real time manner is new. The earlier paradigm of market planning consisted of long cycles of target definition, product creation, market research, pricing, distribution and after sales service, which is inadequate in the changing times. The new business imperatives demand the cycle to be compressed in a cost effective manner and ensuring that it does not loses its effectiveness of achieving the objectives.
Capturing, storing, retrieving and using the existing knowledge about the customers in novel ways is the need of the hour. The challenge is further exacerbated when the in-house know how has to be complemented by the knowledge existing in the external domain (mainly internet). Driving customer interaction programs, collecting vital pieces of information from multiple such programs, keeping sensors in vital places where customers interact with each other and creating a small piece of usable knowledge from huge piles of irrelevant information has to be a practice. Further integrating that with the internal know-how stored in the IT system helps create the desired intimacy with the customers.
Supply Chain Digitization
By supply chain I refer to both supplies to the business and distribution from the business. Supply chain integration is both a source of cost control through efficiency drive and business capability to serve the heterogeneous customer segments with multiple products and services. Both the procurement and the distribution side can find relevance of these two sources.
First let’s talk about the procurement side. Some of the businesses I have interacted with have been working on the agenda of controlling the cost of procurement through lowest price discovery and just in time delivery. With input costs rising and the prices fluctuation remaining uncertain, the need for a better visibility on the prices is a business requirement. How can IT help an organization do this is an area of interest for many. The underlying business processes of procurement is not the focus but how can the information from them be leveraged to devise new and appropriate processes to respond to the need of price discovery and fast delivery by the supplier.
The distribution side of the business needs not only the existing processes to be more efficient and effective but it also needs newer processes to address multiple user segments with multiple products and services. My interaction with businesses brings forth the endeavors they are pursuing and the kind of newer capabilities they need, e.g. faster turnaround of channel initiatives, just in time inventory replenishment of multiple variants of the products at the distributors’ and warehouses’ level, the right ordering and the right delivery etc.
People Partnership
The flux organizations are experiencing today can be handled only by ensuring a larger participation by people at all levels. No more can people be expected to merely confirm and adhere to decisions taken by few at the top. Contemporary market challenges require organizations to distribute power from the centre to the periphery, especially to the customer facing functions. IT has traditionally been used as a control tool in the hands of the top management, who wants to take informed decisions. These decisions affect the organizations and those who work there.
However, with the need for higher agility, the same decisions need to be taken on the ground without spending time in long decisions cycles. The new relevance for IT is to empower people with information and power to take decisions. Many organizations in the FMCG and insurance sectors are looking at devising new ways to empower their front end employees and agents.
The aspect of people participation is not just restricted to information availability and more power to take decisions; it also includes the aspects of learning, development, engagement and motivation. I have found many CEOs talk about their dream to become an organization of choice for the employees. They should realize that IT can play a more meaningful role in their endeavour of creating a great place to work.
Institutionalized Risk Alertness
Risk alertness is not just about the big things like the governance frameworks, high level risk modelling and assessment, scenario planning, security software etc. It is also about the small things. For example awareness at the broader organizational level among a larger set of employees about the risk of product failures, inability to hire the right candidates, inability to capture or let go of fleeting opportunities in the market, failure to operationally leverage the acquired abilities etc. When this awareness is met with empowerment from top, real time information availability to sense the danger and the structural mechanisms (like monthly meets, quarterly reviews, weekly huddles etc.) to act, it creates a broader and institutionalized risk alertness in the organization.
All these new 4 business initiatives can be enabled by IT and hence they define new relevance for IT.
(A word of caution- organizations can extend IT’s role to these areas with varying degree of success depending on the existing maturity of their IT systems. They should first develop their basic IT systems & its management to gear up for deeper role of IT for the new business imperatives).
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