‘Insanity is continuing to do things the same way but expecting different results’. Thus wrote the genius Albert Einstein. Rewording is required to fit the bewildering onrush of change: ‘Insanity is continuing to do different things the same way but expecting different results’. In today’s world, and far more in tomorrow’s, every aspect of operations and strategy is or will be up for grabs.
By now most people understand the meaning and power of Moore’s Law. The co-founder of Intel, Gordon Moore, postulated that the number of transistors on a silicon chip would double roughly every two years. He was bang right, and the vast consequences of that validated prediction are changing the world as I write and you read. As the great man said more recently:
‘The first microprocessor only had 22 hundred transistors. We are looking at something a million times that complex in the next generations - a billion transistors. What that gives us in the way of flexibility to design products is phenomenal’.
You need look no further to understand what is causing a tsunami of new products. The simple and perfectly satisfactory mobile phone of only a year or two back has been superseded by a device - no larger and maybe even smaller - that still makes phone calls and sends messages, but also plays music, takes photographs, calculates, handles data, and so on. The proliferation has made it impossible to take a rational decision on which wonder is the ‘best buy’.
To put that differently, the whole process of buying has become more complex and requires more skills from the buyer. What applies to consumers is also changing management. Simple solutions do not exist. Outsourcing provides an excellent, not to say chilling example.
The logic of buying in services from outside suppliers may seem irrefutable. Why should an airline pose as a catering company when outsiders are clamouring for business - firms whose concentrated skills promise better quality for lower costs?
Promises, promises. No doubt that sales pitch was swallowed whole by British Airways before handing its in-flight catering to Gate Gourmet. The practices of the supplier, as many hundreds of miserable would-be passengers can testify, led to a strike whose support by BA’s own workers brought the airline to its knees and lost the customer £40 million. BA is by no means alone in having to digest unforeseen and unpleasant truths about outsourcing - witness two research findings.
Ask yourself what Geoffrey Colvin, a writer for Fortune magazine, would surely list among the ‘dumb questions’ he recommends dryer machine. Given that the outside IT supplier will be using much the same hardware and hiring the same software skills deployed by people who are paid the same salaries (if not more), costs must be similar cone crusher. But the outsider also wants a margin on sales. The dumb question must be, how can this extra cost to the customer be financed?
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