[size=12][size=12]
The 21st-century Corporation
Business
and industry
EPHEMERAL.
To survive and thrive in this century, managers will need to hard-wire a new set of rules and guideposts into their brains. Not so long ago, for example, leaders believed that building assets over the long haul guaranteed competitive advantage. In this new century, success will go to the companies that partner their way to a new future, not those that put heavy assets onto their balance sheets. Leaders once thought that creating intense rivalries among competitors motivated their employees and assured success. But in the days to come, a company's fiercest competitor might also be its most important collaborator. Since the dawn of trade, every business leader has wanted to build an enduring enterprise. In the new century, though, many companies will be
intentionally ephemeral, formed to create new technologies or products only to be absorbed by sponsor companies when their missions are
accomplished.[/size]
[size=12] Many factors, from the need to expand beyond national borders to the inexorable shift toward intellectual capital, are driving change, but none is more important than the rise of Internet technologies. Like the steam engine or the assembly line, the Net has already become an advance with revolutionary consequences, most of which we have only begun to feel.[/size]
[size=12] DIGITIZATION.
Just as the smaller companies will use technology to gain economies of scale, larger companies will harness technology to reduce the costs of complexity. McKinsey's Bryan points out that technology allows Bank of America to manage a continent-wide bank of $700 billion in assets as effectively as it once managed a single-state bank with $7 billion.
At the very core of the 21st century corporation is technology, or what most people today call digitization. Put simply, digitization means removing human minds and hands from an organization's most routine tasks and replacing them with computers and networks. Digitizing everything from employee benefits to accounts receivables to product design cuts time, cost, and people from operations, resulting in huge savings and vast improvements in speed. Everything a company does involves what Bryan calls ''interaction costs,'' the expenses incurred to get different people and companies to work together to create and sell products. In the U.S. alone, Bryan surmises, such interaction fees account for over half of all labor costs. Digitization lowers these expenses dramatically. ''You are going to see unbelievable speed and efficiencies,'' says John T. Chambers, Cisco's CEO. ''Truly efficient companies, particularly in the first couple of waves of change, will be able to drive [overall] productivity at 20% to 40% a year.''
[/size][size=12] CULTURAL CHANGE.
The potential for productivity gains is everywhere, in every process, in every industry. The bigger the company and the larger its costs, the greater the opportunity to see tremendous efficiencies. In the years to come, large incumbent corporations that get it will be the greatest beneficiaries of the Net, not the dot-com insurgents that once garnered all the publicity and market valuations.
Despite a handful of leading-edge companies, the true 21st century corporation, at least as it will eventually emerge, does not yet exist. John F. Welch Jr. of General Electric Co. may have created the archetypal ''learning organization,'' a highly diverse company that shares ideas across its many boundaries. Chambers of Cisco Systems may boast the most networked organization in the world, a company in which nearly all its administrative functions are conducted over the Internet. Michael S. Dell may have built the most efficient supply-chain network ever, a model that requires virtually no inventory. But there is no one company today that embodies all the possibilities and promise of the superefficient 21st century corporation.
[/size][size=12] FEEDBACK.
High-tech bells and whistles aside, how does this differ from previous efforts to ''delight'' customers? Wingspan invites customers to refine the bank's offerings. ''Our customers have a great desire to improve the bank, and we act on their ideas,'' says Clearly. Customer feedback led to software changes that allowed users to access all their accounts at once, with a single sign-on. In response to customer suggestions, the bank is working on a way to allow deposits at ATMs and to improve downloads of financial data from Wingspan servers to customers' Quicken software.
The best-of-breed companies will go even further. They'll invite customers in as collaborators, binding them ever tighter to the corporation. Procter & Gamble Co. (PG) spin-off reflect.com LLC, an online cosmetics merchant, is a harbinger of what's possible. By answering a series of queries ranging from color preferences to skin type, consumers can custom-design up to 50,000 different formulations of cosmetics and perfumes. When they're done, they can even design the packaging
for the products. Procter & Gamble charges a premium price for the custom-blended blushers and lipsticks, and why not? Customers mixing their own shades aren't likely to try comparison shopping.
Reflect.com is one of many efforts to create enduring relationships with customers in an age of commoditization. ''The next level up is where the consumer is really designing from scratch,'' says Ticoll of Digital 4Sight. ''Organizations will learn from these new
opportunities.''
[/size][size=12] DELIVERING THE GOODS.
In the hands of a creative leader, even the most prosaic Industrial Age enterprises can reap quantum efficiencies by applying the new management principles of the 21st century corporation. No company proves that better than Cemex (CX), which operates in one of the most mundane, commodity-driven businesses in the world: cement. Based in Monterrey, Mexico, Cemex was a modestly profitable business in 1985 when Lorenzo H. Zambrano, a Stanford University MBA whose grandfather founded the company, became chief executive. Cemex' biggest problem in an asset-intensive, low-efficiency business was unpredictable demand. Roughly half of its orders were changed by customers, often just hours before delivery. Dispatchers took orders for 8,000 grades of mixed concrete and forwarded them to six plants. The phones were often jammed with calls from customers, truckers, and dispatchers, resulting in lost orders and frustrated customers.
Then Cemex went digital, vastly reducing delivery and production problems. More important, the makeover helped management refocus efforts from managing assets to managing information. ''Technology allows you to do business in a much different fashion than before,'' says Zambrano. ''We used it not only to deliver a product but to sell a service.''
[/size]
[size=12] CONNECTIONS.
True 21st century corporations will also learn to manage an elaborate network of external relationships. That far-reaching ecosystem of suppliers, partners, and contractors will allow them to focus on what they do best and farm everything else out. And it will let them quickly take advantage of fleeting opportunities without having to tie up vast amounts of capital. Outsourcing and partnering, of course, are hardly new. But in the coming century, such alliances will become more crucial.
Cisco Systems has taken the concept to an extreme. It owns only two of the 34 plants that produce its products. Roughly 90% of the orders come into the company without ever being touched by human hands, and 52% of them are fulfilled without a Cisco employee being involved. ''To my customers, it looks like one big virtual plant where my suppliers and inventory systems are directly tied into an ecosystem,'' says Chambers. ''That will be the norm in the future. Everything will be completely connected, both within a company and between companies. The people who get that will have a huge competitive advantage.''
[/size][size=12] TALENT HUNT.
They also gave a small upstart immediate scale and reach. Juno, for instance, boasts fewer than 300 direct employees yet has nearly 700 technicians in customer service alone because of its alliances. ''If we did all of this stuff ourselves, we would have to have at least 1,000 people to work on content alone,'' estimates Ardai.
Vast changes in technical and organizational structure, however, will only get leaders so far on their journey toward 21st century leadership. Nearly everyone agrees it still comes down to that most precious commodity: talented people. Attracting, cultivating, and retaining them
will be the indispensable ingredient that will drive the ideas, products, and growth of all companies like never before. As management guru Gary Hamel puts it: ''We have moved from an economy of hands to an economy of heads. Therefore, the price of imagination, the premium for it, will go up.'' Increasingly, companies will need to scour the world for the best intellectual capital, then create the kinds of challenging environments that will allow stars to flourish.
[/size][size=12] INCUBATOR.
As a private company, Trilogy can't offer stock options. Instead, it offers the chance to create and run new businesses. Liemandt throws out a daunting challenge to every incoming class: Within two years, the students will be responsible for the creation of at least 20% of new revenues. ''They treat the university as an R&D incubator,'' says Noel M. Tichy, a University of Michigan management professor. Trilogy, for example, has spun out six companies, including one that's selling hundreds of millions of dollars' worth of cars online annually.
To make sure he doesn't lose touch with his employees, Liemandt uses the Net to establish one-on-one conversations with them. Trilogy's 1,500 employees go online to read--and respond to--the mission statements of top managers. Periodically, they're asked to assess managers online. ''Energy and excitement is why people do startups,'' says Liemandt. ''But as the company gets larger, people don't feel as engaged. They feel as if they are spoken to instead of being engaged in a collaboration. The net provides a ten-to-twenty-fold increase in the level of interaction you can have.''
[/size][size=12]The 21st
century corporation will require an array of new skills, all of which must be mastered for leaders to gain the upper competitive hand. Globalization has opened new markets. Deregulation has broken down industry boundaries. Venture capital has funded thousands of new tech-savvy insurgents who now threaten incumbents. And the ever-ubiquitous Web has brought the potential for remarkable gains in productivity--but also for frightening deflationary pressures. All these forces are fast propelling the creation of new business models in the 21st century, models that will look nothing like the once-healthy and seemingly invincible enterprises of an earlier age.[/size]
+---------------------------------------+
http://www.businessweek.com/common_frames/ma_0035.htm?/2000/00_35/b3696011.htm
Businessand industry
-
Musical Industry: The early 21st century has
had a profound impact on the condition of music distribution. Recent
advents in digital technology have fundamentally altered industry and
marketing practices as well as players in unusual rapidity.
EPHEMERAL.To survive and thrive in this century, managers will need to hard-wire a new set of rules and guideposts into their brains. Not so long ago, for example, leaders believed that building assets over the long haul guaranteed competitive advantage. In this new century, success will go to the companies that partner their way to a new future, not those that put heavy assets onto their balance sheets. Leaders once thought that creating intense rivalries among competitors motivated their employees and assured success. But in the days to come, a company's fiercest competitor might also be its most important collaborator. Since the dawn of trade, every business leader has wanted to build an enduring enterprise. In the new century, though, many companies will be
intentionally ephemeral, formed to create new technologies or products only to be absorbed by sponsor companies when their missions are
accomplished.[/size]
[size=12] Many factors, from the need to expand beyond national borders to the inexorable shift toward intellectual capital, are driving change, but none is more important than the rise of Internet technologies. Like the steam engine or the assembly line, the Net has already become an advance with revolutionary consequences, most of which we have only begun to feel.[/size]
[size=12]
DIGITIZATION.Just as the smaller companies will use technology to gain economies of scale, larger companies will harness technology to reduce the costs of complexity. McKinsey's Bryan points out that technology allows Bank of America to manage a continent-wide bank of $700 billion in assets as effectively as it once managed a single-state bank with $7 billion.
At the very core of the 21st century corporation is technology, or what most people today call digitization. Put simply, digitization means removing human minds and hands from an organization's most routine tasks and replacing them with computers and networks. Digitizing everything from employee benefits to accounts receivables to product design cuts time, cost, and people from operations, resulting in huge savings and vast improvements in speed. Everything a company does involves what Bryan calls ''interaction costs,'' the expenses incurred to get different people and companies to work together to create and sell products. In the U.S. alone, Bryan surmises, such interaction fees account for over half of all labor costs. Digitization lowers these expenses dramatically. ''You are going to see unbelievable speed and efficiencies,'' says John T. Chambers, Cisco's CEO. ''Truly efficient companies, particularly in the first couple of waves of change, will be able to drive [overall] productivity at 20% to 40% a year.''
[/size][size=12]
CULTURAL CHANGE.The potential for productivity gains is everywhere, in every process, in every industry. The bigger the company and the larger its costs, the greater the opportunity to see tremendous efficiencies. In the years to come, large incumbent corporations that get it will be the greatest beneficiaries of the Net, not the dot-com insurgents that once garnered all the publicity and market valuations.
Despite a handful of leading-edge companies, the true 21st century corporation, at least as it will eventually emerge, does not yet exist. John F. Welch Jr. of General Electric Co. may have created the archetypal ''learning organization,'' a highly diverse company that shares ideas across its many boundaries. Chambers of Cisco Systems may boast the most networked organization in the world, a company in which nearly all its administrative functions are conducted over the Internet. Michael S. Dell may have built the most efficient supply-chain network ever, a model that requires virtually no inventory. But there is no one company today that embodies all the possibilities and promise of the superefficient 21st century corporation.
[/size][size=12]
FEEDBACK.High-tech bells and whistles aside, how does this differ from previous efforts to ''delight'' customers? Wingspan invites customers to refine the bank's offerings. ''Our customers have a great desire to improve the bank, and we act on their ideas,'' says Clearly. Customer feedback led to software changes that allowed users to access all their accounts at once, with a single sign-on. In response to customer suggestions, the bank is working on a way to allow deposits at ATMs and to improve downloads of financial data from Wingspan servers to customers' Quicken software.
The best-of-breed companies will go even further. They'll invite customers in as collaborators, binding them ever tighter to the corporation. Procter & Gamble Co. (PG) spin-off reflect.com LLC, an online cosmetics merchant, is a harbinger of what's possible. By answering a series of queries ranging from color preferences to skin type, consumers can custom-design up to 50,000 different formulations of cosmetics and perfumes. When they're done, they can even design the packaging
for the products. Procter & Gamble charges a premium price for the custom-blended blushers and lipsticks, and why not? Customers mixing their own shades aren't likely to try comparison shopping.
Reflect.com is one of many efforts to create enduring relationships with customers in an age of commoditization. ''The next level up is where the consumer is really designing from scratch,'' says Ticoll of Digital 4Sight. ''Organizations will learn from these new
opportunities.''
[/size][size=12]
DELIVERING THE GOODS.In the hands of a creative leader, even the most prosaic Industrial Age enterprises can reap quantum efficiencies by applying the new management principles of the 21st century corporation. No company proves that better than Cemex (CX), which operates in one of the most mundane, commodity-driven businesses in the world: cement. Based in Monterrey, Mexico, Cemex was a modestly profitable business in 1985 when Lorenzo H. Zambrano, a Stanford University MBA whose grandfather founded the company, became chief executive. Cemex' biggest problem in an asset-intensive, low-efficiency business was unpredictable demand. Roughly half of its orders were changed by customers, often just hours before delivery. Dispatchers took orders for 8,000 grades of mixed concrete and forwarded them to six plants. The phones were often jammed with calls from customers, truckers, and dispatchers, resulting in lost orders and frustrated customers.
Then Cemex went digital, vastly reducing delivery and production problems. More important, the makeover helped management refocus efforts from managing assets to managing information. ''Technology allows you to do business in a much different fashion than before,'' says Zambrano. ''We used it not only to deliver a product but to sell a service.''
[/size]
[size=12]
CONNECTIONS.True 21st century corporations will also learn to manage an elaborate network of external relationships. That far-reaching ecosystem of suppliers, partners, and contractors will allow them to focus on what they do best and farm everything else out. And it will let them quickly take advantage of fleeting opportunities without having to tie up vast amounts of capital. Outsourcing and partnering, of course, are hardly new. But in the coming century, such alliances will become more crucial.
Cisco Systems has taken the concept to an extreme. It owns only two of the 34 plants that produce its products. Roughly 90% of the orders come into the company without ever being touched by human hands, and 52% of them are fulfilled without a Cisco employee being involved. ''To my customers, it looks like one big virtual plant where my suppliers and inventory systems are directly tied into an ecosystem,'' says Chambers. ''That will be the norm in the future. Everything will be completely connected, both within a company and between companies. The people who get that will have a huge competitive advantage.''
[/size][size=12]
TALENT HUNT.They also gave a small upstart immediate scale and reach. Juno, for instance, boasts fewer than 300 direct employees yet has nearly 700 technicians in customer service alone because of its alliances. ''If we did all of this stuff ourselves, we would have to have at least 1,000 people to work on content alone,'' estimates Ardai.
Vast changes in technical and organizational structure, however, will only get leaders so far on their journey toward 21st century leadership. Nearly everyone agrees it still comes down to that most precious commodity: talented people. Attracting, cultivating, and retaining them
will be the indispensable ingredient that will drive the ideas, products, and growth of all companies like never before. As management guru Gary Hamel puts it: ''We have moved from an economy of hands to an economy of heads. Therefore, the price of imagination, the premium for it, will go up.'' Increasingly, companies will need to scour the world for the best intellectual capital, then create the kinds of challenging environments that will allow stars to flourish.
[/size][size=12]
INCUBATOR.As a private company, Trilogy can't offer stock options. Instead, it offers the chance to create and run new businesses. Liemandt throws out a daunting challenge to every incoming class: Within two years, the students will be responsible for the creation of at least 20% of new revenues. ''They treat the university as an R&D incubator,'' says Noel M. Tichy, a University of Michigan management professor. Trilogy, for example, has spun out six companies, including one that's selling hundreds of millions of dollars' worth of cars online annually.
To make sure he doesn't lose touch with his employees, Liemandt uses the Net to establish one-on-one conversations with them. Trilogy's 1,500 employees go online to read--and respond to--the mission statements of top managers. Periodically, they're asked to assess managers online. ''Energy and excitement is why people do startups,'' says Liemandt. ''But as the company gets larger, people don't feel as engaged. They feel as if they are spoken to instead of being engaged in a collaboration. The net provides a ten-to-twenty-fold increase in the level of interaction you can have.''
[/size][size=12]The 21st
century corporation will require an array of new skills, all of which must be mastered for leaders to gain the upper competitive hand. Globalization has opened new markets. Deregulation has broken down industry boundaries. Venture capital has funded thousands of new tech-savvy insurgents who now threaten incumbents. And the ever-ubiquitous Web has brought the potential for remarkable gains in productivity--but also for frightening deflationary pressures. All these forces are fast propelling the creation of new business models in the 21st century, models that will look nothing like the once-healthy and seemingly invincible enterprises of an earlier age.[/size]
+---------------------------------------+
http://www.businessweek.com/common_frames/ma_0035.htm?/2000/00_35/b3696011.htm
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