The New Reality for Customer Engagement
In 1994, when Gary Hamel wrote Competing for the Future (Harvard Business School Press) with his long-time colleague and former professor, C.K. Prahalad, it changed much of the debate about how companies set strategy. Instead of advocating a top-down approach, Hamel, who is also a visiting professor of strategic and international management at the London Business School, and Prahalad, a professor at the University of Michigan, proposed that business strategy should involve employees at all levels of a company. Moreover, they argued that when companies set their strategic course, they ought to include younger employees and even dissidents in the processa theme that Hamel expounded upon later in his 2000 best seller, Leading the Revolution.
Since his first book appeared, Hamel, 47, has continued his writing and speaking activities, and also founded a consulting firm in Menlo Park, Calif., called Strategos. The Economist calls Hamel "the world's reigning strategy guru," and MIT Professor Peter Senge describes him as "the most influential thinker on strategy in the Western world." As the author of concepts such as "core competence" and "industry revolution," Hamel has helped to change the focus of strategy in many of the world's most successful companies, including The Royal Dutch/Shell Group, Nokia Corporation and Ford Motor Co.
But staying ahead by being a revolutionary is easier said than done. In Hamel's view, even highly competitive companies can develop blind spots. When that happens, they can lose out to newer challengers. The reason for that blindness, Hamel says: "An unwillingness or inability to look outside of current experiences." Helping companies "see" better has been the focus of his latest work.
Hamel recently spoke with CIO Insight Executive Editor Marcia Stepanek about how CIOs contribute to that blindnessand how they can correct their vision. What follows is an edited transcript of Hamel's remarks.
Over the last decade, CIOs have been rewarded for using information technology to drive efficiency, reduce transaction costs and reduce procurement costs. If you divided most IT investments or projects into two bucketsenhancing some particular activity versus transforming itI think most would be in the first bucket.
I have no problem with that, but one of the things we know is that to create wealth, an organization needs to increase its productivityand productivity has two dimensions to it. It has an "E" dimension, and I mean "E" in terms of efficiency. It also has a "V" dimensionvalue. Productivity growth is always some blend of the two, using people and capital more efficiently while at the same time increasing the value that customers place on what you produce.
The reality, though, is that when you look at companies that have created a lot of new wealth, they've done it, by and large, not by getting better at using fewer people via CRM systems, automated order systems and the likebasically using technology to take time, capital and labor out of the business process. Instead, they've created new wealth by delivering new value to customers. Think of Starbucks or any other company bringing new products and services to the marketplace.
There's still no question that if you look at most of the technology projects out there, most of the e-commerce stuff is still really not much more than an online catalog with maybe some immediate access to customer service. So, yes, it's wonderful that Office Depot is steadily increasing the amount of its revenues that come from e-commerce. But all they've really done is find an effective online catalog that is probably more useful than talking to somebody on the telephone. To me, that is incredibly boring.
Then, on the e-business side, you have companies such as General Electric and Oracle, which claim to reap hundreds of millions of dollars of efficiencies from their b2b efforts. I have no doubt that will happen. But this is simply re-engineering on steroids. This is what companies have been doing for the last decade, first with EDI and now with the Internet, but it's essentially just automating the supply chain. So to me, all of these things are really a yawn.
Now, don't get me wrong. I know, from the perspective of a technologist trying to work through all of the complexities of doing this, that these efficiency projects are important. I have enormous respect for anybody who has the courage to face the back-breaking, mind-boggling complexity of setting up an industrywide exchange. But I want to distinguish that from initiatives that could actually create new wealth for a company.
My question to the IT community is: What is the contribution you are going to make to produce incredible new value for customers?
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