The Hindu Business Line : Put simplicity on view

Have you ever noticed that though many consumer businesses, such as McDonald’s and Wal-Mart, are highly complex, ‘they keep that complexity inside their business and make it simple for their customers to use them’? Drawing attention to this, Laurie Young observes that “by complete contrast, many IT companies have let their complexity fall straight through to their customers who have had to pay extra to manage their ‘platforms’ or ‘ infrastructures.’ The integrators and outsourcers have, as a result, built up multimillion dollar businesses by managing this complexity, he adds, in From Products to Services ( www.wiley.com).

In many sectors, business leaders would be ashamed to say that their products were so poorly designed and so unfit for purpose that their customers had to pay up to a thousand per cent more to integrate it with existing purchases or for advice and customisation expertise to make it work properly, the author rues.

Fortunately, for consumers, things are becoming better. “With the personal PC, the iPod and the BlackBerry, the technology industries have shown that they can, at least, marshal design, investment and marketing to create real value propositions.”

Young sees a growing unwillingness among customers to be the victim of a remote industrial supplier.

“Rather than buying the latest machine or piece of software, buyers in markets as different as communications, IT and copying expect a customised package which meets a specific need.” He says that, as a consequence, the suppliers have had to go back to school to learn how to become a ‘solutions supplier,’ deploying their people to create unique packages of product, software and services for their customers.

However, since customisation is more expensive than pre-packaged items, the ‘solutions’ offer ought to be a premium-priced adaptation of technology, the book instructs. For instance, the Swedish telephone supplier, Ericsson decided to move to a service orientation, by “creating new services such as systems integration or charging customers for advice that had previously been funded from the product margin, called in the trade ‘from free to fee.’”

Another caveat when designing ‘service’ is to ensure that the analysis of customers’ needs is not superficial. There are needs beyond the purely technical, and these can be unearthed through the use of apt research techniques.

Prescribed read.

Information will not do your thinking for you

Around the world there are thousands of people writing software for computers, but how much effort have we made to write software for the human mind, asks Edward de Bono in Intelligence Information Thinking (Westland).

He bemoans that, outside of mathematics, we have made no effort at all for about 2,400 years. Why so? “Because the excellence of the software designed by the GG3 (Greek Gang of Three) has seemed so perfect that there was no need for new software,” the author reasons. The ‘three’ are Socrates (who was preoccupied with dialectic or argument), Plato (who believed that just as there were ultimate truths in mathematics so there should be ultimate truths everywhere), and Aristotle (who introduced his ‘box logic’).

“Intelligence is like the horsepower of a car. Thinking is like the skill with which the car is driven. Information is like the road map available to the driver,” explains de Bono, through a simple analogy.

It is a mistake to assume that intelligent people are necessarily good thinkers, he cautions. Also, “Thinking is never a substitute for information. We need all the information we get.”

Use thinking to interpret information in different ways, to put information together to design value, and to see where to get more information, the author urges. “Because of the excellence of our computers we are starting to believe that all you need to do is to collect and collate information. That information will do your thinking for you. That information will make your decisions, design your strategy and indicate the way forward.”

Let not schools be a sort of ‘baby-sitting’ exercise, where information fills up the time, de Bono frets. “In the UK children leave school knowing the names of most of Henry VIII’s wives and even the date of the Treaty of Utrecht. Yet they have no idea how the corner shop works or how value is created in society.”

Powerful insights.

Is somebody sitting behind ATMs?

ICICI Bank saw a growth rate of more than 180 per cent in its very first year, but with only 50 branches, K. V. Kamath found himself ‘sandwiched between the State Bank of India and the foreign banks that had an excellent retail presence.’

The idea that would bridge the big gap was the installation of ATMs across the country, he reminisces, in one of the essays included in The A-List of B-Schools: Your definitive guide to the best in management education from Network18 ( www.MBAUniverse.com).

“To set up an ATM, you need three-four levels of redundancies. You set up recycling, you have to have a lease line, a dial-up line and you are still not sure the ATM would work 94-95 per cent of the time. Today, you have ATMs available 99.99 per cent of the time. So, there were these risks but we bet on technology.”

The challenge before him, when rolling out ATMs in 2001-02, was the promise of putting up 1,000 ATMs a year, or roughly three ATMs a day, something unheard of when telephony was not as easy as it is today.

“When the ATM was being operated, somebody from the media asked if there was somebody sitting behind pumping out the money,” recounts Kamath.

“In 2001, 90 per cent of transactions took place in a branch and about 10 per cent transactions at the ATM. Today, we have 15 per cent transactions taking place in the branch.

Branches still look busy and run from 8 a.m. to 8 p.m.… About 25 per cent of all transactions take place on the Internet. At ATMs, 40 per cent transactions, and then the rest, in call centres and so on.”

Wannabe IT managers will benefit from a chapter on ‘specialised programmes,’ which speaks about a six-month full-time post-graduate diploma in information technology management, offered by the All India Management Association and HCL, aimed at ‘developing IT professionals who will be equipped with the knowledge and competencies required for a variety of roles, such as business analyst, project manager, IT consultants, and CIO/CKO.’

Informative reference.

Deal swirl

Sometimes negotiators are so intent on the overall objective of cutting the deal that they fail to analyse the many variables that can influence whether the ultimate business transaction will succeed or fail.

Thus observes Michael Benoliel in The Upper Hand: Winning strategies from world-class negotiators ( www.vivagroupindia.com).

As an illustration, he cites the case of how EDS (Electronic Data Systems) learnt the lesson the hard way.

“To keep IBM and other competitors out of the race to win a US Navy and Marine Corps contract back in 2000, EDS slashed its original bid of $8.6 billion by $1.7 billion and agreed to stiff conditions, like deferring payments for equipment and salaries until performance standards were met, and the Navy gave its okay.”

After winning what was then the largest multibillion-dollar computer outsourcing contract, ‘designed to merge 4,00,000 of the Navy’s and Marine’s decades-old computers, in more than 1,000 disparate networks, into one Web-based Intranet,’ EDS came upon a surprise: “It found 1,00,000 different software applications on these computers – not the thousands the company had anticipated – and hundreds of old applications that could not be moved to the new system.”

Two-and-a-half years later, EDS found itself well behind schedule, the author recounts.

“After almost three years, EDS had invested hundreds of millions of dollars in this contract and had yet to receive a single penny from the Navy… By the end of the first quarter of 2003, EDS was reporting substantial losses on a contract that cost it $334 million.”

Valuable guidance.

dmurali@thehindu.co.in

Tailpiece

“We discovered that the scam was perpetrated by adopting sophisticated software tools to maintain a parallel set of accounts, which they called…”

“Number two books?”

“No, ‘Ledger two-dot-oh’!”