"Bringing the Future to Your Industry" |
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BOOK SUMMARY
THE HYPERCONNECTING CORPORATION is not a book about the Internet. It is about how business is being transformed by a change in mindset, globalization, “placelessness,” and connecting technologies (of which the Internet is but one).
We all know that technology is rapidly transforming the nature of our corporations, and the skills of its managers and employees. In THE HYPERCONNECTING CORPORATION, Knoke discloses the specific effect of emerging technologies on how our corporations are organized, managed, and made to prosper. He holds the thesis that, in an economy where everything is “hyperlinked” to everything else, the classical boundaries that once defined the corporation are blurring. The “hyperconnecting corporation” teams the best people and resources from around the world to solve problems much more quickly than the old bureaucratic corporate form. It better adapts to new technologies, and interfaces with customers and suppliers. In the revolution already underway, no industry will be left untouched.
Using straightforward, easy-to-read language, THE HYPERCONNECTING CORPORATION paints its story with a colorful palate of high-profile companies already harnessing the extraordinary power of hyperconnecting. Knoke unmasks golden opportunities and keys to implementation, as well as the harsh realities that await us all just ahead.
THE HYPERCONNECTING CORPORATION sprang from his popular keynote presentations to industry groups the world over, where convention organizers and business executives asked him the same question: where are we going?
BOOK OUTLINE
PART I: TOWARD OUR HYPERCONNECTING ECONOMY 2: The Hypereconomic Revolution PART II: HYPERCONNECTING YOUR ORGANIZATION PART III: HYPERCONNECTING WITH YOUR CUSTOMERS 8: Good Old Fashioned Customer Links 9: Customer Links for Tomorrow PART IV: YOUR HYPERCONNECTING SKILLS Conclusion PART I: TOWARD OUR HYPERCONNECTING ECONOMY
Chapter 1: Business at the Crossroads
Our corporations are in turmoil. Newer technologies tear into the soul of entire industries, Blue Chip dominance collapses, major competitors emerge overnight, and tested channels of distribution become hollowed.
Part of the turmoil is due to classical economic theories that no longer apply. The three classical pillars of labor, capital and raw materials no longer underpin the creation of wealth. Japan does well without many factors, while Saudi Arabia does poorly with them. Wealth in the old system was based on the old triad to manufacture products; wealth in the new system is built on the tripod knowledge, relationships, and entrepreneurism to render service. Nineteenth century economics has no place in the 21st.
Even the metrics are wrong. Standard financial reports fail to measure how value is really created.... What is the value of a brand name? Of a “can-do” attitude? Of cohesive corporate culture? Of an in-house knowledge exchange? Of technological patent protections? Of innovative key managers? These are among the new bricks and mortar of wealth creation.
The government has it wrong too, operating with outdated ideas. Today, Keynesianism, monetarism, and social policies are at the mercy of global forces.
What is needed is fresh new thinking.... Chapter 2: The Hypereconomic Revolution
At the core of economic value-added is the ability to connect humans with humans. The better the connections, the more adroit the society in creating wealth. These connections, founded on relationships, knowledge and information, transcend geography and corporate boundaries, and define the “hyperconnecting corporation.” Such economic organization benefits from advances in “connector technologies”: computers, communications and transportation, that make human liaisons possible beyond the constraints of a place-bound three-dimensional world.
As connections become effortless, the optimum manner of organization necessarily changes. Workers link directly, bypassing large centralized headquarters, causing a collapse in hierarchy. They no longer need to travel to downtown offices to work, but telecommute from home.
As place declines, so does the importance of receiving paychecks from the same entity. We can outsource workers, use “temps,” or dynamically recombine talents across corporate boundaries in joint ventures and strategic alliances.
It is not a luxury to hyperconnect, but a necessity. Technology is perishable, rendering time-to-market paramount. The ability to rapidly assemble the correct mix of resources — independent of geography and corporate boundaries — determines the difference between success and failure. This in turn, gives the advantage to enterprises that form and manage teams across corporate borders over the ones stuck in a bureaucratic or departmental in-house-only mode.
How should all this be implemented?.... PART II: HYPERCONNECTING YOUR ORGANIZATIONChapter 3: Knowing Oneself
Implementation begins by establishing robust “hyperlinks” within the organization. We unveil the effects of connector technologies on minimizing the importance of headquarters offices, and the decline of hierarchy since people can connect directly.
From this, we find that even the idea of a downtown office building to get the needed critical mass is outmoded. People can work from anywhere, offices can be modular, and workers can telecommute.
In internal hyperconnecting, the challenge becomes one of managing dynamic relationships between employees, and how to leverage the most prized of assets in the 21st century: knowledge. We look at intranets, knowledge databases, videoconferences, in-house seminars, conventions. We explore leading examples in computer-aided design and manufacturing, electronic resource coordination, and more. How can a company let proprietary knowledge flow freely to maximum effect? And if information is flowing freely, what keeps it from leaking to competitors? What pitfalls are to be avoided? What opportunities await?
The chapter will be peppered throughout with rich “real world” case studies: Asea Brown Boveri (small headquarters), Telemorphix (no physical offices, exclusive telecommuting), CitiBank (global information flow), Chiat/Day (modular offices), Andersen Consulting (internal information exchange), Motorola (electronic built-to-order pagers), Lotus Notes (example of a tool), and more. Chapter 4: Outside the Box
While the prior chapter illustrates the advantages of hyperconnecting inside the corporation, we now take it outside — to outsourcing.
If it no longer matters where employees work, does it matter that they all receive their paycheck from the same entity? And even if they do work physically together, what difference does it make if talent is leased employees, “temps” or consultants? Or if marketing or customer services is done by third-party call centers? In hypereconomics, wealth is created by the clever application of human talent to solve specific human problems; corporate boundaries are not always a blessing.
We trace the rise of outsourcing throughout the world, and glean lessons from a variety of illustrative examples: We learn of a Silicon Valley firm that outsources everything from A to Z, and operates a growing, high-tech company with little more than an idea. We look at the book publishing business where some publishers outsource everything (writing, editing, manufacturing, public relations, sales, shipping, foreign distribution) to good effect. We look at Fortune 100 companies that outsource critical computer systems. We see how Andersen Consulting takes over whole business units. We examine the role of computer-aided integration systems. In each case, each outsourcee understands their role, and develops a strong core competency.
In the extreme, outsourcing assumes the model of the “Amoeba Form.” Like the protoplasm viewed under the microscope, the emerging business combinations can be amorphous. They conform to the shape of the environment, grow, contract and divide as needed. In the coming battle between the ossified bureaucratic form and the more nimble and agile Amoeba Form, the latter will win every time. The challenge for large corporations will be to decentralize; the challenge for small business will be to link with others.
While the rise of outsourcing allows each entity to focus on its core competency, risks and hazards are real. Under some circumstances, outsourcing is just not appropriate. The key is knowing when to use it, and how to harness its extraordinary power. Chapter 5: Tying the Knot
Sometimes these hyperconnections are best tied with a permanent knot through mergers, acquisitions, joint ventures and strategic alliances.
We start with industry consolidations. We unmask mergers as ways for two corporations to hyperconnect more intimately than is possible via commercial contracts. We explore case studies of successful mergers in the banking industry, in telecommunications, the funeral industry, to understand the dynamics that underlie the mergers... and when the effects can be better achieved in other ways.
Next we turn to unsuccessful mergers: Failed cases in TV/Cable, AT&T/NCR and others. Why do some mergers fail and others succeed? Are too many mergers driven by fees, the urge for gigantism and egos? Is corporate culture an issue? Why do some work and others end in disaster? When is outsourcing or the “Amoeba Form” better than a merger? When is it not? How can the tools of hyperconnecting be used to leverage a merger to the fullest?
Next we turn to joint ventures (the joint formation of a third entity by two or more). We look at VISA International, Integrion, IBM/Apple, and the worldwide automotive industry. How important is preserving known brand names in the joint activity? What makes a successful joint venture, and what are the pitfalls? When does it make sense to form a joint venture with a competitor? When are they appropriate vis-à-vis other options?
Strategic alliances are next. We glean useful tidbits from alliances such as Microsoft/Intel, GM/Ford, and British Airways/American Airlines.
Finally, we compare these with subcontracting. We turn again to automotive and computer industries, both rich in all forms of hyperconnecting. How does a manager know which form of hyperconnecting is appropriate? How can investors spot potential carrots before they ripen? What are the pitfalls, and, most importantly, how can they be made to work? Chapter 6: Linking the Supply Chain
In a hyperconnecting economy, the advantages of establishing links go much beyond the internal mechanisms of the corporation, or its relationships with suppliers. There are clear cases where entire industries stand much to gain by hyperconnecting. This includes interlinking the entire supply chain into a single whole, and shifting the mind set from one of competitive mistrust to collaborative cooperation.
When individual corporations respond blindly to customer orders, they often miss the bigger picture. Price and ordering signals often ripple up the supply chain, and create extraordinary distortions for originating suppliers, which can take years to even out. We take a close look at the foodservice industry, at how large retailers distort upstream perception of demand patterns. This industry’s effort at hyperconnecting is creating new solutions that can be applied to many industries from food services to aviation.
In doing so, important questions are answered: What information sharing is important beyond price signals and immediate demand? How can information be shared, without it becoming a competitive threat? Are third party entities necessary to regulate and “lubricate” the efficiency of the industry? What is the role of industry standards?
How can industry cooperatives function regionally or nationally to the exclusion of outsiders? What is the proper role of government in helping hyperconnecting industries? Chapter 7: Hyperconnecting the Globe
Prior chapters explored hyperconnecting both internally and externally: from loose (outsourcing) to tight (mergers) to broad (industry). Now we look at these issues in the context of globalization. Our economy today goes well beyond national borders; “transnational” corporations are increasing in power, sometimes dwarfing the countries in which they operate.
By hyperconnecting on a worldwide scale, there are advantages galore: combining the best with the best from around the world, diversification, broader markets, market intelligence, cultural cross-fertilization... even regulatory circumvention. But building teams across multicultural lines can be cumbersome. Distances can fray the best of organizations. Government hurdles can be formidable, and regional market chauvinism daunting.
We look at successful—and failed—attempts at global hyperconnecting to extract the essence of what it takes to make it work. PART III: HYPERCONNECTING WITH YOUR CUSTOMER
Chapter 8: Good Old Fashion Customer Links
Part II was focused on hyperconnecting to produce wealth. But for whom? Now in Part III, we include hyperlinks to the most important stakeholder — the customer. This opening chapter gives some low-tech examples for perspective, followed by higher-tech tools in Chapters 9 and 10.
The historic way to connect with customers is in physical retail stores. But channels of distribution are changing dramatically. We start with something we all understand: catalogue-based telemarketing. We look at successful catalogue marketing companies like Dell (computers), Lands’ End (clothing), CUC International (major appliances). We also examine Sears Roebuck catalogue operation to see why it failed. What are the key factors that make telephone-marketing catalogues work?
Other low-tech customer links are formed through “multilevel” marketing. We glean the common elements of established companies such as Amway (general items), Mary Kay (cosmetics), Shaklee (vitamins), Tupperware (kitchen items), and more avant guard entities like Excel Communications (telecommunications) and A.L. Williams (term life insurance). We find that multilevel marketing works in a hyperconnected society where the link between the salesperson and the customer is more essential than the link between the salesperson and his home office.
We next turn to conventional customer service formulae: post-sales support, tracking customers through warranty cards, encouraging repeat sales and more. We look at examples ranging from Microsoft (upgrades) to United Airlines (frequent fliers). The bottom line in every case is to form hyperlinks between the supplier and the customer. Chapter 9: Customer Links for Tomorrow
These customer hyperlinks can include high-tech tools as well... from product conception to marketing and sales to post purchase support....
In the hyperconnecting corporation, the “customer,” is not a distinct entity sitting outside the value-added-generation process, but an “insider” stakeholder like any other. Hyperconnecting companies link intimately with customers, and treat them as insiders in product design groups, even before products are conceived. The key is to solve real customer problems.
In advertising, broadcast marketing is giving way to narrowcast marketing. It doesn’t just target neighborhoods with focused television and limited-edition journal ads, but uses sophisticated databases to develop market programs targeted to individuals, one-on-one.
Hyperconnecting requires careful tracking of customer histories. Sophisticated customer databases track account profiles, historic purchases, service problems. They allow a customer service representative to “know” the customer before she picks up the phone.
As orders are placed, modern manufacturing equipment allows economic order quantities of one: The customer hyperconnects to the manufacturing floor to customize anything from a car or dinner plates to wallpaper and chip design. Electronic ordering systems are further hyperconnecting customers and suppliers, to allow producers advance warning of inventory status and minute-by-minute product movements.
As the tools of hyperconnecting mature, we find nearly all industries disintermediating. As we look at banking, stock brokers and general retailers, we find middlemen being cut out in every case. This is particularly empowered through the Internet.... Chapter 10: How the Internet Fits In
The World Wide Web (WWW) has become today’s icon of customer-supplier hyperlinks. The Web is not a panacea that solves all problems, but it offers a powerful lever in the hyperconnecting toolbox. In this chapter, we explore where the Web works and where it fails in establishing objective-oriented value-added for the hyperconnecting corporation.
We highlight dramatic examples of Internet success stories ranging from the oft-referenced Amazon.com to PC Flowers, from Lycos to personal ads to Blue Chip home pages. We also highlight dramatic failures. What makes electronic commerce successful, and what are its limitations? We explore the various income models: service subscriptions, advertising revenue, data selling, direct sales, sales support.
The Internet is seen as a potential source for higher quality information linking supplier with customer. It bypasses conventional retailing and face-to-face contact, and has a self-automated, lower labor component making it ideal for certain applications.
The Web operates by different dynamics than its analogy in conventional business. On the Web, product and service become fully integrated. The functions of marketing, sales, and support merge. Product “packaging” is no longer the box and labels, but the rich “information envelope” that can be provided electronically to induce an order.
Properly used, the Web offers a powerful tool for hyperconnecting to the customer.... but only when done properly. PART IV: YOUR HYPERCONNECTING SKILL SETSChapter 11: The New Employee
Where does the worker stand in all this? There is both good and bad news....
The rise of technology and global hyperlinks spells doom for “commodity” workers in developed countries; if a task is routine (whether physical or mental), it can either be automated or moved offshore. The negotiation position of labor unions in most (but not all) industries are on the decline.
On the positive side, there is unlimited upside potential for the creative worker. A non-hierarchical team structure with physically remote colleagues requires an ability to self-define problems, use new tools, articulate ideas, listen to others, and have multicultural compassion. In the hyperconnected economy, each worker is a service provider, each with a “customer” — no exceptions.
In an environment of change, the key is not to be displaced by technological tools, but to master them. Lifetime education becomes paramount with primary responsibility falling on the individual himself. Hyperconnecting corporations must provide sources for in-house training, while encouraging employees to seek self improvement through community courses, and those distributed via the Internet, cds, video conferencing and videotapes. Chapter 12: Managing the Leap
Today’s business managers have to learn new rules and get their organizations to adapt. But are today’s business managers equal to the task? Maybe, but the skills that lead to success in the capital-centered corporate form of yesterday are not the same as those needed in the relationship-centered hyperconnecting corporation of the future....
The hyperconnecting manager needs to know how to manage knowledge, not assets; how to engage in entrepreneurism, not administration; how to cultivate teams, not command them. There is a special skill in creating an “organizational mind” that marries the right people with the right processes and compensation packages. How does one monitor quality with a worker one cannot see? How does one create an esprit de corps in a multinational or multi-corporate effort? How does one delegate authority or assign responsibility in a system without hierarchy? What productivity tools are important and what are their limitations? If the hyperconnecting corporation depends on technology to keep it operating, what about technological obsolescence?
At another level, the hyperconnecting manager will be challenged to establish new metrics for performance evaluation and decision making; the old capital-based measures are just dwarfed by other considerations. How does one value proprietary technology, brand names, image? How does one measure service level and customer satisfaction? How does one know if entrepreneurism is a brilliant asset or a dangerous liability? Without new measures, hyperconnecting managers will be forever shooting from the hip.
Paramount in all this is the ability to see the hyperconnecting corporation not as a collection of distinct programs or hyperlinking tools, but as a living organism with a culture and synergy all its own. PART V: CONCLUSION
The book will close with salient threads developed in the course of the extensive research required to write the book.
All industries are under siege today. The underlying cause in almost every case is the rise of hyperlinks in reorganizing how humans interact with one another to create wealth. The shift toward the hyperconnecting corporation will create opportunities for those who adapt, and pose competitive problems for those who do not. This book is an essential guidebook to map out the new rules.
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The
Hyperconnecting Corporation