I believe that we are about to see a major innovation occur in the software industry that will transform the nature of midsize businesses through a convergence of technology and business. This view has also been espoused by industry luminaries, discussing the future of technology innovation. A few weeks ago, Shai Agassi said to ZDNET’s Dan Farber that the implications of R3 were that you could globalize a company, and that the implications of SOA are that it gives you unprecedented business model flexibility. So, if a company sees a new opportunity, it can attack the opportunity as a business and have their IT systems reflect that new business – not in a matter of years, but in a matter of days, weeks, months instead. This technology advantage then translates into a strategic business advantage because it enables a company to respond to changing market dynamics more quickly and be first to market. In short, we will see a convergence of software & business that will level the playing field for mid-size businesses and allow these companies to be much more agile, and therefore more much competitive.
## Today’s Business Challenges
Why is business model flexibility so much more important in the future? I believe that there are several critical business challenges that today’s companies, especially midsize companies, are currently contending with that will herald the need for a new way of doing business characterized by rapid innovation.
### Rapidly changing market conditions & ecosystem
– How can we keep our operations flexible enough to respond to changing market conditions and seize emerging business opportunities?
– How can we develop even more intimate knowledge about our customer’s unique & changing needs to deepen our customer relationships?
– How can we collaborate better with our partners, suppliers, & contractors?
– How can we compete against market entrants from lower cost countries, such as China & India?
### Cost pressures
– How can we get our core operations running more efficiently?
### Product commoditization
– How can we deliver more differentiated, innovative products to market faster than ever before… and, at least faster than our competition?
### New regulations & compliance concerns.
– How can we ensure compliance with increasingly complex regulations without severely straining our people & our budgets?
The pace at which these challenges are impacting midsize businesses is accelerating, and IT systems need to be able to keep up if they are going to serve as a strategic advantage.
## Business 2010 & the Future of Technology
In order to stay competitive given today’s business challenges, companies will need to drive unprecedented operational efficiency as well as find new ways to innovate. Thus, Business 2010 will be characterized by companies that are smart enough to identify emerging business opportunities & flexible enough to adopt new business models quickly in order to deliver growth through innovation.
I see some of the key characteristics for Business 2010 as follows:
360 degree Visibility: I’m talking about a level of visibility that goes beyond the basic promise of ERP. Of course, the IT basics must be in place first, and thus, companies that have not invested in consolidating their systems will need to do ASAP. The benefits of having the IT basics in place are well understood – real time visibility across all key metrics, processes, and operations, which allows companies to monitor and analyze the efficiency of the operations and the health of the business. The innovation will be in taking this visibility out of the executive suite & arming any employee in the organization with the visibility they need to see across, up & down the organization. This is especially critical for resource constrained organizations that are in fierce competition with giants and need to be extremely efficient in order to survive. For example, imagine if a tele-sales rep that is negotiating a deal in an unfamiliar region had access to real-time information about pricing discounts by region. This allows the tele-rep to close the deal faster as well as delight the customer.
Bottom-up People Empowerment: Another benefit of 360 degree visibility is that it allows organizations to identify what is working and what is not. All routine transactional tasks in processes can be identified and eliminated, in order to free up employees to work on value-added activities. Armed with insight and freed from routine tasks, employees can survey the market for new opportunities, find more efficient ways to get their work done, and generate innovative ideas. For example, finding new opportunities to outsource to lower cost suppliers, initiating a project with the marketing & IT teams to sell solutions over the web, or managing skills development with e-learning. Imagine having the ability for not letting a day go by when insights from employees, partners, suppliers, etc are not leveraged to improve the operations & strategy.
Agility of business models with IT in lockstep: In Business 2010, companies will need to embrace IT as a strategic, competitive weapon to enable rapid innovation. As discussed earlier, businesses will need to be prepared to transform business models & operations quickly in response to global pressures in order to survive & thrive in the coming years. This is only possible if they have a system in place that is easy to change and keep aligned to always reflect the current state of the business. Even as new business models are adopted, the IT system should be adaptable to reflect these changes quickly. Waiting 5 years, or 1 year, before making changes to an IT system will not be feasible any longer in an era of rapid innovation. Without up-to-date visibility across the metrics, processes, people, and operations that reflects all business models, companies will not be able to understand what is working and what areas need improvement. Some examples of new business models that today’s product manufacturer will likely consider adopting in the next few years:
– Providing comprehensive services (in addition to new products) in order to meet their customers’ total needs. In other words, they will shift from being exclusively a product company today to being a total solutions provider in the coming years in order to stay competitive.
– Global expansion: franchise & subsidiary model
– Remote Management of Hosted Products & Services
Seamless Process Collaboration that trump organizational & geographic boundaries: Collaboration across operations, partners, suppliers, & contractors will be crucial in Business 2010 in order to better serve customers. Any remaining decentralized operational silos will need to become one globally connected operation with a keen focus on measuring & optimizing operational efficiency. Extending key business processes to suppliers and partners arms them with the information needed to respond to service escalations and resolve customer problems more quickly. Another form of collaboration will be co-innovation across the eco-system. In business 2010, we will see companies partnering with other complementary companies in multiple countries around the globe to co-innovate cutting edge industry solutions
## Implications: Challenges / Opportunities
I believe that the implications stemming from companies transitioning in the next few years to Business 2010 are enormous: for MM companies, for technology vendors, for partners, for technology entrepreneurs, for the ecosystem, for customers. There will be many challenges for midmarket companies as they traverse this transition to a technology empowered business, creating opportunities for those who serve them. In future posts, I will offer some thoughts that I have on what the challenges and opportunities are for the various segments, and would love to hear your ideas on the subject as well.