Living on Borrowed Time
The financial crisis has done a thorough job of weeding out companies that were extended beyond their means. Those who believed they were immune quickly learned that this tsunami was more than they could overcome. We who remain look in the mirror and wonder if we’re next.
This economy makes times gone by seem absolutely serene. The collapse of the U.S. housing market has frozen credit markets and encumbered financial firms with almost $600 billion in losses. Observers forecast the worst holiday season since 2002.
How should we respond?
Now, more than ever, skillful management will determine whether your business lives to see another day. Concepts such as innovation, agility and transformation— which require new skills—have taken on new meaning. Often labeled as buzzwords in the past, and therefore dismissed, they have now become synonymous with survival. Rightly so, in my opinion.
Our response to events such as those playing out today should not be panic, retreat or budgetary ax wielding. Instead, we should adopt the management tools necessary to lead a 21st century organization—financial panic or not—because it is the only way to prepare for both good times and bad.
When we try to articulate what is happening to us in this new century, we resort to a familiar set of words: globalization, outsourcing, offshoring, information age, innovation, age of connectivity, disaggregated corporation, death of command and control, real-time corporation, knowledge economy and sustainability.
As a first step in organizing our thinking about these forces and designing a response, we can group these terms in two categories. Information, knowledge and innovation might be considered the “what.” Connectivity, disaggregation and partnerships might be considered the “how.”
In other words, what companies need today to survive is information, which can be analyzed and turned into knowledge, and which can then point them to innovation in products, processes or business models. Enterprises get there by connecting, disaggregating and reaching out in new ways.
As a second step in our understanding, let’s add another word to the pile: people. If you focus on people, all of these other things—globalization, outsourcing, disaggregation and the like—will fall into place.
Four groups of people matter: those who work within your organization, those on the outside with whom you set up formal partnerships, those on the outside with whom you form ad hoc learning relationships, and those you strive to please with a product or service.
Innovation is born in the minds of people who draw insight from the raw materials of information and knowledge. The leader’s task is to connect and manage people—both inside and outside the organization—so innovation can surface and be put to use in the service of customers.
Whether you’re looking to innovate, become more agile and responsive, or simply keep your company’s head above water, successfully achieving those goals depends on the convergence of your business and technology management, a distinctly new way for your people to work together.
Regrettably, this is not the situation in most enterprises. We simply haven’t adopted management disciplines that align the business and technology sides of our organizations. One reason is that the computer age is still relatively young, it has changed constantly and we’ve been reacting to the rapid fire of developments instead of holistically managing them. Another reason is that the business and technology sides of the organization haven’t fully understood—and developed a trust in—one another.
At some point, technology crossed the line between being just a tool and being a strategic element in the business. That meant that the business could no longer be managed without simultaneously managing the technology it runs on, with the same people looking at both as an integrated whole. Sometimes, a business idea dictates, and a technology solution is found. Sometimes, a new technology dictates, and business processes—and even new business models—are built around it.
In companies that manage this process well, their business and technology are said to be “converged.” Although this is not yet mainstreamed in practice, it is not hard to find such companies. Look at those that do well in the marketplace, consistently beat their competitors and are weathering the current economic storm, and you’re likely to find a sophisticated interaction of business and technology.
These times do require change. However, the change in how we design and manage an organization was inevitable long before Wall Street went over the cliff.
Faisal Hoque is chairman and CEO of BTM Corporation and author of forthcoming book Convergence Scorecard to be published by Harvard Business Press. BTM innovates business models and enhances financial performance by converging business and technology with its unique products and intellectual property. © 2008 Faisal Hoque