Going for Growth
January 1 2005 by Chief Executive
Once upon a time, achieving top-line growth was relatively simple. “Back in the late ’90s and even 2000, growth was everywhere,” recalls Pat Russo, CEO of Lucent Technologies. “You could place lots of bets and most of them paid off because somebody was willing to buy.” But now, says Russo, “we are living in a very different world.”
No doubt about that. After blowing so much money in the bubble days, companies have spent several years focusing on the bottom line. They’ve been on the defensive because of a climate of scandal and economic volatility. But the pendulum is shifting again. “Now, we want top-line growth,” says Ginni Rometty, global head of IBM Business Consulting Services, which sponsored a roundtable on the subject. “Cost-cutting is not going to go away. But now the challenge is getting work forces that can do both of these at the same time.”
So the burning question is how technology can be employed to pump up revenue growth. Data mining€¦quot;essentially, a deep, intelligent analysis of corporate and customer information using computerized databases€¦quot;is one such trend. It’s not exactly brand new, but many companies have begun to regard the once experimental technology as an essential tool, both to defend existing business and to go after new business. “Any of the things anybody with lots and lots of customers can do pretty effectively€¦quot;if they can use this technology well€¦quot;is to learn which customers really make them money,” said Fred Smith, founder and CEO of FedEx. “Then, you try to get more of those customers and less of the customers that lose you money or cause you problems. You can also relate customer retention with specific incidents and specific activities.
“If you want to grow your top line,” Smith continued, “the easiest way is just to stop the leakage out of the bottom of your boat, because turnover in most businesses is enormous.”
Rometty agreed. Data-mining technologies, she said, “are now available that would have been cost-prohibitive before. Even stochastic analysis€¦quot;what you have to do to feed out all that noise and data€¦quot;you can do it now in an economically feasible way.”
Consider Karl Rove. “That’s what he did to win the election,” said Smith. “They correlated Republican buyers and Democratic buyers to zip code by type of car, size of house, watching NFL, NASCAR, the whole thing. They did it with a lot of relational databases and data mining, a rifle shot into that household or that voter.”
As important as it’s become, data mining is hardly the only technology used to raise revenue. But whatever technologies are considered and adopted, whether the scale be large or small, whether the technology is being sold to customers or used internally, just about everyone at the roundtable agreed on several principles that should guide top executives:
Don’t push technology on your customers. “You need a product roadmap, a technology roadmap, driven by the customer experience, instead of saying, €˜Here’s the technology, where’s the market?’” said Jay Desai, president of the Institute of Global Competitiveness.
Be careful what you ask your customers. “The customer cannot articulate unmet and emerging needs,” Desai said. “If you ask them, €˜How do you improve this?’ you generally end up with incremental improvement. So it’s very important to start with game-changing ideas internally, and then go validate or prioritize them with the customer.”
Anticipate the future and work backward in time. Foresight is rarely 20/20, but you need to squint and do the best you can. Andy Mattes, president and CEO of Siemens Communications, said the company’s corporate technology department looks 10 years into the future, picturing, say, the home or the hospital of the future. “And then you work backwards,” said Mattes, whose division oversees both the cell phone and networks businesses for North America. “You go into your trend scouting, internal as well as external, you look at venture capital and what have you to see what matches the roadmap or vision you have. “Usually you don’t even know which technology will be available at that particular time,” Mattes added. “It’s more a functional thing€¦quot;this is how the hospital of the future is going to look. You look at technology trends that support that vision. Then [the lab] hands it off to people who transfer that into tangible products and solutions.”
Get out of the office. Top executives can’t depend only on staff to introduce them to new technologies. They need to do some scouting on their own. “One of the things I think we’ve all done as CEOs is get an awful lot more active in terms of getting out and looking at technology,” said Mark Thimmig, chief executive of White Hat Ventures, a computer-based education company. “I spend a considerable amount of time every year going out to see a lot of technology, really drilling down.”
Communicate. Not just you, but your entire company needs to have good communication flowing. “When you can get the right resources together you can solve any problem,” said Donald Nigbor, chief executive at Benchmark Electronics. “The challenge is to bring them together. When you’re spread out all over the world and people don’t know each other, that’s a challenge.” More companies are creating “knowledge management” information systems that help employees who need particular expertise to find one another. But it’s no substitute for face-to-face. “I head up the engineering council for the company and we meet on a monthly basis,” said Nigbor. “We have plants all over the world. We sit down and talk about what’s happening in technology, and we share those ideas. We kind of have our own inside consulting service, where any technical person in the company can find out what’s going on. And, then, once they have that information, they can follow up and later go to another geography or location and pick up more technology, more detail.”
Bring business execs and tech execs closer together. Just as the gap between business units and technology gurus is a problem for managing existing IT infrastructures (see story, page 60), so, too, is it a challenge when it comes to growth. “The business side and the technology side need to be in concert,” said Eric Pelander, partner and global leader for strategic change solutions at IBM Business Consulting Services. “Unfortunately, there’s a pretty big variance in terms of a company’s ability or willingness to do that. Often they come at their strategy very much from a business perspective and figure out what that means for technology later. Then they’re likely to miss some disruptive technology that could result in a new business model, or something fundamentally different for their customers.”
Know that every company is a technology company. One of the most important but largely unheralded economic trends of recent years is how service-sector companies have embraced technology to achieve not just higher productivity, but growth as well. “There is a misconception that to provide technology you have to be a technology company,” said Barry Siegel, president of Recruitment Enhancement Services. “To provide service, proper service, you have to have the best technology. But don’t say that you’re selling technology. You’re selling the best service based on that technology.”
Manufacturing industries turned to advanced technology long before most service companies did. But now it is the service sector that could be ripest for technology-generated growth. In the past several years, for instance, the travel service industry has been utterly transformed by the Internet. Agencies that failed to adapt to the changes either sold their businesses or closed their doors. Those that embraced the new technologies took advantage of the ensuing industry consolidation. “We’re not calling ourselves just a travel management company anymore,” said Gloria Bohan, president and CEO of Omega World Travel, which she built from a one-woman shop into a $1-billion-a-year company. Rather than simply schedule travel over the phone or online, “we’re going into corporations and into the federal government, offering them new technology that will make booking online easier. We’re helping them automate their authorizations, and we’re helping companies attach a travel and entertainment system to a reservation system.” Her core advice: “You have to know the business, know what needs to be done and apply that to technology.”
Remember that technology is not just for productivity. “The issue you have in all businesses is how you get your business leaders to remove their blinders,” said Harold Yoh, CEO of Day & Zimmermann. “They’ve been so used to competing in one dimension. Now, they have to compete in another dimension. They’re used to technology being a way to either streamline processes or cut costs. The question is, How can you change your business model and accelerate your customers’ success by using technology?” Unleashing the next wave of innovation could obviously have a major impact on the growth of the American economy, allowing it to rise above competitive pressures from China and elsewhere. In fact, the economy’s future may hinge on whether a new burst of ideas can reach the marketplace. Hopefully, this time around, CEOs will be wiser and better equipped than they were in the go-go days of the 1990s.