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Tech Trends That Matter

Recognizing technologies that meet your business needs.

Chief executives hear a lot of chatter about new technologies that are going to change the world. Most of them, of course, don’t. So the CEO’s job is to cast a wary eye on new technologies until a few winners emerge that can be commercially harvested. The trick is putting all those new technologies in the context of real industry and market forces. As readers contemplate the year 2006, we at Chief Executive sought to identify three long-term technology trends that really will matter. Some touted technologies like blogs will be important, but not for the reasons many assume. Some hyped ones like radio frequency identification (RFID) will be black holes for money and attention. Still others like supply chain simulation can transform a company’s operations. But all require CEOs to grasp the essential changes in the business landscape.

 

Here are our picks:

 

1 Customers Are In Control There’s no doubt that the Internet is a potent marketing tool, allowing companies to reach out to individuals. But the Internet is increasingly allowing customers to tell companies what they want. “It starts to give the reins of control to the individual user,” says Todd Board, senior vice president of the technology and communications practice of marketing research company Ipsos Insight.

 

In blogs and online discussion forums, people can publicly praise products and companies-or vent displeasure to thousands, and sometimes millions-magnifying their voices and reducing months to minutes the time that word of mouth has significant impact. The often anonymous person might be a customer or a disgruntled employee or competitor. They don’t have to be accurate to have an effect; they only need an audience. Publicly countering criticism only brings it more prominence and legitimizes the source. Individuals similarly have growing control over the information that reaches them. Indro Mukerjee, chief marketing officer of Philips Semiconductors, notes that as cell phones and other personal devices gain broadband capabilities, they are moving beyond voice connections to become complete data pipes. People can do anything anywhere, including at work.

 

Really Simple Syndication (RSS) lets people choose individual multimedia streams from various sources and build what are effectively personal media outlets. Virtually every leading news and entertainment organization has already begun to use RSS. According to a Forrester Research study earlier this year, only a small percentage of adults use the technology knowingly, yet it’s also at the heart of My Yahoo and My MSN. Board estimates that more than 20 percent of the Internet population uses RSS without realizing it. That number will increase as Microsoft follows its plan to integrate RSS into the next versions of Internet Explorer and Windows. Some companies are getting on board now to keep a foot in a whole lot of doors. IBM has a corporate-wide initiative to use RSS in providing everything from technical updates to investor relations materials. Nestle’s $9.2 billion Purina Pet- Care division is providing content from its customer-focused Web sites in the same way, and gives permission for people to repost information to personal blogs and noncommercial Web sites, anticipating at least the possibility of positive word of mouth.

 

Neither company can point to a significant payback-yet. But now is the time to test the waters. Happily, according to those who have been there, it costs next to nothing to implement RSS, so taking the plunge isn’t painful. Causing more discomfort, however, are cases where a company’s content is used by a consumer to create something entirely different, says Columbia Business School associate professor Rita Gunther McGrath. New technologies allow people to actually modify company-created Web-based applications and the data they include, so a user could take content from multiple Web sites without permission to offer a product or service that the originating companies never envisioned. For example, one programmer “combined Google maps with multiple listings from real estate brokers’ sites to give you a visual display of available apartments and where they are,” McGrath says. “Such programs fundamentally change the dynamic of your entire information infrastructure.” Board adds that they also raise the question of who owns the resulting composite application, or “mash up.” Think you could shut someone down? The recording industry thought exactly that with Napster, which went on to become a major player in legal delivery of online music. The long and short of it is that with customers increasingly in control, CEOs cannot trust traditional command and control approaches to running a corporation. Persuasion and finesse will become at least as important.

 

2  Global Competition Means Global Cooperation In 1624, John Donne wrote that no man is an island. In today’s environment, neither is any corporation. Companies are partnering everywhere around the world. But corporations cannot look for low costs by simply handing off tasks and expecting others to deliver without supervision, consultation and participation. Even in outsourcing noncore business functions, the amount of interaction and management time is typically significant, reducing the often starry-eyed visions of enormous savings. Hayes Co., a Wichita, Kan.-based lawn and garden products manufacturer, sells to such chains as Wal-Mart, Target, The Home Depot and Lowe’s. Satisfying them means “product on the shelf on time with orders shipped complete and [regularly introducing] new products,” says CEO Steve Hayes. To keep the flow going, the company uses designers at home and business partners around the world. That used to mean about 2,500 concepts in the pipeline at any time, but only a small number could actually turn into accepted products, and Hayes needed more. So the company began using a Product Lifetime Management system that let everyone attached to a project use the same specifications, conceptual drawings and computer-aided design files. Concept rates doubled and by keeping technical issues clear, Hayes reduced the need to express ship prototypes between continents.

 

Doing this eliminated an annual $200,000 expense that essentially paid for the software the first year. Cooperation with customers is just as important as with vendors-just ask packaging manufacturer Rock-Tenn in Norcross, Ga. Specialty paperboard manufacturers have found themselves buffeted by changing economic realities. About 20 percent of the makers of specialty paperboard have closed since 2000. “[The market] recognizes that there’s not a lot to be gained from any headroom left in the supplier margins,” says CEO Jim Rubright, “so everything’s got to come out of efficiencies.” Yet customers want better service and they want to save money, so that means vendor managed inventories. Rock-Tenn keeps people and product at its largest customers and uses information technology to pull off tight synchronization. “We’re looking at their production schedules and matching our production and deliveries to be just in time for them,” he says. Such cooperation is vital; overcharging vendors will find themselves out of business, and customers who push suppliers to the point of insolvency could find themselves unable to obtain parts and supplies at critical times. CEOs must pay attention to all opportunities to collaborate and react to important stakeholders, even where they least expect it. A growing type of collaboration, in a sense, is enterprise feedback management (EFM), according to IT research firm Gartner Group. These are programs that are sometimes commercially packaged and sometimes custom-developed that not only let a company accept comments and views from customers, employees, stockholders, vendors or any other group, but distill what the company can learn and then integrate this information into corporate decisionmaking. The feedback may be answers to surveys, comments to customer service personnel or solicited views.

 

Aon Reed Stenhouse is a Toronto-based insurance brokerage firm that begins a  series of surveys and conversations with customers three to four months before they are due to renew policies. The discussions might be about customer needs, but could just as easily address perceived shortcomings about the company. “We can start to use this information to not only direct our service policies, but we also get to start thinking about product development,” says marketing director David Cliche. A clear analysis of customer behavior can provide key insights. Dreyfus Service of New York, for example, has been “able to predict that the customer is going to exit three to six months before it actually happens and with accuracy of 80 to 85 percent,” says executive vice president Prasanna Dhore. In short, getting feedback and acting on it closes the gap between executive decisions

and needs in the marketplace.

 

 

3  Supply Chains: Stop Cutting Costs, Start Building Business Throughout the 1990s, CEOs rightly wanted to trim the size of their organizations. But somewhere along the line, companies decided they should cut out portions of their supply chains. It was a big mistake for two reasons. One was that by focusing on small costs, CEOs were looking at business as though it had not significantly changed since the 1950s. “Twentieth century supply chain was factory-centered,” says Kevin O’Marah, vice president at Boston-based AMR Research. “The 21st century supply chain is actually a global supply network. You’re not going to win by slicing out 5 percent of some portion of your total costs. You can buy plastic cheap all day long, but at the end of the day if nobody wants it, you’ve lost money.” What’s changing about supply chains is the way smart CEOs think about them. Increasingly, CEOs need to look at the supply chain as a whole. It is a big job in terms of concept and scale. The real win is focusing on customers, knowing what they want and being able to give it to them, in a cost-effective way, using now ubiquitous instantaneous communications that were not available even five years ago. As O’Marah puts it, companies should know “what my market or customers or even opportunities are calling for, and reconfiguring the supply chain to take instantaneous advantage of it.

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