6 assumptions that technology changed.

These precepts are not being cast aside - just altered, rethought, and expanded

Technology has long been recognized as a central driver of business change, but recently there has been a deep shift in the way executives think about - and worry about - their information systems.

The focal point of this new attitude is, of course, the Internet, which has moved from the back rooms of government and campus to the mainstream of business with a speed that has surprised even the most zealous visionaries. Just a few years ago, for example, enthusiastic pundits predicted that there would soon be $2 billion worth of business conducted on the Internet. Recently, networking component manufacturer Cisco announced that its Web-based sales had topped an annual rate of $2 billion - and Cisco is just one of thousands of companies on the Web. Corporations that don't adapt to the Internet "will be left behind, regardless of their size," Cisco CEO John Chambers pointed out. "Every major aspect of how business will be done will be affected by this new technology."

As compelling as it is, the Internet is just one aspect of the technological revolution. Wireless networks, data warehousing, intelligent telecommunications networks, groupware, global positioning systems - a whole range of technologies is affecting business. Today, computers and networks are doing far more than driving efficiency; they're putting companies in touch with customers, driving the creation of new products and services, and altering the very shape and nature of the corporation itself. At the same time, these technologies continue to become cheaper and faster - and therefore more widespread and interconnected. Keeping track can be difficult. "I hear CEOs say the explosion of technologies and the rate at which they are changing are making it increasingly difficult to know whether their companies are making the right choices and getting the full benefits from technology," says Edward M. Schreck, managing partner of Andersen Consulting's Technology Competency.

Executives need to learn to look beyond the "technology du jour," says Neal Goldsmith, president of the Tribeca Research technology strategy consulting firm in New York. "Is it Windows? Is it Java? Who cares? CEOs shouldn't be worried about each little technology that comes along every six months. It's not their job. Rather, they have to take a full step back and look at the whole situation from a higher perspective." Typically, he adds, "the problem is not buying the best technology. The problem is having the right attitude toward the technology."

Sorting it all out starts with understanding that the quantitative changes taking place in technology - from faster chips to the growing number of Internet connections - are now leading to a qualitative change in business. These changes are complex and multifaceted, but, in general, they can be summed up in two technology-based concepts: virtualization and interactive reach. Virtualization is the ability to create digital representations of music, pictures, speech, objects, and so forth. Interactive reach is the ability to communicate over long distances in real time - the key being to interact, not just broadcast or transmit messages.

Together, these two simple concepts are making it possible for businesses to "project" themselves via network to just about any place on the globe - and that is starting to change some of the most basic assumptions that business has held about people, place, and strategy. Long-held assumptions, explored in more detail in this CEO Brief, include such traditional truisms as: location is everything, bigger is better, the customer is king, business strategy drives IT, plan ahead, and our people are our greatest asset.

These assumptions are not being cast aside wholesale, however; technology-driven change is rarely that simple. Instead, they are being altered, recast, and expanded in ways that are not always easy to grasp. "I think that what makes this moment in time so confusing is not that the old rules no longer apply," says Paul Saffo, a director of the Institute for the Future in Menlo Park, CA. "The old rules do still apply. But they apply in ways that are subtly but profoundly different from the past. It would be much easier if they simply didn't apply at all anymore."

It's hard to overstate just how profoundly the rules are being changed, says lain Somerville, managing partner of the Andersen Consulting Institute for Strategic Change. The erosion of time-honored assumptions, he says, is altering the fundamental economics of business. "For example, transaction costs are approaching zero. And we're able to separate value realization from asset ownership, as we see with telcos that no longer need to own wire in the ground. So it isn't just a question of taking an existing business model and looking at which bits will be affected by the Web and electronic commerce. It is a matter of recognizing that this is a whole new game."

Such recognition is often lacking because assumptions are so deeply ingrained in business. In the last two decades, many large companies have gotten into trouble because "they have taken into a new future an old assumption that had made them-rich," says Peter G.W. Keen, chairman of Keen Innovations in Great Falls, VA, and a visiting professor at Duke University. "IBM, for example, took into the new environment the assumption that margins on new technology would always be high enough to fund everything else, like marketing and service." And that assumption quickly ran aground on the low-cost but powerful PC.

Weaving tomorrow's business assumptions into the fabric of the organization will require leadership from the top. Executives might take a cue from art school, where teachers typically tell students to paint a vase, and then look at the vase upside down to get a different perspective, says management guru Peter Drucker. "So look at our assumptions about technology or markets - suppose the opposite were true," Drucker recently told an interviewer. "Is there any evidence? Challenge your assumptions. This is basically looking at the vase upside down. Make yourself capable of doing this by building organized abandonment into your systems. By asking yourself every few years, 'If we weren't doing what we do do, would we want to start doing it?' This is not very difficult. It's a habit more than a skill. But it's a habit you have to practice."

Acquiring that habit will often require some uncomfortable soul searching on the part of CEOs. "It is very hard to challenge the assumptions that made your company rich - and even harder to challenge the experience that got you promoted to the top of the company," says Keen. "It's very hard for a guy at the top to turn around and say, All the things I learned and know that got me promoted, I am now going to dump.'" But that's a step that more and more executives will need to take if they want their organizations to move ahead in the coming decade. "The reason so many companies are caught by surprise is not because they are incompetent," Keen points out. "It's because they lived too long on an assumption."

No. 1 GO WHERE THE BUSINESS IS

On a normal business day, Dell computer's web site moves some $3 million worth of PCs and servers and provides technical support to thousands of Deli customers around the globe. This is accomplished without a far-flung string of offices or retail outlets. Business is conducted on-line and is, in a sense, in no place and in every place at once. On several occasions, CEO Michael Dell has pointed out that the company's Web site "is the most effective transaction medium we can think of except for mental telepathy"

Dell understands just how deeply the traditional business assumptions about location have been changed by technology. It was not that long ago that physical location was almost always the key to success. Stores had to be close to customers, offices close to transportation routes, factories close to cheap labor. Henry Ford built plants where workers were plentiful and coal and iron could be shipped in easily. McDonald's built an empire on its ability to pick the right street corner.

Undoubtedly, some of the old truths still hold: Just-in- time warehouses still need to be near the customer's plant, for example, and even high-tech companies have been known to relocate to get better access to fiber-optic networks. But with the interactive reach and virtualization made possible by technology, physical location is becoming less relevant. For example, MIT has an "interactive MBA" program that uses networks to reach students in Asia without having to set up remote facilities. IBM passes Java software development work from one time zone to the next; as one location finishes its workday, another picks up the project and the work never stops as it circles file globe. And workers in, say Hong Kong or New Delhi can now easily perform data entry and systems maintenance for companies m the U.S. "What we are starting to see is a skin of networks that surrounds the planet and we are starting to see 'virtual aliens' - people who work here, but don't live here or pay taxes here," says Don Tapscott, president of the Toronto-based New Paradigm Learning Corp. consulting firm. "So, you can start to talk about a truly global work force."

'A few years ago, a Stanford graduate student put it this way: In cyberspace. there is no distance between two points," says Paul Saffo, a director at the Institute for the Future in Menlo Park, CA. But that reality does not eliminate the need to think about location, Saffo adds - rather. it demands a new perspective on the old assumption. "Location is as important as ever. It's just that we have added an additional dimension. What constitutes proximity is more than just looking at a physical map."

In the past, physical location was important because people tended to congregate in certain places, and you could reach a lot of people by being in the fight place, notes Anatole V. Gershman, director of Andersen Consulting's Center for Strategic Technology. Research[R]. The key today, he says, is to find the new gathering places made possible by technology. This means more than duplicating physical structures in cyberspace: On-line malls established by both MCI and IBM brought a variety of retailers together into single shopping sites - and both efforts were shut down after showing disappointing results. The problem, says Gershman, is that the mall is "an artifact of transportation." The traditional physical grouping of disparate stores was valuable because it saved people travel time a benefit that is meaningless on the Internet.

So what are the new locations? On the Web, many retailers are finding that it's critical to have their sites listed in search sites such as Yahoo! or Infoseek. There is an overwhelming amount of information on the Web, and these sites are usually the starting point for on-line consumers. Hence, they are high-traffic gathering places - a kind of cyber-Main Street that gives retailers high visibility.

In the near future, say's Gershman, Location will be less a matter of where groups of customers gather, and more a matter of reaching the individual customer at the right moment. "Location will mean, 'wherever the customer is,'" he says. "We're still physical beings, and we move about. And we make a lot of our buying decisions not at the computer keyboard. but wherever we happen to be." Technology makes it increasingly practical to reach customers in new locations. Banks, of course. have used ATMs, touch-tone phones, and the Internet to provide banking services to consumers at home or on the road, 24 hours a day. And the backs of airline seats now hold not only magazines. but telephones that offer news services and video screens that can provide on-demand entertainment - and that have the potential to provide services in areas such as investment, shopping, and gaming.

The ability to treat the customer as the location will be greatly enhanced with the merging of satellite global-positioning systems, portable computers, and wireless networks, says Gershman. Using those technologies, his organization has developed a prototype dubbed "Shopper's Eye." The device - a hand-held computer - knows where the shopper is, what he or she is looking for, what stores are nearby, and even which products are in stock in those stores." With such devices, he adds, "you begin to see how electronic commerce and physical commerce can converge."

It all may sound futuristic, but most of the necessary technologies are in place today, and just need to be properly integrated, says Gershman. What's more, he says, only 3 percent of the 6 billion microprocessors produced annually go into computers the rest go into cars, stereos, and a wealth of other products. As these chips proliferate - as products themselves become "smarter" and more interactive, and as computing becomes more and more ubiquitous - the ability to connect products and customers at any time and in any place will become increasingly reliable and increasingly sophisticated. "Technology is creating entirely new realities, and I don't think people fully understand the implications of all this - even the people whose job is to think about these things," says Gershman. "I think the next 10 years will be very, very exciting."

No. 2 BE ALL YOU CAN BE 

A large part of the appeal of the internet is that when you are on-line, no one really knows it you are young or old, short or tall, handsome or homely. You can be whoever you want to be.

On the Internet, no one knows whether you're a giant corporation or a small startup, either - and it often doesn't really matter.

Traditionally, having a lot of physical assets - that is, being big - gave a company strength in the market. A string of worldwide offices and a big salesforce gave you access to lots of customers. Trucks and warehouses let you deliver products quickly and efficiently. And the more assets you had in place, the harder it was for competitors to gear up to enter your market.

Now, technology is giving companies new ways to work that don't require a lot of physical assets. "In looking at successful companies, typically you no longer ask the old questions, like how many people and buildings and plants they have," says Don Tapscott, president of New Paradigm Learning in Toronto. Increasingly, the main assets have to do with the intellectual capital of the organization. If you have a little company with three smart people, and the company can learn as an organization, you can create wealth."

Using the tools of interactive reach and virtualization, small businesses can act like big businesses, acquiring and serving customers around the globe. "Technology has given us electronic analogs of real estate, labor, and transportation," says Joe K. Carter, managing partner of Technology R&D for Andersen Consulting. "A Web site is real estate; intelligent agents are labor; and a communications channel is transportation." With technology's relentless increase in performance and drop in price, "we've got electronic real estate, labor, and transportation getting cheaper by half every 18 months."

In short, technology is putting the raw materials of business within reach of smaller anti smaller companies, and yesterday's physical barriers to entry are falling. As Carter puts it, "Economies of scale are giving way to economies of scope." To enter a new market, a small company no longer has to incur the initial expense of, say, putting offices in a dozen cities across the country. Instead, it can set up a site on the Web; if it needs to add services or capacity, it can do so as business grows. "They're paying for the use of that capability on an incremental basis versus paying for it all up front and hoping that they will he able to achieve enough volume to make it economical," says Carter. "They go from fixed cost to variable cost, so there goes the old idea of economies of scale."

Such economics mean that small competitors can quickly move to go up against big companies - often with remarkable success. PC Flowers, an Internet florist, has grown into one of the most successful flower companies in the nation. It offers a range of selection and customization that would be virtually impossible for a local physical retailer to provide - and it has no warehouses, fewer than 25 employees, and 1997 sales of $300 million. With a handful of employees, CDNow created an on-line national record store that was showing a positive cash flow within months of starting up. And well-known on-line bookseller Amazon.com, with modest offices in Seattle, offers some 2.5 million titles - and has come out of nowhere to present a serious challenge to large bookstore chains. "The cost and time needed to establish a brand used to be enormous," says Carter. "But the cost of doing on the Internet is very low, and it can be done very fast. Amazon.com has grown into a household name in the space of a year."

Technology also makes it easier for the small guy to join forces with other small guys. Creating electronic links with suppliers used to be an extensive, formal proposition. EDI connections, for example, required the close matching of protocols, the purchase of special equipment, and access to a private network. Setting up a connection could take a year or longer - which meant that such links were reserved for long-term partnerships. Today, through the Internet, a similar connection can be set up with little more than a modern and a browser. As a result, companies have the flexibility to link up with many suppliers on more of an ad hoc basis. "It really allows a global extension of the Silicon Valley concept, in which a venture capicalist gets together with a product inventor, a manufacturer, a distributor, a marketer, and others to make a company - but it's actually five or six different small enterprises that joined into an extended enterprise," says Iain Somerville, managing partner of the Andersen Consulting Institute for Strategic Change. "So it's possible. for a small player to play in a big way, and they don't have to own all the assets to do it."

All of this is not to say that the technology revolution is leaving big companies out in the cold. "As small businesses begin to look like big businesses and become a competitive force in the life of big businesses, the Internet provides the defense mechanism for large businesses," Intel CEO Andrew Grove recently said. The technology provides "an opportunity to fight back and overcome the disadvantage of a large business - a slower speed of operation." Networks and groupware let them streamline internal collaboration; the tools of electronic commerce let them reach customers in new ways, provide customized products, and gather customer feedback.

If small business can act like big business, a big business can also act like a small business, providing customized services, tailored offerings, and direct linkages to high-quality customer service. What's more, there are times when big is still better. In particular, the companies providing the infrastructure for electronic commerce - the MCIs and FedExes and America Onlines of the world - need to have scale to offer competitive service. And in their world, the new economics of networks means that value increases dramatically with share of market, says Somerville. "We find that because of technology-enabled infrastructure, there are increasing returns to scale rather than the traditional decreasing returns." For example, he says, when a person joins an intranet or Internet-based service, that person makes the network more valuable to everyone by adding content to the network.

In the end, the new business reality has less to do with being big or small in any traditional sense, and more to do with seeing "bigness" in a new light. Size is now about being global and expanding reach independent of bricks and mortar. "Bigger is better, in the sense of scope," says Tribeca Research's Neal Goldsmith. And nature, he adds, provides a clear analogy,. "Just look at the web - a spider's web, that is, with a small 'w.' It doesn't have much mass. But it covers a lot of territory, and it's strong."

No. 3 WE KNOW YOU ARE

In the good old days, companies liked to say that the customer was king - and indeed, they still do. But kings come and go, and the customer of today is not the same king that business served a decade ago. "The thing about yesterday's kings is they were very remote and they didn't bother you often," says Paul Saffo, a director at the Menlo Park, CA-based Institute for the Future. "Now, I think the customer is an ever-more demanding partner. And if you just blindly follow the old 'customer is king' idea, you are going to miss opportunities."

The heart of the issue is that technology has given customers unprecedented choice. "There is just a tremendous amount of information available," says Glover T. Ferguson, director of worldwide eCommerce programs for Andersen Consulting. "So, if you don't give me as good a deal as I can get, I'm going to find out about it fast and I'm going to be able to switch fast. And I don't have to do business with just the guy in my neighborhood anymore. I can do business with somebody halfway around the world."

At the same time, customers are increasingly impatient. In his recent book, Real Time, marketing consultant Regis McKenna describes today's "supercharged" marketplace as an environment in which "the ticking of 'real time' technologies is teaching the consumer to expect and demand immediate satisfaction." The result, he says, is the emergence of the "never satisfied customer."

Technology has empowered customers to demand what they want - and fortunately, it has also empowered companies to give it to them. "It permits us to actually gather a customer's unique inputs, which was practically impossible before," says Ferguson. This ability has given rise to the concept of mass customization; instead of the traditional one-size-fits-all approach, companies can now build products to order for vast numbers of customers. For example, by using technology to link and coordinate order entry, suppliers, and manufacturing, Deli Computer builds custom machines to order, with a turnaround time of less than two weeks. Or, in the Levi's Personal Pair Jeans program, a customer's measurements are entered into a store computer and sent via network to the factory. There, they are used to make custom jeans that are delivered in a few weeks at a fraction of the cost of traditional tailor-made pants.

The technology can also help companies understand and anticipate what the customer wants and focus on customer retention in ways previously reserved for customer acquisition. "It allows you to develop radically closer relationships with customers, and be far more predictive and proactive in dealing with them," says Ferguson. Instead of waiting for market research, companies can gather huge amounts of real-time data about customers coming in from many channels-Internet sales, e-mail feedback, problems identified through call centers, etc. Data-mining technology makes it possible to quickly sift through this data to identify shifts in taste and to develop detailed profiles of customers that allow companies to provide products and services in an increasingly individualized and customized fashion.

The best way to find what someone wants, however, is to talk with them - and the technology can enable "a rich dialogue between producers and consumers that creates a constant information and feedback loop," according to McKenna. E-mail feedback and sales reports from Web sites are just the tip of the iceberg; the technology also lets companies closely involve customers in designing and creating products.

In the software industry, for example, companies often release new products that have not been rigorously tested; instead, they allow the customer to do some real world testing for them, and then keep turning out iterations of products until all the bugs are worked out. "Companies released incomplete products and used their customers as unpaid beta testers," says Saffo. "That may not seem like a very nice thing to do. But in a new industry where the rules are being remade, the only way you figure out how to evolve your product is with intense customer involvement. That attitude of viewing customer experience and feedback as a partnership is very important."

An even better approach: Let the customers do it themselves. The increasingly interactive nature of technology in general - and the graphical nature of the Web and Internet-like technologies in particular - make it possible to let customers serve themselves in a variety of industries. So, for example:

* AMP, a $5.2 billion distributor of electronic components, uses its Web site to give customers - generally, electrical engineers - access to technical drawings, specifications, and 3D models of some 80,000 products. The engineers can plug this information into their own designs to see how a particular component might work.

* Eddie Bauer's Web site lets consumers download software needed to create 3D models of home environments, try out chairs, lamps, or other items in that environment, and then place an order.

* Andersen Windows has a "Windows of Knowledge" system that lets customers use a computerized kiosk to enter the floor plans of their home and try out standard windows in the plan. Or, they can design their own windows - and the system will help them determine if the custom design can be built.

When done right, such technology-based self-service gives customers new levels of customization, convenience, and control. Typically, it also lowers the vendor's costs, because fewer people are needed to answer phones, explain procedures, and generally hold the customer's hand. For example, NBTel, a New Brunswick, Canada, telecommunications company, used to deal with changes to service - adding call waiting, turning on new phone numbers, etc. - either through a call center or by sending out a repair truck. Recently, however, the company has been letting customers perform their own service changes through a variety of channels, including the Internet, screen phones, and automated touchtone systems. Customers have been receptive - so much so that NBTel CEO Gerry Pond believes the organization is essentially becoming an "electronic services integrator." As more and more customers have picked up on the self-serve approach, the average service transaction cost has dropped from $11.27 to $5.82 in three years - and the company expects to bring that down to $2.31 by the turn of the century.

The trend toward self-service may eventually transform consumers into what author and consultant Don Tapscott calls "prosumers." Prosumption, he explains, is "where the customer doesn't simply select a product, the customer designs a product. When I buy the personalized (on-line) Wall Street Journal, I am not just a consumer of the Wall Street Journal, I am a publisher of Don Tapscott's Wall Street Journal." In other words, the consumer and the producer are so closely intertwined it becomes difficult to draw a line between them.

In any case, yesterday's king - the passive recipient of business services - is already long gone. "Yes, the customer is still king," says Andersen Consulting's Ferguson. "But now, it's not just a king who says, 'Bring me costly raiments and a horse to ride.' It's a king who says, 'I want my raiments in this color, and I want them to fit. And this is the kind of horse I want. This is the saddle I want. This is the bridle I want. And here's where I want to go.'"

No. 4 KEEP TECHNOLOGY AND STRATEGY ON TRACK

In the 1980s, stories about computer problems abounded: The large bank database that shut itself down. The customer information system that was years late and. millions over budget. The new voice messaging system that abruptly erased a day's worth of messages. Executives tended to feel that their systems were costing a lot and getting them nowhere, because things were being done backwards. There was too much "technology for technology's sake" So a new rule took hold.

Technology would do business's bidding. It would follow from the business strategy, and its role would be to support that strategy. No more putting the cart before the horse.

Now, however, it's becoming clear that neither the cart nor the horse should go first. "Technology has become increasingly central to business strategy," says Ed Schreck, managing partner for Andersen Consulting's Technology Competency. "They're inseparable."

It's not that the experts were wrong a decade ago. Indeed, "business strategy drives IT" was a sound assumption in its day. Now, however, technology needs to be considered up front, as strategy is formulated. In part, that's because the complexity of technology and the speed of business make it increasingly difficult to play catch-up. A sophisticated technological infrastructure takes time to create; if work on one doesn't start until the new business trend it supports is crystal clear, "you are already too late," says Peter G.W. Keen, chairman of Great Falls, VA-based Keen Innovations. "When technology is the differentiator, if your reaction time is two years slower than the leader's, you just don't get back in."

Perhaps more important is the increasing range of technology-enabled possibilities that companies need to consider in their plans. "When your capacity to communicate with partners goes from the three-foot-wide garden path to a highway a mile wide - which is the difference between plain old telephone service and OC3 [high-speed Internet connections] - all of a sudden vast new possibilities open up in terms of how we structure our companies and what business strategies we can pursue," says New Paradigm Learning Corp.'s Don Tapscott.

"In the last five years, the technology has advanced so fast that it is really enabling brand-new thinking about business strategies," says C. Rudy Puryear, managing partner of Information and Technology Strategy at Andersen Consulting. Today, technology does not just support the execution of strategy - it can help determine the shape of the strategy because of the new opportunities it creates. Another way to look at it: Recent strategies that failed to take technology into account from the beginning would have missed the opportunity to sell books over the Internet; to collaborate on designing a sophisticated jet airplane with distant business partners; or to effectively segment and sell to the most profitable bank customers. "So you need to start with a clear understanding of technology, how it is specifically and profoundly changing the rules and the context in which business exists," says Rudy Puryear. "You need to have a technology-enlightened strategy."

One way to bring "technological enlightenment" to strategy is to design it into the process - to give the CIO a seat at the table, and to make sure the technological viewpoint is included in the assumptions underlying strategy," says Keen. "You have to match authority and accountability. You can't have it like it was in the old days, with a data-processing czar who had all the authority around IT and no business accountability. Equally, you can't have a CIO who is accountable for key elements in a business strategy but who doesn't have any authority [in that area]."

"[CEOs] should take a look at the agendas of the major meetings that drive strategy - board meetings, directors meetings, executive committee meetings," continues Keen. "And they should look at how much of their own personal time is spent on a discussion of business and IT. I find companies where you can go through the entire board of directors meetings for a year and look for a discussion of IT issues and business issues. You get a discussion of IT budgets, asking why we are spending too much. But for most of them, there isn't much discussion beyond that."

Because technology pervades business, however, responsibility for assessing and understanding it cannot be delegated away or restricted to planning meetings. Senior managers need to take a personal interest in technology, says Tapscott. "Every executive needs to be something of an IT executive, and every CEO needs to be something of a CIO."

There are several ways to integrate strategy and IT on a personal level. For example, Andersen Consulting's Puryear recommends that executives think about their nightmares. "I like to ask, 'If you woke up tomorrow and were tremendously upset to read in the Wall Street Journal that your nearest competitor had done X with technology, what is X?' When you ask CEOs to brainstorm about how they can get creative with technology, they tend to get bogged down in short-term earnings and the limits of their technology group. They tend to be unimaginative when it comes to their own companies. They are far more imaginative when you ask them what their competitor can do that would give them nightmares. They assume a competitor can do anything."

Another approach: Get hands-on experience. To understand new technologies, people often need to have a first-hand sense of how it feels, says Glover Ferguson, director of worldwide eCommerce programs for Andersen Consulting. "A lot of these technologies are intellectual abstractions from where the CEO is sitting, making it hard to rethink his or her company's boundaries. So they should surf the Web, buy something on the Web, see what it feels like to enter their credit card number. Otherwise, they can't understand the extent to which their reach or their customers' reach has been lengthened."

Finally, try listening to the kids. "The next generation contains the new culture of work - the new model of the enterprise, the new paradigm in marketing," says Tapscott. "Their culture is rich with lessons about how we can transform our enterprises through the new technology, because they don't view this stuff as technology. They/grew up with it. They see the computer in the home as being about as complicated as the refrigerator. The technology is like air to them."

No. 5 FOLLOW THE LINE FROM HERE TO THERE

For most of this century, business planning has been a relatively constant ritual: Look ahead three to five years, make a plan, and then execute the plan. It was a lot like laying out a road trip. Identify two points - "here" and "there" - draw a line between them, and then follow the line.

Today, however, technology has made it impossible to visualize that second point in the distance. New products and competitors, rapid distribution systems, and the virtually unfettered flow of information around the globe mean that the competitive landscape can change dramatically overnight. "In the old model, you had a five-year business plan, and you were set for five years, says author and consultant Don Tapscott. "In the new model, you have the five-year business plan and you are set for 15 minutes - unless something changed while you were pumping it off the printer. So now, it's often 'better never than late,' because you don't want to do all the work to get a new product to market, for example, and then find that the market is gone."

Things are not only moving faster, they are moving in increasingly unpredictable directions, as technology drives new forms of business and knocks down traditional geographic and industry boundaries. In essence, it's hard to foresee just what is going to happen even a few months down the road. "I tell companies that in a fast-moving, competitively intense environment, they have to prepare for the 'eventuality of anything,'" says marketing consultant Regis McKenna.

But a company still must plan; it can't just lurch blindly from crisis to crisis. One solution: Abandon the traditional master plan in favor of many smaller, more tentative plans. "We see some companies developing a portfolio of possibilities - and especially of promising technologies-and engaging in a kind of rational experimentation," says Ed Schreck, managing partner of Andersen Consulting's Technology Competency. "The idea is to try different approaches for awhile, growing some, dropping others. These companies kind of feel their way along - and usually, the CEO is directly involved. These executives recognize that the business is going to change based on which parts of the portfolio come to be the right answer for them."

"In the old world, it was 'Ready, Aim, Fire.'" says Paul Saffo of the Institute for the Future. "The model now is 'Ready, Fire, Steer.' You make your best guess in an uncertain environment, and you design into your plan the ability to steer once whatever you have launched is underway."

Technology provides the tools to guide that kind of approach. For example, electronic commerce allows companies to have real-time feedback about sales, customer likes and dislikes, and product problems. Data warehousing and data mining technologies allow executives to quickly analyze huge amounts of customer and competitive data to identify. trends and perform sophisticated "what if" investigations. Networks allow companies to push information and decision-making to the front-line - and for the front-line to relay early warnings of marketplace shifts to decision makers. And groupware makes it easier to quickly pass new best practices and methods throughout the organization.

Perhaps most important, technology can help eliminate the traditional gap between the creation of a strategy and its execution - a delay that companies can no longer afford. "The ability to execute a strategy has become as important as the strategy itself," says Andersen Consulting's Schreck.

"Businesses now have the technology tools to be sensitive instantaneously to changes in their customers and competitors," says McKenna. However, more than any single silver-bullet technology, companies need to consider the integration of systems that will allow the enterprise as a whole to move quickly when the marketplace changes. McKenna advises companies to "build adaptable and flexible development and design systems. Design products and services that are modular and programmable. This allows for rapid response. Manufacturing must be flexible and programmable as well."

Such integrated processes and systems are key to the new approach to planning - but so too is a new kind of mindset on the part of executives, says Schreck. Executives used to the solid ground of the five-year plan may not be comfortable with "making incremental moves, and with each move, reevaluating strategy and adjusting, so that strategy and execution are intertwined," he says. His advice: Remember that flexibility does not mean a lack of structure or method - or results.

No. 6 YOU ARE WHERE YOU WORK

It's a phrase that has graced many an annual report, a nod that CEOs give to the importance of those who make the organization tick, the kind of motherhood-and-apple-pie statement that no one could argue with. Until now.

The assumption that "our people are our greatest asset" is changing because business today is about far more than "our" people. Technology is breaking down the traditional boundaries that have separated the organization from the rest of the world. Today's information systems make it easy - and indeed, desirable - to create close links between companies, allowing them to work in concert. As a result, intercompany relationships, from alliances to extended enterprises to outsourcing arrangements, are burgeoning. "Most people do indeed work for an organization. But increasingly they are not employees of that organization," writes management consultant Peter Drucker.

"People are a very important asset, but today you have to think about people outside of your company - customers, business partners, alliance members," says Hugh W. Ryan, managing partner of large complex systems at Andersen Consulting. "In the old days, you needed to own all of your capability. Now you can ally with others who have complementary capabilities, so that together you are able to provide greater value than either one of you could on your own." And so some 5,000 suppliers can tap into WalMatt's computers to track inventory and keep the retailer's shelves full. Oracle and Deli share technical information to cooperatively sell and support servers pre-loaded with database software. And Boeing uses network connections with many suppliers to collaborate on the design and manufacture of aircraft.

This interconnected world is the direct result of technology, says Paul Saffo of the Institute for the Future. "Companies resemble the information systems that they rely on to do their work." As centralized, controlled computer systems give way to networks of varied and far-flung computers, "the organization's future is a web structure and not a hierarchy."

Just how far can a web of alliances go? In its new Associates Program, Amazon.com lets anyone with a Web page list book titles and link them back to the Amazon.com site. A travel-oriented Web page, for example, may list travel books, or an individual bird watcher with a Web page could list his favorite birding titles. People clicking on these titles are sent to Amazon.com, and the referring site gets a commission of up to 15 percent on the sale. As a result, the on-line bookseller now has alliances with thousands of other Web sites, with business tracked by Amazon.com's computers. "That would be an outlandish alliance in the physical world," says Saffo. "But cyberspace allows new kinds of economies of structure that make it possible for people to be partners who would be inconceivable as partners in the physical world."

As technology dissolves the walls of the corporation, it's also helping workers find their way outside - and to take their work with them. This trend goes beyond the notion of teleworkers, says author and consultant Don Tapscott. "Tele" comes from the Greek word for afar, he explains, and telework has been viewed as working away from the real place of work. "But increasingly, the work has no location in a traditional sense. So an insurance salesman with a networked laptop is not working far from the head office. That person is at the location of the work."

Just as it does for companies, technology increases the reach, mobility, and flexibility of individuals. With the Internet, e-mail, voice mail, electronic calendars, and laptop computers, the individual can be an effective one-person business, moving from company to company and plugging into different projects along the way. These workers are engaging not so much in traditional self-employment as in what Dilbert cartoon creator Scott Adams aptly calls "boss diversification," as they sell their expertise to several companies. "We are beginning to realize it's not that people are the company's best assets, but that we as individuals are our own assets," says consultant Peter G.W. Keen.

As this trend progresses, more workers will be "free agents," says Neal Goldsmith, president of the Tribeca Research consulting firm in New York. "You'll have a portfolio of skills you have to keep burnished. You'll sell them by placing them on the Web, and be chosen to be brought into a team with others to do a certain time-specific task. When that task is over you disband. Even large corporations will function like that, with task-specific groupings."

Clearly, the "ownership" of people assets is changing, as are the assets themselves - and success will require new approaches. Many companies are now shifting their attention to knowledge management, and the use of tools such as groupware and databases to capture the experience and expertise of people in an organization and make it available to others. In a world where workers are highly mobile - where the concept of "our" people is no longer a given - these tools can help companies retain critical knowledge even as individual experts come and go.

The complex relationships between companies, alliance partners, and workers will also require new management approaches. "People who used to be employees are now becoming service providers, and they take a different view of the relationship with the company. They are not there to take orders, but to provide a high-quality service," says Ryan. "I think it can be difficult for a CEO who has a traditional model of the relationship of employees and company and control to accept."

"The rugged individualist image of the successful...CEO may become the dinosaur of this century," writes consultant Robert Porter Lynch in his book, Business Alliances Guide: The Hidden Competitive Weapon. "The future leader/CEO will be more visionary, spiritual, and adaptive, able to capture opportunity, rapidly respond to changing markets, and inspire a team through a dynamic common vision and shared values."

Ultimately, leadership must match the reach and range of the technology, says Ryan. In a world where people and their knowledge are vital assets, executives will have to learn to make use of them wherever they may be. "You have to rethink your company without boundaries - to think of your company as extending across to other companies and deriving strengths and capabilities from others, rather than trying to own it all yourself. Technology will let you do that."

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Six changing assumptions about technology

Technology is rapidly changing the way the world looks at business, and as it does so, the business world is just as rapidly changing its view of technology. "Many of tenets that governed IT five years ago no longer apply," says Ed Schreck, managing partner of Andersen Consulting's Technology Competency. Fast-changing and increasingly powerful technology, coupled with a shifting and unpredictable business environment, "is creating a new generation of strategic thinking about IT," he says. This thinking is changing many of the traditional assumptions about IT, including:

Technology improves productivity. Yes, it can improve productivity, but with the power and reach of technology, that view is far too limited. Executives need to see their technology as the key to new strategic options and as a tool for entering new markets and driving major breakthroughs in overall business performance.

Technology should cut costs. Cost reduction is a proven strength of technology. But more important, IT can be used to create new revenue-creating products and services. The new rule: Turn IT loose on top-line growth. Consider how much of your IT investment is devoted to exploring new revenue opportunities, seeing how IT is used for growth in other industries, and seeing what your competitors are doing with IT.

A technological advantage puts us ahead of the competition for several years. Once upon a time, innovative, large-scale technology provided strong competitive barriers. Today, however, such technology-driven advantages are likely to be leapfrogged by new systems and approaches in short order. Innovation needs to be continuous; competitive advantage tends to come from having a process that cultivates repeated wins that evolve from initial implementations, rather than any single IT investment or program.

IT investments should be a stable percentage of revenues. Today, IT is inexorably linked with the way companies respond to customers and competitors. IT should not be constrained by long-range fixed budgets; it should have the flexibility to shift as new opportunities and threats appear. So instead of fixed investments, think in terms of variable investments and the ability to initiate, redirect, or stop projects when conditions change.

Technology is vital, so we have to own our own in-house technological expertise. IT is very much a part of the ongoing "unbundling" of the corporation and an increased focus on alliances. External resources and expertise are plentiful, and outsourcing has evolved into a sophisticated, widely used practice. Relying on outside help to complement in-house strengths gives you the flexibility to vary IT resources as demand fluctuates.

IT's role is to help us be a low-cost producer. IT's newest and greatest power lies in its ability to transform external processes and relationships, rather than streamline internal processes. Technology can help track and respond to changes in the competitive landscape. More important, it can be used to build and enhance relationships with customers - and thereby avoid the trap of competing on price alone.

Understanding how these traditional assumptions have changed will help CEOs guide technology in a changing world, and exploit it for competitive advantage, Schreck says. However, he cautions, even the newest assumptions about IT are just that - assumptions. "You always have to keep your eye on the horizon," he says, "and you always have to keep questioning your assumptions."

Andersen Consulting is a leading global management and technology consulting firm whose mission is to help its clients change to be more successful. The firm works with clients from a wide range of industries to align their people, processes, technology, and strategy to achieve best business performance. For more information, please contact: Andersen Consulting, 100 South Wacker Drive, Suite 1051, Chicago, IL 60606. Telephone: [phone]. Facsimile: 1-312-507-7965. On the Internet: http://www.ac.com