Fluid Business Networks

The vision of eliminating hierarchy was compelling, and the change initiatives many
of them enabled by emerging information technologies-shook business markets
and the organizations within them to their foundations. But take a walk around
most large, established firms, or talk with executives from established industries, and
it soon becomes clear that the "hierarchy" is far from dead. Yet, when asked what
their companies or industries should look like, most executives call immediately for
new capabilities that enable them to work more effectively and efficiently within
more diffuse and fluid business networks that are popularly called "ecosystems."
(Applegate, 2008, pg 82).

Article Review: "IT Doesn't Matter" by Nicholas Carr (2003)

by Matthew Murphy

Nicolas Carr stunned the business world in 2003 with his bold and counterintuitive assertion that IT doesn’t matter, unambiguously proclaimed as the title of the Harvard Business Review article that brought him to prominence.   Carr’s thesis, simply put, is that information technology no longer offers firms a competitive advantage and that its value as a strategic concentration is diminishing.  Coming soon after the bursting of the dot.com bubble, and apparently cementing a disillusionment with the promise of high tech wizardry, his article infuriated many in the IT field, including the CEO’s of technology companies such as Microsoft, HP and Intel.   

Carr begins by pointing at both corporate spending patterns and managerial attitudes toward IT, noting that businesses worldwide spend “well over $2 trillion a year” in IT capital investment and that CEO’s “routinely talk about the strategic value of IT.”   Yet, Carr argues that this is a misplaced priority dependent on a mistaken assumption, that IT’s predominance ensures its strategic value.  According to Carr, “What makes a resource truly strategic is not its ubiquity – but its scarcity.”  By taking a broad view of technological development Carr is able to draw parallels between the current massive buildup in IT capacity and earlier transformational technologies, like electrification and rail transport.  While initially the adoption of these technologies offered individual firms a strategic advantage, as they became more widespread and commoditized, they offered less in the way of competitive advantages.  Carr makes a distinction between what he calls proprietary and infrastructural technologies.  Proprietary are those that are owned exclusively by a particular firm, analogous to a firm’s specific business model or patented products.  Counterpoised to this are the infrastructural technologies, like electricity and railroads that offer scalable, networked platforms that attain greater value they more people adopt them.  Carr contends that IT is becoming more like a standardized commodity, that it is in effect an infrastructural technology, not a proprietary one.

To summarize, in Carr’s own words;

"Information technology is best understood as the latest in a series of broadly adopted technologies that have reshaped industry over the past two centuries - from the railroad to the telegraph to the electric generator. For a brief period, as they were being built into the infrastructure of commerce, all these technologies opened opportunities for forward-looking companies to gain real advantages. But as their availability increased and their cost decreased - as they became ubiquitous - they all became commodity inputs. From a strategic standpoint, they became invisible; they no longer mattered. That is exactly what is happening to information technology today, and the implications for corporate IT management are profound."

Writing in the Harvard Business Review, the publication of the flagship management institution, Carr’s audience was unmistakable; he was speaking directly to the CEO’s and managers of Corporate America. Perhaps he forgot that many of America’s largest and most successful companies were, and still are, technology companies; Microsoft, Intel, IBM, Hewlett Packard, Dell, Cisco, Google and Apple.  Still his message was clear.  Corporate America has to manage itself differently, with much less emphasis on expensive IT acquisition and development.  Carr offered some startling “new rules for IT management” which he summarized into three simple bullet points:  Spend less.  Follow, don’t lead.  Focus on vulnerabilities, not opportunities.  These clearly went against the conventional wisdom of the day, and yet Carr argued that they were supported by the historical evidence.

The biggest threat to a firms continuing competitive position was overspending on IT projects that failed to deliver the expected returns or make lasting contributions to a firm’s strategic position.  He pointed to studies which showed that “greater [IT] expenditures rarely translate into superior financial results” and that going forward wasteful spending would be penalized with falling profits.  The added expense would put those firms at a “cost disadvantage.”    He suggested that firms were wasteful in their use of the existing investments, such as storage or processing capacity and that stringently managing resources was better than trying to get the latest, fastest and best hardware and software.   

He supported this assertion by referring to Moore’s Law, (the law proposed by Gordon Moore of Intel, which states that IT capability doubles approximately every 18 months).  This trend has held for approximately 40 years and implies that delaying purchases of new IT will reduce costs and avoid the inevitable obsolescence that accompanies new products.  Lastly, Carr noted that “an IT disruption can paralyze a company’s ability to make products, deliver its services, and connect with its customers” and therefore managers should be much more focused on the vulnerabilities of their IT investments, (“the technical glitches, outages, and security breaches”) than with bold new opportunities.  In short, “IT management should, frankly, become boring.”  

Given the importance of Carr’s analysis and the radical nature of its implications, one has to ask does he make a convincing case or not?  Carly Fiorina, CEO of HP called him “dead wrong.”  Bill Gates of Microsoft assailed him in a speech in Redmond and a Microsoft official was quoted as saying “It's just silly to think that there's no competitive advantage to be made in IT. It's insanity.” Despite a flurry of responses, Carr himself noted that his article “just won’t stay debunked.”  One notable adversary was Don Tapscott, who penned an article called “IT: The Engine That Drives Success” at CIO.com, in which he offered a point by point critique of Carr's article and raised specific objections to his thesis.   Tapscott identifies three factors related to information technology that are critical for a firm’s competitive advantage; superior information, smart hardware and business model transformation. 

The first factor he called "superior information."  In responding to Carr's criticism of information technology, Tapscott takes issue with Carr's definition of IT itself.  While Carr initially includes data and information in his definition, he then extrapolates that data is simply a commodity, "endlessly and perfectly reproducible at virtually no cost."  Tapscott takes issue with this, noting that "nothing in this universe is as diverse as a byte of data, which can carry information ranging from baby pictures to a digitally signed million-dollar bank transfer. It’s like saying that Shakespeare’s works are a commodity because he uses the alphabet just like everybody else."  He differentiates between the medium and the message, from the content and its delivery mechanism.  He points out that not only is data not perfectly commoditized but rather that "nothing is more scarce that the right information at the right time."  Carr suggested that data itself was not a source of competitive advantage, but Tapscott was quick to point out that superior use of data is.  KFC's recipe or Coca-Cola’s secret formula or Google’s PageRank algorithm are examples of a non-commoditized piece of information giving a firm a competitive advantage that is not duplicable through the use of information technology.  Tapscott's assertion about the importance of superior information in driving competitive advantage can be summed up as follows:

"Superior IT enables superior information a resource that rivals superior talent in competitive differentiation. High-performing business models are also based on superior information."

The second factor is what Tapscott calls "smart hardware," or "the growing technology embedded in consumer products."  Tapscott notes that "the physical world is becoming smart and networked" through "ubiquitous broadband and services-based computing."  Some have referred to this trend, which began with the use of RFID chips to manage supply chains, and extends to sensors in everything from "automobiles, [to] doors, clothing and coffee cups" as "the internet of things."  By taking advantage of this "historic opportunity to integrate IT-enabled services into its products," a company can "differentiat[e] otherwise commodity products to lock out competitors."   Carr took technology to be ubiquitous and standardized, but Tapscott pointed at smart hardware as a direct refutation of the generalizations that Carr was making and suggested that our concept of what IT is (ie. hardware) is changing rapidly.

Perhaps the most important determinant of corporate competitive advantage that Tapscott identifies is "the role of IT in the new business designs that enable competitive advantage."  While Carr accepts that "effective business models can be the basis for competitiveness," he rejects "the role IT plays in creating these new models."  Tapscott calls this into question, saying, "IT and business models are not discrete factors in strategy; increasingly, they are inseparable."  This is what Valacich and Schneider refer to as "technology/strategy fit."  Pearlson and Saunders regard it as one leg of the Information Systems Strategy Triangle.  Luftman and Kempaiah call it "business/IT alignment."  This fit or alignment is the principal concern of business process management.  While business strategy should drive IT strategy, increasingly "IT is leading to profound changes in business design not just to new business processes but to the deep structures of the corporation."  This is the essential driver of a company's competitive advantage, "focusing on their core cluster of activities where they have unique capabilities and where they create true barriers to replication."  The companies that do so "tend to have better products, lower cost structures and better profitability than their vertically integrated counterparts."  By using this IT-enabled business process change, a company creates a challenge for its competitors, to duplicate the business model change not just the technology.  Tapscott concludes that "companies that successfully alter their business around IT can achieve a significant window of competitive advantage."  (Luftmann and Kempaiah offer a slight twist on this by saying that "organizations need to recognize that it is not how IT is aligned with the business; it is how IT and business are aligned with each other.")

Carr’s writing has had a profound impact and led to a heated debate that continues to this day.  Carr wrote a follow-up book a year later entitled “Does IT Matter?” Perhaps the change in the title from a definitive statement to a question at least opens the possibility that there is a debate to be had on the subject.  In order to solidify his position, Carr would have to nail down exactly what he means by the “fuzzy term” - information technology and differentiate which parts of it he thinks are infrastructural commodities and which parts are necessary to a firm’s competitive advantage.  In a footnote in the original article, Carr states “Information technology is a fuzzy term.  In this article, it is … denoting the technologies used for processing, storing, and transporting information in digital form.”  It is not possible to characterize IT by this definition alone.   He would also have to address Tapscott’s critiques about the uses of superior information, smart hardware and IT-enabled business process change in order to create a more compelling narrative.

Works Cited

Carr, N. (2003, May 1). “IT Doesn't Matter.” Harvard Business Review. pp. 5-12.

Luftman, J. and Kempaiah, R. (September 2007). An Update on Business-IT Alignment: ‘A Line’ 

Has Been Drawn. MIS Quarterly Executive (6:3).

Pearlson, K., & Saunders, C. (2009). Managing and Using Information Systems: A Strategic 

Approach. Hoboken, NJ: John Wiley & Sons, Inc. 97.

Tapscott, D. (2004, May 1). “IT: The Engine That Drives Success.” CIO Magazine , pp. 1-6.

Valacich, J. & Schneider, C. (2012). Information Systems Today, Managing in the Digital World. Upper Saddle River, New Jersey: Prentice Hall.

Some quotes obtained from Nicholas Carr’s blog, Rough Type at http://www.roughtype.com

According to Tapscott, what in addition to information technology, gives organizations competitive advantage?

In his article "IT: The Engine That Drives Success," Tapscott identifies three factors that make organizations gain competitive advantage; superior information, smart hardware and business model transformation.

The first factor can be called "superior information."  In responding to Carr's criticism of information technology, Tapscott takes issue with Carr's definition of IT itself.  While Carr initially includes data  and information in his definition, he then extrapolates that data is simply a commodity, "endlessly and perfectly reproducible at virtually no cost."  Tapscott correctly takes issue with this, noting that "nothing in this universe is as diverse as a byte of data, which can carry information ranging from baby pictures to a digitally signed million-dollar bank transfer. It’s like saying that Shakespeare’s works are a commodity because he uses the alphabet just like everybody else."  He correctly differentiates btween the medium and the message, from the content and its delivery mechanism.  Tapscott is alluding to the critical role of business intelligence and business anaytics in driving corporate competitiveness under hypercompetition.  He points out that not only is data not perfectly commoditized but rather that "nothing is more scarce that the right information at the right time." Tapscott's assertion about the importance of superior information in driving competitive advantage can be summed up as follows:

"Superior IT enables superior information a resource that rivals superior talent in competitive differentiation. High-performing business models are also based on superior information."

The second factor that drives success in organizations is what Tapscott calls "smart hardware," or "the growing technology embedded in consumer products."  Tapscott notes that "the physical world is becoming smart and networked" through "ubiquitous broadband and services-based computing."  Some have referred to this trend, which began with the use of RFID chips to manage supply chains, and extends to sensors in everything from "automobiles, [to] doors, clothing and coffee cups" as "the internet of things."  By taking advantage of this "historic opportunity to integrate IT-enabled services into its products," a company can "differentiat[e] otherwise commodity products to lock out competitors."

Perhaps the most important determinant of corporate competitive advantage that Tapscott identifies is "the role of IT in the new business designs that enable competitive advantage."  While Carr accepts that "effective business models can be the basis for competitiveness," he rejects "the role IT plays in creating these new models."  Tapscott calls into question this whole line of thought and reconceptualizes it saying, "IT and business models are not discrete factors in strategy; increasingly, they are inseparable."  This is what Valacich and Schneider refer to as "technology/strategy fit."  Luftman and Kempaiah call it "business/IT alignment."  This fit or alignment is the principal concern of business process management.  While business strategy should drive IT strategy, increasingly "IT is leading to profound changes in business design not just to new business processes but to the deep structures of the corporation."  This is the essential driver of a company's competitive advantage, "focusing on their core cluster of activities where they have unique capabilities and where they create true barriers to replication."  The companies that do so "tend to have better products, lower cost structures and better profitability than their vertically integrated counterparts."  By using this IT-enabled business process change, a company creates a challenge for its competitors, to duplicate the business model change not just the technology.  Tapscott concludes that "companies that successfully alter their business around IT can achieve a significant window of competitive advantage."  (Luftmann offers a slight twist on this by saying that "organizations need to recognize that it is not how IT is aligned with the business; it is how IT and business are aligned with each other.")

So how does a company utilize the three drivers that Tapscott identifies; superior information, smart hardware and business model transformation to attain a competitive advantage.  Vestas, a sustainable energy company, is doing just that. 

"Since 1979, this Danish company has been engaged in the development, manufacture, sale and maintenance of wind power systems to generate electricity. The company has installed more than 43,000 land-based and offshore wind turbines in 66 countries on six continents. Today, Vestas
installs an average of one wind turbine every three hours, 24 hours a day, and its turbines generate more than 90 million megawatt-hours of energy per year—enough electricity to supply millions of households."

"For Vestas, the world’s largest wind energy company, gaining new business depends on responding quickly and delivering business value. To succeed, Vestas uses one of the largest supercomputers worldwide along with a new big data modeling solution to slice weeks from data processing times and support 10 times the amount of data for more accurate turbine placement decisions. Improved precision provides Vestas customers with greater business case certainty, quicker results and increased predictability and reliability in wind power generation."

"Working with IBM, Vestas can increase computational power while shrinking its IT footprint and reducing server energy consumption by 40 percent. “The supercomputer provides the foundation for a completely new way of doing business at Vestas and combined with IBM software delivers a smarter approach to computing that optimizes the way we work,” says [Lars Christian Christensen, vice president, Vestas Wind Systems].  Christensen estimates this capability can eliminate a month of development time for a site and enable customers to achieve a return on investment much earlier than anticipated."

Vestas is just one example of a successful company utilizing superior information, smart hardware and business model transformation to gain a competitive advantage.

WORKS CITED

Carr, N. (2003, May 1). IT Doesn't Matter. Harvard Business Review. pp. 5-12.


Luftman, J. and Kempaiah, R. (September 2007). An Update on Business-IT Alignment: ‘A Line’ Has Been Drawn. MIS Quarterly Executive (6:3).

Tapscott, D. (2004, May 1). IT: The Engine That Drives Success. CIO Magazine , pp. 1-6.

Valacich, J. & Schneider, C. (2012). Information Systems Today, Managing in the Digital World. Upper Saddle River, New Jersey: Prentice Hall.

"Vestas: Turning climate into capital with big data."  IBM Big Data Success Story Spotlight.  http://www-01.ibm.com/software/data/bigdata/success-spotlight.html  (Accessed on September 10, 2012).

Can IT be used to drive cost savings?

For many years, business executives have viewed IT as a Black box consuming money, other resources, and time. Most IT investments are funded as an outgrowth of a business user's request. Describe if IT can be used to drive cost savings?

by Matt Murphy

I think that is an interesting distinction between the manufacturing firms like Caterpillar and the more service-oriented firms that deal with insurance, finance, etc.  Certainly IT has a different level of impact for different industries and market segments.  However, I wanted to point out that two of the recent cases studies addressed this issue to some extent.  IBM no doubt saw itself mainly as a hardware producer of mainframe servers.  Yet when Gerstner took over he developed a new strategic direction that emphasized consulting and turned the company into an IT-enabled service firm.  Admittedly his focus wasn't strictly on cost savings, but since the company was in such an earnings spiral initially he was required to make drastic cuts.  One of the ways he did that was through massive layoffs of excess personnel.  But perhaps more telling was the opportunity to reduce costs through IT consolidation and streamlining.  In the case study it mentioned that "the company had 125 separate data centers worldwide and 128 CIOs. There were 3 I private and separate networks and literally hundreds of different configurations of PC installations. Data processing costs were a dramatic three times the industry average."  Gerstner recognized that an area in which IBM should have been an industry leader, it was sorely lacking and therefore presented an IT investment represented an opportunity to dramatically reduce costs immediately.  Over the first two years, "the cost of operating and running IT operations was cut in half, generating over $2 billion in cost savings. Key savings came from reducing the number of data centers from 155 to 3 regional "megacenters" fed by 11 "server farms" and a 60 percent reduction in headcount. IT leadership was centralized; 128 CIOs were reduced to 1. Networks were converted to one common protocol."  This is one way of thinking about the possibilities of cost reduction in the context of IT investment.  Arguably, this was an emergency measure and would not itself resulting in a long term or sustainable competitive advantage, but it clearly set the groundwork for what was to follow, namely "One IBM" and "e-business"  which did provide a long lasting strategic advantage and boosted IBM to industry leadership again.
In the Boeing case, we see an aircraft manufacturer confronting a weakening demand and increased competition from Airbus, at the same time that the product is being undifferentiated. ("In 1999, Airbus outsold Boeing for the first time in history and Standard & Poor's analysts stated that there was no clear differentiation between Airbus and Boeing planes.")  Condit's immediate stretegy of strenthening the core business did involve cost cutting measures designed to improve manufacturing, namely It "adopted simpler procedures for configuring aircraft to customer specifications, scheduling and ordering parts, and managing inventory; it also implemented the 'principles and practices of' lean' manufacturing to eliminate waste and promote greater efficiency.'"  But its competitive advantage came from it's e-enabled advantage" strategy which aligned IT investment with its product development and information services to produce new service offerings. "These businesses focused primarily on airplane maintenance, flight operation solutions, and cabin/passenger services. Most notable of these was MyBoeingFleet.com, which was a Web portal to airplane data and applications hosted on Boeing servers."  In addition, Boeing introduced Connextion by Boeing and Boeing's Air Traffic Management service, taking advantage of the many Boeing capabilities around the e-Enabled environment.  This IT enabled advantage both created increased product differentiation and, by leveraging Boeing's investment in data and networking technology, increased cost savings as well.
In conclusion, I think it is possible for any firm, service or manufacturing oriented, to derive competitive advantage through cost reductions from better IT investment coupled with a long-term strategic vision.

Peter Thiel In 'Zero To One': How To Develop The Developed World

Link

NPR's Wade Goodwyn talks to investor and Paypal cofounder Peter Thiel about his new book, Zero to One: Notes on Startups, or How to Build the Future.

Copyright © 2014 NPR. For personal, noncommercial use only. See Terms of Use. For other uses, prior permission required.

WADE GOODWYN, HOST:
You might remember this scene from the movie "The Social Network."

(SOUNDBITE OF FILM, "THE SOCIAL NETWORK")
WALLACE LANGHAM: (As Peter Thiel) You must be Mark.
JESSE EISENBERG: (As Mark Zuckerberg) Hi.
LANGHAM: (As Peter Thiel) We took a look at everything and congratulations, we're going to start you off with a $500,000 investment. Maurice is going to talk to you about...

GOODWYN: That guy you just heard offering $500,000 to a young Mark Zuckerberg - that's Peter
Thiel. Well, not really. It's an actor playing Peter Thiel. Thiel was Facebook's first outside investor. He also co-founded PayPal and Palantir Technologies. And through his venture capital firm Founders Fund, he's invested in a number of big-tech companies. He's written a book with Blake Masters. It's called "Zero To One: Notes On Startups, Or How To Build The Future." Welcome, Peter.

PETER THIEL: Thanks for having me on the show.

GOODWYN: It's our pleasure. Your first piece of advice seemed to me to be your most important, and that is that Facebook and Microsoft and Google have already been created. So what these guys did in creating those success stories is not your roadmap. Your roadmap will be your roadmap.

THIEL: Yes. I believe that every moment in the history of business only happens once. And so the next Bill Gates will not be building an operating system company. The next Larry Page will not be building a search engine. The next Mark Zuckerberg won't be building a social network. And so if you're trying to copy these guys, in some sense you're not really learning from them. And one of the challenges is teaching entrepreneurship or writing about it is that there's no cookie-cutter formula that you can follow.

GOODWYN: So if you can't really give them a roadmap, and you say to them, you know, in order to be a success, you have to be original. How do you help students or would-be entrepreneurs?

THIEL: There is still a surprising amount one can say. There's sort of an interview question I like to ask people which is tell me something that is true that very few people agree with you on. The business version of this question is what great business is nobody building? And these questions turn out to be quite hard to answer for two somewhat different reasons. One of them is it's always hard to come up with new truths that people have not yet understood. Secondly, it also requires a bit of courage because you often have to go against social convention in pursuing certain lines of business. People discourage you from doing things that are strange and new.

GOODWYN: I think it's a capitalist truism that competition breeds efficiency and innovation. But you believe monopolies are actually better. Talk about that.

THIEL: Well, I think people always say that capitalism and competition are synonyms. But I think they're really antonyms. If we look at the restaurant industry, it's a very competitive industry. But it's very, very hard to make money opening a restaurant because all the profits are competed away, whereas a company like Google has not had any real competition in search since 2002 when it definitively distanced itself from Yahoo and Microsoft, and is therefore a very profitable business. You can debate how much monopoly should be regulated or when is it a good monopoly that's inventing something new and is dynamic? When it is a bad monopoly that becomes more like a rent collector? But I do think the great fortunes are always made in these monopoly-like businesses.

GOODWYN: Your book is entitled "Zero To One." What does that mean?

THIEL: The basic idea is if you sort of think about innovations where there's someone who builds a first airplane or first home computer or first smartphone that works like the Apple iPhone, these are what I call zero to one innovations. And I think technology involves intensive, vertical, zero to one progress. Globalization involves horizontal, copying, one to end progress. And we'll need both of these in the 21st century. China is sort of the epitome of globalization. What China does is copy things that work. And it has a very straightforward 20-year plan which is to make itself look more like the U.S. and Western Europe. For the developed world - Japan, Western Europe, the United States - progress is a much trickier thing in 21st-century because to take our civilization to the next level, we need to actually do new things. And so I think the question of how do we develop the developed world is a question that's not often asked but is worth for us to look about a lot more.

GOODWYN: You've been publicly skeptical of the value of college. What's not happening there you think should be?

THIEL: Well, if I had to do it over again, I probably would still go to college, but I would think a lot harder about why I went. I think we have often let education become a substitute for thinking about the future. And it's become much more problematic for the younger generation which is amassing enormous amount of student debt. I believe that there is no one-size-fits-all trajectory, and that there is something a little bit unhealthy about the sort of society that says you go to Yale or you go to jail. We need to create a much more diverse array of alternatives. I think the sort of narrowly-tracked system we have is working less and less well.

GOODWYN: Are you optimistic or pessimistic about this country's technological future?

THIEL: Well, I've articulated the view that there has been a lot of progress in the world of bits and not so much in the world of atoms. So there's been a lot of progress in computers, not as much in some other areas such as say energy or transportation or even biomedical. And so the hope is that we can re-accelerate progress so that technology's not just synonymous with computers. I never like to frame things, however, in terms of extreme optimism or extreme pessimism because they both end up being reasons not to do anything. If you're extremely optimistic, then the future will take care of itself. If you're extremely pessimistic, then there's nothing they can do. And so they both are mindsets that I think lead to inaction. And so I think the healthier mindset is always somewhere in between - to say that there's some good things and some bad things, and we have to figure out what are the meaningful things we can do in our time.

GOODWYN: Peter Thiel is the author of "Zero To One." Peter, good talking to you.

THIEL: Thanks for having me.

The Pitfalls of Balancing Agility with Control

by Matthew Murphy

According to Applegate, (Applegate, 2008) there are two common mistakes that are often made by executives when attempting to balance agility with control:

(1) failure to redesign or reengineer end-to-end processes; and
(2) failure to maintain alignment between ramped-up operations and the other aspects of the organization such as organizational structure, control, authority systems, incentives, and culture.

We see an example of these mistakes playing out in the Frito-Lay case described in the text. When Frito-Lay tried to accelerate the rate of new product development (in an attempt to increase the firm's agility in the market), suppliers were unable to meet the sudden increased demand, manufacturing defects increased, and inventory piled up (loss of operational control).  This was a result of management not considering the effects of the new agility measures on processes such as supply chain, manufacturing, and order fulfillment.  All of these elements would be required to accomodate to a faster cycled operation and increasing logistical complexity.  Frito-Lay's initial attempts were a failure because they viewed the organization in a hierarchical or siloed way and not as a set of integrated, horizontal operating processes.  They neglected to consider the process as an end-to-end process consisting of many integrated subprocesses; product development, manufactiuuring, supply chain and order fulfilmenmt all working in concert.

When they attempted to correct this mistake, they took the time to integrate their new product development process with their supply chain, manufacturing, and order fulfillment processes. In so doing, they were able to identify and eliminate bottlenecks in production and reduce waste throughout the process in the form of excess time or costs.  However, they failed again by making the second common mistake.  This time they neglected to redesign the organization and management systems needed to control these accelerated processes.  This created a misalignment between the new streamlined and integrated processes and existing structures such as control, authority systems, and incentives. As a result of this oversight, the business intelligence and decision support structures were insufficient for the new operational tempo and created a new set of problems, oversights, and delays.

In this case, we have seen how Frito-Lay executives made both of the common mistakes associated with attempts to balance agility with control.

Computers are making us dumb: Nicholas Carr

Automation makes our lives easier and safer, but it also makes us dumb, according to a new book. Pilots are lulled into complacency as autopilot gets passengers to their location safely; doctors rely on streamlined, computerized processes to diagnose patients, and drivers prefer looking at their GPS instead of street signs.

47% of U.S. employment is at risk of being automated within the next two decades. Automation certainly threatens our jobs, but also threatens the way we interact and function in the world. In his new book, “The Glass Cage,” Nicholas Carr argues that automation erodes our skills, leads to “automation complacency,” and dulls our interest in understanding the world around us.

“The reason we’re so enamored of automation and computers and software that do everything for us,” says Carr, “is because it does relieve us of certain burdens and add convenience to our lives.” But there’s a dark side to that, he warns. Automation makes it easier for us to disengage from difficult tasks. “What that means is you’re not pushed to go to the next level of talent.”

While technologists might argue that automation of difficult tasks would free us to do other, more meaningful things, Carr doesn’t see that happening. “If you look at places where work or activities have been highly automated… what you see is the system start to turn skilled workers into computer operators.”

A major airline pilot, for example, spends most of his or her time manning computer screens and entering data. They only end up flying the plane for a short period of time. “That’s not freeing them to think big thoughts about aviation,” says Carr. “It’s making them more complacent… they begin to tune out, they lose situational awareness and so when something goes wrong, you suddenly see people making mistakes in high-risk situations.”

Carr argues that we also put too much faith into automation, and give “undue weight,” to information provided by computers. Not using human judgment to double check the work of programs and algorithms can lead to major market crashes like the flash crash in 2010.

So will automation render us all unskilled and useless? Not necessarily, says Carr. “The danger is that we see more and more jobs being handed over to computers simply because they’re more efficient,” he says. But warns that while, “you can program a computer to do certain things, they’re never going to do it as well as a person can.”

However, automation breeds automation, according to Carr. We’re stuck in a cycle where “we’re taking the tasks away from people and so people are less able to perform them, so we say ‘well we need to bring in more computers because people can’t do the job.’”

Link