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Don't try to bottle expertise; just be content to find it when you need it. Also: new dot-com IPOs; more telecommuters; ''complexity masters''; and more.
CFO Staff, CFO IT
November 17, 2003
There was a time in the early '90s when "expert systems" were heralded as a breakthrough in knowledge management. The goal was to capture and forever reap the rewards of a company's best and brightest. The systems took various forms, but all in essence sought to extract, through interviews and other means, a talented employee's genius for, say, picking stocks (or, at Campbell's, making a perfect batch of soup), and embed it in software. Software, after all, doesn't call in sick, or sign on with a competitor.
It was an appealing vision, but it remains mostly that. While the larger category of artificial intelligence still garners interest at universities and research firms, it finished dead last in a recent poll of technologies of interest to corporate executives. But there is still plenty of expertise walking the halls at most companies, and few efforts to make the most of it. McKinsey & Co. consultant Michael Idinopulos and principal Lee Kempler offer a new approach: don't try to bottle the expertise, just be content to find it when you need it.
Many companies use databases or document repositories of some sort to track employees' expertise, but that information is often captured in a few high-level bullet points that miss key data. Rolling out a new salty snack in Ohio? You'll find several people who cite "product launches" as competencies, but you probably won't know that one of them went to school in Columbus and worked on a nearly identical launch early in her career; thus, the ideal candidate risks going untapped. Experience is not the same as expertise, of course, but Idinopulos and Kempler say it is a "frequent companion" and should be tracked more closely.
Now, using a combination of search-engine and database-integration techniques, it can be. Companies can buy or build new, more-sophisticated systems that truly capture an employee's relevant experiences, interests, and other data. Software can scan documents, forms, and even E-mail messages to create a rich profile of every worker. Interfaces can be customized so that seekers of expertise can slice and dice competing experts' backgrounds, or select by geography, time zone, or other criteria. Such an effort could take several months and cost as much as $500,000, although the cost could be less if a company already has a data warehouse that can act as a repository for this deeper view of employee experience. Compared with what companies have spent on other forms of expert systems, that's a small price to pay for a legitimate brain gain.
It's been several years since you could find the words Internet, initial public offering, and billions of dollars in the same sentence (barring those written in the past tense, of course). But as Nasdaq has climbed, so too has activity in the high-tech IPO space. For example, RedEnvelope.com raised about $30 million in late September, and days earlier the parent company of proFlowers.com filed for an IPO, seeking funds for new online gift ventures. True, RedEnvelope still operates in the red, but many analysts took the IPO as a sign of life not only for E-tailers but for the dot-com world in general.
That space may get an enormous boost in the next few months if a planned IPO by Google goes ahead. The Internet search-engine firm plans to raise $15 billion to $25 billion. While the firm has been talking to investment banks, there are also reports that it may offer shares via an online auction, in an attempt to give the little guy a chance.
Google is widely believed to be profitable, with annual revenue estimated at nearly $800 million. Co-founder Sergey Brin had said as recently as a few months ago that no IPO was imminent, in part because having to meet quarterly expectations would be a distraction. Many a CFO can relate to that, although Brin may have 25 billion good reasons to cope with such distractions. If so, that may further propel Internet-oriented stocks, which are already up more than 100 percent since hitting their all-time low in October 2002.
That's Why We Use Lots of Acronyms
In case you were wondering, we are still very much in the Information Age. New research conducted by professors at the University of California at Berkeley's School of Information Management and Systems found that the volume of new information stored on paper, film, optical, and magnetic media doubled between 1999 and 2002. Last year alone, enough new information was generated to fill half a million libraries, each the size of the Library of Congress.
Researchers took a broad view of "new information," with phone calls accounting for the single-largest contribution. E-mail placed second, with 31 billion messages sent a year, according to IDC. But hard copy is alive and well, with a typical North American consuming 24 reams of paper a year, much of it now in the form of office documents and (snail) mail versus books, newspapers, and other publications. The volume of information stored on paper grew 36 percent between 1999 and 2002, with almost all of the increase stemming from documents produced by computer printers.
If you were to give up completely on your reading list and opt only for visual information, you'd need 2,108 years to watch every film and video title ever produced. Maybe just the radio? Last year, radio stations around the world produced 70 million hours of original programming. You could forgo consumption of any information whatsoever and commiserate via telephone with a similarly overwhelmed colleague, but your call would then contribute to the 3,785 billion minutes of phone conversation estimated to have occurred in 2002. And that's just via land lines: cell calls accounted for another 600 billion minutes.
The survey itself contributed a fair amount to information overload, running about 100 pages. It was sponsored by Microsoft, Intel, EMC, and Hewlett-Packard, all of which agree that information storage and retrieval loom as major challenges. And opportunities.
Take a Number
With less than two weeks to go until Wireless Local Number Portability (WLNP) becomes a reality (carriers in the 100 largest metro areas must begin to offer it on November 24, while others have until next May), businesses may find themselves able to negotiate better deals on cellular service—and avoid having to reprint business cards. WLNP allows a cellular customer to keep the same phone number when switching carriers, which makes it particularly appealing to business users who live and earn by the cell phone.
Carriers are already scrambling to keep customers happy (Cingular Wireless, for example, says operating expenses were up almost 10 percent in its most recent quarter, in part to finance customer-service programs in anticipation of WLNP), and the legion of telecom advisory firms are leveraging the advent of WLNP to sell their services. Traq-wireless, for one, now offers an "alternative carrier analysis" for companies that want to keep their numbers but find better deals. Traq says pilot analyses have found potential savings of 30 to 48 percent on a cost-per-minute basis. Such analyses can arm customers in their negotiations with carriers, the company says, to win not only better rates but also better overall service.
A list of all the firms that offer telecom audit services and/or software would make for a hefty phone book, but many are finding a ready audience in Corporate America as the aggregate bill for wireless and network services continues to climb. WLNP gives customers more leverage, and perhaps more incentive to crunch through all the data needed to assess competing offers.
If the company parking lot is a little less crowded these days, don't blame flu season. Telecommuting is on the rise, as is the need to equip teleworkers adequately. According to The Dieringer Research Group, 23.5 million employees now work from home at least one day a week. Add to that figure employees who work on the road, in satellite offices, from client sites, and elsewhere, and the total universe of telecommuters becomes both enormous and fast-growing.
As that population increases, technology-consulting firms say, companies will have to take the issue of access to corporate computer systems and other forms of provisioning more seriously. Today, almost 90 percent of employed people who regularly work from home tap into corporate computer systems via a dial-up phone line. But by next year, 40 percent of large companies will provide an "always-on" broadband connection to telecommuters; by 2006, 60 percent of large companies will do so. And that, says Meta Group analyst Elizabeth Ussher, is but one step of many that companies will need to take to recraft IT strategies around an inescapable fact: the lights may be out in the office next to yours, but someone is home.
As a superhero moniker it leaves something to be desired, but as a badge of honor for those involved with supply chains, "complexity master" may be a worthy tag. So says Deloitte, which studied almost 600 companies in 22 countries in an effort to understand what makes for a truly superior global manufacturing operation. It found that the best of the best, the complexity masters, had three factors in common: they collaborate not only with suppliers but also customers; they manage existing and new products well, with faster cycle times, better speed to market, and well-managed parts customization; and they embrace technology both for long-term forecasting and planning and for more-tactical areas such as warehousing and transportation.
But the study turned up more than the key attributes of best practices. It also found that between 35 and 40 percent have margins of less than 5 percent or are losing money; missed their goals for return to shareholders; and missed profitability and/or revenue targets. The connection, Deloitte says, is that companies that take an end-to-end view of their supply chains versus a narrower functional view are rewarded for their efforts.
Becoming a complexity master isn't easy: only 7 percent of the companies Deloitte looked at earned that title. But they are 73 percent more profitable than their peers.
According to research firm IDC, worldwide spending on supply-chain management systems tops $19 billion, but corporate interest in large-scale SCM projects is at an all-time low; outsourcing services, IDC says, may win favor. Indeed, a survey conducted by Booz Allen Hamilton last year found that 45 percent of respondents thought SCM investments had not paid off. According to Booz Allen, success depends in part on making SCM a senior-level issue, along with a willingness to completely retool supply chains versus merely adjusting them.
Urgent Assistance Needed
Almost as vexing as spam itself have been the efforts to quantify its costs. Early this year, Ferris Research said spam would cost companies an astounding $10 billion in lost productivity, help-desk support, and drain on IT resources. That figure includes both hard and soft (lost productivity) costs, but even taking a more limited approach—calculating the IT costs of server space choked by spam, for example—the figure is still $500 million a year, according to The Radicati Group, and will increase fivefold (to $257 per employee mailbox per year) by 2007.
However you slice it, spam is a problem that to date has resisted political and technological solutions. True, spam filters can greatly reduce the number of junk E-mails reaching employees' desks each day. And with spam predicted to account for 70 percent of all E-mail messages by 2007 (up from 45 percent today), that's a good thing. But Radicati warns that too often such products deliver false positives, labeling legitimate business E-mails as spam.
Fear of false positives is the leading reason many firms forgo spam filters. Some of the many vendors in this space are working on technologies that will go beyond keyword analysis to understand the full context in which words are used, vaccinate or disguise addresses so they can't be harvested by "spambots," and otherwise bring more intelligence to bear. Worldwide, companies spent more than $600 million on anti-spam products this year, a figure that is expected to reach $2.4 billion by 2007. But it could be several times larger if new products are deemed truly effective.
Meanwhile, a Website facilitating an anti-spam discussion warned participants that their E-mail addresses might be harvested by spammers.