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  1. 1. file:///C|/Documents%20and%20Settings/Administrator/Deskto...0BILL%20-%20BUSINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXTBUSINESS AT THE SPEED OF THOUGHTbybill GatesALSO By BILL GATESThe Road AheadBUSINESS AT THE SPEED OF THOUGHT:USING A DIGITAL NERVOUS SYSTEMBILL GATESWITH COLLINs HEMINGWAY 0VMNER BOOKSA Time Warner Company To my wife, Melinda, and my daughter, JenniferMany of the product names referred to herein are trademarks orregistered trademarks of their respective owners.Copyright (D 1999 by William H. Gates, III All rights reserved.Warner Books, Inc, 1271 Avenue of the Americas, New York, NY 10020Visit our Web site at www.warnerbooks.com0 A Time Warner CompanyPrinted in the United States of AmericaFirst Printing: March 199910 9 8 7 6 5 4 3 2 1ISBN: 0-446-52568-5LC: 99-60040Text design by Stanley S. Drate lFolio Graphics Co Inc Except as file:///C|/Documents%20and%20Settings/Admini...SINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXT (1 of 392)12/28/2005 5:28:51 PM
  2. 2. file:///C|/Documents%20and%20Settings/Administrator/Deskto...0BILL%20-%20BUSINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXTindicated, artwork is by Gary Carter, Mary Feil-jacobs, KevinFeldhausen, Michael Moore, and Steve Winard.ACKNOWLEDGMENTSI first want to thank my collaborator, Collins Hemingway, for his helpin synthesizing and developing the material in this book and for hisoverall management of this project.I want to thank four CEOs who read a late draft of the manuscript andoffered valuable thoughts on how to make it more meaningful forbusiness leaders: Paul ONeill, Alcoa; Ivan Seidenberg, Bell Atlantic;Tony Nicely, GEICO Insurance; and Ralph Larsen, Johnson & Johnson.Details on the use of technology by business and public agencies camefrom worldwide travel and research by Collins and by Jane Glasser.Barbara Leavitt, Evelyn Vasen,and Ken Linarelli researched one or morechapters. The book gained from the careful editing of Erin OConnorduring manuscript development. Anne Schott served as combinationresearch assistant and project coordinator.I want to thank Bob Kruger and Tren Griffin who offered thoughtfulcomments on many chapters as the book progressed. And Steve Ballmer,Bob Herbold, and Jeff Raikes for their thoughts about the booksorganization and focus. David Vaskevitch, Rich Tong, Gary Voth, andMike Murray helped shape important ideas. For their review commentsthanks to Mich Mathews and John Pinette.Thanks also to Larry Kirshbaum, chairman and CEO of Time Warner TradePublishing, and Rick Horgan, VP and executive editor of Warner Books,for their incisive feedback. Thanks to Kelli Jerome, who has nowmanaged the worldwide marketing of both of my books in a smooth andprofessional manner, and to Lee Anne Staller for her help in sales.At Warner, thanks also to Harvey-Jane Kowal, VP and executive managingeditor, and Bob Castillo, senior pro duction editor, aswell as SonaVogel, copy editor, for their editorial assistance.With all the search capabilities provided by technology, theresearchers at the Microsoft Library remained an in valuable resource:Laura Bain, Kathy Brost, Jill Burger, Lynne Busby, Peggy Crowley, ErinFields, April Hill, Susan Hoxie, Jock McDonald, Tammy Pearson, K.C. file:///C|/Documents%20and%20Settings/Admini...SINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXT (2 of 392)12/28/2005 5:28:51 PM
  3. 3. file:///C|/Documents%20and%20Settings/Administrator/Deskto...0BILL%20-%20BUSINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXTRich, Deborah Robinson, Christine Shannon, Mary Taylor, Dawn Zeh, andBrenda Zurbi. For their general assistance, thanks to Christine Turnerand Gordon Lingley This work gained enormously from the assistance ofmany people at Microsoft and others closely associated AMA with ourcompany. There are far too many people to mention here. I appreciateyour help and support.Finally, Business @ the Speed of Thought was possible only because ofthe commitment in time and energy of ,many of Microsofts customers andpartners. We were all amazed and encouraged by the willingness ofcustomers to talk frankly about their successes and challenges, abouttheir business and technical issues. These customers are listed in aspecial section at the end of the book.CONTENTSINTRODUCTION Xiii INFOPLMATION FLOW IS YOUR, LIFEBLOOD2 CAN YOUR DIGITAL NERVOUS SYSTEM Do THIS? 223 CREATE A PAPERLESS OFFICE 39COMMERCE: THEINTEKNET CHANGES EVERYTHING4 RIDE THE INFLECTION RoCKET 635 THE MIDDLEMAN MUSTADD VALUE 726 TOUCH YOUR CUSTOMERS 917 ADOPT THE WEB LIFESTYLE x CONTENTS CONTENTS ri 8 CHANGE THEBOUNDARIES OF BUSINESS 133V 9 GET TO MARKET FIRST 141SPECIAL ENTERPRISES19 No HEALTH CARE SYSTEM IS AN ISLAND 33320 TAKE GOVERNMENT TO THE PEOPLE 357MANAGE KNOWLEDGE TO file:///C|/Documents%20and%20Settings/Admini...SINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXT (3 of 392)12/28/2005 5:28:51 PM
  5. 5. file:///C|/Documents%20and%20Settings/Administrator/Deskto...0BILL%20-%20BUSINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXTINTRODUCTIONBusiness is going to change more in the next ten years than it has inthe last fifty.As I was preparing my speech for our first CEO sum mit in the spring of1997, I was pondering how the digital age will fundamentally alterbusiness. I wanted to go be yond a speech on dazzling technologyadvances and ad dress questions that business leaders wrest le with allthe time. How can technology help you run your business bet terR Howwill technology transform business@ How can technology help make you awinner five or ten years from nowP If the 1980s were about quality andthe 1990s were about reengineering, then the 2000s will be aboutvelocity.About how quickly the nature of business will change.About how quickly business itself will be transacted. About howinformation access will alter the lifestyle of consumers 410 and theirexpectations of business. Quality improvements ,ABC and businessprocess improvements will occur far faster.When the increase in velocity of business is great enough, the verynature of business changes. A manufacturer or retailer that respondsto changes in sales in hours instead of weeks is no longer at heart aproduct company, but a service company that has a product offering.These changes will occur because of a disarmingly sim Ple idea: theflow of digital information. Weve been in the Information Age forabout thirty years, but because most of the information moving amongbusinesses has remained in paper form, the process of buyers findingsellers remains unchanged. Most companies are using digital tools tomonitor their basic operations: to run their production systems;invoices; to handle their accounting; to generate customer to do theirtax work. But these uses just automate old processes.Very few companies are using digital technology for new processes thatradically improve how they function, that give them the full benefit ofall their employees capabilities and that give them the speed ofresponse they will need to compete in the emerging high-speed businessworld. Most companies dont realize that the tools to accomplish thesechanges are now available to everyone. file:///C|/Documents%20and%20Settings/Admini...SINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXT (5 of 392)12/28/2005 5:28:51 PM
  6. 6. file:///C|/Documents%20and%20Settings/Administrator/Deskto...0BILL%20-%20BUSINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXTThough at heart most business problems are information problems, almostno one is using information well.Too many senior managers seem to take the absence of timely informationas a given. People have lived for so long without information at theirfingertips that they dont realize what theyre missing. One of thegoals in my speech to the CEOs was to raise their expectations. Iwanted them to be appalled by how little they got in the way ofactionable information from their current IT investments. I wantedCEOs to demand a flow of information that would give them quick,tangible knowledge about what was really happening with theircustomers.Even companies that have made significant investments in informationtechnology are not getting the results they could be. Wha tsinteresting is that the gap is not the result of a lack of technologyspending. In fact, most companies have invested in the basic buildingblocks: PCs for productivity applications; networks and electronic mail(e-mail) for communications; basic business applications. The typi IrINTRODUCTION XVcal company has made 80 percent of the investment in the technologythat can give it a healthy flow of information yet is typically gettingonly 20 percent of the benefits that are now possible. The gap betweenwhat companies are spending and what theyre getting ste ms from thecombination of not understanding what is possible and not seeing thepotential when you use technology to move the right information quicklyto everyone in the company.CHANGING TECHNOLOGY AND EXPECTATIONSThe job that most companies are doing with information today would havebeen fine several years ago. Getting rich information wasprohibitively expensive, and the tools for analyzing and disseminatingit werent available in the 1980s and even the early 1990s. But hereon the edge of the twenty-first century, the tools and connectivity ofthe digital age now give us a way to easily obtain, share, and act oninformation in new and remarkable ways.For the first time, all kinds of infbrmation-numbers@ text, sound,video-can be put into a digital form that any computer c n store, file:///C|/Documents%20and%20Settings/Admini...SINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXT (6 of 392)12/28/2005 5:28:51 PM
  7. 7. file:///C|/Documents%20and%20Settings/Administrator/Deskto...0BILL%20-%20BUSINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXTprocess, and forward. For the first time standard hardware combinedwith a standard software platform has created economies of scale thatmake powerful computing solutions available inexpensively to co mpaniesof all sizes. And the "personal" in personal computer means thatindividual knowledge workers have a powerful tool for analyzing andusing the information delivered by these solutions. The microprocessorrevolution not only is giving PCs an exponential rise in power, but ison the verge of creating a whole new generation of Personal digitalcompanions-handhelds, Auto PCs, smart cards, and others on the way-thatwill make the use of digital information pervasive. A key to thispervasiveness is the improvement in Internet technologies that aregiving us worldwide connectivity.In the digital age, "connectivity" takes on a broader meaning thansimply putting two or more people in touch.The Internet creates a new universal space for information sharing,collaboration, and commerce. It provides a new medium that takes theimmediacy and spontaneity of technologies such as the TV and the phoneand combines them with the depth and breadth inherent in papercommunications. In addition, the ability to find information and matchpeople with common interests is completely new.These emerging hardware, software, and communications standards willreshape business and consumer behavior. Within a decade most peoplewill regularly use PCs at work and at home, theyll use e-mailroutinely, theyll be connected to the Internet, theyll carry digitaldevices containing their personal and business information. Newconsumer devices will emerge that handle almost every kind of data-textnumbers voice, photos, videos-in digital 7 form. I use the phrases"Web workstyle" and "Web lifestyle" to emphasize the impact ofemployees and consumers taking advantage of these digitalconnections.Today, were usually linked to information only when we are a t ourdesks@ connected to the Internet by a physical wire. In the future,portable digital devices will keep us constantly in . touch with othersystems and other people. And everyday devices such as water andelectrical meters, security systems, and automobiles will be connectedas well, reporting on their usage and status. Each of theseapplications of digital information is approaching an inflectionpoint-the moment at which change in consumer use becomes sudden andmassive. Together they will radically transform our lifestyles and the file:///C|/Documents%20and%20Settings/Admini...SINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXT (7 of 392)12/28/2005 5:28:51 PM
  8. 8. file:///C|/Documents%20and%20Settings/Administrator/Deskto...0BILL%20-%20BUSINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXTworld of business.Already, the Web workstyle is changing business processes at Microsoftand other companies. Replacing paper processes with collaborativedigital processes has cut weeks out of our budgeting and otheroperational processes.Groups of people are using electronic tools to act together almost asfast as a single person could act, but with the insights of the entireteam. Highly motivated teams are getting the benefit of everyonesthinking. With faster access to information about our sales, ourpartner activities, and, most important, our customers, we are able toreact faster to problems and opportunities. Other pioneering companiesgoing digital are achieving similar breakthroughs.We have infused our organization with a new level of electronic-basedintelligence. Im not talking about anything metaphysical or aboutsome weird cyborg episode out of Star Trek. But it is something newand important.To function in the digital age, we have developed a new digitalinfrastructure. Its like the human nervous system.The b iological nervous system triggers your reflexes so that you canreact quickly to danger or need. It gives you the information you needas you ponder issues and make choices. Youre alert to the mostimportant things, and your nervo us system blocks out the informationthat isnt important to you. Companies need to have that same kind ofnervous system-the ability to run smoothly and efficiently, to respondquickly to emergencies and opportunities5to quickly get valuableinformation to the peoplein the company who need it 7 the ability toquickly make decisions and interact with customers.As I was considering these issues and putting the final touches on myspeech for the CEO summit, a new concept popped into my head: "thedigital nervous system." A digital nervous system is the corporate,digital equivalent of the ted flow of human nervous system, providing awell-integra information to the right part of the organization at theright time. A digital nervous system consists of the digital processesthat enable a company to perceive and react to its environment to sensecompetitor challenges and customer needs and to or I anize timelyresponses. A digital nervous 5 9 system requiress combination ofhardware and software;. file:///C|/Documents%20and%20Settings/Admini...SINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXT (8 of 392)12/28/2005 5:28:51 PM
  9. 9. file:///C|/Documents%20and%20Settings/Administrator/Deskto...0BILL%20-%20BUSINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXTits distinguished from a mere network of computers by the accuracy,immediacy, and richness of the information it brings to knowledgeworkers and the insight and collaburation made possible by theinformation.I made the digital nervous system the theme of my talk.My goal was to excite the CEOs about the potential of technology todrive the flow of information and help them run their businessesbetter. To let them see that if they did a good job on informationflow, individual business solutions would come more easily. Andbecause a digital nervous system benefits every department andindividual in the company, I wanted to make them see that only they,the CEOs could step up to the change in mindset and culture necessaryto reorient a company s behavior around digital information flow andthe Web workstyle. Stepping up to such a decision meant that they hadto become comfortable enough with digital technology to understand howit could fundamentally change their business processes.Afterward a lot of the CEOs asked me for more infored to mation on thedigital nervous system. As Ive continu flesh out my ideas and tospeak on the topic, many other CEOs, business managers, and informationtechnology professionals have approached me for details. Thousands ofcustomers come to our campus every year to see our internal businesssolutions, and theyve asked for more in formation about why and howweve built our digital nervous system and about how they could do thesame. This book is my response to those requests.INTRODUCTION XiXIve written this book for CEOs, other organizational leaders andmanagers at all levels. I describe ho w a digital nervous system cantransform businesses and make public entities more responsive byenergizing the three major elements of any business: customer/partnerrelationships, employees, and process. Ive organized the book aroundthe three corporate functions that embody these three elements:commerce, knowledge management, and business operations. I begin withcommerce because the Web lifestyle is changing everything aboutcommerce, and these changes will drive companies to restructure theirknowledge management and business operations in order to keep up.Other sections cover the importance of information flow and special file:///C|/Documents%20and%20Settings/Admini...SINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXT (9 of 392)12/28/2005 5:28:51 PM
  10. 10. file:///C|/Documents%20and%20Settings/Administrator/Deskto...0BILL%20-%20BUSINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXTenterprises that offer general lessons to other organizations. Sincethe goal of a digital nervous system is to stimulate a concertedresponse by employees to develop and implement a business strategy, youwill see repeatedly that a tight digital feedback loop enables acompany to adapt quickly and constantly to change. This is afundamental benefit to a company embracing the Web w9rkstyle.Business @ the Speed of Thought is not a technical book. It explainsthe business reasons for and practical uses of digital processes thatsolve real business problems. One CEO whoread a late draft of themanuscript said the examples served as a template for helping himunderstand how to use a digital nervous system at his company. He waskind enough to say, "I was making one list of comments to give to you,and another list of things to take back to implement in my company." Ihope other business readers discover the same "how to" value. For themore technically inclined, a companion Web site provides more background information on some ofthe examples, techniques for evaluating the capabilities of existinginformation systems, and an architectural approach and developmentmethodologies for building a digital nervous system. The book sitealso has links to other Web sites I reference along the way.To make digital information flow an intrinsic part of ny, here aretwelve key steps: your compaFor knowledge work:1. Insist that communication flow through the organi all so that youcan act on news with ration over em reflexlike speed.2. Study sales data online to find patterns and share insightseasily.Understand overall trends and per sonalize service for individualcustomers.3. Use PCs for business analysis, and shift knowledge workers intohigh-level thinking work about prod ucts, services, andprofitability.4. Use digital tools to create cross-departmental vir tual teams thatcan share knowledge and build on each others ideas in real time,worldwide. Use dig ital systems to capture corporate history for use file:///C|/Documents%20and%20Settings/Admini...SINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXT (10 of 392)12/28/2005 5:28:51 PM
  11. 11. file:///C|/Documents%20and%20Settings/Administrator/Deskto...0BILL%20-%20BUSINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXTby anyone.ess to a th tal Drocess 5. Convert every paper proc 91 eliminatingadministrative bottlenecks and freeing knowledge workers for moreimportant tasks.F . or business operations:6. Use digital tools to eliminate single-task jobs or change them intovalue-added jobs that use the skills of a knowledge worker.7. Create a digital feedback loop to improve the effi ciency ofphysical processes and improve the qual ity of the products andservices created. Every rINTRODUCTION Xxiemployee should be able to easily track all the key metrics.8. Use digital systems to route customer complaints immediately to thepeople who can improve a product or service.9. Use digital communications to redefine the nature of your businessand the boundaries aroun( your business. Become larger and moresubstantial or smaller and more intimate as the customer situationwarrants.For commerce:10. Trade information for time. Decrease cycle time by using digitaltransactions with all suppliers andpartners, and transform every business process intojustin-time delivery.11. Use digital delivery of sales and service to elimi nate themiddleman from customer transactions. If youre a middleman, usedigital tools to add value to transactions.12. Use digital tools to help customers solve problems for themselvesand reserve personal contact to re spond to complex, high-valuecustomer needs. file:///C|/Documents%20and%20Settings/Admini...SINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXT (11 of 392)12/28/2005 5:28:51 PM
  12. 12. file:///C|/Documents%20and%20Settings/Administrator/Deskto...0BILL%20-%20BUSINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXTEach chapter will cover one or more points-good information flowenables you to do several of these things at once. A key element of adigital nervous system, in fact,is linking these differentsystems-knowledge management, business operations, andcommerce-together.Several examples, particularly in the area of business operations,focus on Microsoft. There are two reasons.First customers want to know how Microsoft a proponent of informationtechnology, is using technology to run our business. Do we practicewhat we preach? Second, I can talk in depth about the rationale forapplying digital systems to operational problems that my companyactually faces. At the same time, Ive gone to dozens of pioneeringcompanies to find the best practices across all industries. I want toshow the broad applicability of a digital nervous system. And, insome areas, other companies have gone.beyond us in digital collaboration.The successful companies of the next decade will be the ones that usedigital tools to reinvent the way they work. These companies will makedecisions quickly, act efficiently, and directly touch their customersin positive ways. I hope youll come away excited by the possibilitiesof positive change in the next ten years. Going digital will put youon the leading edge of a shock wave of change that will shatter the oldway of doing business. A digital nervous system will let you dobusiness at the speed of thought-the key to success in the twenty-firstcentury.INFORMATION FLOW IS YOUR LIFEBLOODMANAGE WITH THE FORCE OF FACTSThe big work behind business judgment is in finding and ac knowledgingthe facts and circumstances concerning technol ogy, the market, and thelike in their continuously changing forms. The rapidity of modemtechnological change makes the search for facts a permanently necessaryfeature.Alfred P. Sloan Jr My Years with General Motors file:///C|/Documents%20and%20Settings/Admini...SINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXT (12 of 392)12/28/2005 5:28:51 PM
  13. 13. file:///C|/Documents%20and%20Settings/Administrator/Deskto...0BILL%20-%20BUSINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXTAUMM@l MOM, have a simple but strong belief The most meaningful way todifferentiate your company from your competition, the best way to putdistance between you and the crowd is to do an outstanding job withinformation. How you gather, manage, and use information willdetermine whetheryou win or lose. There are more competitors. Thereis more information available about them and about the market, which isnow global. The winners will be the ones who develop a world-classdigital nervous system so that information can easily flow throughtheir companies for maximum and constant learning.I can anticipate your reaction. No, its efficient processes! Itsquality! Its creating brand recognition and going after marketshare!Its getting close to customers!Success, of coursel depends on all of these things. Nobody can helpyou if your processes limp along, if you arent vigilant about quality,if you dont work hard to establish tyour brand, if your customerservice is poor. A bad stra egy will fail no matter how good yourinformati I on is. And lame execution will stymie a good strategy. Ifyou do enough things poorly, youll go out of business.But no matter whatever else you have going for you today-smartemployees, excellent products, customer goodwill, cash in the bank-youneed a fast flow of good information to streamline processes, raisequality, and improve business execution. Most companies have goodpeople working for them. Most companies want to do right by theircustomers. Good, actionable data exists somewhere within mostorganizations. Information flow is the lifeblood of your companybecause it enables you to get the most out of your people and learnfrom your customers. See if you have the information to answer thesequestions:What do customers think about your products?What problems do they want you to fix? What new features do they wantyou to add?What problems are your distributors and resellers running into as theysell your products or work with you?Where are your competitors winning business away from you, and why? • file:///C|/Documents%20and%20Settings/Admini...SINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXT (13 of 392)12/28/2005 5:28:51 PM
  14. 14. file:///C|/Documents%20and%20Settings/Administrator/Deskto...0BILL%20-%20BUSINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXTWill changing customer demands force you to develop new capabilities?• What new markets are emerging that you should enter?A digital nervous system wont guarantee you the right answers to thesequestions. It will free you from tons of old paper processes so thatyoull have the time to think about the questions. It will give youdata to jump-start your thinking about them, putting the informationout t here so that you can see the trends coming at you.And a digital nervous system will make it possible for facts and ideasto quickly surface from down in your organization, from the people whohave information about these questions-and, likely, many of theanswers. Most important it will allow you to do all these thin sfast.9ANSWERING THE HAkD QUESTIONSAn old business joke says that if the railroads had understood theywere in the transportation business instead of the steel-rail business,wed all be flying on Union Pacific Airlines. Many businesses havebroadened or altered their missions in even more fundamental ways. Anunsuccessful maker of Japans first electric rice cooker became SonyCorporation, a world leader in consumer and business electronics and inthe music and movie industries. A company that began byopportunistically making welding machines, bowling alley sensors, andweight-reduction machines moved on to oscilloscopes and computers,becoming the Hewlett Packard we know today. These companies followedthe market to phenomenal success, but most companies are not able to dothis.Even when you look at your existing business, its not always clearwhere the next growth opportunity is. In the frenetic world of fastfoods, McDonalds has the strongest brand name and market share and agood reputation for quality But a market analyst recently suggestedthat McDonalds flip its business model. Referring to the companysoccasional promotion of movie-inspired toys, the@Aanalyst said that McDonalds should use its low-margin burgers to sell file:///C|/Documents%20and%20Settings/Admini...SINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXT (14 of 392)12/28/2005 5:28:51 PM
  15. 15. file:///C|/Documents%20and%20Settings/Administrator/Deskto...0BILL%20-%20BUSINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXTa line of high-margin toys instead of the other way around. Such achange is unlikely but not unthinkable in todays fast-changingbusiness world.The important idea here is that a company not take its position in themarket for granted. A company should in constantly reevaluate. Onecompany might make a great ther business. Another company breakthroughinto ano y might find that it should stick to what it knows and doesbest. The critical thing is that a companys managers have theinformation to understand their competitive edge and what their nextgreat market could be.This book will help you use information technology to both ask andanswer the hard questions about what your business should be and whereit should go. Information technology gives you access to the data thatleads to insights into your business. Information technology en ablesyou to act quickly. It provides solutions to business problems thatsimply werent available before. Information technology and businessare becoming inextricably interwoven. I dont think any@ody can talkmeaningfully about one without talking about the other.TAKING AN OBJECTIVE, FACTS-BASED APPROACHThe first step in answering any hard business question is to oach.This principle, eastake an objective, facts-based appr ier said thanacted on is illustrated in my favorite business book, My Years withGeneral Motors, by Alfred P. Sloan u read only one book on business,read Sloans Jr If yo 1. Sloans bookfirst came out in 1941. Thecurrent edition features an introduction by Peter F. Drucker (New York:Viking, 1991).(but . dont put this one down to do it). Its inspiring to see inSloans account of his career how positive, rational,information-focused leadership can lead to extraordinary success.During Sloans tenure from 1923 to 1956, General Motors became one ofthe first really complex business organizations in the United States.Sloan understood that a compa ny could not develop a sweeping strategyor undertake the right ventures without buildi g on facts and innsights from the people in the organization. He developed his ownunderstanding of the business from close personal collaboration with file:///C|/Documents%20and%20Settings/Admini...SINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXT (15 of 392)12/28/2005 5:28:51 PM
  16. 16. file:///C|/Documents%20and%20Settings/Administrator/Deskto...0BILL%20-%20BUSINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXThis technical and business staffs and by regular personal visits to thecompanys technical facilities.His greatest impact as a manager, however, came from the way he createdworking relationships with GM dealers across the country. Heconstantly gathered information from GMs dealers, and he cultivatedclose, productive relationships with them.Sloan made a big deal out of fact-finding trips. He outfitted aprivate railroad car as an office and traveled alLover the country,visiting dealers. He often saw between five and ten dealers a day. Hewanted to know not just what GM was selling to dealers, but what wasselling off the dealers lots. These visits helped Sloan realize inthe late 1920s that the car business was changing. Used cars would nowprovide basic transportation. Middle-income buyers, assisted bytrade-ins and installment plans, would buy upscale new cars. Sloanrecognized that this change meant that GMs fundamental relationshipwith dealers had to change, too, as the automobile business moved froma selling to a trading proposition. The manufacturer and the dealerhad to develop more of a partnership. Sloan created a dealer councilto meet regularly with GMs senior executives at corporate headquartersand a dealer relations board to handle dealer complaints, did economicstudies to determine the best locations for new dealerships, and wentso far as to institute a policy of "grubstaking capable men" who didnot have ready capital to form dealerships."Accurate sales information continued to be hard to come by, thou gli.GMs sales figures were inconsistent, out of-date, and incomplete:"When a dealers profit position was failing, we had no way of knowingwhether this was due to a new car problem, a used-car problem, aservice problem, a parts problem, or some other problem. Without suchfacts it was impossible to put any sound distribution policy intoeffect," Sloan wrote. He said he would be willing to pay "an enormoussum and feel "fully justified in doing so" if every dealer "could knowthe facts about his business and could intelligently deal with the manydetails in an intelligent manner." Sloan thought that helping dealerswith these information issues "would be the best113investment General Motors ever made. file:///C|/Documents%20and%20Settings/Admini...SINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXT (16 of 392)12/28/2005 5:28:51 PM
  17. 17. file:///C|/Documents%20and%20Settings/Administrator/Deskto...0BILL%20-%20BUSINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXTTo address these needs, Sloan set up a standardized accounting systemacross the GM organization and all dealerships. The important word isstandardiTed. Every dealer and every employee at every level in thecompany categorized numbers in precisely the same way. By the mid-1930sGM.dealers, the auto divisions, and corporate headquarters could all dodetailed financial analysis using the same numbers. A dealership, forinstance, could gauge not only its own performance, but also itsperformance against group averages.An infrastructure that provided accurate information led to aresponsive organization that other carmakers didnt come close tomatching for decades. This infrastructure,2. Sloan, 288.3. Sloan, 286-87.Standardizing Worldwide Is Hard in Any Eraicrosofts international business grew really fast once we got rollingM overseas. We made a point of moving into international markets asearly as possible, and our subsidiaries had a lot of entrepreneurialenergy. Giving them the freedom to conduct their businesses accordingto what made sense in each country was good for customers andprofitable for us. Our international business shot up from 41 percentof revenues in 1986 to 55 percent in 1989.The independence of our subsidiaries extended to their financialreporting, which came to us in a number of different formats driven bya number of different business arrangements and taxation rules. Somesubsidiaries accounted for products from our manufacturing corporationin Ireland based on their cost; others used a percentage of customerprice as the cost. Theyd reconcile the actual sales and profits indifferent ways. Some of our subsidiaries got a commission on directsales to customers such as computer manufacturers selling PCs in theircountries. Other subs facilitated direct sales from the parentcompany, and we reimbursed them on a cost-plus basis. The half a dozendifferent financial models gave us a lot of headaches.Steve Ballmer, then executive vice president of sales and support, andI had to be pretty agile as we looked at the numbers. Wed be lookingat a financial statement, and Mike Brown, then our chief financialofficer, would say, "This is a Style 6 subsidiary, with cost-plus on file:///C|/Documents%20and%20Settings/Admini...SINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXT (17 of 392)12/28/2005 5:28:51 PM
  18. 18. file:///C|/Documents%20and%20Settings/Administrator/Deskto...0BILL%20-%20BUSINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXTthis or that," meaning the financials were different from the otherfive models. Wed have to recompute the numbers for that sub in ourheads as fast as we could so that @ve could compare them with othernumbers."Not knowing any better," as Mike likes to say, he and our controller,Jon Anderson, decided to take advantage of the fact that everyonealready used PC spreadsheets for other kinds of analysis. Theydesigned a cost-basis profit and loss financial that didnt show any ofthe intercompany markups or cornmissions. Mike and Jon showed the newP&L around via e-mail and got quick buy-off on it. When we looked atour subsidiary financials after that, we had a much easier time seeinghow we were actually doing, especially when we could pivot the data tosee it from several different views. Its hard to overstate thebenefit of being able to compare all of this data online. One criticalaspect is being able to easily control exchange-rate assumptions in anyview so you can see results either with or without the effects ofexchange rates.Later on, when we were ready to centralize our sales transactions inone corporate-wide system, wed already done some of our homework. Alot of companies centralizing their sales systems lose time decidinghow they want their financials organized. Because we had alreadyfigured that out, we were able to centralize our sales data far morequickly and inexpensively than many other companies.what I call a companys nervous system, helped GM dominate automakingthroughout Sloans career. It wasnt yet digital, but it was extremelyvaluable. Knowing dealer inventory was something GM did better thananyone else, and GM got a huge competitive advantage from capitalizingon this information. And this use of information extended beyond GMscorporate walls. GM used manual information systems to develop thefirst "extranet"-a functioning network for GM, its suppliers, and itsdealers.Of course, you couldnt get nearly as much information flowing throughyour company then as you can now. It would have taken too many phonecalls and too many people moving paper around and poring over paperrecords, trying to correlate data and spot patterns. It would havebeen immensely expensive. If you want to run a worldclass companytoday, you have to track far more and do it far faster. To manage withthe force of facts-one of Sloans business fundamentals-requiresinformation technology. What companies can afford to do, what it makes file:///C|/Documents%20and%20Settings/Admini...SINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXT (18 of 392)12/28/2005 5:28:51 PM
  19. 19. file:///C|/Documents%20and%20Settings/Administrator/Deskto...0BILL%20-%20BUSINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXTsense for them to do whats competitive for them to do, has changeddramatically.Now GM uses PC technology and Internet standards to communicate withits dealers and customers. Its solution, GM Access uses a wide-areasatellite intranet for interaction among headquarters, factories,and GMs 9,000 dealers. Dealers have online tools for financialmanagement and operational planning, including total order managementand sales analysis and forecasting. An interactive sales tool combinesproduct features, specifications, pricing, and other information.Service technicians have instant access to the most current product andparts information through electronic service manuals and technicalbulletins and online parts planning and inventory reports. E-maillinks the dealers with GM headquarters, the factory, and one another.The private dealer solution is integrated with the public GM Web site,where consumers can get detailed vehicle information. Web technologiesprovide the foundation for a fundamental shift in the way consumersshop for vehicles, and they position GM for electronic commerce.Of course, other automakers have also improved their informationsystems. Toyota in particular has used information technology todevelop world-class manufacturing.DIFFERENTIATING YOUR. COMPANY IN THE INFORMATION AGEIf information management and organizational responsiveness made such afundamental difference in a traditional smokestack industry seventyyears ago, how much more difference will they make propelled bytechnology? A modem automobile manufacturer may have a strong brandname and a reputation for quality today, but it is facing even greatercompetition around the world. All car manufacturers use the samesteel, they have the same drilling machines, they have similarproduction processes, and they have roughl the same costs fortransportation. Manufacy turers will differentiate themselves from oneanother by the sum of how well they design their products, howintelligently they use customer feedback to improve their products andservices how quickly they can improve their production processes, howcleverly they market their prodUcts, and how efficiently they managedistribution and their inventories. All of these information-richprocesses benefit from digital processes. file:///C|/Documents%20and%20Settings/Admini...SINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXT (19 of 392)12/28/2005 5:28:51 PM
  20. 20. file:///C|/Documents%20and%20Settings/Administrator/Deskto...0BILL%20-%20BUSINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXTThe value of a digital approach is especially apparent ininformation-centric businesses such as banks and insurance companies.In banking, data about the customer relation ship and credit analysisare at the heart of the business, and banks have always been.big usersof information technology. In the age of the Internet and increasingderegulation of financial markets, though, how do two banksdifferentiate themselves from each other? It comes down to theintelligence of a banks credit analysis and risk management and itsresponsivenessin its relationship with the customer. Its brains thatgives one or the other bank the edge. I dont mean just the individualabilities of bank employees. I mean the overall ability of the bank tocapitalize on the best thinking of all of its. employees.Today bank information systems have to do more than manage huge amountsof financial data. They have to put more intelligence about customersinto the hands of business strategists and loan officers. They have toenable customers themselves to securely access information and paybills online while the banks knowledge workers collaborate onhigher-value activities. Information systems are no longer only aboutback-end number-crunching. Theyre about enabling information to beput to work on behalf of the consumer. Crestar Bank of Richmond,Virginia, pro i@ vides banking, mortgage application, and bill paymentsen, vices over the Internet and its tellers in remote locations suchas supermarkets or malls can open accounts and initiate loans forcustomers-all by connecting the customer to y means of digitalinformation flow.the back-end systems b I was speaking at a bank roundtable in Canadarecently and got some questions about how banks should invest in theInternet. Today they have back-end database systems that storeinformation, and they have applications for people doing customerservice on the phone and for tellers and for branch banks. Now theyrelooking at adding new systems to present customers with data over theInternet.They said, "We dont want to pick up the additional cost and complexityof still another interface." I told them the solution was simple: Theyshould build a great interface for customers to see data over theInternet3 then use the same interface to view data internally. Theydhave a small amount of additional data that the bank employees wouldget to see-customer data and background on recent interactions with the file:///C|/Documents%20and%20Settings/Admini...SINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXT (20 of 392)12/28/2005 5:28:51 PM
  21. 21. file:///C|/Documents%20and%20Settings/Administrator/Deskto...0BILL%20-%20BUSINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXTcustomers-but the interface would be the sam. e. If they do the newsystem on a mainstream platform, they can replace all the differentways of viewing data.Over time, as it makes business sense, they can upgrade the back-enddatabase to new technology, but meanwhile the Internet interface willsimplify their lives, not make them more complex. The new interface"becomes" the bank , both inside and out.PUTTING INFORMATION TO WORKAfter the introduction of ENIAC, the first general-purpose computer,during World War II, computers quickly proved they were faster and moreaccurate than humans in many applications-managing the customer recordsof the largest 9 institutions and automating almost any mechanicalprocess that could be broken into discrete, repetitive steps.Computers were not functioning at a high level, though. They assistedpeople but not in an intelligent way. It takes brains to understandthe physics and develop the underlying calculations for the arcs ofartillery projectiles or ballistic missiles; it takes an idiot savant-acomputer-to do the calculations in an instant.Businesses need to do another kind of work, what Michael Dertouzos,director of M.I.Ts laboratory for computer 4 science and author of WhatWill Be5 calls "information 4. What Will Be: How the New World ofInformation Will Change Our Lives (San F-ncisco: HarperCollins,HarperEdge, 1997).work." We usually think of informations memo, a picture or a financialreport, say-as static. But Dertouzos convincingly argues that anotherform of information is active-a "verb" instead of a static noun.Information work is "the transformation of information by human brainsor computer programs Information work designing a building, negotiatinga contract, preparing tax returns-constitutes most of the realinformation we dea with and most of the work done in developedeconomies."Information-as-verb activities dominate the terrain of information,Dertouzos says." He estimates that information work contributes 50 to60 percent of an industrialized countrys GNP. file:///C|/Documents%20and%20Settings/Admini...SINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXT (21 of 392)12/28/2005 5:28:51 PM
  22. 22. file:///C|/Documents%20and%20Settings/Administrator/Deskto...0BILL%20-%20BUSINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXTDertouzoss insight into information-as-action is profound. Whencomputers went from raw number-crunching to modeling business problems,they began to participate in information work. Even manufacturingfirms have always J expended much of their energy on information aboutthe work rather than on the work itself information about 11 productdesign and development; about scheduling; about i marketing, sales, anddistribution; about invoicing and financing; about cooperativeactivities with vendors; about ,customer service.When I sit down with developers to review product specifications, orwith Microsofts product divisions to review their three-year businessplans, or with our sales groups to review their financial performance,we work through the difficult issues. We discuss feature tradeoffsvs.time to market, marketing spend vs. revenue, head count vs.return and so on. Through human intelligence and collaboration 7 wetransform static sales, customer, and demographic data into the designof a product or a program. Information work is thinking work. Whenthinking and5. Dertouzos, 230-31.Basic operationsBusinessL Strategic reflexes hinking syste cust inter A digital nervoussystem comprises the digital processes that closely link every aspectof a companys thoughts and actions. Basic operations such as financeand production, plus feedback from customers, are electronicallyaccessible to a companys knowledge workers, who use digital tools toquickly adopt and respond. The immediate availability of accurateinformation changes strategic thinking from a separate, standaloneactivity to an ongoing process integrated with regu or usinessactivities.collaboration are significantly assisted by computer technology, youhave a digital nervous system. It consists of the advanced digitalprocesses that knowledge workers use to make better decisions. Tothink, act 7 react, and adapt.Dertouzos says that the future "Information Marketplace" will entail "agreat deal of customized software and intricately dovetailed file:///C|/Documents%20and%20Settings/Admini...SINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXT (22 of 392)12/28/2005 5:28:51 PM
  23. 23. file:///C|/Documents%20and%20Settings/Administrator/Deskto...0BILL%20-%20BUSINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXTcombinations of human and machine procedures"an excellent descriptionof a digital nervous system at work.GETTING THE NUMBERS EASILYTo do information work, people in the company have to have ready accessto information. Until recently, though,6. Dertouzos, 231.we ve been conditioned to believe that "the numbers" should be reservedfor the most senior executives. A few executives might still want tohold information close in the interests of confidentiality, but for themost part access to information has been restricted simply because itused to be so hard to get. It took time, effort, and money to moveinformation around. Its as if even now our mindsets go back to thedays when there was this big backlog of work that came from the need towrite a custom program every time somebody wanted to see numbers in anew way. It was so expensive to pull data out of a mainframe, and ittook so much labor to try to.COrrelate the data, that you ice presidentto order up the work.had to be at least a v Even then, the information was sometimes soinconsistent or out-of-date that youd have VPs from differentdepartments show up at high-level meetings with different data!The only way that Johnson & Johnsons CEO, Ralph Larsen, could get dataabout any of J&Js companies in the late 1980s, for instance, was tohave the finance department rt. As well see in chapter 18, thingsprepare a special repo at J&J are different now.On todays computer networks you can retrieve an . d present dataeasily and inexpensively. You can dive into the data, to the lowestlevel of detail and pivot it to see it in different dimensions. Youcan exchange information and ideas with other people. You canintegrate the ideas and people or teams to produce a wellwork ofmultiple pe thought-out and coordinated result. We need to break outof the mindset that getting information and moving information aroundis difficult and expensive. Its just basic common sense to make allof your companys dataeverything from the latest sales numbers todetails of the 401(k) plan-just a few clicks away for everyone who canuse it. file:///C|/Documents%20and%20Settings/Admini...SINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXT (23 of 392)12/28/2005 5:28:51 PM
  24. 24. file:///C|/Documents%20and%20Settings/Administrator/Deskto...0BILL%20-%20BUSINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXTExecutive Information Systems Evolvethe early effort to improve information flow, at least for executives,was 0 the executive information system (EIS). Emerging in the late1980s, EIS gave executives the ability to get sales information orother data without having to wait months for a special report. EIS wasthe right idea, but it was limited to senior ranks and wasnt connectedup with the other company information systems. EIS tended to be justanother proprietary system within a proprietary system. One largeUS.steel company discovered that the information provided by the new toolled senior executives to ask more questions of their subordinates, whodidnt have the information to answer them!With the benefit of PC-based platforms, tools for rapid applicationdevelopment, and improved graphical user interfaces, the executiveinformation system has evolved into the "enterprise informationsystem," also called a "performance measurement system." The new EISsystems are intended to provide information to a wider range of peoplein an organization.As the vendors of EIS systems moved to a standard platform and tools,their roles evolved. The real value they offer is not in building theapplication, but in helping companies figure out what to do with it.Customers often arrive with their expectations so shaped by the ideathat information is hard to get that they dont know what is reasonableto expect from their information Systems. A leading EIS vendor,Comshare, of Ann Arbor, Michigan, starts out by asking a customer suchbasic questions as "What do you want from the (@omshares sytem?" and"What are the outcomes you want to measure?" sales analysisapplication comes with ninety specific questions about the kinds ofdata a company might want-performance, underperformance, regionalperformance, and so on.Comshare, which offers a Mix of systems using standard desktopapplications or browsers as the front end, assists the customer withanalyzing and shaping the right approach to the problem and will bringin consultants to help with business process reengineering if thatseems to be needed. Only after analysis and any necessaryreengineering of processes does Comshare deliver the technology. file:///C|/Documents%20and%20Settings/Admini...SINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXT (24 of 392)12/28/2005 5:28:51 PM
  25. 25. file:///C|/Documents%20and%20Settings/Administrator/Deskto...0BILL%20-%20BUSINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXTA companys middle managers and line employees, not just its high-levelexecutives, need to see business data. Its important for me as a CEOto understand how the company is doing across regions or product linesor customer segments, and I take pride in staying on top of thosethings.However, its the middle managers in every com any who I p need tounderstand where their profits and losses lie, what marketing programsare working or not, and what expenses are in line or out of whack.Theyre the people who need precise, actionable data because theyrethe ones who need to act. They need an immediate constant flow andrich views of the right information. These employees shouldnt have towait for upper management to bring information to them. Companiesshould spend less time protecting financial data from employees andmore time teaching them to analyze and act on it.Of course, every company is going to draw the line on informationaccess somewhere. Every company keeps salaries confidential. Ingeneral, though, I believe in a very open policy on informationavailability. Theres incredible value in letting everybody involvedwith a product, even the most junior team member, understand thehistory, the pricing, and how the sales break down around the customer segment. The value of having everybody get thecomplete picture and trusting each person with it far outweighs therisk involved.In many companies the middle managers can be overwhelmed by day-todayproblems and not have information they need to fix them. They may havereams of data in front of them-literally reams of paper reports-thatare difficult to analyze or correlate with data in other reports. Asign of a good digital nervous system is that y 011 have middle,managers empowered by the flow of specific, actionable information.They should be seeing their sales numbers, expense breakdowns, vendorand contractor Costs, and the status of major projects online, in aform that invites analysis as well as coordination with other people.The systems should notify them of unusual developments according tocriteria they set-for example, if an expense item is out of line. Thisway they dont need to monitor normal expense activity. Thesecapabilities are available at a few companies, but Im continuallysurprised by how few companies use information technology to keep their file:///C|/Documents%20and%20Settings/Admini...SINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXT (25 of 392)12/28/2005 5:28:51 PM
  26. 26. file:///C|/Documents%20and%20Settings/Administrator/Deskto...0BILL%20-%20BUSINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXTline managers well informed and to avoid routine review.Im amazed by the tortuous path that critical information often takesthrough many Fortune 500 companies. Im spoiled by being able toe-mail a view of the latest data to key managers and let them dig intoit. At McDonalds, until recently, sales data had to be manually"touched" several times before it made its way to the people who neededit.Today, McDonalds is well on the way to installing a new informationsystem that uses PCs and We b technologies to tally sales at all of itsrestaurants in real time. As soon as you order two Happy Meals, aMcDonalds marketing manager will know. Rather than superficial oranecdotal data, the marketer will have hard, factual data for trackingtrends.As well see in the description of Microsofts reaction to theInternet, still another sign of a good digital nervous System is thenumber of good ideas bubbling up from your line managers and knowledgeworkers. When they can analyze concrete data, people get specificideas about howto do things better-and they get charged up about it,too.People like knowing that something theyre doing is working, and theylike being able to demonstrate to manag ement that its working. Theyenjoy using technology that encourages them to evaluate differenttheories about whats going on in their markets. They get a kick outof running what-ifs. People really do appreciate information, and itsa big motivator.A final sign of a good digital the rvous system is how focused yourface-to-face meetings are and whether specific actions come out ofthem. Pilots like to say that good landings are the result of goodapproaches. Good meetings are the result of good preparation.Meetings shouldnt be used primarily to present information. Its moreefficient to use e-mail so that people can analyze data beforehand andcome into a meeting prepared to make recommendations and engage inmeaningful debate. Companies struggling with too many unproductivemeetings and too much paper dont lack energy and brains. The datathey need exists somewhere in the company in some form. They justcant readily put their hands on it. Digital tools would enable themto get the data immediately, from many sources, and to be able to file:///C|/Documents%20and%20Settings/Admini...SINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXT (26 of 392)12/28/2005 5:28:51 PM
  27. 27. file:///C|/Documents%20and%20Settings/Administrator/Deskto...0BILL%20-%20BUSINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXTanalyze it from many perspectives.GMs Alfred Sloan said that without facts its impossible to put asound policy into effect. I am optimistic enough to believe that ifyou have sound facts, you can put a sound policy into effect. Sloandid, many times over. At todays pace of business change, we need evenmore to manage with the force of facts.What Im describing here is a new level of information analysis thatenables knowledge workers to turn passive data. into activeinformation-what Michael Dertouzos calls information-as-a-verb. Adigital nervous system enables a company to do information work withfar more efficiency, depth, and creativity.Business LessonsInformation flow is the primary differentiator in the digitalage.U Most work in every business is "information work," a term coined byMichael Dertouzos to describe human thought applied to data to solve aproblem.Q Middle managers need as much business data as senior executives butoften have less.U Unproductive meetings, or meetings that largely involve statusupdates, are signs of poor information flow.Diagnosing Your Digital Nervous System Do you have the information flow that enables you to answer the hardquestions about what your customers and partners think about yourproducts and services, what markets you are losing and why, and whatyour real competitive edge is?U Do your information systems simply crunch numbers in the back room orhelp to directly solve customer problems?CAN YOUR DIGITAL NERVOUS SYSTEM DO THIS?A firms IQ is determined by the degree to which its IT infra structureconnects, shares, and structures information. Iso lated applications file:///C|/Documents%20and%20Settings/Admini...SINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXT (27 of 392)12/28/2005 5:28:51 PM
  28. 28. file:///C|/Documents%20and%20Settings/Administrator/Deskto...0BILL%20-%20BUSINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXTand data, no matter how impressive, can produce idiot savants but not ahighly functional corporate behavior.Steve H. Haeckel and Richard L. Nolan, "Managing by Wire: Using IT totransform a Business" ike a human being, a company has to have aninternal communication mechanism, a "nervous system," to coordinate itsactions. All businesses focus on a few basic elements: customers;products and services; revenues; costs; competitors; delivery; andemployees. A company has to carry out and coordinate the businessprocesses in each area, especially activities that cross departmentlines.Sales needs to quickly find out whether the company has the inventoryor can get it quickly before promising delivery on a big order.Manufacturing needs to know what product is selling like gangbusters sothat it can shift production priorities. Business managers throughoutthe company need to know about both and a whole lot more.An organization s nervous system has parallels with our human nervoussystem. Every business, regardless of industry, has "autonomic"systems, the operational processes that just have to go on if thecompany is to survive.Every business has a core process at the heart of its corporatemission, whether its the design and manufacture of products or thedelivery of services. Every business has to manage its income andexpenses. And every business has a variety of administrative processessuch as payroll. No company will prosper for long if products dont goout the door or if the bills and the employees dont get paid.The need for efficiency and reliability has driven the rush to automatemany basic operations. With managers using whatever solutions wereavailable, the result over time has been a proliferation ofincompatible systems. Each independent system may operate smoothly onits own, but the data in each is isolated and hard to integrate withthe data in the others. What has been missing are links betweeninformation that resemble the interconnected neurons in the brain.Extracting data from operational processes and using it in a meaningfulway has been one of the more intractable problems of business.Although automation has been valuable, todays technology can make file:///C|/Documents%20and%20Settings/Admini...SINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXT (28 of 392)12/28/2005 5:28:51 PM
  29. 29. file:///C|/Documents%20and%20Settings/Administrator/Deskto...0BILL%20-%20BUSINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXTbasic operations the cornerstone of a much broader, corporate-wideintelligence.A company also needs to have good business reflexes, to be able tomarshal its forces in a crisis or in response to any unplanned event.You might get a call from your best customer saying hes going withyour biggest competitor, or that competitor might introduce a hot newproduct, or you might have a faulty product or an operations breakdownto deal with. Unplanned events calling for a tactical response can bepositive, too. You might get an unexpected opportunity for a majorpartnering activity or an acquisition.Finally, theres the conscious directing of your comanys muscles,whether youre creating teams to develop p new products, opening newoffices, or redeploying people in the field to go after newcustomers.To be carried out well, these planned events need deliberation,strategic analysis, execution, and evaluation. You need to think aboutyour companysfundamental business issues and develop a longtermbusiness strategy to solve problems and take advantage of theopportunities your analysis unearths.Then you need to communicate a strategy and the plans behind it toeverybody in the company and to partners and other relevant peopleoutside the company.More than anything, though, a company has to corners and act on what itlearns in municate with its custom that communication. This primaryneed involves all of a companys capabilities: operational efficiencyand data athering, reflexive reach and coordination, and strategic 9planning and execution. The need to communicate effectively with yourcustomers will come up again and again in this book. Ill show how adigital nervous system helps successful companies bring all of theirprocesses to bear on this most important mission of allorganizations.JA digital nervous system serves two primary purposes in the development of business understanding. It extends the individuals analyticalabilities the way machines extend physical capabilities, and it file:///C|/Documents%20and%20Settings/Admini...SINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXT (29 of 392)12/28/2005 5:28:51 PM
  30. 30. file:///C|/Documents%20and%20Settings/Administrator/Deskto...0BILL%20-%20BUSINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXTcombines the abilities of indi viduals to create an institutionalintelligence and a unified ability to act. To put it all together inthe right context: A digital nervous system seeks to create corporateexcellence out of individual excellence on behalf of the customer.MAKING DATA AVAILABLE EVERY DAYOne way tothink of a digital nervous system is as a way ta for dailyto give your internal staff the same kind of da business use that yougive a consultant for a special project.With their years of experience in the industry and their expertise inbusiness analysis, consultants often come in with fresh ideas and newways of looking at issues. After crunching through census-typedemographic and sales data, consultants invariably surprise seniormanagement with their profitability analyses, their comparisons tocompetitors, and their insight into better business processes.From another perspective, though, its just crazy that somebody outsideyour company receives more information than you use for yourself Toooften, important customer and sales information is pulled together on aonetime-only basis when consultants arrive. You should have thatinformation available on an ongoing basis for your regular businessstaff.If consultants get more insight from your systems than you do, itshould be because of their unique abilities, not because you prepareinformation especially for the consultan ts that isnt otherwiseavailable to your staff. If a consultant can find trends in your datathat you cant, theres something wrong with your flow ofinformation.Not all of your managers will have the expertise or breadth ofknowledge that a consultant brin s to your business, but your 9 ers ould have access to data of the same quality.manag shThey should be able to walk into work every day and see the freshestdata and be able to analyze it in numerous instructive ways. As wellsee in the following example, good things happen when they can.INFORMING STRATEGIC PLANNING file:///C|/Documents%20and%20Settings/Admini...SINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXT (30 of 392)12/28/2005 5:28:51 PM
  31. 31. file:///C|/Documents%20and%20Settings/Administrator/Deskto...0BILL%20-%20BUSINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXTSince our direct sales force calls only on large corporations andpartners, Jeff Raikes, our group vice president of sales and support,wrestles every year with the question of how to improve theeffectiveness of our marketing to small and medium-size customers.. Weusually reach these customers through seminars, co-marketing activitieswith partners and similar broad-reach programs. Jeff had been reviewin9 various approaches to reach our smaller customers. Should we do moremarketing in the larger cities since more small and medium-sizecustomers are concentrated I there? Or should we expand our activitiesinto the next half-dozen cities in each district according topopulation size? Given S limited resources what would be the bestapproach?In Microsofts culture of numbers you have to have good factual data toconvince people of almost any business proposition, and no one hadconvincing evidence of the best way to proceed. Then somebodyremembered an analysis Pat Hayes, operations manager for MicrosoftsCentral Region, had done. Pat had rationalized travel budgets amongdistricts that had most of their customers in a major city, such asChicago, and districts that had most of their customers dispersedacross several states. His study had identified some small outlyingcities with high concentrations of PC ownership. Would these cities bethe best untapped source of new revenue?Pat and a small team were charged with determining the best newmarketing opportunities on a regionwide basis-eighteen US. states andCanada. What happened in 7 the two months between November 1996 andJanuary 199 illustrates how the typical digital tools that manyknowled e workers already have can integrate with back-end fig nancialsystems to help companies improve their sales.How do you go about identifying the cities with the best salespotential among hundreds of cities of different sizes? What are theright metrics? How do you develop a aimm marketing program thatdoesnt call for hiring dozens of people and spending tens of millionsof dollars? You begin by putting the information you have to work.Pat and a couple of other people began by culling data from MS Sales,our mission-critical revenue measurement and decision support system.This PC-based data warehouse has information from every resellerworldwide on the sales of every version of every product we sell. More file:///C|/Documents%20and%20Settings/Admini...SINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXT (31 of 392)12/28/2005 5:28:51 PM
  32. 32. file:///C|/Documents%20and%20Settings/Administrator/Deskto...0BILL%20-%20BUSINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXTthan 4,000 employees use MS Sales regularly for decision support,supply chain management, sales force compensation, month-end generalledger close, fiscal budget planning, R&D planning, and market shareanalysis.From the Internet, the team grabbed US. census data that showed theaverage number of employees per company per city. From an outsideconsulting firm, the team got information on the number of PCs percity. From field marketing managers around the region, the teammanually gathered information on seminars and other marketingactivities in each city. Finally the team included a list of thenumber of Microsoft partners in each city. This research, begun by twopeople using e-mail, intranet postings, and the phone to communicate,ultimately involved dozens of people around the country.After merging and scrubbing all the data, Pat and the team began toanalyze it in several different ways. Sometimes independently,sometimes in collaboration, and always with our electronic tools, theytried to spot a correlation between sales numbers and marketingactivities across cities of varying sizes. MS Sales provided two setsof data that proved crucial: last years sales data, which enabled themto calculate growth, and revenue by postal code. Having revenuenumbers at the postal code level enabled very granular analysis bymetropolitan area. With the census and PC data, they could create twoother important metrics: revenue per PC and revenue per each companysemployee.By early January, when they had identified eighty cities that werelikely candidates for a new marketing campaign Pat and the team metwith Jeff Raikes. Jeff suggested that they develop a performance indexand an activity index for each city. The indexes would provide thecommon mea surement they had been looking for in order to understandthe relationship among revenue, PC density, and marketing. Theperformance index would be the percentage of revenue divided by thepercentage of PCs in the region; the activity index would be thepercentage of all attendees at Microsoft events who were from theregion divided by the percentage of PCs in the region. A numbergreater than I would mean that t he city was outperforming othercities; a number below I would mean that the city was underperforming.With a consistent set of metrics, the little group didnt have to havephilosophical discussions about whether a city was in the Sun Belt or file:///C|/Documents%20and%20Settings/Admini...SINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXT (32 of 392)12/28/2005 5:28:51 PM
  33. 33. file:///C|/Documents%20and%20Settings/Administrator/Deskto...0BILL%20-%20BUSINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXTthe Rust Belt or whether the economy in that area was generally goodand therefore our sales should be up. Instead the discussion wasstraight math.They could relate each citys performance to every other citys and tothe presence or absence of marketing activities. Most important, theyhad a way to extrapolate potential sales for those cities in which wewere not doing any marketing at all. A number of small cities lookedvery promising." 17 I first heard about the project at the executive review in lateJanuary 1997, when Jeff presented the data. We were all intrigued andgave him the go-ahead to Pursue a testand-invest marketing strategy forsome of these smaller @i cities. Before we spend big bucks, we want tofind out on a small scale whether our idea will work. Jeff e-mailedPat and told him to draw up a final set of recommendations for a pilotprogram and to plan to review it with Jeff within two weeks.The day before that meeting, Pat and an associate were working on thefinal recommendations. Using his list of the number of Microsoftpartners in each city, Pat had created a new index for partners toindicate the relative potential for co-marketing activities in eachcity. Not knowing where theyd end up, Pat and his associate decidedto use the indexes to carve up the cities into different categories andcome up with a recommendation for each category. At one end theydhave a city with high marketing activity that was overperforming.Their recommendation for such a city would be to lower activity and seewhether performance dropped. If performance remained fine, the companycould spend less for the same results. If marketing activity was highand performance was low, theyd check the partner index to see whetherwe had enough partners in that city to justify increasing marketingactivity there. It was late when they got down to the last category,cities with an activity index of 0, meaning no marketing at all.Overall, our average regional revenue for smaller companies was $2.90per customer employee, but actual revenue per small-company employeevaried tremendously. In a large city such as Dallas, where we have adistrict office and do marketing programs, our average was $8.43. In asmaller city like San Antonio, where we have no office but do marketingrograms our revenue was $3.44 per emP ployee. In the eighty citieswith no office and no marketing (the "zero activity" index), ouraverage revenue was $0.89 Suddenly they had their answer. New file:///C|/Documents%20and%20Settings/Admini...SINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXT (33 of 392)12/28/2005 5:28:51 PM
  34. 34. file:///C|/Documents%20and%20Settings/Administrator/Deskto...0BILL%20-%20BUSINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXTprograms where we already did marketing would give us incrementalresults of some kind, but if new marketing programs brought even halfof the eighty "zero activity" cities up to just our regional. averageof $2.90, we would double our revenue in those cities from $30 millionto $60 million in a year!Pat, who had never presented to Jeff before, had no way of knowing thathed never cover his plan in a formal way. Jeff has a habit. offlipping through presentations quickly, to find the slides thatdescribe action items. He can read faster than most people can talk,and skimming lets him get past the "status" aspect of a meeting andinto the heart of the matter in a hurry. "We never got past slide one,Pat said. They dived right into the spreadsheets, an swering Jeffsquestions for two full hours. When Jeff saw 1 the potential for the"zero activity" cities, he said, "Go do this."Jeff made a final suggestion. Sift the eighty cities again with an eyeto an 8to-1 return on investment, the mini -71 mum ROI we think willjustify a marketing program. Set ting an 8to- I bar would enable the mto weed out any cities where the percentage return migi-It be high butthe absolute dollar revenue would be too low. The 8:1 ratio representsour typical marketing spend as a percentage of net revenue."Get this nailed, and then tell me what you need," Jeff said. In afollow-up e-mail he added, "Dont let head count and marketing budgetget in the way. Just do it."A week later Pat e-mailed Jeff with his final proposal to concentrateon forty-five cities (later pared to thirtY7 eight). Ultimately themarketing experiment was simple: two "Big Day" events in the year ineach qualified city in V which we hadnt been doing any marketing.Each Big Day would provide an overview of Microsoft strategy and our Iproduct line, and with our partners wed present various salesoffers.With a third party to handle logistics and with help from our partnersfor the Big Day events, the plan would entail just two new head countsand cost a total of just $1.5 million.The maximum ROI looked to be a stag gering twenty to one: a $30 millionrevenue increase on a $1.5 million, investment. file:///C|/Documents%20and%20Settings/Admini...SINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXT (34 of 392)12/28/2005 5:28:51 PM
  35. 35. file:///C|/Documents%20and%20Settings/Administrator/Deskto...0BILL%20-%20BUSINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXT3First Seminar Second Seminar 7/1/ 2/17/98192 - ly Sales -narsAm2/97 4/97 6/97 8/97 10/97 12/97 2/98 4/98 6/98Microsofts digital nervous system enables sales managers to pinpointcities that are most likely to generate increased sales as the resultof new marketing programs. Digital analysis led to a program thatincreased sales by 57 percent, more than 3.5 times the norm.Marketers can track the effectiveness of each marketing effort withindays and, cis these results from a Texas city show, test how oftenevents should be repeated without diminishing returns. Digital dataalso shows what subject matter needs to be delivered next time.As the Big Day events were carried out, we used MS Sales to constantlymeasure our progress in the thirty-eight cities against figures insimilar markets to see if our new program was really making animpact.The results: After three quarters, we showed a 57 percent increase inrevenue in those cities in which we did Big Day events vs. 16 percentgrowth in a control group of nineteen small cities that met the ROIrequirement but sat out the test-and-invest period.Our partners in the thirty-eight smaller cities, primarily value-addedresellers and local retailers, were gratified by the Big Day program.Their sales increased an amount commensurate with ours, and thegoodwill we achieved with them established a solid basis for futuremarketing cooperation.Weve continued to build on these early efforts at identifying newmarket opportunities. Weve expanded theFrom DISCO to Shirt Color, MS Sales Informs file:///C|/Documents%20and%20Settings/Admini...SINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXT (35 of 392)12/28/2005 5:28:51 PM
  36. 36. file:///C|/Documents%20and%20Settings/Administrator/Deskto...0BILL%20-%20BUSINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXTS Sales, our worldwide sales information system, has been responsible Mfor a great deal of learning that has improved our marketing.One of the most meaningful MS Sales reports is DISCO, for districtcomparisons. Using DISCO, our I Northeast district manager discoveredthat the top districts overall in Fiscal Year 1 996 were those thathad done the best job of selling Microsoft Office to small business.She kicked off a direct-mail campaign to resellers in thesmall-business market that greatly increased district sales. Bymonitoring the results in MS Sales, she determined that the mailingsneeded to continue every six to eight weeks in order to keep drivingincreased revenue.The Northeast district finished FY 97 as the top growth district inthis business sector, and the program has been emulated in otherdistricts with similar results.Microsoft India used MS Sales to track the effectiveness of programsdesigned to encourage customers to buy CD-ROM versions of our productsrather than the floppy disk versions. The change would save customersa lot of disk switching to install products and reduce our cost ofgoods. India also used MS Sales to determine which special promotionsto resellers actually increased sales for particular France Microsofts large account team analyzed which accounts hadenough software to qualify for our highest-volume discount program andwent to those companies offering them great deals. In cases wherecustomers had decentralized purchasing, we were able to tell them thelocations of all of their PCs and help them better control theirpurchases.In Argentina one of our salespeople was talking to a reseller who triedto impress him with somewhat inflated sales claims. Still on the phonewith the reseller, our guy quickly,checked MS Sales and found outexactly how much her company was selling, which was less than thereseller was claiming. When he casu ally mentioned the real salesnumbers, she was surprised and asked how he had gotten the informationso quickly.He described MS Sales to her and went through all the data he could getfrom it. "Thats not all," he said. "It also knows youre wearing a file:///C|/Documents%20and%20Settings/Admini...SINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXT (36 of 392)12/28/2005 5:28:51 PM
  37. 37. file:///C|/Documents%20and%20Settings/Administrator/Deskto...0BILL%20-%20BUSINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXTred polo shirt.The phone went silent."How does it know?" she finally asked.It was a lucky program to other regions and to other countries.We recognized the value of the numbers we originally collected foronetime use, so we now have them in the sales system and keep themup-to-date. Anybody working on any sales analysis can view the dataand do historical comparisons.Also, while Pat Hayess project was under way, another member of Jeffsgroup was working separately on an "opportunity map" for potential newbusiness by different products. Jeff combined the work on products andPats work on the basis of revenue. Now we have a tool that allowsanybody in the company to pivot through opportunities not just byrevenue potential, but by product as well.Today, instead of scheduling a general Microsoft strategy tour in eightcities where overall revenue is low, we can determine whether one cityneeds a seminar on Office, another a seminar on Windows, and a third aseminar on Exchange.MAKING AN INVESTMENT, NOT RELYING ON LUCKMS Sales, our sales database, was a major part of our marketingsolution for smaller cities. MS Sales was the result of our commitment to build a financial reporting system that would capture a widevariety of sales information and put it at our fingertips. MS Salesenables us to drill into data in every way imaLyinable-b country,customer size duct y region, pro area, salesperson, even postalcodes.Every business needs information systems that can quickly provide thisgranularity of . detail. It should be just a click of a button awayfor your sales managers or for your people in the field.It wasnt a matter of luck that we happened to have a crucial numberlike postal code revenue handy. Weve made a real investment over a file:///C|/Documents%20and%20Settings/Admini...SINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXT (37 of 392)12/28/2005 5:28:51 PM
  38. 38. file:///C|/Documents%20and%20Settings/Administrator/Deskto...0BILL%20-%20BUSINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXTnumber of years in obtaining this kind of data and in getting ourchannel partners to feed sales data into our systems electronically.Because of our indirect sales model, integrating channel sales datadigitally into our financial reporting is crucial. We didnt knowbeforehand all of the questions that would come up, but we had a prettygood idea of the kinds of data wed need to answer a broad range ofquestions, at all levels of detail and from many perspectives.A paper-based system could not do this work. Similarl Y) any systemwithout easy spreadsheet access to allow different theories to betested would not have worked. The need to combine census data andcollaborate across the country required immense flexibility. Becausemuch of the sales data now comes to us via the Internet in a format wecan immediately use in MS Sales, the process is inexpensive, so ourchannel partners can afford it. By sharing the analysis from thesetools appropriately with our partners, we also raised businessdiscussions with them to a more strategic level.Really difficult business problems always have many aspects. Often amajor decision depends on an impromptu search for one or two key piecesof auxiliary information and a quick, ad hoc analysis of severalpossible scenarios.You need tools that easily combine and recombine data from manysources. You need Internet access for all kinds of research. Widelyscattered people need to be able to collaborate and work the data indifferent ways. At one point Steve Ballmer company president, wascritiquing plans for Pat Hayess project by e-mail from Europe. Aback-end database was important to our solution, but more important wasour decision to build our infrastructure around overall informationflow. All of the important decisions were made in oldfashionedface-to-face meetings, but the program would not have been possiblewithout the preparation enabled by our digital nervous system.CHANGING THE ROLE OF DISTRICT MANAGERSAt Microsoft our information systems have also changed the role of ourdistrict sales managers. When MS Sales first came online, ourMinneapolis general manager ran a variety of numbers for her districtat a level of detail never possible before. She discovered thatexcellent sales among other customer segments were obscuring a poorshowing amonLy larLye customers in her district. In fact@ the district file:///C|/Documents%20and%20Settings/Admini...SINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXT (38 of 392)12/28/2005 5:28:51 PM
  39. 39. file:///C|/Documents%20and%20Settings/Administrator/Deskto...0BILL%20-%20BUSINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXTC@l Cy was dead last among US. districts in that category. Findingthat out was a shock but also a big motivator for the largecustomerteams in the district. By the end of the year Minneapolis was thetop-growing district for sales to large customers.If youre a district manager at Microsoft today, you must be more thana good sales leader helping your team close the big deals, which hasbeen the traditional district manager role. Now you can be a businessthinker. You have numbers to help you run your business. Before, evenif you were concerned about the retail store revenue in your area, youhad no view whatsoever of those results.Now you can look at sales figures and evaluate where your business isstrong, where your business is weak, and where your business has itsgreatest potential, product by product, relative to other districts.You can try out new programs and see their impact. You can talk toother managers about what theyre doing to get strong results. Being adistrict sales manager in our organization is a much broader role thanwhat it was five years ago because of the digital tools weve developedand their ease of use.Customer Analysis Identifies WeaknessesS Sales also includes a central customer database, which we M use toevaluate purchasing patterns of individual customers as well as groupsof customers. Our Northern California district recently used MS Salesto analyze deployments for products such as Microsoft Exchange,Microsoft Office, and Windows. The team generated spe cial reportswith pivot tables to understand the number of licenses and the marketpenetration we were achieving among large customers in various customersegments Manipulating the spreadsheets to look at national, regional,and district data and to look at industries or specific accounts,Northern California realized that deployment of Microsoft Exchange, ourmes saging product, was weaker in certain types of accounts than inothers. The district also found that in certain kinds of accountsIBMs Lotus Notes tended to be the main competitor, while elsewhereother products were the primary competitors.This precise information helped the district put together programs toensure that Microsoft met the market challenge by sending our systemsengineers and consultants to the right accounts. The infor mation alsohelped Microsoft engineers and consultants show up better prepared, file:///C|/Documents%20and%20Settings/Admini...SINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXT (39 of 392)12/28/2005 5:28:51 PM
  40. 40. file:///C|/Documents%20and%20Settings/Administrator/Deskto...0BILL%20-%20BUSINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXThaving gotten more training on the chief competitor in an account sothat they could answer tough questions about compar ative strengths ofour product vs. the competitors.DOING BUSINESS AT THE SPEED OF THOUGHTA digital nervous system gives its users an understanding A and anability to learn what would not be possible otherwise. A good flow ofinformation and good analytical tools gave us insight into new revenueopportunities among volumes of potentially impenetrable data. Itmaximized the capabilities of, human brains and minimized humanlabor.The Central Region team had only two core memberswho pulled in manyothers, and everyone was doing the work on top of his or her regularduties. The same infrastructure gave us the right tools for executing,evaluating, and finetuning our marketing program.To begin creating a digital nervous system, you should first develop anideal picture of the information you need to run your business and tounderstand your markets and your competitors. Think hard about thefacts that are actionable for your company. Develop a list of thequestions to which the answers would change your actions. Then demandthat your information systems provide those an swers. If your currentsystem wont, you need to develop one that will-one or more of yourcompetitors will.You know you have built an excellent digital nervous Sys term wheninformation flows through your organization as quickly and naturally asthought in a human being and when you can use technology to marshaland coordinate teams of people as quickly as you can focus anindividual on an issue. Its business at the speed of thought.Business LessonsU Businesspeople need to shake loose of the notion that information ishard to get.U Better information can expand the role of sales managers from beingthe closers of big deals to being business managers.U Bringing together the right information with the right people willdramatically improve a companys ability to develop and act on file:///C|/Documents%20and%20Settings/Admini...SINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXT (40 of 392)12/28/2005 5:28:51 PM
  41. 41. file:///C|/Documents%20and%20Settings/Administrator/Deskto...0BILL%20-%20BUSINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXTstrategic business opportunities.U Integrating sales data with partners not only streamlines reportingprocesses, but also raises the business discussions to a more strategiclevel.Diagnosing Your Digital Nervous System• Is important data culled only for special onetime use, or canemployees get access to it on a daily basis? • Make a list of the mostactionable questions about your business. Does your information systemprovide the data to answer them?CREATE A PAPERLESS OFFICEDo your digital systems enable you to pinpoint sales areas that offerthe most opportunities or that need the most attention? It is soberingto reflect on the extent to which the structure of our businessprocesses has been dictated by the limitations of the file folder.Michael Hammer and James Champy, Reengineering Your Business igitaltechnology can transform your production4 processes and your business processes. It can alsoR free workers from slow and inflexible paper pro cesses. Replacingpaper processes with digital processes liberates knowledge workers todo productive work. The all-digital workplace is usually called "thepaperless office," a phrase that goes back to at least 1973. Its agreat vision."No more stacks of paper in which you cant find what you need. No morepawing through piles of books and reports to find marketing informationor a sales number. No more misrouted forms, lost invoices, redundantentries, missing checks, or delays caused by incomplete paperwork.But the paperless office, like artificial intelligence, is one of those"any day now" phenomena that somehow never seem to actually arrive.The first use of the phrase paperless office appeared in a headline aquarter of a century ago in a trade publication for phone companies.The Xerox Corporation (although it never called it a "paperless file:///C|/Documents%20and%20Settings/Admini...SINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXT (41 of 392)12/28/2005 5:28:51 PM
  42. 42. file:///C|/Documents%20and%20Settings/Administrator/Deskto...0BILL%20-%20BUSINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXToffice") did more to promote the concept than anyone else.In 1974-75 the company was talking about the office of.the future" that would have computers and e-mail with informationonline. Between 1975 and 1987 several business publications promisedthat the paperless office wasnt far off and would radically change theworkplace, but in 1988I told a reporter, "This vision of a paperless office is still very,very far away. . . . Computers today are not yet fulfilling thisvision." Today we have all the pieces in place to make the vision areality. Graphical computing and better analytical tools make it easyto-integrate data of various types. Highly ca .4; I pable, networkedPCs are ubiquitous in the office environ ment. The Internet isconnecting PCs around the world.Yet paper consumption has conti nued to double every fouryears, and 95 percent of all information in the United States remainson paper, compared with just I percent stored elec@ironically. Paperwork is increasing faster than digital tech i nologycan eliminate it!In 1996 I decided to look into the ways that Microsoft, a big advocateof replacing paper with electronic forms, was still using paper. To mysurprise, we had printed350,000 paper copies of sales reports that year. I asked for a copy ofevery paper form we used. The thick binder that landed on my deskcontained hundreds and hundreds of forms. At corporate headquarters wehad 114 forms in P ro 1. James E. LaLonde, "G ates: Computers Still TooHard to Use," Seattle Times,I June 1988.curement alone. Our 401(k) retirement plan had 8 different paperforms-for entering and exiting the plan, for changing employeeinformation, and for changing employee investments or contributions.Every time the government changed the rules, wed have to update andreprint the forms and recycle thousands of old ones. Paper consumption file:///C|/Documents%20and%20Settings/Admini...SINESS%20AT%20THE%20SPEED%20OF%20THOUGHT.TXT (42 of 392)12/28/2005 5:28:51 PM