In The Spotlight

Transformational role of IT 

Business India Article, 06/09/2010, Ganesh Natarajan

The role of Information Technology in business has been the subject of much debate for decades. The Massachusetts Institute of Technology (MIT) in its path breaking “Management in the Nineties” program had forecast in the late eighties that firms would move from evolution to revolution in their use of IT with the progress of applications from localised exploitation through integral integration  to the much  more transformational steps of business process reengineering, business network redesign and eventually business scope redefinition. While industry after industry and company after company progressed in its technology discovery journey and made this prediction come true in this decade, a more recent concern about the imminent commoditisation of IT has yielded to the belief that with cloud computing, software as a service and new models of deploying and benefiting from IT emerging, the best is still to come for IT users and the IT industry.

A thought provoking conversation in Los Angeles with Oracle Corporation’s Retail CIO of the Year demonstrated how much new technology and new modes of communication have changed the way people think about their business. Fast fashion retail has progressed from four seasons to twenty-six seasons of two weeks each with companies like Zara in Europe and WetSeal in the US demonstrating their ability to predict trends, manage assortment plans and have new products in stores every fortnight with the willingness to mark down the merchandise and clean out the store as quickly as it was filled. Zara has been the subject of case studies in Harvard and London Business Schools because of its management models but new fashion retailers are aggressively exploring data warehousing, statistical modeling, mobility and social networking as enablers for their own objective of shaving a couple of percentage points off their cost, which is the crucial element of the retail business.

If that sounds like jargon, imagine the retailer of the future who uses gaming and “Build Your own Designs” applications for the Facebook community to create and quickly validate new ideas within the target community itself. Add to this the power of capturing the look of new designs from around the world and getting quick feedback from the same social networking community. Analysis of the likelihood of building commercial volumes in store clusters around the world can trigger small lot manufacturing and focused shipping decisions that delivers just the right quantity of merchandise at the right time to the right outlet. That’s not all, as soon as the demand for the new item wanes, merchandise markdown and replacement decisions can be triggered and the cycle goes on.

This kind of expectation is expected to ripple through all sectors as the CXO discovers how previously impossible scenario building and evaluation is enabled by the innovative use of technology. The mobile phone, iPod and a host of new devices that have made their retail debut in the last few years have awesome potential for business use which is just beginning to be exploited. Aggressive investments that are being made in Silicon Valley to enable easy transportability of information access and communications across the four commonly used screens – mobile phone, game console, computer and television, will soon result in a host of new marketing and service delivery ideas changing the way business transactions are conceptualized, designed and executed in future. All this will present significant challenges as well as opportunities for the technology providers from India. The challenge will come from the need to develop deep domain and consulting skills and the opportunity will be evident in the new areas that will need transformation consulting and technology development.

The industry response will not fall short of customer expectations. On the innovation front, the sharp focus on new product and service creation as well as process and business model innovation with industry spending two to five percent of its profits on active research and development has led a thirty times increase in patent filings with software product revenues tripling in the last five years. Over seventy-five percent of Indian firms have active innovation programs in place leading to significant value creation for customers. The recent launch of BPO 3.0 with its strong emphasis on knowledge and domain based services, business analytics, process re-engineering and technology-enabled platforms will see India emerging as a design and innovation hub for global corporations.

A deeper and broader innovation focus in the industry will lead to new demands placed on the workforce and our education systems too will have to adapt to the changing needs of the employer community. A day spent on a recent American tour at the University of Colorado in Colorado Springs was an eye-opener to the amount of thinking that is going into redesigning American Higher Education. Synchronous and Asynchronous forms of learning through technology, new bachelors degree programs in the management of PGA Golf Courses and integrated  innovation and entrepreneurship programs for students of engineering and management – all this innovation in a small University campus leads to a definite feeling that the USA will continue to lead through best practices well into this decade. Is anybody in India watching and listening?