EDGE: You’ve been following IT and business for some time now. Where do you think executives should focus?
KEEN: The one thing that is being underestimated is the massive, radical, consistent commoditization of every industry. It used to be you innovated by innovation, you had lots
of resources, you had lots of capital. With deregulation and globalization, you get overcapacity, price-erosion and standardization of components. Look at what is happening with car manufacturing — it’s all standardized parts. The real challenge is how do you innovate in a commodity world. In the past, you innovated by having something different and proprietary, but look how a standard interface like the USB port created the digital camera market. There is absolutely no way to make money.
EDGE: So standardization of components isn’t just a computer industry phenomenon. It’s happening everywhere.
KEEN: You see it mostly in car manufacturing, where Toyota has cleaned up by appropriate standardization of all its systems so they can move production to Mexico, or wherever, in a week. They innovate by their ability to co-ordinate. Dell has the same product as other PC companies but puts it together better. The question I am asking is, “”Who owns the enterprise co-ordination design?”” The guys at the top own this design. If you don’t have a co-ordinated design, you end up with the problems of Chrysler and GM. Every three years, they look like they are coming out of the trough. They’ve got brand new cars, which is good, but two years later, they are back where they started. (Pharmaceutical giant) Eli Lilly has a portal where they post research problems and solutions can come from anywhere. That’s the co-ordination of design. Once you have co-ordinated design, you push to the next big thing, which is value-add.
EDGE: This almost seems obvious. So why isn’t this collaborate to innovate idea catching on?
KEEN: The fundamental problem is that the more complex business becomes, the more you have to co-ordinate. We were previously stuck in the notion that either you centralize or decentralize, and you yo-yo between them.
EDGE: What are some of the other areas executives should be looking at?
KEEN: I really missed what was happening in China. The real issue is the search for global talent. You have two types of labor regimes, by city and by country. What’s killing the car industry in North America is that you have $800 worth of steel and from $1,200 to $1,600 worth of health care. What’s happening is that as the world’s education systems are catching up and passing Europe and North America, the game changes. Coming back to collaboration, anybody who is sensible is moving towards synchronized, value-add research and development. The U.S. graduates 70,000 engineers a year and China graduates 1.2 million. You get talent at a much lower cost. You can get six really good engineers in Shanghai for two engineers in New York. I think what has happened that in the recession, the last two years have been the death of ideas. The only idea has been to cut costs.
EDGE: But when driving the costs out of business is all that occupies the hearts and minds of executives, doesn’t innovation suffer?
KEEN: Why I come back to the co-ordination of design is that it has to be the guy at the top who understands this and the design has to be enterprise-wide.
If you have a good co-ordination design, you don’t have a culture problem. At Dell, there is no other way to work but to collaborate. When (former IBM CEO) Louis Gertsner came in, they had 150 different ledger systems. Standardization changes the innovation rules. It’s a different form of innovation. It’s process innovation, it’s production innovation and it’s relationship innovation.
EDGE: What role can CIOs and IT departments play in bringing about a collaborative organization?
KEEN: One of my goals is to show people that you can eliminate the word culture. Coming back to General Motors, they all try to build collaborative cultures and they all have leadership courses. But the message you really want to get across is that it’s harder not to collaborate than it is to collaborate. With 150 general ledgers, you spend more time arguing about the figures than what the figures mean.
EDGE: Are you talking about an attitude change?
KEEN: Two months ago, I reached my 40th year in IT and realized that, in this 40 years, nothing fundamental has changed. If you look at system development, failure rates are the same. The problem remains the dialogue and the nature of collaboration between the designers and users. The surface has changed.
What happens is this problem of centralization and decentralization swings every 10 years. The PC was not a technical revolution, it was we can do something without having MIS. Then we had local area networks and recentralization, so we swing back.
What we do to solve this problem is we rename the field periodically. In the 1960s, when I came in, we had data processing. In the 70s, it was management, information systems. Then it became IT, we invented the figure called the CIO, but that in itself narrows down what things are.
My comment is that IT doesn’t matter, but co-ordination technology does. It may sound trivial, but as soon as you say co-ordination technology, you start to pay attention to the ideas we are talking about. So, should we choose to outsource to India or should we choose to link research hubs? I would argue now that business depends on its interfaces.
Coming back to the supply chain, some of the interfaces are simple, such as networks. Others are complicated, such as defining a common set of terms for procurement so hi-tech manufacturers or retailers can work together. That could take 10 years. It’s not IT, it’s co-ordination technology.
My goal is to quite simply get CIOs to be willing to share in the dialogue about this shift, take on the issue of who owns the corporate design, and then start looking at their role in the value webs, because it’s the value web that is replacing the value chain.
BIO
Peter Keen, Founder, Keen Innovations
The Herndon, Va.,-based expert has spent 40 years in the industry and authored more than 20 books on IT and business.
