Business strategy: IT matters. Riflessioni con C. K. Prahalad. Cronaca in diretta.

Milano, 28 ottobre 2008.

Nei locali del campus Bovisa del Politecnico di Milano, sono in attesa dell’inizio del convegno. Ho già visto la sagoma tondeggiante del prof. C. K. Prahalad (CKP per i fans) aggirarsi nei dintorni del palco, ma la sala inizia a riempirsi solo ora.

Qualche nota sul personaggio, tratta dalla documentazione del convegno: CKP, definito da BusinessWeek “The world’s most influential business thinker”, è consulente e membro del consiglio di amministrazione di società quali AT&T, Citigroup, Colgate Palmolive e molte altre dello stesso calibro, ed è anche l’autore del bestsellerCompeting for the futurecon Gary Hamel, tradotto in 20 lingue e considerato uno dei migliori libri di strategia degli anni 90.

Opere più recenti:The future of competitioneThe Fortune at the Bottom of the Pyramid – Eradicating Poverty through Profit“.

Umberto Bertelè, Politecnico di Milano

Diamo inizio all’incontro, benvenuti. Il prof. Prahalad, qui per il World Business Forum è a nostra disposizione per oggi.
Breve presentazione: al tavolo, Claudio Contini, responsabile marketing ICT Telecom Italia, Giuseppe Gorla, Technology consulting lead Accenture, Livio Palomba, Portfolio director CapGemini Italia.

Poi Andrea Ragone del Politecnico; io sono Umberto Bertelè.

Breve descrizione dell’attività di CKP: è un personaggio noto da molti anni, insegna all’Università del Michigan, è di uno dei principali pensatori di strategia e management a livello mondiale. Ecco alcuni suoi testi (cita alcuni dei libri che ho descritto sopra).

Ha vinto anche una serie di premi con articoli di rilievo, andiamo dai premi della McKinsey alla Harvard Business Review. Il suo ultimo libro si chiama “The new age of innovation”, e ancora parla di co-creazione del valore attraverso meccanismi che vedono la valorizzazione dell’IT per fare un salto nella qualità attraverso una rilevante personalizzazione.

Il titolo del convegno, IT matters, si contrappone a un famoso articolo del 2003 intitolato “IT doesn’t matter”, che descriveva la tecnologia come una commodity. Faceva l’esempio della elettricità: utile ma può creare anche dei problemi da evitare.

IT matters pone rilevanza sull’IT per creare un meccanismo di innovazione continua nel tempo e anche di una experience personalizzata nel rapporto tra impresa e cliente.

CKP ha sempre dato forte rilievo alla discontinuità.

Prego professore.

Entra CKP: Applauso.

CKP

Good afternoon. I’m delighted to be in your beautiful city, (si spengono le luci) …well… I’d like to see some people (si riaccendono) thank you. (risate)

I want to share with you this meeting, I will try to be interactive, and give you a perspective on what is new on strategy, and why IT is NOT a back office issue. Hope you have fun.

I am not interested in best practices. If we’d all would focus on each other’s best practice, we would all go towards mediocrity.

I am interested in next practices. To see the next pattern, you’ll have to amplify weak signals.

The role of business is value creation. Not only for stake holders, but for the community too.

I also observe the change in relationship between business and consumer. That’s the heart of it.

The innovation debate, the value creation debate, the strategy debate are all the same debate.

Two reasons: competing for the future means a departure from our strategies. Beyond finances, beyond tangible resources.

If you look at knowledge, is all about people. So for the first time the people teams are at the heart of the whole thing.

What the implications of the internet? On this I wrote “The future of competition”. I went from thinking on employees and managers as the critical resource of the company, to the consumer, as main resource.

Understanding the centrality of the individual, see the poor as the source of knowledge, see the community as a whole, as a source of the knowledge.

My books are straightforward. Globalization is here to stay. It is like gravity. You cannot deny it, but you can defy it with an airplane.

How can we make globalization work for us? Just consider:

No 1: For the 1st time in history 3,5 billion people are connected. 1st time. That has some impact.

2nd key fact: digitalization. Prices go down, performances go up. Technology is not going to be the privilege of the rich. Think of the implication of this.

3rd: convergence. A telephone is also a computer, a camera, a watch. And soon it’ll be a radio tv as well.

Finally, 4: social networks, how many of you use it? (tutti) It’s a global phenomenon.

Take just these four… you really think it will not have impact? Nonsense.

If you look at these 4 drivers… you can totally deny the data: you won’t have to worry but… you’ll loose your competitivity.

Is the shift in power going to create a rebalance, and which are the implications?

Google. You have iPods? you make your own playlists? In Google I make my own page, my maps. With the iPod I make my own playlist. In other words, every consumer has a different product. Isn’t that unique? On the same time, they do not produce maps or songs…

One consumer experience at the time.
Resources may come from thousands of sources.

If you’re a 100 year old company, what’s in it for you?

“The firm is the center of the universe” Can this be sustained any longer? For me as a manager this is a very practical question.

In the shop “Build a bear” you go and decide how it’ll be your bear: fat, sound, name, take it home: that’s your baby. There’s nothing on the shelves. Then: you buy snow shoes for the bear, and all kind of accessories, and then another bear… most people end up spending 75 dollrs. How much do you think it costs, the bear? 5 dollars? Let me ask you: what did you make spend the 70 dollar difference?

Qualcuno: Experience.

It must be a hell of an experience, for 70 bucks!

Qualcuno: for co-creating.

That’s right. The experience of the privilege of co-creating a unique, personal experience. That is it. And then, you made a promise: my bear is special: I chose it, I made it, it’s special.

All experience are always personal.

All experience are also spacio-temporal. Significant value. If you go back to the store, your son is in a different mood… different experience. Another unique experience.

This changed the paradigm of the toys business. Used to be: sales for the 50 % in the Christmas week, huge bulks of goods in the warehouses… The most important thing: who gives you ideas on your product? Children. Good news or bad news? Good news in my opinion, wide base of idea resources.

More. Consider Cardiac Pacemakers. Question: assume I have a pacemaker. How can you increase the value of that pacemaker for me?

Remotely monitoring of me. In case something goes wrong, send me a sms and tell me to sit down. Or go to the hospital. Think about this. This can be already done today.

Wouldn’t be nice if someone could say, while you’re in Milano, why don’t you check in in a local hospital and leave your data?

In this system where is the real value? The physical product or something else? What then? You need a network of providers. Cell phone. Hospitals. Transmitters. Social service network. Church. You don’t have to own all this, just have a network.

Can you change very old businesses? Like selling tyres. Anybody bought tyres recently? Did you worry about brand or price? 80% price or 80% brand?

The interested thing… if I were a fleet owner I would look at price. How can you change this business? Pay per use. If you sell the tyre, the fleet owner must give money upfront. If you pay me on mileage, just pay per usage, little by little. That’s a new business model. Take it further: now you have a monitor on all these trucks, and you can monitor them. A driver is driving too fast, you send him a message: slow down. What am I selling? Relationship, not transaction. On the tyre manufacturer side, you get realtime information on tyre use. Precious.

In Italy you must love shoes. What if… you have your foot scanned, 3-D images taken, sent to factories and you get your shoes made like you want?

Auto insurance. How do they charge? Per year? Traditional model: look at the data, 45 year old, you are safe. 18 year old? not safe. Why cannot you have a model in which you pay for what you actually drive? You may be a 45 years old… drunk all the time, and a 18 years old very straight.

One consumer at the time.

I find it fascinating, what are these examples about? Real time information management.

Apple iPod. You create your own list. Co-creation. But if you look at it, they do not produce music, they do not produce the product (all components are Toshiba, Samsung and so on) but they changed the music industry.

It’s co-creating experience. But anytime it has to be personal.

The new form of innovation is not product platform, but experience co-creation platforms.

Is it clear? You do not need to produce anything, to provide experiences. You just need network, that is: dramatic capacity of coordination, and that’s why IT is so important.

1910 H. Ford: “you can have any colour you want as long as it’s black”. And everything is produced inside the Ford plant.

Now we’re going to a point you have to worry at one consumer at the time, but in order to do this you may need to work with 100, 200, 500 partner companies. All outside of your company. Exactly the opposite.

The source of competence is changing, It’s used to be just the company. Then the suppliers. Now is the people. That’s good news, it means more resources, don’t you think?

Every experience is unique means: no commoditazion of your business.
(il bold è mio!)

The point is… access to raw material, access to technology, that’s there. Advantage really is in the quality of databases, understanding of the technical evolution, network management, interoperability of systems, (altri)

Pay per use models, not one-time-transaction models. What would it take me, as a tyre producer, to be able to give you microbilling, like telecoms do? Analytics.

Build these capabilities one at the time, focus on people. One step at the time.

The talent may be the critical issue. Access to talent, evaluate talent.

In India in the 1980s anybody thought “this is just cheap labor”. But since then they went on to dramatic change, and now they have tremendous chances. Even a company like IBM today has a need to find talent. They employ 75,000 people in India, I expect they will employ to more Indians in India than Americans in the US.

That has to do with talent, not with cheap prices. That’s interesting for Europe: if you won’t find talent, these jobs will move away from you.

IBM today is: 14 places and 400 people for 1 project. Not in one place. Same thing for Ferrari. Right here in Italy is happening: search for talent.

There are huge HR implications. Becoming global; crosscultural knowledge; 24/7; creating new knowledge; focus on local analytics; (altri)

Line managers are creating value creation. CIOs/CTOs are living it in the old traditional ways.

From the firm-centralization model to the experience-centralized model.

This will accelerate:
– communication platforms
– computer platorms
– collaboration platforms

The competitive landscape and the competitive advantage is changing… we need to focus on the networking, based on IT.

– centrality of the individuals

– …

– co-creation of the innovation

– democratiziong entrepreneurship

Tranformation requires:

– imagination
– passion
– courage
– humanity
– humility
– intellect
– luck!

You will not know your way in this opportunity.

You will need to imagine your way into this opportunity.
Thank you.

(Applausi).

Contini

CKP

Can Telecoms know about me a lot? Why should I have a standard cost plan?

I am a heavy cellular consumer… suddendly for 2 months no usage, zero. Wouldn’t it be interesting for the Telcom to know what happened? Was I in Japan? That’s interesting for a Telecom. Maybe they could sell me a platform for usage in the Far East. Tlcoms are the perfect examples of a need in change in management mentality.

We need large number of schemes, and also the same scheme for many people.

If I look at the options of Telcoms… nobody will ever understand one thing. Always more options, adding more and more things… Instead of taking away what the consumer doesn’t want… saying “I know a lot about this person, why can’t I offeer him/her a personal cost plan, so she is happy and I will make some money?” But this will need not only technology but managerial mindset, which needs to change.

Once the organization gets used to it, you can improve it. Let’s start from small businesses, big businesses will do what they want. Let’s start from the 1st step.

Gorla

Thanks mr Prahalad for your insightful example of how technology can be integrated. But I think we have a gap to fill… let’s go back to the discontinuity between line managment and CIO/CTO… these are very seldom part of the company boards, they are not involved in strategy designs, we still have 2 groups of people, business vs technology, how can we address to fill this gap?

CKP

Important question. Marketing and finance are integrated with management. The CIO/CTO is not. Why? CIO/CTO are so involved in technology they do not speak the language of business.
In these cases in US they cut your budget. So you end up doing maintenance, no innovation.

The business requirements are changing dramatically. Take schools, too.

In University, you can get away if you don’t know anything about IT, not so with marketing or finance.

The language of technology is not required. But businesses must change, if business changes, business schools will change, they are reactive, not proactive.

This can only be solved if both evolve: strategy or IT? I don’t think it is a good thing to distinguish the two. We need to create a language that is accessible for the two.

Palomba

(…)

CKP

Consider:

1.
Basic technology components are all going down.

2.
Extreme dev.t of social collaborative platforms, there are so many of them

(In India 8 yr olds are already on Facebook. They think email as “old stuff”. Imagine these people becoming consumers at 20).

3.
Much more transparency in business models. More and more businesses are moving into pay per use, this means more transparency. Innovation is not going to be episodic but continuous. Every book about innovation is about One Guy that had One Big Idea and so on.

Look at Google, they have nothing to do with what they were. That is continuous innovation.

Palomba

How about the difference between B2B and B2C?

CKP

I believe that if we do this correctly is no different, B to B ort B to C.

Just saying B… means a firm-centric vision.

We should start with a C = Consumer no more with the B. I believe this is not a good way to think.

Apple is it a product innovation, business innovation, a platform inovation? All of the above.

We need a new language system.

Ore 16.40: C. K. Prahalad lascia il convegno tra gli applausi dei presenti.

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4 commenti
  1. Anonimo ha detto:

    Grazie di questa trascrizione, purtroppo non sono potuto essere presente e grazie a questo blog non mi sono perso niente.

  2. I was very excited to attend Dr. Prahalad lecture because I read a short review on his work which arise high expectations on his insight on new business models. I figured that before I went ahead and buy his book(s), I would get a good overview in his own words.
    And I did.
    I work in documentary production and distribution and there is nowhere I can think the values of “experience” and “co-creation” sound more appropriate. You wouldn’t believe, however, that pretty much each and everyone of us (producers, distributors, content aggregators, packagers, networks, providers, Home Video publishers and so on) is struggling to figure out new business models and reverse the course of our shrinking market in addition to refresh and renew a still very traditional way to conducting business. It’s worse than the music business. We keep talking about “cross-platforms” or “Convergence”. Sometimes, I feel we don’t know what we are talking about!
    Are we really ever gonna find the “next practises”?

    So, when I realized that the “main plot” of the lecture was going to reach its dramatic peak moving from “IT doesn’t matter” to “IT matters”, I figured that maybe I would finally find a paradigm, the unexpected angle, that element of surprise that so much makes the documentary an experience worth living/viewing.
    And I did… Not quite, though.
    I actually left the conference room a bit sceptic thinking that – at the most – “IT can matter”.
    So, although I am not the most qualified person to try to argue and comment what I heard, (and hopefully understood) I would like to throw my ball to you and I would truly appreciated it if you could bounce it back to me and/or, if Dr. Prahalad could read my comment and reply as well.

    The truth is that I just couldn’t shake off the feeling that Dr. Prahalad is oversimplifying the matter, looking for a simple formula that works for everything.
    I believe neither “Information” (with all implications of language and communication, and the noble goal of sharing “what is known”) nor “Technology” (which means to me “the application of a fantastic scientific discovery”) can be reduced to whether it is a “commodity” or a “strategic value”.

    IT feels as something liquid that at times can solidify in a produce or vaporize in an ever-changing X strategic factor depending on case scenario. And it is hard to “foresee” the scenario, especially if it is a brand new one.

    When Dr. Prahalad suggested that “centrality of the individual” is a source of knowledge and ultimately “the consumer is smart enough”, therefore “co-creating” with C (Consumer, employee, supplier…) is the key, the Ticket (or rather the “Golden Ticket” of web 2.0 meaning) to new practises, I got ready to take some notes. Dr. Prahalar proceeded making examples.

    But I felt they didn’t quite represent the principles he spoke about, confusing me.

    1. Let’s take Build a Bear in regards to “co-creation” and the “Unique personal experience”. I may be happy to make my own personal bear and share it with the “bear community”, until I look to the one my friend did and I realize mine looks horrendous; my experience is a negative one. Maybe I want my money back! (especially if I am buying the privilege of co-creating the unique personal experience). Personal experience may be all right but beware: not all I do because “I” do it makes me happy.

    2. Dr Prahalad’s wife will always feel she’s got no shoes even if she goes SGI with a 3D scan of her foot. Have you ever seen a woman who is going to think that if she’s comfortable with a pair of shoes, she won’t buy any more shoes? Italian fashion would be doomed. IT is pragmatic (for sure) and cost-effective, but is IT beautiful?

    3. And have you ever seen a truck driver who is going to be happy when a devise tells him to slow down or put air in his tires? I don’t think so. When I stop to a highway’s gas station and I observe those huge trucks full of personalized tapestry, signs, pictures, and I hear conversations about engine performance and so on, I doubt that a truck driver doesn’t feel that “his” truck isn’t “his” baby. No matter if they don’t own it, no matter if they are part of a fleet. Fleet owners better be sensitive before installing such device. I think truck drivers ultimately like to be the “experts” on interpreting the data they receive.

    Of course, many women are extremely happy about the GPS car navigation systems that allow their husbands to be able to reach destination without having to beg them to stop and ask for directions when they are lost! Moreover, the new sensors embedded in the asphalt on many roads in the big cities actually give you the fastest route, which makes the husbands arrive home even on time! In this case, IT does matter to everybody and provides a great service by keeping family arguments to a minimum.
    More seriously, in face of an emergency, having my pacemaker sending a signal to my doctor reporting that my heartbeat is irregular, and giving me instructions to lay down while providing me with the list of the closest hospitals, most definitely IT should be available to any heart patient.

    Perhaps, B may not need to produce all in-house (like Ford) anymore, and can rely on co-creation avoiding to paying business gurus (who will tell what’s the next “cool” toy) big bucks, but I do believe there is still a request for risk-taking, trend-setting and mostly ISPIRATION that has to do more with personal ethics, vision and common sense. And some good ‘ol R&D.
    IT just happened with President Obama’s fund-raising campaign, but probably the success of this co-creation goes to Barak Obama who made IT “happening”.

    IT WHO matters.

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