Everywhere, the talk is about cloud computing, mobile, social and big data. Their impact is so huge that they have been likened to tsunamis. But has anyone asked why these tsunamis have so much lifting power? Is it just that they are fashionable technologies? Or is it that they actually facilitate the most difficult interactions in business, where gut feel, intuition, experience and skill dominate? These areas are rarely supported by enterprise applications. But the winds are changing. Welcome to tacit tech.
What’s wrong with this picture?
Best retailer – Apple
Best bank – eBay (PayPal)
Best logistics – Amazon
Best data centre - Google
The enterprise companies who should be winning their segments are being disrupted by new players who are using technology in different ways to the incumbents.
That is certainly the perspective of Vinnie Mirchandani in his book, The New Technology Elite: “The more I analysed operations of Apple, Google, Facebook, Amazon, Twitter and eBay – their data centres, distribution centres, retail stores, application ecosystems, global supply chains – the more impressed I was with the industrialisation of their technology. They are considered “consumer” tech, but they have better technology on a greater scale than most enterprises.”
But the flip side also applies.
In effect, according to Mirchandani, what we are seeing is a shift in thinking about technology. For too long, IT has been an expensive and low-payback back-office investment. Now companies are building technology into their products as this is allowing them to generate revenue and growth.
Core catalyst
The core catalyst driving change in the software world today is the consumerisation of technology. “This is my phone / tablet. I want to use it for everything I do.” People bring to work the devices they were given for Christmas and expect to be able to use them to do work in the same way as they use those same devices for leisure and domestic activities.
As a result, the key trends in consumer IT are also making their mark in business tech:
- Mobility: users want anytime / anywhere access to enterprise data – this is a real challenge for the IT departments who see their job as securing and protecting that same data
- Social media – apps in this space, when they have a definable ROI, tend to be primarily customer-facing
- Big data / analytics – we collect more data than ever before and create more content than ever before (for example, we send 340m tweets a day); as a result, we need to process a bigger pile of data than ever before, and ask questions that have never been asked before
- APIs: the user sees just one interface, but behind the scenes, many applications work together in seamless integration
- Cloud – bringing us ubiquitous availability of massive, low-cost computing power
- App marketplaces - easy to find, purchase and install customised functionality
- Monetisation - an explosion in monetisation models and opportunities for software developers, enabling a host of new software developers to bring products to market in contention against the established big brands
The economics of computing is also changing fast. That’s why Marc Andreessen, the creator of Netscape, says that software is eating the world: “The typical cost of running enterprise applications has dropped by two orders of magnitude – 99% - in the last ten years in large part due to cloud computing.”
Interactions
The basic question we should be tackling is this: does all this industrialisation and consumerisation of tech actually help enterprises or are they just expensive victims of fashion? How do these tech trends help companies improve the productivity of their employees? Possibly, because they help the most valuable employees in a workforce do the toughest thing they do: interact.
Over the past 30 years, companies have boosted their labour productivity by reengineering, automating, or outsourcing production and clerical jobs. As more companies specialise in core activities and outsource the rest, the greatest need is for workers who can interact with other companies, their customers, their partners and their suppliers. These workers now dominate the workforces of western companies.
But how do you make such workers more productive? You can use technology to replace a checkout operator, but can you depend on technology to choose an advertising campaign? What technology can do is to help such interaction workers make better decisions, more effectively and quickly. Although the direction of interaction innovation fits in with the vector of software tsunamis, the actual path is not clear at all. That is bad news for companies who simply want to copy best practice from others – but it is good news for entrepreneurs and innovators who thrive on challenge and opportunity.
We need to distinguish between three kinds of worker:
a) Transformational: extracting raw material and converting them into finished goods. At the start of the 21st century, only 15% of the US workforce came into this category, even though a hundred years earlier, almost all the non-agricultural workforce would have come into this category.
b) Transactional: works on simple, routine interactions, such as clerical and accounting work, or processes that companies try very hard to automate or eliminate
c) Tacit: complex interactions where people have to deal with ambiguity and have to exercise high levels of judgement
Applying tech to tacit
Both transactional and tacit workers can be referred to as information / knowledge workers, but much of the technology industry is focused on supporting the transactional worker. If the tacit worker is supported, then it is through:
- Using technology to replace the manual transactional activities that a tacit worker engages in so that they can concentrate on the most complex problems
- Using technology to complement and extend the tacit capabilities and activities of the worker.
There are three ways of using tech to improve the lot of the tacit worker:
- Eliminate low-value-added transactional activities – such as a pharmacy using a robot to fulfil a prescription
- Boost the quality, speed and scalability of decisions employees make
- Extend the breadth and impact of tacit interactions – using loosely-coupled systems will enable tacit interactions to flourish in networks inside and outside the company.
Is it worth doing? Currently, companies invest in tech to boost the performance of transformational or transactional activities. They spend far less on tacit tools. But they need to. Currently, the spread between the most productive and least productive companies in transformational sectors is quite narrow, but the variability of company performance widens in the transactional sector and is 50% greater in tacit-based sectors.
Tacit activities are worth improving. No question.
There are deeper implications for business applications as well. Will software buyers develop their understanding so that they go to market seeking tacit tech? They need to be educated on this. Will this tacit tech search prevent them from simply investing in new software that only focuses on transactional and process tech, the current norm in business software? And can software vendors find a way of crafting together the disparate tsunami trends into tacit tech products that actually make a difference to today’s business?
If today's software tsunamis are to be more than fashion items, then they will reshape the landscape for enterprise tech - and tacit tech will be a key driver. Again, I venture to say, no question.
Excellent article, and a different viewpoint on what's happening.
I certainly see evidence of of public practice accountants moving to tacit tech ways of working.
Today, around 70% of the services accounting firms provide to small and medium sized businesses comprises heavily transactional compliance work; statutory returns, tax calculations and filing and annual reporting.
In a cloud context, the heavy lifting of compliance is considerably reduced, freeing the accountant up to shift to a tacit mode where they are able to spend more time discerning issues and trends in their clients' financial data and then providing their clients with more valuable advisory guidance.
While not directly related, I also see opportunities for small businesses to obtain augmented operational capabilities, I wrote about this on our blog a while back..
- http://blog.xero.com/2010/11/weaponized-business-processes/
Gary Turner
Managing Director, Xero
@garyturner
Posted by: Gary Turner | May 28, 2012 at 02:41 PM
Gary, you point to an interesting shift that accountants need to navigate: from transactional / compliance work to tacit insights and advice. The new tech trends certainly support this way of working, if accountants are prepared to move from their traditional ways of working (and the tools they are accustomed to using). But are accountants prepared to do so?
I also agree that small businesses can use the new tools to augment their operational capabilities. This is an interesting angle because it is looking at the problem from the opposite angle. Instead of thinking about how process-focused businesses can support their more ad-hoc, instinctual activities, this perspective tells us that small businesses that are used to doing ad hoc activities anyway can build in smarter processes by "weaponising" them. We need to see both trends pushing ahead.
Posted by: Jyoti Banerjee | June 06, 2012 at 09:02 AM