The Digital Nervous System
At the 2000 NIA convention in Orlando, manufacturers, distributors and contractors discussed where they were in respect to e-commerce and customer connectivity. Along with this group, third party service providers and software providers also met to discuss future project developments. It was a good interchange and several themes emerged from the meetings. Among the conclusions:
- Manufacturers had budgets and personnel allocated to discuss the future, but action plans hinged on how demand and technology would evolve.
- Distributors were viewing the next stage of software from earlier Gordon Graham oriented systems.
- Contractors were viewing information needs as a priority, safety, material safety data sheet (MSDS), order status and bid process.
- Third parties were working on customer connectivity venues that were perhaps two to four years out in thinking.
Today I venture to guess that the scope of thought from the same group has changed as to what the future of information efficiency will demand.
Familiar Terms Help Transition to Information Age
Part of the genius of the information age may well be that over the last 30 years we have been introduced to the virtual world of digital information storage and information processing through familiar icons and descriptions. Everyday terms and concepts such as "desktop," "folders," "files," and "recycle bins," along with the use of terms such as "my documents" and "my computer" have made the gradual transformation to digital format not only personal, but also recognizable within the familiar comfort zone.
Conceptually and literally we have been weaned and transformed through the 1980s and 1990s and into the 21st century; a time where a company’s "Digital Nervous System" has become the hub of its business enterprise. If the 1980s were about application discovery, and the 1990s about re-engineering for the future, then the first decade of the 21st century is about creating digital information and processing centers from which all aspects of business are managed.
Certainly each stage of this transformation has had its peaks and valleys, success and failure, breakthrough and breakdowns, but steadily the future is evolving through trial and tribulation. The future is clearly about "digital" processing and the effect on quality and quantity of information provided. To quote Bill Gates, "How you gather, manage, and use information will determine whether you win or lose." This statement was made in reference to 21st century competition and differentiating your company in the information age.
It’s a given that in industry, electronic "business to business" connections are being made every day to enhance transactions. This isn’t a new concept, as telephones and fax machines have provided the same enhancements to transactions in their own time. The difference today is the cost per transaction, the information per transaction and the speed of the transaction. All things equal, the speed of acquiring information has been a driving force in all that we do in this new digital age. As we have become more productive as individuals from information access, our tolerance for waiting has diminished. Also, our ability to sort out and understand the vast amounts of data we can acquire or produce is limited by time. In short, the new digital age is creating the need to rethink the use of information as it applies to our businesses.
A Means to an End
Information through technology is a means to an end. Who gets the information? Who is trained to use it? Who is empowered to act on it? How does it arrive at the decision maker’s desk? Is it accurate? Is it timely? Is it complete? Does it enhance the decision process? The heart of a digital nervous system is data, and when this gets processed into usable information it will affect all areas of your business. These include:
- Basic Operations: capturing and reporting data.
- Business Reflexes: reacting to change.
- Strategic Thinking: understanding trends.
- Customer Interaction: facilitating transactions and information.
The results of the digital revolution are simple: increased productivity, decreased cost of processing/storage, and quicker and more accurate information, which enhances the decision- making process. Every business strategy today should be looking at these areas. The examples are obvious in many areas. For airline tickets, if you go through a travel agent, you pay $8 in costs, but only $1 if you went through the Internet. For insurance fees, agent costs are $400 to $700, compared to $200 or less through the Internet. You pay $1.07 per transaction for banking costs if using a teller. That same transaction is 27 cents by ATM and $.015 through proprietary online systems. The examples are numerous and diversified, and the previously mentioned items illustrate only cost savings, and not productivity changes.
The question today is how many businesses are really thinking through this digital revolution to create a "Digital Tapestry," connecting information for customer satisfaction? How many businesses are creating a "Digital Cockpit" of instruments to manage their business? How many businesses are missing the fact that "Real Time" information and employee education are differentiating factors in the future? How many businesses realize that the future is here in regards to these tools and concepts?
The real question might be: At what stage are you in thinking about virtual tools versus bricks and mortar tools? Have you been left behind thinking that a folder is manila and a file is a sheet of paper in the folder that you can touch and feel? Can you let go of the notion that a report can only be processed on a paper form? Can you visualize the postage machine being mothballed? When someone offers to mail you information, do you ask for an e-mail or a CD, as opposed to paper, which contains information that will have to be altered to make useful? When you operate a laptop with 20 billion bites of space, can you picture the number of file cabinets it would take to store that amount of information in your office? If you need to transfer a file to someone at a meeting, do you use infrared transfer of data?
Taking Advantage of Tools
The odds are that almost everyone is using digital equipment and digital software tools. It’s likely that only a few have actually converted to a paperless digital network of information. It’s doubtful that many are thinking about these concepts when they’re doing budgets and looking for savings. A stroll through the office can be an interesting adventure. You might see people filing delivery tickets for four hours a day, processing receipts and expense reports, stuffing envelopes with invoices, rummaging through outdated catalogues for information and copying and mailing forms to every location and customer. Meanwhile, the office itself has become so cluttered in paper that the desk has disappeared (along with any chance for organization).
However, what if there were no delivery receipts to be filed because they were scanned in the warehouse office? What if expense reports and receipts were scanned and e-mailed to headquarters so that accounts payable (AP) can process them without paper? What if the cluttered desk paper could be scanned into files and stored digitally upon arrival? What if invoices were e-mailed to customer accounts without paper, printing or postage? What if company forms for every purpose were only available digitally for processing? What if all employees were trained to use the Internet and data processing tools to get information? The answers to these questions include, but certainly aren’t limited to, better use of personnel, lower costs and more time for customers.
I have been through four distribution oriented, computer hardware and software conversions in 18 years, and each system was better than the previous one. However, one constant can be claimed with each system, and that is that only 20 percent to 30 percent of its capability was ever used. The process through which we select information technology tools is complex, time consuming, and expensive. The latest system, recently converted, is by far the most powerful tool to date. In addition to thinking through our processes to be sure the new system can adapt to any future demands, we also committed to using more of the system’s capability, in as much that we’re trying to think digitally about information and real time availability of resulting reports.
With newer software systems, the concept of "real time information" is probably the most important aspect. Older systems captured data and put it into compartments for end of month processing and manipulation. The concept of "real time information" means that reports, summaries, statements and all information is constantly updated and at the fingertips of the decision maker. Reports can be created and changed constantly within the system but can also always be current to the minute. This raises the question of employee empowerment regarding information.
Employees now have more than an information network. They now can have processed, summarized information that makes them more knowledgeable about courses of action. Meetings to update employees can be reduced because the general employee population has its relevant management reports, thus reducing the need for the manager. The manager is then free to have more customer contact because he has more time. These steps create something of a domino effect in terms of better efficiency, improved time management and enhanced customer service, to name just a few of the benefits.
The concept of a digital nervous system affects all aspects of how you think about your business. As quickly as information can move across a network today, do you want to take 15 days at the end of the month to assemble data and pass it along to employees? Or would you like everything summarized at 8 a.m. on the first of each month, with financials, inventory reports, accounts receivable (AR), AP cash flow analyses, sales, margins, key performance indicators, and year to date (YTD) comparisons? The answer is simple and you didn’t have to wait until the end of the month. You could pull month to date (MTD) data against YTD from the previous month at any time during the month.
So, no matter the size of your company or configuration, realizing that newer digital information systems are active and dynamic, but also different from older and more static information, is key. Then comes the realization of a digital nervous system’s capability in reducing costs and increasing productivity. Easy access to information also decreases stress in the normal workday for employees, and complements a customer’s search for information. After these points are realized, a planning stage can be implemented to review your data processing capacities.
Determining your digital nervous system needs hinges on conducting a relationship and transaction roundtable discussion with employees, customers and (in the case of distribution), manufacturers. At this point you might discover that information drives everything about which you and your customer are thinking, and that customers are the most important part of the process. You may decide that proper information use is so important that you form a new position or group in the company. This might be a customer relations manager or a customer relations management (CRM) team. This team or manager would constantly be looking at best practices in customer relations based on information received, provided and processed.
A word of caution needs to be heeded in utilizing new systems, capacities and information, and in creating a CRM position. That is, don’t get trapped in the 20 percent to 30 percent zone.
It’s easy to understand a concept and a totally different program to implement the vision. It takes perseverance, dedication and constant reminders to all to take the vision to reality. A laissez faire attitude about proper implementation becomes a waste of funds and resources. In other words, these elements enhance your business only after the work is done properly. It’s also not easy to keep telling employees and customers how great this new digitally enhanced software will be down the road, when the setup process itself is dragging them down. The commitment must be strong and the educational process excellent to achieve the vision.
Today there are so many ways to connect to the supply chain, so many ways to enhance and speed up operations and efficiencies, and so many ways to streamline processes that it becomes similar to buying a new car. You go in to buy a basic car and you walk out with every option known to mankind, including a fine set of Texas Longhorns on the hood. The beauty of all the different enhancements in information technology today is that you can add segments as funds allow. It’s not necessary to buy it all on the first day. Also, many businesses need only minimal enhancement, depending on their customer base. The truth is today "business process" needs are served by "systems of systems" integrated in an infinite structure to solve problems.
Theoretical Nervous System
A theoretical view of an efficient digital nervous system might include the following scenarios to capture the rhythm of this thinking. For example, "customer one" places an order during off hours from his home or hotel, after viewing the existing inventory in his supplier’s warehouse. He orders what he sees is available with a note to back order one item. The Internet order prints in the warehouse for morning processing. The order requires MSDS sheets, which the warehouse manager selects to print with the delivery ticket. The inside sales personnel and sales manager have a daily report that’s automatically generated when they come to work in the morning, indicating MTD sales, yesterday’s sales and current day processing orders.
Purchasing personnel then report to work and see requisitions for the back order, which they send off immediately to the vendor, who in two hours confirms the expected time of delivery. This information is e-mailed to the customer.
During the day, "customer two" needs technical information and it knows that your Web site is connected to absolutely everything. So the customer visits your site and readily identifies from your library what it needs and downloads the information to its system. "Customer three" has a problem at midnight on a Saturday and needs to reach an employee for an emergency request. As a call-in and Internet option you have a list of "on-call" employees in each of your geographical locations. The customer subsequently locates an on-call person within 15 minutes, and the problem is resolved. If customers visited an inside sales person’s office, they wouldn’t find any cabinets or file drawers, but they would notice a small rack of CD’s and a personal computer station.
In the meantime, "customer one," who placed the remote order, is close to its credit limit and the AR department sends an internal e-note to the sales rep concerning this situation. A manufacturer announces a price increase and e-mails the new prices, formatted in sequence for your system. The sales manager sees decreased sales from a customer in the first two weeks of the month, prompting a call to the customer. The customer wants his price book on an electronic Web page, secured for his use and updated to real time.
These aren’t important as individual transactions, but they’re important to see how quickly a good digital nervous system can process information. The demand for speed and accuracy is increasing to satisfy the supply chain. The speed at which integrated information systems can reach the correct personnel today approaches "the speed of thought." Make no mistakes about this process-to work properly there are a million data files in the back of the store that have to be current and updated
What is key to the entire process is that "value" must be provided to the customer as the result of the investment in a real time digital nervous system. Value must be perceived by the customer to differentiate your company from the pack. Value must be presented in a way that its many faces are revealed. These include speed, accuracy, productivity, information, reporting features and reduced transaction costs.
Information is indeed different today than it was a few years ago because something happened to change its nature. That change was "The Digital Nervous System."