A manager in a manufacturing company is glaring at a senior executive from one of its suppliers across a teleconferencing link. The definition is good enough for each to see the whites of the other’s eyes. The manager leans forward: “You are going to deliver these components on time, aren’t you,” he says, daring his opposite number to come up with an excuse for failing to meet his obligations.
It’s a scenario which, hopefully in less confrontational mode, could become commonplace, as new ways of working based on ubiquitous and universal connectivity – described by communications group Nortel as “hyperconnectivity” – sweep through the business world.
Anyone who doubts that these new ways of collaborating are fomenting a business revolution need only look at patterns of traffic across the world’s telecommunications networks.
According to Lloyd Salvage, vice-president of global marketing for the US telecoms giant AT&T, 40 per cent of all the traffic passing across the company’s network is video: “This is a dramatic change over the past five years.”
Some of this video is consumer traffic – individuals downloading movies or using social networking sites such as Facebook – but organisations are increasingly using video as a training medium, for instance, or for communication with staff or, as in the example above, with suppliers.
Companies such as AT&T are providing high definition teleconferencing systems which can radically alter the way an organisation does business. Mr Salvage provides an example that is close to home for AT&T: members of his marketing team are based across the globe and use of teleconferencing for a recent meeting saved the company $17,841 in hotel and travelling costs.
Today, AT&T and its competitors are spending billions of dollars annually to ensure that, as the current recession gives way to growth, the infrastructure, networking speed and capacity are in place to support hyperconnectivity for companies large and small. “Collaboration is for all and not just the few,” Mr Salvage says.
Connecting with customers, suppliers, partners – and even competitors – through a variety of networks will mean companies will have to re-examine their business processes and beliefs: “The technology is changing the nature of what it means to be an organisation,” says Rob Gear of PA Consulting.
IBM, for example, once one of the world’s most inward-looking organisations, has embraced social networking (see ‘Managing the change’ at www.ft.com/connectivity).
For 18 months, Mr Gear has been working with Carsten Sorensen of the London School of Economics to consider how businesses should face up to the challenge: “Historically, organisations have protected themselves with impenetrable buildings, security guards and complex rules and procedures,” he says.
“Technology is challenging this approach, especially around the boundaries of the organisation. It can be difficult to understand who should be inside and who should not. Our top level finding is that this new way of working has tremendous possibilities for innovation and new business models but there are incredible risks as well.”
There are powerful examples of companies which have redefined themselves in the process of building new business models.
Mr Gear says: “You see companies which were previously manufacturers becoming more like service providers. The engineering group Rolls-Royce, for example, no longer sells aero engines: it sells flight time – it says ‘We will provide this many hours of uninterrupted flight time for your aircraft before things fail.’
“At a more mundane level, you don’t buy a photocopier any more, you buy ‘an integrated copy experience’ where the machine is monitored remotely 24 hours a day. Before it breaks down, a technician turns up because they were monitoring the machine and knew it was just about to go wrong.”
But, Mr Gear says, not all collaboration is good: “You can have too much collaboration. Heinz, the foods company, for example, invited members of the public to make their own videos to promote a brand of ketchup.
“At face value it was a great idea, but it missed out by failing to allow the public to do the filtering and voting. Heinz was left with a pile of technically inadequate videos some of which carried the wrong message. When you bring people in from outside – you have to formalise processes that had been fluid. You cannot afford to give your collaborators too much discretion or you will end up with mayhem.”
Mr Gear argues that companies should automate as much as possible, find ways of enabling customers to provide and maintain information about themselves while retaining and selectively applying discretion: “And that is the expensive part,” he says.
So it is all about the customer. Andy Mulholland, global chief technology officer for the consultancy Capgemini, uses the airline industry as an example of the new regime: “Over 10 years we have moved from fixed price tickets to a situation where you can interact with the airline online to see what combinations of destination, departure time and luggage allowance are available.
“The network used to be something that connected computers. Now it has become a business tool based around the concept of ‘how do I find and do business with a variety of people and partners and – internally – link up my resources to provide flexibility’.”
He points to the example of Nike, the sports equipment manufacturer, which in one initiative organised 800,000 people to take part in a 10km run in 23 cities as if it was one competition.
“Running had been a lonely activity. Now you were running with other people and testing yourself against them. Running became a friendly thing with social connections. And Nike’s share of the running shoe market increased by more than 10 per cent over the promotion.
It will, however, mean changes in the “boiler room” – not all of them welcome. A recent research paper from Capgemini*, outlines the problem facing IT departments: “The bad news is that corporate IT will struggle to keep up. The constraints on organisations are increasing: regulation is increasing and so are the risks to organisations – whether through loss of personal data, hacking or failure to comply with legal requirements.
“The CIO is particularly under pressure because IT is often seen as the cause of the problems or a brake on progress. The dilemma is to manage risk while enabling the organisation to connect and innovate.”
But, it goes on: “An old friend, the organisation’s IT network, turns out to be a source of salvation. At the intersection between the external and internal networks, it is in a unique position to do more than merely connect. It can help manage in a way which is ever vigilant but unobtrusive.
“It can also start to interpret activity in ways which are only starting to be recognised and intervene in real-time. Free from concerns for security and compliance, CIOs can turn their attention to adding value to the organisation by providing the necessary tools for users to engage in the new world.”
None of this will happen by accident, however. Companies will have to think hard about their role in the market and how they can position themselves for change. A forward-looking, flexible architecture is a prerequisite. And, as in most things, fortune will favour the prepared.