Traditional business management has had to make room for a new facet of business: technology. Through the years traditional business management has had to marry its strategies with the proliferation of technology where every business owner from Starbuck’s to Jim’s Auto has had to incorporate technology into its everyday operations.
The problem is that in the late nineties business believed technology was going to be the solution for every business problem, but it wasn’t until recently that business managers realized that technology will fail if not implemented properly. That is, traditional business management must seamlessly marry itself with technology.
Traditional business management is pretty self-explanatory; it’s managing business through traditional methods that have been used for many years. Traditional business management takes into account all aspects of running a business, large or small. Whether it is a million-dollar company or a billion-dollar company, all companies run the same. Those traditional methods incorporate three aspects of business: sales and marketing strategies, efficient operation and production methods, and manageable finances (SG&A). I believe all businesses should pay attention to these areas of business management.
So, now you have this traditional business model to think of, and you also have to think that the model has incorporated technology. You see, managing a business is not as easy as it sounds, and I know you have never looked at your business in this way before.
Believe it or not, graduate schools teach this stuff and larger companies obviously have the money to pay someone to think of this stuff. But most businesses do make the mistake in believing technology will solve all of their business problems. This is simply not true; technology cannot solve every business problem.
Many large corporations install and implement technology as quickly and arbitrarily as they would a new desk or a new lamp, not taking into consideration the stress new technology places on both business processes and human nature. Humans inherently do not like change, especially at the work place where they might feel as they might lose their job or were not consulted in helping determine which technology is best for their task or function.
Business processes do not like change either as the processes a business must go through to operate are much more complex than people might think. Most technology consultants want to “go live” with their implementation as soon as they can so they can share the praise of a successful launch. What most technology consultants don’t realize is that their eagerness to “sell” the job puts a business in a precarious operational bind.
It only makes sense to understand that as technology can be customized and most business processes cannot, basic technology implementations will hurt a business’ process as opposed to helping.
Some of the technology solutions out there can be very complex and some can be very simple. For example, I recently helped a client realize that developing a method of capturing labor time per phase of each of their projects allowed them to better understand and account for costs associated to labor and materials, per project. This allowed their sales team better cost data related to profit margins required per project. Initially the client was looking to spend money on purchasing one of those electronic card readers that each of his employees would have to swipe as they moved from station to station. We were able to solve his process issue at half the cost of that electronic clock by simply creating a custom process document from Microsoft Excel. The fact that the clock was not customizable would require the business processes to change just to accommodate the clock.
In this case we are trying to convey the importance of understanding your business and its processes before you move into technology. It is less expensive and less burdensome on your business processes. What we accomplished in the case above was that we were able to ‘tweak’ the business processes at will, where had we purchased the clock, we would have been forced to comply with what the clock required, not the business.
In the late nineties the hype of technology and the Internet fueled the belief that plugging technology into your business or developing your business around technology was the best way to run a business. A great example was WebVan and HomeGrocer.
These companies spent over a hundred-million venture capital dollars building the infrastructure that was going to give them the warehouse space to buy food products to fill all the customer orders that were to come via the Internet.
The mistake was that the company put all of its money into the assumption that its idea would work because the American grocery shopper was ready to buy groceries online via state-of-the-art technology. The orders never came.
Actually, the orders did come; the problem was that both companies were in so much debt because they couldn’t generate interests in their business model and they went out of business.
Today, the traditional grocery chains such as Albertson’s and Vons in the western U.S. have capitalized on earlier business models and realized their traditional way of doing business could was a great foundation to build their technology around their current processes.
I had the privilege of touring the WebVan warehouse in Oakland, California. It was impressive. If I remember correctly, it was an 80,000 square foot building equipped with a technologically advanced conveyer belt system worth millions of dollars. It looked like the inside of a United Parcel Service (UPS) warehouse, but much more expensive. For those who have never seen the inside of a UPS warehouse, it is just a bunch of conveyer belts.
Interestingly, about 50 people were milling around the WebVan warehouse; their main task was making sure the computers were pulling the right products and putting them on the conveyer belts. Great operation, but they ran out of money after just a little over a year.
So, what failed here, technology or money? Lack of money failed at WebVan, and lack of money fails almost every business that goes out of business. Lack of money fails business due to lack of business knowledge.
Business owners, make sure that you understand technology and that it can be customized and should be customized to meet your business process requirements. You can see the most successful implementation of technology in companies such as Wal-Mart and Toyota and we can see failures in technology such as WebVan.
We make sure we know how our business operates and what those operations require when making your businesses more efficient and effective. We look at understanding what your business requires before we recommend technology.
In the long run, you’ll spend less and profit more.