The Overdrive

The digital nervous system. The best way to put distance between company and the crowd. Accurate information about sales. A standardized system of accounts for the entire GM organization. Achieving advantage over competitors in the information age.

Рубрика Экономика и экономическая теория
Вид анализ книги
Язык английский
Дата добавления 16.06.2012
Размер файла 19,8 K

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I have got to read the book by Bill Gates. At first look, it might seem to be just an extended advert for Microsoft. But no, there is more to this book. It is penetrating, and entertaining. This book is not just about big business getting bigger, but also about how simple techniques of good information flow management within even the smallest of organizations, can make contented customers keep coming back to you again and again for more commerce.

This is an excellent book on using the Information Technology (IT) within your company to succeed. This book is not about trends of Information Technology industry but about trends of IT usage.

Each chapter of this book has an instructive title. I'll tell you about the first chapter named «Information Flow is Your Lifeblood». It divided into several pieces.

In the first part the author says about digital nervous system, which will free you from the old paper processes so that you'll have the time to think about some organization questions. It will give you the data to start thinking immediately, and to see the trends coming at you.

In the second part he tells that no company can assume that its position in the market is safe. A company should constantly be thinking about its options. Also in this part he says that the most important thing is that a company's managers have the information to understand where they can compete and what their next great market could be.

Than Bill Gates tells us: «The first step in answering any hard business question is to look at the facts» and writes about Alfred Pritchard Sloan who was a long-time president, chairman, and CEO of General Motors Corporation.

The next part states: «In the age of the Internet and increasing competition in financial markets, the key to success is the intelligence of a bank's use of data and how well it responds to its customers».

In the fifth part the author says about information work, which he defined as the processing of information by human brains or computer programs

The final section states: «To do information work, people in the company have to be able to find information easily». Bill Gates convinced that the policy of access to information should be more open.

company sale advantage competitor

1. Manage with the force of facts

The best way to put distance between your company and the crowd is to do an excellent job with information. There are more competitors today. There is more information available about them and about the market, which is now worldwide. The winners will be the ones who develop a world-class digital nervous system so that information can easily flow through their companies for maximum and constant learning.

I know what you're going to say: no, it's efficient processes! It's quality! It's winning market share and creating brands that are recognized! It's getting close to customers! Success, of course, depends on all of these things. Nobody can help you if your processes aren't efficient, if you don't care about quality, if you don't work hard to build your brand, if your customer service is poor. A bad business plan will fail however good your information is. And bad practice will spoil a good plan. If you do enough things badly, you'll go out of business.

But whatever else you have on your side today-smart employees, excellent products, loyal customers, cash in the bank-you need a fast flow of good information to make processes efficient, raise quality, and improve the way you put your plan into practice. Most companies have good people working for them. Most companies want to treat their customers well. Good, useful data exists somewhere within most organizations. Information flow is the lifeblood of your company because it enables you to get the most out of your people and to learn from your customers. See if you have the information to answer these questions:

* What do customers think about your products? What problems do they want you to fix? What new features do they want you to add?

* What problems do your partners have as they sell your products or work with you?

* Where are your competitors winning business from you, and why?

* Will customers' changing demands force you to develop new capacities?

* What new markets are appearing that you should enter?

A digital nervous system won't guarantee you the right answers to these questions. But it will free you from the old paper processes so that you'll have the time to think about the questions. It will give you the data to start thinking immediately, and to see the trends coming at you. A digital nervous system will make it possible for facts and ideas to quickly surface from deep in your organization, from the people who have information about these questions and, it's likely, many of the answers. Most important, it will allow you to do all these things fast.

2. Answers for difficult questions

An old business joke says that if the railroads had understood that they were in the transport business instead of the steel-rail business, we'd all be flying on Union Pacific Airlines. Many businesses have changed their goals in even more basic ways. But it's not always clear where the next growth opportunity is.

McDonald's has the strongest brand name and market share and a good reputation for quality. But a market analysis recently suggested the company change its business model. McDonald's has occasionally promoted movie-linked toys. The analysis suggested that the company should use its well-known small profit product to sell the high-profit toys, and not the other way round. Such a change is unlikely, but not unthinkable in today's fast-changing business world.

No company can assume that its position in the market is safe. A company should constantly be thinking about its options. One company might be hugely successful if it broke into another business. Another company might find that it should stay with what it knows and does best. The most important thing is that a company's managers have the information to understand where they can compete and what their next great market could be.

This book will help you to use information technology to ask and answer the hard questions about what your business should be and where it should go. Information technology gives you the data that leads to deeper understanding of your business. It enables you to act quickly. It provides solutions to business problems that simply weren't available before. Information technology and business are becoming so tightly linked that you can't talk about one without talking about the other.

3. Be objective - rely on facts

The first step in answering any hard business question is to look at the facts. It's easier to say this than to do it. The principle is illustrated in my favorite business book, My Years with General Motors, by Alfred P. Sloan Jr. If you only read one business book, read Sloan's (but don't put this one down to do it). Extraordinary success can follow from positive leadership that's based on information and reason.

During Sloan's time as boss, from 1923 to 1956, General Motors became one of the first really complex business organizations in the United States. Sloan understood that a company could not develop a broad business plan or choose the right projects without building on facts and on the understanding of the people in the company. He developed his own understanding of the business by working closely with his staff and by regular personal visits to the company's technical departments. His greatest influence as a manager, however, came from creating working relationships with GM dealers across the country. He constantly gathered information from GM's dealers, and he worked to develop close relationships with them that produced results.

Sloan thought that fact-finding trips were very important. So he built an office in a private railroad car and traveled all over the country, visiting dealers. He often saw between five and ten dealers a day. These visits helped Sloan to see that the car business was changing. It was moving from simple selling to trading, as people wanted to trade their old cars when they bought new ones. Sloan saw that GM's relationship with its dealers had to change as well. The manufacturer and the dealers had to become partners. Sloan formed a dealer council to meet regularly with GM's senior executives. He also created a department to handle complaints from the dealers. He paid for economic studies to find the best places for new dealers, and even found a way to lend money to «capable men» who did not have the cash to become dealers.

Accurate information about sales was still hard to find. When a dealer's profits went down, GM didn't know why. Without the facts, it was impossible to know what to do. Sloan said he would pay a lot of money so that every dealer «could know the facts about his business and could intelligently deal with the many details… in an intelligent manner.» This would be «the best investment General Motors ever made.»

Sloan created a standardized system of accounts for the entire GM organization and all its dealers. Every dealer and every employee, at every level of the company, put their numbers into exactly the same categories. By the mid-1930s GM's dealers, its factories, and its offices could all do detailed financial analysis using the same numbers. A dealer, for example, could clearly see how well he was doing and also compare his results to the average across the company.

An infrastructure that provided accurate information led to a company that responded quickly to events. Other car makers could not compete with GM for decades. This infrastructure-what I call a company's nervous system-helped GM to dominate the car business throughout Sloan's career. It wasn't yet digital, but it was extremely valuable.

Of course, you couldn't get nearly as much information flowing through your company then as you can now. It would have required too many phone calls and too many people moving paper around and looking at the data to find patterns. It would have been very expensive. If you want to run a world-class company today, you have to obtain much more data and do it much faster. To manage with the force of facts-one of Sloan's business principles-requires information technology.

4. How to achieve advantage over competitors in the information age?

If information management and quick responses made such a basic difference in a traditional industry seventy years ago, how much more difference will they make when they are powered by information technology? A modern car maker may have a strong brand name and a reputation for quality today but it is facing even greater competition from around the world. All car makers use the same steel and the same machines; they have similar manufacturing processes and they have roughly the same transport costs. Today the tests of success are how well they design their products, how intelligently they use information from their customers to improve their products and services, how quickly they can improve their production processes, how cleverly they market their products, and how efficiently they deliver their products and services to customers. All of these processes are rich in information and they benefit from digital technology.

The value of a digital approach is especially clear in businesses such as banks and insurance companies where information is central to the business. In banking, data about customers is the heart of the business, and banks have always been big users of information technology. Crestar Bank of Richmond, Virginia, offers all its banking services over the Internet. It has bank employees in supermarkets and malls who can offer banking services to customers using digital information flow.

In the age of the Internet and increasing competition in financial markets, the key to success is the intelligence of a bank's use of data and how well it responds to its customers. Its brains that give one bank or another the advantage. But I don't just mean the individual abilities of bank employees. I mean the overall ability of the bank to make use of the best thinking of all its employees.

5. Information should work

After the introduction of ENIAC, the first general-purpose computer, during the Second World War, computers quickly proved that they were faster and more accurate than humans at many tasks. Computers were not working at a high level, though. They assisted people but not in an intelligent way. It takes brains to understand the physics of a rocket; it takes a computer to do the sums in seconds.

Businesses need to do another kind of work, «information work.» This phrase comes from Michael Dertouzos, director of MIT's laboratory for computer science, and author of What Will Be. We usually think of information-a letter, a picture, or a financial report-as something that doesn't change. But Dertouzos argues that another form of information is active. Information work is the processing of information by human brains or computer programs.

Information work-designing a building, making a deal, filling in tax forms-is most of the work done in developed countries. Dertouzos estimates that information work contributes 50 to 60 percent of the total value of the goods and services produced by an industrialized country.

Dertouzos's idea is important. When computers went from simple number-work to modeling business problems, they began to play a part in information work. Even manufacturing firms have always put more energy into information about the work than into the work itself: information about product design and development; about marketing, sales, and supplies; about payments and finance; about cooperating with sellers; about customer service.

6. Simplicity of received data

To do information work, people in the company have to be able to find information easily. Until recently though, we've been told that «the numbers» should be reserved for the most senior executives. Sometimes there are good reasons for secrecy, but usually information has been reserved simply because it took time, money, and effort to move information around, so you had to be senior to order the work. On today's computer networks you can find and present data easily and cheaply. You can dive into the data to the lowest level of detail and look at it from different angles. You can exchange information and ideas with other people. You can bring together the ideas and work of many people for a better result.

We need to stop thinking that getting information and moving information around is difficult and expensive. It's just basic common sense to make all of your company's data easily available to every person who can use it.

All of a company's employees, not just its high-level executives, need to see business data. It's important for me as a Chief Executive Officer (CEO) to understand how the company is doing across regions or product lines or different types of customer, and I take pride in staying informed. However, it's the middle managers in every company who need to understand where their profits and losses come from, what marketing programs are working or not, and what expenses are under control or too high. They're the people who need accurate, useful data because they're the ones who need to act. They shouldn't have to wait for upper management to bring information to them. Companies should spend less time protecting financial data from employees and more time teaching them to analyze and act on it.

In many companies the middle managers can drown in day-to-day problems and not have the information they need to fix them. A sign of a good digital nervous system is that middle managers are made more effective by the flow of accurate, useful information. The systems should tell them about unusual events-for example, if an expense item is too high. Then the managers don't need to look at normal expense activity. Some companies work like this, but I'm constantly surprised by how few companies use information technology to keep their middle managers well-informed and avoid routine review.

I'm amazed by the twisted path that important information often takes through many Fortune 500 companies. At McDonald's, until recently, sales data had to be «touched» by hand several times before it made its way to the people who needed it. Today McDonald's is installing a new information system that processes sales at all of its restaurants in real time. As soon as you order two Happy Meals, a McDonald's marketing manager will know. So that manager will have hard facts to analyze sales, not unreliable data.

As we'll see in the description of Microsoft's reaction to the Internet, another sign of a good digital nervous system is the number of good ideas coming from your middle managers and knowledge workers. When they can analyze real data, people get detailed ideas about how to do things better-and they get excited, too. People like knowing that something they're doing is working and they like being able to show managers that it's working. They enjoy using technology that encourages them to test different theories about what's happening in their markets. People really appreciate information.

A final sign of a good digital nervous system is how effective your face-to-face meetings are. Good meetings are the result of good preparation. Meetings shouldn't be used mainly to present information. It's more efficient to use e-mail* so that people can analyze data before the meeting. Then they will be prepared to make suggestions and debate the issues at the meeting itself.

Companies that are struggling with too many unproductive meetings don't lack energy and brains. The data they need exists somewhere in the company in some form. Digital tools would enable them to get the data immediately, from many sources, and to analyze it from many angles.

GM's Alfred Sloan said that without facts it's impossible to put an effective plan into action. I believe that if you have good facts, you can put an effective plan into action. Sloan did, many times over. At the speed business moves today, we need more than ever to manage with the force of facts.

What I'm describing here is a new level of information analysis that enables knowledge workers to turn raw data into active information-what Michael Dertouzos calls knowledge-as-a-verb. A digital nervous system enables a company to do information work with more efficiency, depth, and creativity.


I found this book rather interesting to read. If you would like to run your own company, or you are just interested in reading about big business, then you will be satisfied with this book. Gates does a great job of citing examples of how technology is impacting business in today's economy. It might even give you a few ideas for making your own business more efficient.

I recommend this book because it can help you in future. Some things in this book I had heard before, but gave them no attention. Now, I seriously thought about it. This information was really useful for me.

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