As technology reshapes the world, finance executives must aggressively reshape their business strategies and their own corporate hierarchies, according to a new manifesto from leading thinkers at McKinsey & Company.
Given McKinsey's "reach and influence in the senior executive community" (as even a competing Gartner analyst admits), finance professionals need to know the firm's new list of "10 tech-enabled business trends to watch." Pay attention: Your CEO could quiz you about any or all of these hot topics.
Significantly, the theme of McKinsey's new list seems to take technology beyond its merely computational and transactional duties to help create a new world of connectivity. To McKinsey, connectivity changes everything.
For one thing, it means everything happens faster. Bob Hacker, a veteran finance executive and CFO of Nicholas Negroponte's ambitious third-world development project, One Laptop Per Child, says it means that organizations — whether business or government — will need to adapt to this new, rapid information flow by creating "autonomous, non-bureaucratic response teams." Is yours in place yet?
According to McKinsey consultants Jacques Bughin, Michael Chui and James Manyika, "new developments, such as virtualization and cloud computing, reallocate technology costs and usage patterns, while creating new ways for individuals to consume goods and services and for entrepreneurs and enterprises to dream up viable business models."
Here then is McKinsey's new top 10 list of tech mega-trends:
- Distributed co-creation moves into the mainstream. The power of the social Web is changing not only how companies connect with customers, but also how they actually make money. McKinsey notes that 70 percent of senior executives report their companies regularly "created value through Web communities." One good example: Intuit puts its best users to work in customer support by creating a warm and cozy place for people to share problems and solutions — and cutting support costs by 90 percent.
- Making the network, the organization. McKinsey says Dow Chemical, for example, has set up its own social network "to help managers identify the talent they need to execute projects across different business units and functions." Dow has even extended the network to include retired employees." Failing to take advantage of your extended network of resources, McKinsey warns, limits your ability "to tackle increasingly complex challenges."
- Collaboration at scale. Video and web conferencing, for example, is growing 20 percent annually as companies seek to pool, manage and multiply the effectiveness of their knowledge workers. Even the U.S. intelligence community is adopting wikis and blogs. The whole notion of organizational "capital" could evolve as full-scale collaboration becomes a reality.
- The growing "Internet of Things." The proliferation of RFID tags on products and inventory is only the first wave in a new breed of "smart" assets — refrigerators that can automatically re-order and schedule delivery when you run out of ketchup, cars that can automatically take evasive action to avoid accidents. Imagine the changes in cost and pricing structures for the grocery business or auto insurance.
- Experimentation and big data. What if you could analyze every transaction? In fact, corporate data is doubling every 18 months and some leading companies — like Amazon, eBay and Google — are using the new plethora of data to test everything from new manufacturing processes to products and promotions.
- Wiring for a sustainable world. "Clearly," McKinsey says, "environmental stewardship and sustainability are C-level agenda topics." CFOs can expect to be involved in developing new management systems designed to continuously track and improve resource use and the impact on earnings.
- Imagining anything as a service. Cloud computing, for instance, is changing how technology is produced, priced, sold, bought and used. Genentech has abandoned Microsoft Outlook for Google Apps. And City CarShare and ZipCar are challenging Hertz and Avis with anytime, anywhere, one-price models.
- The age of the multi-sided business model. MasterCard, for instance, has built a consulting unit based on the data it gathers from its card users. And companies like Skype are free for many in order to provide paid, premium services to a few. CFOs should be asking: Who might find our data valuable? What would happen if we gave away our product for free? What if a competitor did so first? It happened to newspapers when the Internet came along, could it happen to you?
- Innovating from the bottom of the pyramid. Established multinational companies are finding new challenges from the smallest entrepreneurs in the furthest places. China, for instance, hosts Alibaba, a 30-million member business exchange to expedite connections between manufacturers and customers. GE is locating new research centers in Asia and Africa to find upstarts early.
- Producing public good on the grid. McKinsey states flatly: "The role of governments in shaping global economic policy will expand in coming years." And it will be enabled by new technologies. CFOs can expect to see "novel, unfamiliar collaborations among governments, technology providers, other businesses, nongovernmental organizations and citizens."
None of these trends, of course, will be the sole responsibility of the CFO. But neither can CFOs afford to ignore the threats and opportunities. "As change accelerates," McKinsey says, "the odds of missing a beat rise significantly."
For finance executives and managers, therefore, simply knowing about these 10 trends isn't enough. You will need to think strategically about how to re-think your business — and to do it every day.
COMMENT: Which of these 10 trends will most affect the way you do business? E-mail Rick Telberg.
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Rick Telberg is president and chief executive of Bay Street Group LLC, advisors in marketing, management and strategy.