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The term ‘horseless carriage’ is a pejorative for any construction that’s an obvious misapplication of technology. It implies tunnel vision, unimaginativeness, a failure to grasp something’s potential. Everyone knows it’s wrong – that’s why we have the metaphor in the first place. Yet many businesses do the exact same thing with their technology systems. They are acquiring and implementing technology in a way that prevents them from using most of that technology’s power. Why do global corporations continue to build these horseless carriages?
To understand why, let’s take a look at the metaphor we began this post with. Cars have changed more in their first 30 years than in all the years since. The first horseless carriages had wooden wheels, open cabins, umbrella roofs, steering tillers, and the drag coefficient of Mount Rushmore. 30 years later, they had pneumatic tires, enclosed cabins, steering wheels, and streamlined bodies – all the characteristics of a modern car. All of these features were technically possible in 1900, but they were unnecessary – until motors changed.
Early cars looked like carriages because early automakers assumed that the value of their invention was the ability to do away with the horse. They assumed the future would be a slightly-better version of the present. As motors rapidly improved, it became apparent that this view was mistaken. The real value of the automobile was that it allowed people goods to go anywhere ten times faster than what was once possible. Carriages turned into cars because all the carriage features were preventing the car from going fast. If you install a modern motor on a horseless carriage, you won’t be able to use most of the power of your expensive new upgrade.
When it comes to information technology, an alarming number of businesses make the exact same mistake. When they are considering a technology purchase, they assume that the value of information technology is that it allows a particular silo or department to function a little better than it does right now. They make their choice based on which particular application seems best for a particular task. What’s wrong with incremental improvement? Nothing – but it distracts businesses from pursuing a much more worthwhile goal: to enable all data to move instantly and automatically to anywhere it is needed in the organization. The goal should be a system that creates huge efficiency gains and enables powerful new business processes. The goal should be to have a car instead of a horseless carriage.
The people who are making this mistake aren’t doing so because they are dumb or lazy. They’re making it because the cost of upgrading to an integrated system are clear and the benefits are not. If you’re approaching the problem from a horseless carriage perspective, the total value of an upgrade is the sum of the incremental improvements. Integrated technology doesn’t work like that because the performance gains aren’t linear. Two integrated systems won’t perform much better than two separate systems, but ten integrated systems will leave ten separate systems in the dust. Because integrated technology creates capabilities most businesses have never possessed, it’s hard for these businesses to understand what they’re missing out on.
Suppose a business has a sales/distribution solution and a production planning system. Separate, they are of marginal benefit to the company. But when linked together, the production planning system can see the conversion rate and number of leads in the sales funnel, and scale up or down accordingly. If they were separate, that capability wouldn’t be possible. Now add in a materials management system. Not only can the business accurately forecast demand, it can use that information to operate a just-in-time supply chain. That eliminates the need to have warehouses for finished units and inputs. Raw materials come straight in one end of the plant, and finished units go straight out to their buyers. Together, these systems give their business capabilities that would be impossible if the systems were separate.
Linked technology systems are the equivalent of cars. With every feature structured around the goal of getting information to where it’s needed automatically and instantly, businesses can make huge gains in efficiency and offer an unprecedented level of service. So why do good companies end up with horseless carriages? This mistake can be made in one of two ways, from the top down or from the bottom up. In a bottom up scenario, a company’s different departments and processes are each responsible for choosing their own technology. Sales chooses its own order processing package, manufacturing (and sometimes even individual plants!) choose production planning, and so on. The system ends up like this:
This technology ‘system’ isn’t a system at all. It’s just a bunch of mismatched products from a bunch of different manufacturers that, while well-suited to their particular functions, don’t generate any larger synergies. This horseless carriage will drag down the company’s efficiency for as long as it is in place. Even worse, no department has any incentive to change. Who wants to pay to make a changethat will mostly benefit other units?
The second way companies can wind up with a horseless carriage is from the top down. The top-down scenario usually follows the bottom-up scenario. A salesman meets with the CEO, correctly diagnoses the problem as a bunch of incompatible systems, and sells him a huge, integrated solution like SAP on the golf course. The CEO hands down a decree to all his department heads that the company is moving to SAP and that they need to come up with a plan to accomplish this in three years. So far, so good. But all the department heads interpret that to mean “Come up with a plan to keep doing what you’ve always done, except on SAP.” They configure their expensive new purchase around their silo’s existing processes. Now their system looks like this:
Even the best packages don’t generate any synergies if they aren’t configured to work together and the business processes aren’t adjusted accordingly. Once again, the company ends up with a bunch of incompatible systems, except more expensive and without the nice features of the systems they replaced.
How can this horseless carriage problem be solved? A company needs to do several things to truly harness the power of technology. First, the organization needs to have a clear vision for the future. The entire organization needs to understand that the goal of the IT system is to move information smoothly and instantaneously to wherever it’s needed. Everyone should understand that the new system will generate local inconveniences, but these will be outweighed by big gains in speed and efficiency across the enterprise.
Next, the company should put a group in charge of managing the transition. This group should contain a mixture of business process and technology experts. The group’s eventual goal is to integrate the entire company into a single technology system, and it should create a set of standards and practices for everyone to follow. For example, there should be a single source of truth for all objects and tables in the company. Each object should have a single owner. There should be no unnecessary customization. While the group should be as accommodating as possible to the needs of the business units, it cannot compromise its primary goal of integrating all of the company’s technology.
The last bit of advice is to integrate bit by bit. Don’t try to do it all in three years. For one thing, you’ll never succeed. That’s far too much for a single group to manage, and you’ll just end up with the top-down failure scenario. Instead, pick a couple groups who have a lot to gain from integrating. If possible, use volunteers. Integrate these groups. Gain some expertise. Put a win on the board so you can show the other units the good results your test subjects got. Once everything is stable, integrate a third group. Then a fourth. As you start adding more units, you’ll start to get exponential gains. That will make it a much easier sell to the rest of the organization, and that will make it easier for you to reach your final goal – a system that looks like this:
To avoid building a horseless carriage, you have to view your technology as a single system rather than a collection of parts. By setting the goal of enabling all the information in your company to move to where it’s needed, you can fully capitalize on the potential of IT. Remember, capabilities create possibilities. The more you can streamline your information flows, the more you’ll be able to create new efficiencies and innovative services.
TL;DR: Make a plan for your whole company’s technology system. Build an integrated system, not a collection of separate parts. Establish a team to lead the transition, and make the transition gradually.
Harrison Holland and Thomas Mitchell, 2016 Big Concepts