Innovation is an important adjunct of a competitive market position; indeed it could be seen as necessary to effective competition. If you compete merely by doing what has been done before, then almost by definition you are catching up. To take a truly novel step, something that offers the customer a facility they cannot get from any competitor, is a powerful and longer-lasting competitive weapon.
In the extreme case, parts of the competitive strike can be patented; the scope for this in ICT is limited, since patents for software or business processes are not provided for or difficult to defend in many countries. However, there is still a lot of strength in keeping the mechanics of the innovation secret. Even if every element of the innovation is in plain view and easy to imitate, it will still take the competitor some time to put in the work needed to catch up.
Less visible and less celebrated are the behind-the-scenes innovations that add to the efficiency and effectiveness of the provider’s operation. Reducing cost of development and deployment, and hence the price to the customer on the back of an efficiency-boosting innovation, is more powerful than simply discounting in the hope of attracting custom.
We track three examples of how enterprises made innovation as their weapon of choice to survive, stand out or compete in a shifting and resource constrained environment.
Entering new territories
On the back of its major mobile network projects in New Zealand and various parts of the world, Vodafone has honed a strategy for a packaged implementation of networks at a reasonable cost in new territories.
The approach depends on tight definition of standard components for the network, standard procedures for implementation and testing, a plan that gets revenue-earning basic services up and running quickly, along with a set of standard arrangements internationally for sourcing the components of the set-up that do not lie in Vodafone’s core areas of competency.
The first true test of such an implementation has been in setting up a second cellphone network for the Emirate of Qatar, concentrating on Doha, the capital city where most of the 1.65 million population live.
“They hope to rubber-stamp the model around the world,” says Grant Borrie, who provides testing services to the project from his company The Testing Consultancy.
Vodafone Qatar’s chief financial officer, John Tombleson, agrees, “We are building a model that is reusable by other Vodafone [operational companies] that may startup in the future. We are using roadmaps [of supporting equipment suppliers], leveraging our global IT and network resources, and resisting the urge to add functionality that is not retrofitted back into the worldwide source code of the respective vendors.”
Doha is a desert city with comparatively little in the way of local services that an incoming company can depend on, says Borrie. Much must be bought with them or sourced from outside – with all the complexities of supply-chain management that the process entails. Management of the huge amount of information involved in such a project is done using remote centralised document repositories, so access to the internet is vital.
Tombleson says a number of factors make for an optimistic outlook for a telecomms provider in Qatar. “The country is compact with a dense population in Doha. The expatriate population refreshes every three years as new [workers] replace old and therefore there is a telecom purchase decision at least every three years by 70 percent of the market.”
Those born in Qatar make up only 15 percent of the country’s population. Before Vodafone arrived telephone service was provided by a monopoly, Qtel. “Customers are looking for choice and service,” says Tombleson.
The Vodafone project began with selection of IT system vendors in October 2008, provided high-level business requirements that month, and went live with the first 1000 beta-trial customers on March 1 this year “with only three or four days end to end testing”, says Tombleson. “That was a leap of faith that was rewarded by the systems successfully delivering to our needs.”
Main supporting vendors are EDS for IT and Alcatel-Lucent for the network. “Our network vendor was selected in September 2008 and the network coverage reached 98 percent on March 31, although this is mostly supplied by temporary cell sites as we go through the process of gaining land leases and building-permit approval,” he says.
Innovative use of existing technology
Dairy giant Fonterra has an encouraging attitude to innovation, says Nigel Jones, general manager of supply chain strategy and procurement. “Innovation is nurtured in all parts of the company, there is an annual award for the leading innovative ideas in product and in technology.”
Jones certainly experienced no scepticism from top management when he suggested a novel approach to the tracking of bulk product delivery internationally. On the contrary, they gave his project a lot of support. “It’s a matter of being able to walk through a business case,” he says.
The innovation cuts to the heart of the operation; supply chain management is one of the most critical elements of Fonterra’s business. The company’s supply chain moves more than 2.6 million tonne of dairy ingredients to more than 140 countries, through a complex distribution and warehouse network. Fonterra is highly dependent on a variety of outsourced logistics providers to deliver its products in prime condition and on time. Many of these use incompatible IT systems. Determining the status of an order at any given time used to take a manual search through up to 11 different systems.
To improve functioning of delivery and related processes, and to make sure any problem is promptly located and dealt with, Fonterra has made novel use of a lower-level tool designed for a different purpose.
Business Activity Monitoring (BAM) is usually seen as a diagnostic procedure for fine-tuning the performance and integration efficiency of a suite of applications. BAM is intended to provide a real-time summary of business activities to operations managers and upper management.
While sourcing its data from low-level measurements such as the efficiency of message passing between software modules, BAM aggregates this data into a set of measurements expressed in terms of higher-level business activities. For example: Number of transactions; number of process events; transaction revenue; number of items consumed; number of errors; or number of problem ‘tickets’ resolved.
However, BAM is usually seen as an efficiency-monitoring tool distinct from the more complex business processes that are designed and programmed at a higher level. Fonterra’s ICT department decided there is little point collecting similar information twice and have used the BAM information itself as the basis of the tracking system.
Fonterra decided to design its container logistics system around Software AG’s Web Methods. The ICT team was already using the BAM facilities within Web Methods to monitor the performance of, for instance, electronic data interchange messages in the system. “We thought isn’t this exactly what the supply-chain itself is doing, measuring entities passing through a series of processes? It’s just measuring different things on a different timescale,” says Jones. There is no reason why BAM data shouldn’t be used as the foundation of the process itself, he says.
Other companies are paying for separate applications to ensure supply-chain visibility, either in-house or through hosted services. Fonterra has rendered this unnecessary.
The technique is not completely novel, though according to Software AG, this is the largest system in the world by a factor of 10 that Fonterra is using.
The result is a system that offers unusual visibility of the whole supply-chain and helps customers know exactly what the current state of their orders are. “We report on arrival times, not just departures,” Jones says. The tracking system presents the customer’s view of the service.
“We have an online portal into which our logistics suppliers and own systems electronically feed the latest status information, meaning we’re notified when a container of Fonterra product leaves a store, is loaded onto a ship, leaves port and arrives at the destination port,” he says.
Conventional tracking systems, which work at a higher level of data abstraction, offer a more limited range of information, he claims.
Development of the new system began about 18 months ago and it has been running fully for six months. It has proved its worth, increasing the percentage of consignments that are delivered in full and on time he says. If there is any delay, the system, with its complete view of the supply chain, will locate the holdup and issue an alert to the appropriate people.
Reuse of previous knowledge
Development of the system for issuing Super Gold Cards to New Zealand superannuates, provides an example of Unisys’ use of its knowledge of the market from previous projects – knowledge which typically is not available to the client, says New Zealand CEO Brett Hodgson.
In the case of the Super Gold Card, a project for the Ministry of Social Development (MSD), Unisys reduced costs by reusing some of the infrastructure it had developed for processing drivers’ licences for the NZ Transport Authority (NZTA).
“People think of innovation in terms of large projects that bring about major change and are part of world-changing or business-changing events,” says Hodgson. Unisys tries to “think innovation every day”, in creating smaller elements of systems, such as apparently minor process changes. You look at things differently and not predominantly from a technological point of view, he says.
A survey conducted for Unisys by IDGnet and CIO looked at 188 companies around the world. “It’s interesting the organisations that have the most positive outlook in these times, are the ones that are embracing innovation as a part of their cost reductions,” says Hodgson.
It was thinking about the project from the point of view of a business problem that changed the focus away from a technology programme to “a business programme that was technology enabled”.
“The work that we did with the Super Gold Card was some of that same thinking coming through. Why would a government department do its own thing, when a number of the components are in place as a part of a government supply chain today?”
The project was taken to tender in late 2006 and delivered in mid-2007 after a four-month development process. “We looked at [the tender] and decided that a number of the components from a business point of view were already in effect in place within the government supply chain. For example, we had worked with NZTA in setting up the agency agreements with NZ Automobile Association and tasks like the photo capture for the driver licences.”
That work was completed in 1999 and an upgraded version of the technology, with better digital cameras, was running at the time of MSD’s issue of a request for information for the gold card project. Unisys approached MSD with the idea of having some of the data capture and networking structure for the NZTA project being part of its response for the later project. That avoids the government having to duplicate both process and cost, says Hodgson.
The idea was taken to the State Services Commission to see whether it would support such an approach and it did.
“So NZTA effectively joined our approach to the MSD around Super Gold Card. Had that not been the case, we probably wouldn’t have tendered for it, because it just would have been a matter of the cost of manufacturing a plastic card and the capture would have been done elsewhere.”
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