The case of distributing company 7-Eleven Japan, which puts 70% new products on the market each year through its more than 11,000 stores, was used by Peter Weill (PDF, 12 Kb) to illustrate the way in which the world’s most dynamic companies innovate. Weill, who serves as director for the MIT Center for Information Systems and Research, noted that in order to get maximum value out of ICT, most organizations opt for linking ICT in with their business strategy. Nevertheless, he said, this model is dangerous for corporate innovation in that it slows down the implementation rate. In order for ICT to be a truly proactive mechanism for creating value in a company, Weill suggested that companies should first define the operating model, meaning the level of standardization and integration of its processes. Next, the company should choose between four available models according to their objectives: diversification, unification, coordination and replication. “Choosing the right model is key because it allows you to define the abilities and limits of the company and its foundations” he said.

Weill noted that most companies may actually find processes that suit each of their particular models, which explains why some companies have adopted different models for their different business units, as did Johnson & Johnson. However, added the MIT professor, it is better to choose a single operating model. This way the foundation can be laid for building the business architecture. “This architecture will be what gives organizational logic to the business processes and to IT,” said Weill. During his talk, Dr. Weill identified four phases of maturity in the business architecture, adding that it is important to learn from each one of these stages. “Companies shouldn’t skip any of the phases because that could cause the project to fail.” Nevertheless, he conceded, there will be some exceptions to this rule, citing the successful case of ING Direct.

Lastly, Weill, the author of the book Enterprise Architecture as Strategy, recommended patience as a key to successfully building business architecture. “It’s a lengthy process, where you need to focus on building abilities, not solutions,” he concluded.

Presentation (PDF, 60 Kb)

The ebCenter interviewed Peter Weill,director del MIT Center for Information Systems and Research, during his visit to Barcelona to participate in the VI Event of the Center

Read interview (PDF, 19 Kb)

Generally speaking, Spanish companies are not famous for making large investments in information and communications technologies. This is a known weakness but does it necessarily mean there is a lack of innovation? IESE professor Josep Valor (PDF, 12 Kb) does not think so. “Just as making large investments in ICT does not necessarily mean you are innovating, nor is it true that innovation is always expensive,” he explained. The professor based his comments on a recent qualitative study that professor Sandra Sieber led along with professor Valor on the adoption of innovations by 25 Spanish companies, whose initial results were presented at the event. During his talk, Valor made the distinction between two types of innovations: that which acts in support of the business strategy and that which redefines the way a sector functions (disruptive). One example of the first strategy is that of electronic banking, an improvement upon services traditionally offered by banks. As a clear example of the disruptive model, the professor cited the case of ING, a company whose customer service is less efficient than that of traditional banks—it has few offices and offers fewer services—but which has managed to attract the segment of the market that prefers financial advantages to user services. “This disruptive strategy has made it the second largest growing firm, trailing only eBay,” pointed out Valor.

The study grouped companies into three categories: inherently innovative companies, those striving to improve production processes and those who try to create new business sources. The first variety strive to be leaders in innovation so as to get ahead of their rivals. Companies looking to improve production processes focus on increasing productivity, reducing costs, cutting down on operational inefficiencies or automating processes, all of which means it is the functional areas of a company that drive innovation. Lastly, innovation at companies looking for new revenue sources comes from functional departments, such as the marketing department.

All three types bring about an increase in productivity but this is even more true in the companies studied that pursue a specific objective. Also, explained Valor, in each case upper management is directly involved in innovation processes and while their support is key in the development of a new technology, it often results in priority being given to innovations that are able to get past the cost-benefit analysis stage. Nevertheless, and in light of the serious challenges presented by this criteria due to the difficulty of calculating the ROI for an investment, “data quite often tends to get disguised in order to gain approval for the project,” warned Valor. None of the companies studied has measured the results of its upgrade project, although most of those surveyed say that adopting the innovation has been a success. Finally, having a project champion—who can come from anywhere in the company, not just the technical side—raises the perception of success in ICT projects. This person’s role is vital for driving innovation in the three types of companies studied. “It is even more important to have a project champion than it is to have a front office that supports innovation,” said the professor.

The results of the qualitative analysis will be complemented with the answers of a quantitative study that is carrying out by the Center. If you would like to participate, please press here.

Presentation (PDF, 798 Kb)  (In Spanish)
Dossier "Efectos de las innovaciones en la industria (PDF, 454 Kb) " (In Spanish)
Dossier "Efectos de la adopción de innovaciones en la organización de la empresa y en las prácticas del trabajo (PDF, 1691 Kb) " (In Spanish)

Ignacio González (PDF, 10 Kb) , director commercial distribution for Bimbo, explained how his department’s adopting mobile technology has halved the time needed to process orders. Bimbo has 60 offices and 11 production plants. Having so many locations reinforces its main competitive advantage—product freshness—but with this advantage also comes its main limitation, namely that its products have an expiration time frame of 11 days. To keep up with distribution demands, Bimbo employs 1,500 mobile workers, covering 1,200 routes and servicing 20,000 points of sale. The mobile technology it was using had now become obsolete and so, given the need to modernize it, the company four years ago decided to bring a new technology into the fold, one capable of increasing the efficiency and speed of product distribution.

First, a list of activities and customers was prepared, and when it was discovered that some of the activities created no value, they were scrapped. One critical activity for the business is handling orders, which becomes increasingly complicated as the distribution market gets more sophisticated. For instance, some supermarket chains sells different products in each store, which are selected based on the habits of its customers, and thus having information is ever more important. Bimbo opted for giving its mobile workers devices that connect directly to the company’s SAP system, which provides the historical information needed to produce more accurate orders. While SAP is a very powerful system, it is also rather user unfriendly, explained González, and so the tech department at Bimbo designed .NET-based applications for their employees to connect through.  “It would have been tough to get our sales reps to use the SAP interface,” explained González. This new system allows a company access to real-time information about its orders, reducing the time between the moment the order is made and its delivery to the store. Meanwhile, the company is already considering the need to incorporate the option of automatic ordering.

González feels that the success of the project is owed to the high level of involvement of the operations personnel, as well as the fact that “there was little mention of ROI and quite a bit about creating flexibility and change. Plus, the transition was fairly painless because both models coexisted for a while,” he added.

Presentation (PDF, 416 Kb)  (In Spanish)

Josep Ramon Llopart (PDF, 11 Kb) , director of planning for the health services organization Badalona Serveis Assistencials (BSA), explained how a digitization project launched in 1999 has completely transformed his company. Eight years ago the company was facing the challenge of expanding its geographic reach and taking on more than 100 professionals as well as their patients. The physical space available to the organization was limited—its main building is located in the Badalona city center—and it needed a place to store all of its medical records. Thanks to its digitization project, BSA avoided having to move the professional staff to the main building, and instead all of the doctors, regardless of their particular location, could now access all of their patients’ files. It also decided to digitizing X-ray diagnosis as well as the other complementary tests, which are now input into the system in real time. These measures allow the institute to offer new services to its patients, such as house calls, along with cost savings. Additionally, the hospital has managed to reduced the number of beds from 150 to 120, and has simplified the organization and eliminated redundant management positions. This process has set off a virtuous cycle: the hospital receives increasingly more-sophisticated technology offers, which it is now able to consider in light of its newfound technological readiness. Badalona Serveis Assistencials is now the second largest public health organization in Catalonia, with a staff of 1,200 people spread out across a number of municipalities.

“The adoption of these new technologies came from management but the process had to overcome the doctors’ reticence,” explained Dr. Llopart. In this type of situation, the attitude of the professionals involved is a critical factor: since they are legally responsible for any decision that gets made, their opinion is of the utmost importance, he added. “Something that helped overcome that challenge was the fact that these doctors are young professionals—mostly under the age of 40—who are accustomed to change and to new technologies, as well as having a good working environment.” Furthermore, to encourage the adoption of the new technologies, there was an effort to stress the importance of coordinating the various levels of integration as well as an incentive program. Finally, in order for the innovation itself to motivate the professionals involved, the company has created an innovation office to take their suggestions and look into ways of applying them, said Llopart.

Presentation (PDF, 807 Kb)