The Link Between Business Growth and Information Technology
The article discusses what needs to be done to increase profits and reduce the costs of serving new customers.
It demonstrates the link between a company's successful growth and information technology. It provides a method to distinguish useful technologies from useless ones.
The Deep Connection
There is a deep connection between the real world and the world of software, which has driven the explosive growth of IT adoption in business.
The world of software and the real world were able to unite because in both of these worlds, the process of completing a task can be divided into two stages: gathering resources and executing a simple instruction.
Two Examples of Planning
1 – A New Contract
Consider an example of inefficient contract approval with a new client. A manager starts filling out a request but doesn’t know the department code. They search for it. Then it turns out the lawyer has no free time until the end of the week. Then the CFO requests an additional statement. Each step involves endless waiting, information searching, and the stress of pressure from above due to missed deadlines. This is a sequence of actions where information gathering and execution are intermingled. To serve slightly more clients, the company has to hire additional managers and lawyers. Costs rise sharply, both for new employees and for resolving conflicts among them. Margins shrink.
From bad:
In an inefficient process, work is a long chain: start doing -> realize something is missing -> search -> wait -> continue. Resource gathering and action are inseparable.
2 – GPS Navigation (Positive Example)
When you open a navigation service like Google Maps, enter your destination, and press "Start," the route is built almost instantly. All the data needed to build your route was collected by the service long before you got into the car and decided where you wanted to go. As the number of customers increases, the service does not have to proportionally increase the number of employees. Of course, there are additional costs for increasing server capacity, but these costs are negligible compared to the costs of new staff. Fixed costs are distributed over a growing volume of customers – the more customers, the cheaper it is to serve each one. Profit grows.
To good:
In an efficient customer service process, there are only two tasks:
- Prepare everything needed in advance.
- Deliver the service as quickly as possible, without delays.
Scaling a Business
Individuality does not scale. Serving more customers without losing profit is possible by abandoning the idea of building a new process for each customer and instead offering a minimal set of standardized services.
In a scalable process, each new service provided is simply a different set of parameters, not a different process. Each subsequent order requires almost no additional cost. This is operating leverage: revenue grows, but costs barely increase.
Best example
At Starbucks, you can buy coffee from a limited list of options, but with your name on the cup. The company creates a sense of belonging to a shared experience through a uniform ritual and individual engagement by writing the customer’s name on the coffee cup.
The Connection to IT
Dividing a business process into two components gives rise to the following applications of software:
- Information retrieval. If the service preparation stage involves gathering information, this is where information technology shows its greatest strength. Peak efficiency is achieved when the information search can take place long before the customer requests the service.
- Service delivery. The core of a company's operations is its business process. Software only allows you to check that the sequence of tasks follows that process. If work is organized chaotically, trying to transfer control and management into software will merely cement that chaos.
Conclusion
A business grows only through a scalable process.
A process is called scalable when increasing the number of customers reduces the cost of serving a single customer.
To organize an efficient process, it must be split into preparation and template execution stages.
Information technology speeds up the preparation stage and cements the existing process.
Does your current business process and the software you use allow you to increase the flow of customers without increasing costs?