How could this come to pass? Making no judgments about the sociological and/or cultural import, it was, in a word, innovation -- albeit the 16th century flavor. Diamond's theory suggests there were several factors that contributed to the Spaniards' ultimate competitive advantage; most notably, their adept use of steel, horses, cannons, and writing. The Inca were foot-bound, the Spaniards on horseback. The Inca had bronze weapons, the Spaniards carbon steel blades. The Spaniards had cannons, the Incas did not. All of this added up to 180 conquistadors defeating thousands of Incans. And in the process altering history.
Now, in a Crichton-like fashion, flash forward with me a few centuries...I had mentioned in a previous post the On Demand Business Adoption study, and that at some future date I would pass along a few details. Welcome to that future.
Just as the distinguishing factor between winning and losing on the part of the Spaniards was innovation, so was the case with the Fortune 1000 companies we analyzed. In our study, we worked to measure the business advantage of those enterprises that had successfully adopted On Demand business capabilities. Not unlike the Spaniards and the Incas, it was a thin line that separated the more successful companies from the rest. Of those companies who were on the leading frontier of On Demand business technology adoption, they:
- Grew earnings 15 points faster than their peers
- Enjoyed 1.3 points better gross profit margin improvement
- Experienced 1.2 points better difference in return on investment (ROI)
- .6 points better difference in return on assets (ROA)
Not bad for a few days' work. And those are certainly respectable enough metrics. But one might go on to ask, what was the bottom line impact of implementing these changes? I wrote previously that a company with $5B in revenues which gained a single point in gross profit margin (GPM) yields $50M. A two-point gain in GPM for a company with $40B in revenues yields $800M. Like I said, not bad for a few days' work.
Of course, that's the party line data. What the study doesn't really tell us much about are the derivative, more personal fruits gained by individual customers when smart companies enhance their on demand business experience by implementing such capabilities into the mainstream of their businesses. The UPS online package tracker, the American Airlines automatic flight update pager, e-Bay bid tracker...the list goes on.
If you remember my vacation trip to Belize from the earlier post (if not, see below...I can barely remember it myself at this point), there was a very slim chance that I would have stayed at a hotel in Ambergris Caye that did not have a presence on the Internet. I mean, there would have had to have been some serious, Tipping Point-ish word of mouth from a very good personal friend before I would have bought off the Internet grid, because I wanted to be able to see the pictures of the hotel and room, price it online, book it online (the fact that they had wi-fi access sealed the deal), etc. Ditto for the airline booking and planning, the dive trip planning, learning about restaurants -- pretty much every angle of the trip I covered off online.
These days, these types of features really fall under the heading of cost of doing business. We're far beyond the basics. Check out Google new Earth beta to get a taste of another example of next generation capabilities (and prepare to have your mind blown). In future posts, I'll elaborate on some of the key characteristics that characterize these "bleeding-edge" on demand businesses.