CM: You have been talking a lot lately about how we'll be seeing corporations leverage external networks. How will this change industry as we know it?
Means: The major brand-owning companies — whether they're a company like Ford or General Motors or Allied Signal or Du Pont — the leading companies now understand that the market is not rewarding them for owning all factors of production or service delivery. They squeeze as much as they can out of it, but processes have become standardized and the next move is what I call the Cisco model, which is to move toward a decapitalized model through outsourcing and through moving a lot of stuff into external networks, B2B-style networks.
If you do that, you get more capital leverage. You also make yourself even faster and more responsive to the customer, because you can spend your time understanding the customer requirements and then through outsource networks find the capacity to make what you need and send it to the customer. So the key is to create these external networks and learn how to manage them so that you can move fast and be extremely flexible, but have huge market control and ownership — which is what Cisco's done.
CM: Let's talk about the Cisco model. Why is this model an example for the future?
Means: Cisco and all the companies that are moving into the B2B direction successfully have fully e-enabled themselves so that they organize their supply chain via the net, they manage their supply chain via the net, they track their products via the net and via their portals. The customers come into the portals and order what they want and know precisely where it is in the supply chain. They do their interviewing through the net. They communicate to their employees through the net. They do deals through the net. They do their financial accounting, increasingly, through the net. They're so disciplined at Cisco that they close their books daily — not quarterly, not annually — they close them daily, so they know precisely what their financial position is so that they can continue to do these deals.
So you are talking about a completely different kind of company that is e-enabled, has a different process model from our traditional process model for companies. It's extremely fast. It's focusing on customer requirements. It's trying to understand where the market is going, and it's moving very fast to organize its external networks to produce product and to supply the customers and make sure that there is a high level of customer satisfaction.
CM: So, what role exactly does the consultant play in this new world of externalized networks?
Means: What we're describing here, and this reveals the changing nature of our consulting business to some degree, is that you have to understand how to run an external network as a business, which we are called upon to do increasingly, and actually move into an operating role after we do our advisory roles and technology roles to actually run some of these networks for some of our clients. They are in fact service businesses. And we're increasingly asked to also take equity in these businesses, because that's good business for us since these are highly valuable businesses. It transforms our business and our clients. So, what we're talking about is a new role for our clients, but we're also talking about a dramatic new role for ourselves. It redefines the consulting industry.
CM: It seems like more than ever there'll be a demand for consultants to help companies determine what to outsource and in what order. Is this the nature of a good portion of projects you're now involved with?
Means: It's becoming a huge portion of our business. We are getting an enormous flow of B2B business right now with leading companies, the icon companies in every sector, saying, We understand we need to make this transition, We understand we need to define the model. They need a consultancy that can really define the model, but that can also work with them to completely redesign their processes and organization.
Clay Christensen, of course, wrote the book The Innovator's Dilemma, and he said that companies really can't go through this kind of transition. They'll have an almost impossible time transforming into these gigantic transformational models because they have to run their so-called traditional business while moving into the new business. So they have to commit the entire executive team and everything to make this transition so that they will be a leader in their sector, because this will be the dominant economic model for every sector.
CM: You describe most companies as becoming increasingly focused on services. So they will resemble the consultants who work for them?
Means: Yes, B2B transforms the leading companies in every industrial sector into quasi-service companies. They are understanding customers, they are organizing supply chains, they are connecting customers to supply chains, they are running external technology networks. They are basically starting to run themselves like a service company. And from that perspective, the markets are coming to us. And the "us" is really not very many companies — it's a small number of companies.
The smaller consultancies that participated in B2C (business-to-consumer) work are really not equipped to play in this world. This is a world where you need to be able to manage very large outsource networks and organize huge industrial transformations and put in the new processes and technologies. You need to basically operate on a large scale and have a deep range of understanding in service from strategy to process redesign through technology installation through network management to participating and owning parts of these networks, which are essentially service networks.
What you are seeing is a redefining of what consulting is. So, it's not just advisory and technology installation, it's large-scale network management. It's large-scale ownership of networks, and it really transforms our business dramatically. And there are probably two or three companies who can take advantage and be big players in that world. We're one of them.
CM: What types of firms will play a role in these transformations?
Means: Firms will need to have depth of knowledge and a lot of talent across a whole range of areas, because clients need to move fast. The 18-month window is not very long to figure out the strategy and design the process and organizational model. Basically, to move the company through the change process so they do it, create the networks and run on the external networks. So you need scale, and you need to be able to manage vast numbers of people. Small firms don't know how to manage thousands and thousands of people and to deploy them effectively and train them and basically make a profitable business out of it. This is a scale we have, and we're very good at it. When you talk about transformations of the auto industry, the chemical industry, the financial services industry, you are talking about a very big change in the way business gets done. The only types of firms that can support that level of change are the biggest firms with the most depth.
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