Mark De Simone, President and CEO, Olivetti Canada Limited
OPENING NEW WORLDS: MANAGING IN THE INFORMATION AGE
Introduction: John F. Bankes
President, The Empire Club of Canada
"Where is the wisdom we have lost in knowledge? Where is the knowledge we have lost in information?"
T. S. Eliot
Recall the character Sebastian Flyte in Evelyn Waugh's novel Brideshead Revisited who clutched his teddy bear well into adulthood. Like Sebastian Flyte, North America seems to be in love with its own childhood!
In this, the 500th year since a European named Christopher Columbus sighted land somewhere in the West Indies, the book publishing industry has launched a fleet of texts on the subject of the discovery of the New World.
The cargo contained in these new texts ranges from re-enactment of the voyage, to arcane conspiracy theories, to wildly contradictory biographies of the navigator. This range of views proves the point that history, like individual memory, is selective.
One of the more interesting and colourful textual contributions to the quincentenary celebrations of this heroic figure and his historic legacy is by Paolo Taviani, Vice President of the Italian Senate. Taviani describes the navigator as "a modern man, concrete and pragmatic" inspired by faith that was strong, sincere and inexhaustible. He views Columbus as symbolizing "the creative genius of Italy shaping the modern age."
(As an aside, Columbus, in the eyes of some, changed from hero to villain smack amid preparations for the 500th anniversary of his "encounter," the currently correct work for discovery. Fair is fair: perhaps the time has come to see Columbus from the vantage of native peoples, for whom his advent prefigured pestilence and death, robbery and servitude. It may be some consolation to Prime Minister Mulroney that another popular idol experienced a steeper fall from grace this year!)
The Renaissance period of the 14th and 15th centuries--a period characterized by a spirit of significant intensity and creativity--featured many prominent creative geniuses. Michelangelo and Leonardo da Vinci were among those contributing to the revival of arts and letters under the influence of classical models.
The Empire Club today is privileged to have as its speaker Mark De Simone, President and CEO of Olivetti Canada. As many of you are aware, Olivetti Canada, under Mr. De Simone's stewardship, has launched an effective marketing campaign which focuses on the Renaissance of the Computer. The thrust of this campaign discredits some of the conventional wisdom on computers and information technology as typified by Pablo Picasso's famous dictum: "Computers are useless. They can only give you answers." Or, as American writer Martin Mayer once put it: "Like sex drives, card tricks and the weather, computers tend to be discussed in terms of results rather than processes, which makes them rather scary."
In a recent speech, Mr. De Simone referred to the Renaissance as a "time when the focus of society was on the individual. The underlying belief was that every individual could make extraordinary contributions to society, and to the arts, painting, music and architecture." Borrowing on a theme espoused by Alvin Toffler and others, he went on to suggest that, with the Renaissance of the Computer, it's possible for the first time for all individuals to demonstrate exceptional creativity and productivity.
Of course, the handmaiden of every new technology is risk. There are no adequate guidebooks to the New. Success or failure often hinges on instinct, and the willingness to invest in a belief. Olivetti has invested heavily in the architecture of an open system--one of the cornerstones of this 20th century renaissance. The company, under Mr. De Simone, has positioned itself to play a big role in the organizational restructuring that is sweeping the business world.
A recent article in The Financial Post referred to today's speaker as "a man of Old World charm and New World thinking." Mark De Simone brings both these attributes to the task of changing the way we think about doing business.
Born in Italy, Mr. De Simone immigrated to the U.S. at the age of 16. He is a graduate of the engineering faculty at Cornell University and earned an MBA from Columbia University. After postings with Hewlett-Packard and McKinsey & Co., Mr. De Simone joined Olivetti in 1988 as VP Marketing for Europe. He was appointed President and CEO of Olivetti Canada in April of last year and successfully launched the Company's first PC manufacturing and testing operation in North America.
Mr. De Simone is a very youthful CEO. He is sufficiently young that he never remembers having been told not to "bend, fold, spindle or mutilate" a form. He is presently refocusing the company's Canadian operations to leverage off Olivetti's reputation as one of the largest providers of information systems worldwide.
Mark's speech, Opening New Worlds--Managing in the Information Age, will focus on challenges and opportunities facing us all.
Ladies and gentlemen. Mark De Simone.
Mark De Simone:
Five hundred years ago Christopher Columbus set out to challenge current thinking. He had a theory, a vision, and courage. He knew that there were risks to be faced. As one historian observed, the most difficult barrier Columbus had to surmount was a psychological one.
Columbus knew well that whether he failed or succeeded, his attempt to prove that he could travel to the Indies by sailing west would change the world. He did not succeed. He did not fail. He learned. His voyage heralded a new order. The existence of a huge land mass between Europe and India was startling new information.
New World--a term that people began to use--meant far more than a new continent. Rather the New World signified a far-reaching redefinition of society and its boundaries. Relationships among countries, enterprises, and individuals had forever changed. For the women and men of 1492 courage and intellectual curiosity were the key to this new era.
Today changes of similar proportions are taking place. The world has entered the Information Age. Business organizations, individuals and nations are feeling the impact of this new environment and its new rules.
The decade of the '90s is witnessing one of the largest redistributions of wealth and power ever recorded. What does it all mean for your business? How will your organization fare in this new environment? The answer depends on how effectively organizations use the new tools that manage information.
What I would like to discuss this afternoon is how organizations can prosper in this new economy by understanding the strategic role of information technology. We at Olivetti have called this new vision of information technology, The Renaissance of the Computer.
Let's first examine the world around us which seems to be changing at whirlwind speed. During the last 12 months political and economic boundaries that have been in place throughout our adult lives have been redrawn. Long-standing trade barriers in Europe, North America, and Asia are being lowered.
These events have no single cause. But the changes have been accelerated by the revolution in information technology. The resources for creating and using information have become little short of remarkable. There are now over 3,000 communication satellites in space, and their numbers are increasing each year. Moreover, there are over 50 million commercial computers installed worldwide with well over 100 million professional users.
We live in an increasingly complex world, with more variables to predict and forecast. And the speed at which these changes are communicated and processed has risen by orders of magnitude.
The loss of jobs and the movement of firms that we are now experiencing is not just part of a cyclical downswing. It also reflects a profound change in the fundamentals. There is a global restructuring of economies around new value chains. In this new environment the worth of goods and services can no longer be viewed in the time honoured manner. There is now a shift from the value that is intrinsic in the physical characteristics of the product or service, to values associated with the knowledge of who requires the product, who supplies it, and what the product does.
Take what might once have seemed a straightforward purchase. You walk into a store, buy a magazine, and pay for it with your charge card. Simple transaction? Hardly. The information about who you are and what magazines you prefer--information recorded by the store's computer--is worth nearly as much as the return on the sale of the magazine.
That information can be packaged in several ways and marketed to other vendors. Moreover, all internal processes of the retail organization are affected by your decision. From marketing to purchasing to finance.
In short, how effectively an enterprise uses information will in large measure determine its long-term survival.
In today's world, goods and services have a complex value. They have a physical worth and an information-based worth. And the information technology component in goods and services begins to have as much value, if not more value, than the physical one.
All organizations today are in the information business. The impact of this phenomenon is causing businesses all over the world to rethink their role, how they add value, who their customers and competitors are, and how they organize themselves internally. As consulting giant McKinsey sees it: "One of the most challenging endeavours of any top executive today is the task of the core-process redesign of his or her organization."
How do these changes affect business? We can look at several specific areas.
Let's begin with customers. Customers have become more knowledgeable and more demanding. And understandably so. They now have access to more information and are more aware of their options. They expect suppliers to know and even anticipate their needs, and to provide solutions.
The individual who comes into the local branch of her bank and sits down with the manager expects sound advice on long-term financial planning. She wants answers tailored to her own case. She expects to be counselled, not only about one particular product, but about a broad range of options--so that her complex needs are satisfied. She expects communication with the bank professional to be on a high level.
Looked at from the bank's side, there is a tremendous need to make effective use of information technology so that customers are more than pleased. Systems can no longer be used simply as a means of processing repetitive transactions. They must be seen as tools that support decision making. To begin with, they can help determine customer profiles for more effective marketing.
Information technology also provides the bank's front-line managers with a fuller knowledge of complex products. It can guide the seller through questions that might lead to better solutions. In the end, this technology should be used to make the complex task of advising clients on delicate matters much simpler. And it can be used to enter new relationships.
The information platform used by the bank representative is a crucial part of the services delivered to the customer. As this example suggests, information technology improves the value and profitability of a complex service offered the customer. It no longer simply improves the efficiency of a routine administrative task.
It's a tool for value creation.
Information technology not only transforms relationships with customers. It also changes relations with competitors. In the years ahead who will be your company's most formidable competitors? Another way of putting this question is: "What business is your company really in?"
In his book, Microcosm. The Quantum Revolution, George Gilder writes: "By overcoming the restraints of material resources, the microchip has devalued most large accumulations of physical capital and made possible the launching of global enterprises by an entrepreneur at a workstation."
If knowing your customer better is a key to winning the new Information Age game, our beliefs about our competitors' size may have to be rewritten. Just ask Bill Gates at Microsoft! Who would have thought that a company which did not exist in 1975 could have challenged the giants of the information technology industry and win?
In the New World of information technology your most formidable competitors may as well come from another industry! Take the cable TV companies. What business will they really be in the year 2000? Already they've placed a decoder in many households. That decoder is really a computer that is used only to receive messages. If you upgrade that device to two-way exchanges, you've tied most of the country into an electronic telecommunications network.
This electronic delivery channel can provide much more than video programming. It could be a message delivery system, or it could be used for shopping, banking, or browsing through the catalogue of a local library. All of a sudden the post office, the telecommunication companies, the banks and retail sector become competitors and possibly partners in a new industry.
To take another example, some of the non-bank credit card companies feel they are as much in the retail banking sector as the more traditional players. But they compete with a very different cost structure and channels of distribution.
And information technology is also transforming our workplace.
As we move from a smokestack economy to an information-based one, knowledge workers become the most important factor in value creation. The most effective employees are the independent thinkers. These individuals expect responsibility and demand the proper tools to support their decision making.
How does a company realize the full potential of its knowledge workers? The answer to that question helps define the path that businesses must pursue if they wish to be profitable and competitive in the year ahead.
The successful firm will be transformed from a top-down hierarchical structure to one that is much more horizontal, and is--in many cases--organized around teams. The individuals who produce the goods or meet the clients must have decision-making authority. They must have access to a broad range of data. And they should be allowed broad flexibility in their approach to the data--and their interaction with others in the firm.
Information systems must be transformed. Here the change parallels the transformation of the firm. There's a need to move away from the traditional computing hierarchy with a mainframe at the summit and non-intelligent devices at the terminal end.
Instead the system must distribute its power to where information is used and generated The information system must conform to the requirements of the new organization, while maintaining operational stability, security, and ease of use.
Only slowly have we been moving toward true distributed computing. In the 1980s, over 50 million personal computers entered our organizations. But most were used as a single-user productivity tool to run spreadsheets and word processing packages. All communication among users had to go through the mainframe.
As a result, when it came time to tap into the main information system of the organization, users found that their flexible and powerful workstations were limited in their function as "slaves" to the "master host." Little of the power of these PCs went to strengthen group productivity.
In the 1990s we're beginning to move away from that hierarchical structure of computing. The trend is toward linking PCs in local and wide area networks. This provides the basis for the transition to true co-operative distributed computing.
The PCs throughout your company represent a major investment. But are you getting the return you deserve? Probably not.
The investments made by most large organizations over the past five years in personal computing technology have not yet realized their full potential. Before they do, a number of conditions must be met.
• In the first place, as technology becomes a tool for value creation, user groups must become more fully involved with information technology decisions. They must be intimately involved, not just from a distance. They must become as knowledgeable about their computing needs as they would be about the pricing or features of the products and services their company offers.
• As well, a new approach must be taken to develop software applications. New tools are available that make this task far easier than in the old days of a dominant mainframe. But if someone has always worked on a mainframe, that individual may have trouble adapting to the PC environment. Amazingly, most young college graduates today have had more exposure to these tools than our own "experts" have.
• Finally, the existence of standard, multi vendor operating systems has accelerated the pace with which the software industry brings products to market and reduces their cost. As a result, there's a 'let's wait a few months" syndrome. Purchasers are hesitant to buy new products, lest something still newer or less expensive comes along. This delayed decision-making has widened the gap between needs and solutions.
How will successful organizations deal with these issues? In three ways.
First, the adoption of a clear reference architecture allows an information system to deal with the fact that applications will be running on various parts of your hardware, software and networks. Some of the processing will be done on the workstation under MS-DOS, MS Windows or Presentation Manager. Others will be run under UNIX or OS/2 on the server. Some will come from the host on a X.25 backbone. Others will instead come from an SNA communication line. Some in fact might come on your existing proprietary environments.
Regardless of where the processing and storage of information occurs, the architecture allows the information system to take advantage of those resources and to decouple solutions from technology.
Let me give you an example of how an architectural solution works. A manager is in Word for Windows, writing an important document. This individual needs marketing statistics and information about a current advertising campaign. With one click of the mouse a window opens to the services of the system. (The manager is still in the document.) The services are in English or French.
The marketing database is selected. The manager doesn't know that the marketing database is on a server that's located across town. The system worries about all the technical details of opening and closing files, operating systems and SQL databases. Next this user searches the second database of information about the ad campaign. That database, located in another part of the company, contains several valuable ads used in the past. They are seamlessly dropped into the document.
When the manager finishes, she decides to fax the document to her boss, who happens to be on vacation up north where there are no LANs. Her directory knows that, and when she mails the document, the system knows it has to look for a fax, dial a particular number, and send it out. All this from within the Word for Windows document. That should explain the role of an architecture.
The second way successful organizations will deal with emerging issues is through commitment to open systems. This will ensure that your choices will continue to be supported by the information technology industry. It serves as an insurance contract that your technology will not become obsolete. It makes certain that your solution can use all the major platforms. And software produced for MS-DOS, MS Windows, Unix or any other standard open systems is far more affordable than applications for proprietary systems. Why? It's just a matter of economies of scale. If 50 million workstations are using the same software, the price has to come down. No one company, no matter how large, can stop a standard that the whole industry has chosen.
Third and finally, successful organizations will have to devote their best resources not to the pursuit of the latest and greatest technology, but to the development of practical solutions for users. At a time when the focus of information technology is on the creation of value, companies must decide if they're going to use those systems to improve existing processes or to give users the power to create new and better ones. Which will it be? I think you all know the answer.
The idea of open systems is not simply a vision for the future. For many years, we at Olivetti have been helping companies all over the world shift to open systems. We provide an architectural model that frees long-term decision-making from the idiosyncrasies of technology. We have the skills to help you. And we'd like to work with you to create coherent, corporate-wide solutions.
Olivetti's approach has always been an open one. The focus of our combined efforts should be on solving the challenges that your business faces, and finding technology solutions to meet them. Not in choosing sides in a debate about technology.
Let me conclude with a call to action for executives.
My first recommendation is that executives evaluate investment in technology from a new perspective not just on cost reduction, but on revenue and margin generation. Traditionally, outlays for information technology investments were approved because they lowered operating expenses. But in today's world it's better to think of information technology as a means of adding value to products and services, strengthening customer loyalty, and reaching new markets.
Not only will the expense side of the income statement be affected. Information technology will also boost revenues and improve margins.
My second recommendation is that investment in technology be viewed as a business decision undertaken by all executives, not just the "specialists." Traditionally, decisions about whether to buy information technology were the mandate of people running operations. Today technology is increasingly viewed as a business investment. Hence the decision about whether to invest must be a collaborative effort. Both the business group users and the technology specialists must work together to identify needs and find solutions.
My final recommendation is that the corporate information system should exercise control in a different way. In the past it was easier to run a tight operational ship by limiting the functional options of the user. Today it is important to foster an environment that allows knowledge workers to be fully effective. Promoting the desired behaviour is a lot more difficult than directing or controlling it. But the rewards are that much greater.
The world is changing, and so must we. The pace of change, the intensity of competition in all our businesses is quickening. And central to the transformation of business activity is the explosion of information technology. We need a new mindset. "The difficulty," as John Maynard Keynes said, "lies not in the new ideas, but in escaping from the old ones, which ramify into every corner of our mind."
Either our businesses will respond to this challenge, and take full advantage of these new powerful tools, or in the plainest language--they won't survive.
As Columbus did 500 years ago, we executives must show vision and courage in facing the challenges ahead. Ahead lies a new world of information. A world that will astonish us, if we have the courage to face it. This is the Renaissance of the Computer.
I urge Canadian managers to take the steps I have described. We are well positioned for leadership in this information age. We have one of the best educated populations in the world. We've long been in the forefront of such information industries as telecommunications. Now it's time for us to show that we can be on the cutting edge of the revolution in information technology.
The poet T. S. Eliot wrote:
Between the idea
And the reality
Between the motion
And the act
Falls the Shadow.
Let's not be daunted by indecision. The time to act is now.
The appreciation of the meeting was expressed by Ed Badovinac, Professor, Department of Electronics, George Brown College and a Director of The Empire Club of Canada.