Books | The way firms do business is changing

Books | The way firms do business is changing

Authors C.K. Prahalad and M.S. Krishnan assert that business in the global economy is undergoing a “fundamental transformation" from mass production to customization.

Two interwoven principles govern these changes, one affecting each individual consumer and the other reshaping international business. One principle points out that to create value, businesses will have to customize and provide each customer with a “unique, personalized experience". The second specifies that with diversified customer demand, a network of organizations will evolve into a knitted “global ecosystem". The authors believe these concepts will soon become simply the way companies do business. Welcome to the new norm.

Traditional distinctions are dissolving. Producers are providing services — such as customer training — instead of products. This breakdown of old boundaries forces businesses to change their processes and not insist on old assumptions, methods and pricing systems that impede transformation. Unfortunately, many businesses don’t recognize that this door to change is already open.

Some companies, such as ICICI Bank, have already developed “explicit" bonds among their “strategy, business models and business processes". ICICI Bank adapted its processes when it saw new banking markets emerging in India. For example, it developed wirelessly networked, solar-powered ATMs to serve rural communities.

Recognizing that many Indian nationals living abroad send money home, it digitized the funds transfer process, cutting transaction time by more than a week. These innovations enabled ICICI Bank to capture a major market share.

The authors urge business leaders not to rely on intuition but instead gather and analyse numerical “transactional data" such as the rate of sales, and richer, more complex information, such as first-person observations. Your goal is not to understand why something happened after it happens but to anticipate market movements, recognize and evaluate trends as they emerge and position yourself to take advantage of them.

Customers expect industrial age quality and production speed but they also want services to be tailored to their needs. To navigate between “efficiency and flexibility", your organization must redesign its “social architecture" into a transparent corporate culture in which information flows freely.

The authors identify the subsequent stage of business evolution as a “dynamic reconfiguration of talent" in which responsibility for projects is assigned to global teams with shifting members and fluid identities. Instead of inexorably moving low-tech jobs to the developing world, talent of all kinds will be located everywhere.

You must also adapt your information technology to changing market demands and evaluate it continually at all levels; “technical architecture" must enable you to connect to different devices and to transfer unlimited data to and from partners beyond your office walls.

Unlike many books on the subject, this work cites sound examples from firms from around the world. C.K. Prahalad and M.S. Krishnan add clarity to their arguments with drawings and charts which, unfortunately, tend to force a simplistic Cartesian graphing system on to complex changes. Overall, though, these are minor glitches in an innovative, useful study. GetAbstract recommends this book to executives and others who are committed to keeping up with change on a global scale.

Rolf Dobelli is the chairman of getAbstract.