This is the thesis developed by Christopher Meyer, vice president and director of Cap Gemini Ernst & Young's Center for Business Innovation, in his "Keeping Pace with the Accelerating Enterprise" article. He gives very interesting examples. Let's look at two of them.
Red Lobster, for example, subscribes to Landsat satellite data, because they want to know the temperature of the Gulf of Mexico. Why? Because the temperature affects the rate at which shrimp breed, which in turn affects the size of the catch, which then affects the price. If they can sense this variable, they can reduce their costs, because they will know when to go into the market and when to stay out. Multiply that on the order of a billion times, and you have businesses all over the economic map sensing and responding in close to real time.
Progressive Insurance has been experimenting with [real time.] It set up almost real-time claims processing -- you have an accident, a Progressive van comes to the scene, takes pictures, gives you an estimate, and gives you a check. The point is the whole thing stays in the system for a couple of hours instead of a couple of weeks or a couple of months. Another thing Progressive did was to say, "All right, we charge you for insurance based on where you live, among other things, but where you live and where you drive aren't really the same thing." So in a pilot program they put a GPS sensor in customers' cars. The idea was to charge more per minute spent in a high-crime neighborhood, for example. The sensor gives them the ability to charge you just for the risk you consume, when you consume it.
But clearly, Christopher Meyer wants more.
I have a Dell computer. As far as I know, it gives me no way to give Dell feedback. They don't know how I like it, how it could do more for me. There is no feedback loop to Dell from the machine I'm using. Whereas every time Netscape crashes, it launches a little application that asks, "What were you doing when Netscape crashed, and will you send this information to Netscape?" Why shouldn't everything have a feedback loop like this if connectivity is universal? With this real-time information, Dell could update or patch my computer, but it could also learn from my experience and build that into its new computers, improving its product in real time and not waiting until my next purchase in three years to learn that I wasn't happy.
After a long analysis, the writer looks as time at a scarce resource and at how we should consider it.
We still haven't worked through the idea of time as the scarce resource. When the costs of what we sold were mainly raw materials and labor, we became efficient about consuming those things. But now all our costs are fixed costs with regard to time. We build software systems and factories that cost the same whether we use them or not. Therefore, the more efficiently we use the time of those expensive resources, the less they cost.
If the scarce resource is time, we need a management system that measures return on time, for people and for capital. Michael Rothschild invented an accounting system for manufacturing that, instead of doing normal activity-based costing, allocates costs according to the degree to which an activity uses up our bottleneck capability. So if painting is the bottleneck in your automobile factory, allocate cost based on the percent of the paint capacity you use, because that's what your gating factor is.
Source: Christopher Meyer, for CIO Insight, November 2, 2002
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