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July 19, 2005

Fast, Pretty, and Cheap

Bob Evans over at Information Week wrote up the importance of HP's new CIO Randy Mott to its strategic needs. Mott is the mastermind behind Wal-Mart and Dell superiority in IT enablement of business performance.

Is strategic success portable? Evans points out that, "During the five years Mott was CIO at Dell, the company's revenue grew more than 60%... among Mott's biggest contributions were helping the IT team set strategic priorities and putting in place global standards... At Wal-Mart, Mott specialized in cutting latency out of the supply chain and ultimately increasing customer intimacy by helping to ensure that the seller was offering what the buyer wanted, when the buyer wanted it, and at a price the buyer accepted. As a result, in the six years that Mott was Wal-Mart's CIO, the company's sales almost tripled..."

Clearly Mott is a guy who knows how to get things done. But let's recap that: Mott focused his (IT) operations on three things:
- speeding up the runtime throughput of operational processes
- aligning IT's support of the business to its clarity about buyer's requirements
- making that sustainable and affordable in a way that allowed continuous progress over several years.

In a nutshell, he made operations fast, pretty and cheap.

The official joke about fast-pretty-cheap is that you can pick any two of them but you can't have all three. But evidently, getting all three really is possible, and when it happens you become Number One in your niche.

So, what's interesting to think about is how those three impacts rely on each other. In general, we're looking at how the operation establishes a fit with (a.) its environment, (b.) with the prospective customer/beneficiary, and (c.) with the market. When productivity feeds quality and quality feeds acceptance, you get a winner.

Faster operational throughput presumes that the chain of inputs and outputs that link functions and processes together is "streamlined". That is, the functions and processes all know what is the right direction to go in, and they offer little resistance to the environment they are moving through. "Efficiency" is an easy way to refer to minimizing resistance while strengthening direction, but policies and standards actually go directly to the problem in a more profound way. By reducing the number of operational variations that will be attempted in the first place, policies and standards reduce the volume of necessary downstream corrections and distractions, while making it easier to recognize when recurring activities are actually generating benefits or risks.

Clarity about the impacts of activity underlies operational quality, and quality is pretty. Impact clarity means that the downstream benefits and risks of most importance can be targeted more accurately and confidently. As a result, quality promises can be made more rationally and certainly, which increases the customer's interest and attraction.

Customer requirements come from the perspective of the customer's needs, and the greater the need is, the more valuable it is to satisfy the need. But meanwhile, the usual laws of supply and demand apply. The availability (supply) of that satisfaction is a strong lever in prices. But the customer's need (demand) can also range in two ways: from critical to merely discretionary, and from few people to many. So, the smart business wants to focus on the most valuable "sets" of requirements. By tailoring the fulfillment operation to quality for a particular importance and volume of need, economy of operational scale is easier to determine, and improvement there allows more attractive pricing and coverage for customers. Then, of course, what finally makes quality inexpensive to produce is better sales that readily pay off the investment in quality.

So the fast-pretty-cheap trick is not about which one of them to leave out. Instead, it is about how to order and align them. This also reflects CIO Mott's approach when he first arrived at Dell. His first steps were to reduce the number of planned projects by 90%, leaving only those most important to business capability for making products more marketable and sellable. Recognizing that cost is always a critical issue, his initial emphasis was actually on prioritization and focus, not on cost. As Bob Evans quoted him saying, "once we got our priorities set, we were able to be a lot more effective." And we know that both Dell and Wal-Mart are price leaders as a result of their effectiveness. It looks like the best way to reach "cheap" is to stop wasting effort, and do the right work.

Posted by Malcolm Ryder at July 19, 2005 7:55 AM

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