I am a great admirer of McKinsey, the international consulting firm. I particularly like their thought pieces on international business. McKinsey uses these articles as a way to differentiate themselves into a very select group of professional service providers who have original thinking on complex issues. In the August 2010 issue of the McKinsey Quarterly an analysis was presented of Ten Tech-enabled Business Trends to Watch. The article describes certain implications from IT technology in the areas of organization management, new business opportunities and emerging IT technology. I think they overlooked or paid insufficient attention to two important trends.
- McKinsey correctly highlights the rapid growth in data, which is doubling every two years. McKinsey correctly identifies the increasing trend for companies to resell their transaction data from customers to interested third parties. What I think McKinsey overlooked is the ability of large intermediaries to use their data to re-price third party services. For example your company arranges shipping for clients all over the world. You hopefully have ten years of data on every ship you have booked, the tonnage, the delivery distance and the rates paid. You now have better information on shipping rates than any shipping company. Develop a good algorithm and you now have the ability to set the price for your client's shipping business. A similar approach could be used by insurance brokers, almost all transportation services and any other free market service where third parties are used as arrangers. What the hedge funds have done in financial markets on debt is not so different from what I am describing.
- McKinsey correctly highlights how technology is changing the way organizations work in terms of collaboration and co-creating. What McKinsey misses in their organization analysis is that volume and speed of data creation and data capture is drastically reducing the time for decision making. Remember the early stories about news events that broke first on Twitter and how every card carrying geek loved this fact. Organizations need to adapt to this trend of rapid information flow and establish autonomous, non-bureaucratic response teams. Some people are saying that the meltdown of 2008 was really only averted because the Federal Reserve did not have to ask for anyone's permission before they reacted. I think that governments and large corporations are going to need to set up autonomous organizations that respond at the first sign of disaster, whether it be financial issues, natural disasters or public relations problems. The bad news is becoming very viral and organizations need to adapt for rapid decision making.