Interview: Douglas F.Aldrich

INTERVIEW: DOUGLAS F. ALDRICH, Managing Director, A.T. Kearney
"Intermediaries Are Being Cut Out"'

The author of Mastering The Digital Market Place talks to BT's Seema Shukla on digitisation.

Q. How quickly do you see the digital revolution spreading in the developing world?

A. This is a revolutionary change as opposed to an evolutionary one. The difference being in the rate of change. What we are seeing here (in the digital revolution) is a flat line with a sudden spike. Most industries say it doesn't matter. Then, suddenly someone makes a change and everyone scrambles to get into the game.

Last spring, Toyota announced it would sell made-to-order cars on the Net. Order the car on Monday and take delivery the following Monday. The need was to turn out a product in four days; not the usual six-to-eight weeks. You cannot sell on a four-day turnaround unless you can buy on a four-day turnaround. So this thing that was not going to happen according to the automobile industry changed everything overnight.

Many Indian companies are still sorting out their supply chains. Is this a disadvantage in the New Economy?

The lack of a defined supply chain is a help. If you do not have a strong tradition of doing things in a certain way, then any way is as good as any other. Companies are leapfrogging the mistakes of traditional supply chains as they get into the new model. There is a great chance for developing markets to get on ahead. And there isn't as much of a disadvantage in being behind as before.

Do you see a new world order emerging from this?

Absolutely. Look at the IMF's tendency of giving advice to developing countries to invest in infrastructure and manufacturing. It takes billions of dollars for countries in Africa, Asia, and South America to become competitive. In the Net-enabled world, how much infrastructure do you need for somebody in New Delhi to sell to somebody in Detroit?

When you say you need a certain minimal amount, what is that?

Digital market places are wonderful, but people still want to eat apples. The infrastructure needed to market apples is a fraction of what it once was because of digitisation. That is the key point. And that is what I try to stress in my book-this revolution is not just about the Net. It is about customers having the final say on what they do: the ability to get their way every time, and if they cannot get it from traditional suppliers, there are a couple of hundred thousand people who, through the Net, are willing to help them in a different way.

How does organised retail still being in its infancy in India affect the development of e-business? Is the simultaneous development of the Net and organised retail a hindrance?

I can only speculate because that has not really happened anywhere yet. Indians do not have a tradition of going to an organised market. Does India have a tradition of buying certain things in certain ways? No. Everything exists-small markets, big markets, catalogue shopping. In such a market, the digital purchase is just another choice, and you won't find the traditional biases you have in developed markets.

There's lot of talk of brick companies going click; now even click companies are going brick. Is this how it happened in the West? Does there always have to be a mix of click and brick?

I think so. In the US, there are people who want to buy books after browsing in a store. The key point is that the customer gets to do it the way he wants to.

In the book, you stress that customer focus was never as important as it is now. Why?

When only 10 per cent of your workforce has any idea of what it takes for you to reach your end-customer, how successful can you be? Our advice is to outsource all non-value adding activities of your business. If you outsource, a larger percentage of the workforce is customer-focused. That is still in its evolutionary stages. The Net will be a catalyst helping to set up this largely physical business to make some end-customer happy. The First Wave of the revolution was about doing things we used to do, but in a better way with Net-enabled technologies. Wave Two is about doing things we used to think were fundamentally impossible.

How will this affect the role of the consultants-will they take advantage of outsourcing and consolidation?

Every time there is change, there are those that understand the change and help companies move towards it. There is a services business that will grow. In the old days, you would have called it outsourcing. I'm not sure that is the right word anymore. I can't understand why any company should run its own payroll-it is not a value-added activity.

Technology is changing the way we do business. Companies like Napster are challenging the revenue models of traditional firms. Where do you see this going?

We don't have a way to make money. That is the key point-not whether Napster is legal or not. Stephen King's latest book is only available digitally. David Bowie has his own music site. The interesting thing is that intermediaries are being cut out. When David Bowie sings a song, he makes five cents a copy; Sony puts it on a disc and sells it for $7-that is what we pay as consumers. Bowie only gets the nickel, and so his logic is: log on to my site, pay a nickel, and get a copy of my song. Would you steal a song if it costs you only a nickel to get the original? For David Bowie this is easy. But if you are Debbie Roberts, an emerging singer, you need the promotions a music company provides. It could still be a Net variant of promotion-you want to find out about music, you sign on to a service that is like a global chat room promoting new music. It will be interesting.

Your favourite examples of companies that have flourished in the digital market...

Dell is still my favourite. When you want to buy a pc, you send them money and they turn out the order in just four days. Everyone else takes 30 days. The computer will be exactly designed to your specs. Similarly, General Motors' Onstar system: a private cellular network-based offering that will give you geography-inputs-the best route to your destination. If you leave your keys in the car, the satellite will open the door, and it can download the latest movies if you have a screen in the back. If you think of a car not as a car, but as a transportation vehicle then these things can give you a lot of digital value-add. Amazon: it gets to know you as you interact with it. It doesn't ask for a profile; it just notes that you buy a mystery book. The next time you log in, it tells you about related books. I had not logged in for 36 months; still I got a mail telling me of a new track from the same singer whose album I had bought for my daughter sometime ago.

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