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Future Proof with the One-Stop-Shop Business Model

by Rene T. Domingo (Send comments to rtd@aim.edu)

Conventional Principle: A system or chain of processes must be set up to move materials and goods from producer to consumer. Ensure that each link adds value to the product or service being processed.

New Principle: The customers looks for value, not the chains or circles behind it. Create and deliver value as close as possible to the customer.

In spite of claims of modernity, present day management is still mired in the functional paradigm. Organization charts are still made up of the basic functions of marketing, finance, operations, and human resource management or some variation of the same theme. Sadly, MBA and business schools worldwide, including the top ones, continue to perpetuate this functional orientation by maintaining these subjects as first year core courses and group the professors accordingly. The functional set up has generated interdepartmental strife, whether the department is headed by a corporate vice president or a tenured professor. The feud is punctuated by comic debates about which department is most important to the company or school and therefore deserve the highest budget.

To minimize the inherent silo effect of this seemingly logical set-up and sort of link and placate these warring functional islands, the principles of process management, internal customer satisfaction, and value chain analysis were recently introduced. This process orientation, which looks at outputs and inputs of entire processes or value chains, rather than those of functions or departments is definitely a big improvement. While these concepts seem to have put order, hierarchy, and discipline in the organization, they still did not change the serial outlook on business and management. The different parts of the organization were just made to interact and communicate with each other. The chains of processes were synchronized and made seamless. Still most of the so-called modern day managers dogmatically hold that material, product, and information, must flow in a sequential fashion, as value is added incrementally at each stage and builds up cumulatively into some desirable form and level at the last stage where the end-user or consumer is waiting.

In this new millennium, where time waits for no one, the relatively slow and bureaucratic serial business configuration, albeit seamless, is no longer sustainable. Customers are much more impatient now and will not care about the departments, value chains, and series of black boxes behind their order. Orders placed today were wanted yesterday. Precious time are lost in handoffs from one process or function to another. Even synchronizing the relays between serial functions or processes will not break the new speed barriers. Only the high speed modes of operation will, namely the concurrent or parallel, the one-stop-shop, and point-to-point business designs.

Examples of concurrent processes that will be the minimum requirement for survival in the new millennium are:

concurrent engineering designing a product simultaneously by several designers, using IT, in real time consultation with manufacturing, engineering, purchasing, suppliers, and marketing

concurrent marketing customer order taking, selling, cross selling, servicing, and account management at the same time at the point of sale

design for manufacturability (DFM) cross functional team of design engineers and manufacturing personnel design concurrently for functionality, marketability and manufacturability

quality function deployment (QFD) - cross functional team of design engineers and marketing personnel design concurrently for marketability, functionality and competitiveness

These obviously are not yet perfect concurrent solutions. More comprehensive, cross functional processes will have to be developed. For instance, R&D, marketing, and manufacturing will merge and converge into one discipline. All three functions will lose their individual identities, organizations, vice presidents, and business school professors. Then things will really begin to speed up.

Parallel thinking also means that management will veer away from transactions and move towards partnering. Examples are:

Supplier partnership - long term buying simultaneous with training, developing, and financing of suppliers (instead of just buying from and haggling with suppliers)

Customer partnership simultaneous selling to, caring for, listening to, and retaining customers for life (instead of just selling to them); this may come in the form of customer participation and interaction with highly intelligent call centers

Employee partnership - workers work, produce, create, innovate, and sell at the same time, and are paid through productivity gain-sharing schemes rather than salaries

Competitor partnership also known as strategic alliance or coopetition, the simultaneous competition, cooperation, sharing, and collaboration with business rivals (instead of just trying to outsell them)

The most efficient business configuration is definitely the no-handoff one-stop-shop. In addition to the intensive use of parallel or concurrent operations, this set-up will require a new breed of employees or service providers: team players, multiskilled, multitaksing, empowered, managerial in authority, and entrepreneurial in outlook. Imagine banks and insurance companies without chairs where customers can finish all transactions standing up, and standing still - without walking- while being served by superemployees manning the superstations. Office lobbies with cozy sofas will become old fashioned, if not symbols of decadence and inefficiency. The new millennium will put an end to the front office and backroom dichotomy - two sets of layouts, organization and employees - and merge them into one. Figuratively, the customer can walk straight into the kitchen and see the cooking because no door separates it from the dining area. The Benihana hibachi (the combined frying pan and dining table) concept will soon migrate to other industries and services.

Another high speed business configuration is the point-to-point set up. Its antithesis, the hub-and-spoke, is still the de facto standard for efficiency and low cost. But not for long. With the availability of powerful information and telecommunication technologies, point-to-point transaction and processing will soon become faster and more economical. Presently the point-point routing of Southwest Airlines has proven more lucrative and profitable that the hub-and-spoke strategy of the bigger Northwest and United Airlines. The original hub-and-spoke configuration, which was based on economies of scale and convenience, was not invented by the airline industry. It is the logic of the trading business - the middlemen, the Arab traders, the Japanese sogo soshas, the large American supermarket chains, Wall Street stockbrokers, and bankers. The idea of hub-and-spoke in trading is for many manufacturers and sellers to sell their goods in one place, and for many buyers to go to same place to find and purchase the particular stuff they want. The suppliers represent the incoming spokes that feed the hub (the trader), while the buyers represent the outgoing spokes that deplete it. In principle, the point-to-point buy and sell transaction would be chaotic, costly, and cumbersome as sellers and buyers grope for and grapple with one another. But the new millennium technologies will tip the balance in favor of the traderless, stockless, point-to-point business process.

Amazon.com, the largest and successful on line book store, is the evolving prototype of the point-to-point business design. It is the bookstore without books and stores. In their places is the powerful information system that links and mediates between buyers and publishers. Instead of physical books, electronic information flows in and out in a hub-and-spoke fashion. Books are virtually shipped from publisher to customers, in a point-to-point fashion, as Amazon carries very little inventory. The Amazon system can be easily replicated into other industries. Soon we can order every product we need online straight from their makers and factories, bypassing physical and even electronic middlemen. Soon we can electronically buy stocks directly from sellers and issuers, or borrow money directly from depositors, rendering stockbrokers and banks obsolete. Direct sourcing and direct selling will be the norms of transaction. All sorts of middlemen - of goods, services, and capital - will eventually be threatened and destroyed by the new economics of the point-to-point system. Very soon we will have trading without traders, brokering without brokers, and banking without banks. As the saying goes, one who stays in the middle of the road gets run over. It is no longer safe and secure to stay and work in the middle in the new millennium.

 

 

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