Managing in real time

If you keep your ear to the ground on such matters, you've probably heard buzz about something called RTOs (real-time operations). RTOs attempt to make information available both internally and externally in a dynamic fashion. If you've seen the ad on TV that asks, "Is your market information really current?" then you've been assaulted by the RTO hype. The ad implies that, because of time delays, many sources of financial information are unreliable and even dangerous.

There is some truth to the idea behind the ad, so many companies believe that moving to RTOs will help them gain a competitive advantage by reducing lead times and improving efficiency and responsiveness to customers. It also holds the promise of real-time (or even more frequent) reporting of financial results. In the first half of 2001, for instance, many companies were widely criticized for failing to publicly acknowledge how badly they were being hit by the economic downturn. Investors will not readily forget the sudden drop in earnings forecasts that followed. As a result, the investment community will demand faster and fuller disclosure, which will require companies to be capable of closing their books to audit faster and more frequently.

Real-time organizations can change the competitive landscape in an industry. Leading European low-cost airlines, such as easyJet, have maintained an edge over their rivals by using demand-based, dynamic pricing systems to adjust ticket prices in real time, maximize yields, and to sell in real time over the Web. Dell Computer Corp. also uses real-time dynamic pricing, and other computer companies are saving money by introducing real-time customer services. IBM Corp., for example, claims it saved US$1.5 billion in 2000 on its U.S. call-center costs by introducing Web-based, real-time customer assistance.

Enabling a company for RTOs will involve codifying the different routines and rhythms that exist in the company and the industry. Daily sales figures, weekly team briefings, monthly board meetings, quarterly reporting, and annual budgets superimpose one rhythm on another. And operations such as order processing, product shipments, rent payments, staff appraisals, and financial audits have their own daily, weekly, monthly, quarterly, and annual cycles.

Each situation is different, and the rhythms of business differ according to the activity, the enterprise, and the industry. Every company has to discover the rhythm and pulse rate for each element of its business. In doing so, it should compare the pace at which it operates with that of other companies in the industry. It should also consider whether there is competitive advantage in doing things faster.

Building a real-time organization will prove to be a never-ending task. There will always be something else to real-time enable. Because of this, the temptation to make everything happen in real time needs to be resisted -- converting the final 30 percent of operations, for instance, will likely yield no payoffs and incur large costs.

Barb Gomolski is a research director at Gartner, a research firm in Stamford, Conn. Contact her at BarbaraGomolski@earthlink.net.

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