The Advantages of Working Dangerously

Early adopters of new IT and customers of start-up vendors can win competitive advantage and other treasures, but only if they look before they leap.

Reader ROI

• When to consider becoming an early technology adopter
• Risk mitigation tips for contracts and implementation
• Specific rewards from new applications, platforms and delivery mechanisms

Years of budget cuts and still-painful scars from the overheated tech-buying spree of the 90s have left many companies nervous about being early adopters. Being first in line for products based on cutting-edge technology is even more hair-raising when you're holding hands with a start-up vendor. But a few braver-than-average companies are taking chances and making them pay.

The reasons they become early adopters vary. For some, it's a necessity rather than a choice, when they find no mature technology to meet their needs. For others, it's a calculated attempt to save gobs of money. For others still, it's a necessary step to leapfrog larger competitors. And with expectations for IT to drive innovation and competitive advantage at a growing number of organizations, the urgency to try something new is mounting. Even Nicholas Carr - Mr "IT Doesn't Matter" - admits in his book that IT first movers have an opportunity to gain competitive advantage.

Whatever the motivation, being an early adopter involves significant risks as well as rewards. As with bungee jumping, careful preparation can mitigate many dangers. But at some point, you're still going to have to take that big step off the bridge.

Before you do it, early adopters uniformly warn, you must make a strong business case for the move - the stronger the better. Will using the new technology ensure that you will gain ground on the competition? Will it allow you to win new business you can't acquire any other way? Will it cut costs out of your operations like nothing else can? Will it make you orders of magnitude more agile than you are today? If you can't build a sound case around any of these business outcomes, then waiting or seeking a more established solution is probably the wiser way to go.

And even if you can build the case, you need to look inside and make sure that you and your company have the intestinal fortitude to follow through with the implementation. Working with new tech can have remarkable benefits, but the path to those rewards may be significantly more strenuous than when you deal with established technology from a known vendor. You'll be building best practices, not borrowing them. Technical support may be limited or nonexistent. You may in effect be beta testing (or even alpha testing) the product. The implementation process will require more risk mitigation planning and ongoing monitoring than you're accustomed to.

Still interested? Good. Now it's time to see how several companies made it work.

Reasons and Rewards

COST REDUCTION When Mysia Benford became information systems and logistics director at Associated British Nutrition and Agriproducts (ABNA) in November 2001, she knew she was getting into a company that didn't make changes lightly. Some inefficient business processes had been in place for decades at the agricultural products and services company. Farmers, for instance, often called for grain feed delivery when their feed bins were just about down to dust. Feed products are made to order, so a late order would alter the manufacturing schedule, introducing the possibility of raw material substitution with its increased cost. And pickup and delivery times were not always well-coordinated. Empty trucks - fresh from delivering feed to a farm - would sometimes pass other empty ABNA trucks on their way to the same farm to pick up products that the farmer was selling.

The typical solution for overhauling inefficient logistics is an ERP system. But Benford wouldn't hear of it. "My view is that [ERP] is an executive solution to 'Wouldn't it be lovely if there were one thing in the world that would solve all my problems?'," she says. "To be generous, it's naive."

Instead, Benford wanted a solution that would allow her to quickly integrate new business processes - and even new businesses - without the hassle that she associated with ERP. "All the [ERP] configuration issues mean you need a load of consultants before you can see how this software works," she says. And if that happens, "you've lost as an organization the ability to understand how your business works". Her alternative was something brand-new at the time (early 2002), a service-oriented architecture (SOA) built on an enterprise service bus (ESB) from Sonic Software. The integration flexibility it provides ABNA means that a $US2.8 million software-plus-implementation investment in Sonic ESB and a separate enterprise logistics product "have the potential to generate a 5 percent to 10 percent reduction in ABNA's $US100 million yearly costs for logistics", Benford says.

But convincing every piece of the supply chain to take advantage of the flexibility that SOA can provide remains an ongoing challenge. In the case of the empty farmer silos, for instance, ABNA has begun testing sensors that could generate an XML request when feed drops to a specified minimum level. The ESB would then treat that request as a B2B transaction for more feed, replacing the last-minute phone call from the farmer and eliminating the need for human data entry.

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