A little while back I spoke at a conference sponsored by Fidelity Equity Partners, a private equity firm that’s part of Fidelity. FEP has an interesting investment strategy: they "focus on investing in established high-growth midsized companies that have gained meaningful competitive advantage through the innovative use of information and systems."
This is music to my ears, of course, and I was excited to be part of the event. It gave me an opportunity to present the work my colleagues and I have been conducting on IT’s competitive impact (discussed here, here, and here ), and also to learn about the types of companies FEP is interested in. Five companies presented at the event: AllConnect, Bazaarvoice, HighRoads, iSqFt, and TopCoder (the companies’ descriptions of themselves are included at the end of this post).
The presenting companies were in dissimilar industries and had wildly different business models. What struck me, though, were their similarities, which went beyond an affinity for or reliance on information technology.
As I listened to their presentations, two themes emerged:
The power of novel IT-embedded business processes. The entrepreneurial insight behind each of these firms, I found, could be (very) loosely summarized as "Wait a minute — here’s a process that isn’t working very well. It takes too long, costs too much, and/or delivers unsatisfactory results. We can make it work a LOT better by applying some technology to it." The processes ranged from getting utilities purchased and turned on after a move (AllConnect) to obtaining construction drawings and bidding on a job (iSqFt) to managing a large corporation’s HR programs and suppliers (HighRoads).
One of the things I find fascinating about process innovations like these is that they’re often only obvious in retrospect. This is also the case with many product innovations. Most of us didn’t realize that our gear for listening to music was sorely lacking until the iPod showed up, and I once heard the history of the pharmaceutical industry summarized as "giving us drugs for medical conditions we didn’t know we had." The compaines presenting at the FEP conference highlighted for me that the same is probably true for many, or even most, of our current processes. How many of them have been looked at with a fresh, critical eye, a holistic perspective, and a technology-friendly mind? Relatively few, I’d guess, which explains why I’m optimistic that the IT-fueled productivity boost has not yet run its course.
These companies and many other examples have also showed me the difference between simply re-engineering a business process on a whiteboard and embedding the new way of working with IT. A process embedded in technology is more standardized, repeatable, and amenable to monitoring than one that’s deployed only with memos, manuals, and training and enforced via audits and checkups. Technology can improve many things. Of these, one of the most important yet least appreciated might be the the ability of process innovators to deploy their new designs, and to have great confidence that they’ll be executed as designed.
An addiction to data. Standardized, IT-enabled business processes throw off a lot of data, and all five companies talked about how powerful these data were, and how many ways there were to make use of them. BazaarVoice could measure how much the addition of user reviews improved conversion rates and order sizes on eCommerce sites, and TopCoder seemed to quantify every aspect of software development, going so far as to give each contributor a numeric rating that was taken quite seriously by all involved. The presentations at the FEP conference reinforced Lord Kelvin‘s belief that "when you can measure what you are speaking about, and express it in numbers, you know something about it; but when you cannot measure it, when you cannot express it in numbers, your knowledge is of a meagre and unsatisfactory kind; it may be the beginning of knowledge, but you have scarcely in your thoughts advanced to the state of Science, whatever the matter may be."
I walked away from the event thinking that FEP’s investment hypothesis is a sound one, but then again I walked into the event thinking that. I also came away more convinced than ever that that IT-based process redesign is nowhere near complete, and that huge entrepreneurial and intrapreneurial opportunities remain. Most of these opportunities depend not on novel technologies, but instead on novel perspectives on how work should get done.
Company descriptions (provided by the companies themselves)
ALLCONNECT (Atlanta, GA): Allconnect (www.allconnect.com) is the leading provider of essential home services and connections during residential relocations. Founded in 1998 to help people during their move, the company establishes a number of residential services for consumers including power, telephone, sewer, cable television, Internet, newspaper, and lawn care all at no cost to consumers. The company partners with more than 30 power companies and hundreds of service providers across the U.S. and employs more than 500 associates.
BAZAARVOICE (Austin, TX): Bazaarvoice (www.bazaarvoice.com) offers outsourced technology, services, analytics, and expertise to help companies enhance the online shopping experience with social commerce applications that drive sales. Bazaarvoice Ratings & Reviews™ and Ask & Answer™ deliver immediate success by minimizing implementation risk and maximizing the strategic impact of user-generated review content through complete customization, deep integration, community management, advanced analytics, search engine optimization, and syndication across the Web and to offline channels.
HIGHROADS (Woburn, MA): HighRoads, Inc. (www.highroads.com), the new way of managing HR programs and suppliers, improves the employee experience while dramatically reducing costs for large, complex organizations. HighRoads has automated HR processes for more than 100 Fortune 500 employers along with 700 of their suppliers, consultants and outsourced administrators.
ISqFt (Cincinnati, OH): iSqFt (www.isqft.com) provides online bid solicitation and preconstruction management services to the construction industry in the United States. The company’s products include The Private Construction Office, which gives general contractors the ability to distribute project plans, specs, addenda, and other documents to subcontractors and suppliers; and The Internet Plan Room, which provides subcontractors, suppliers, and professional estimators with access to project information, plans, specs, and addenda for publicly bidding construction projects. It serves general contractors, subcontractors, building material suppliers, and manufacturers.
TOPCODER (Glastonbury, CT): TopCoder (www.topcoder.com) is a marketplace of freelance software developers. The company uses its own platform for documentation, process, ranking, review, and submission of outsourced development projects as well as sponsored coder competitions. Sponsors use the competitions to recruit and rank developers from around the globe. The TopCoder ranking scores are recognized within the development/hacking community and by the IT hiring community as the best way to quantify the capabilities of a developer. Pulling from competition winners and a component library of winning projects the company provides outsourced development services at a higher quality, lower price, and faster than other major outsourcers.