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It has become very clear that structures, systems, processes and skills that have brought organizations to this point in the history are no longer good enough to enable organizations to cope up with the cut-throat competition and the challenges of the 21st century. Take a real-life example of Sony Corporation. In 1986 a 14” Sony color television was priced in the local market for Rs. 9,500/- and there were only one or two major competitors in the market for this prestigious Japanese brand. After fourteen years, today, Sony 14” color television in Pakistan sells for less than Rs. 9,000/- and there are at least six other major competitors in the market. The question worth pondering is that in fourteen years with an average of 7-8 percent inflation in the country with continuous devaluation of the local currency in the international market, how could the organization still survive? Are they selling it on a loss? Certainly, not. They are making profits and probably more than what they were making previously. Is this price control at the cost of quality? Certainly, not. Today, the television is several times better as compared with its 1986 model. The view screen is better, flatter, clearer and put lesser strains on eyes. Its remote control has over two hundred features as compared with only twenty features in 1986. It comes with a “stereo” and four-speaker system as compared with “mono” and one-speaker system in 1986. Suffice it to say, that in each of the technical aspect as well as in terms of aesthetics, today it is much better. It is estimated that if today Sony Corporation was manufacturing the TV exactly with same structures, systems, processes, staffing and technology as back in 1986, a 14” television could have been priced in the local market at approximately Rs. 48,000. The same trend could be noticed in other industries including cellular phones, air-conditioning, computer, etc. Let me share another interesting fact about the service sector. Back in 1996, using activity-based-costing (ABC) tools, I calculated that public-sector banks were spending between Rs. 1200-1600 for each personal check they were cashing. There were six people who were involved in the process of encashment of each personal check such as, cashier, peon, ledger officer, signature verifier, senior officer, and finally the manager. In addition, there were nine different activities involved in the process and end result: the process was taking an average of 25 minutes and costing the bank Rs. 1200-1600. This was an example of the banking sector. However, other industries in the service sector including telecommunication, cellular phones, electricity, gas companies, hotels, travel agencies, airline companies, be it be in public or private sector were not much different. Do you think that these companies could have survived without introducing fundamental changes in their processes and use of technology for their advantage? Certainly, not. They had to change, and many did change. Compare the figure of Rs. 1200-1600 per check, 6 people, 9 activities and 25 minutes with these statistics. Less than Rs. 100 per check, 1 person, 6 activities, and less than 5 minute processing time. These are the statistics of a foreign bank. Do you still think that the Globalization and associated pressures for change, a “blessing” or a “curse”, both for the organization as well as for its customers? The Study |