Saturday, February 26, 2011
Now the subject of interfacing vs. integration might not seem important to you at the moment, but think about it. Walmart ‘integrates’ with their suppliers in their on-going commitment to provide their common customers with ‘everyday low prices’. The key phrase here is ‘common customers’, because Walmart sees themselves as a conduit for their manufacturers and suppliers to deliver their products to their customers. Walmart’s customers are their supplier’s customers, plain and simple. The result of these partnerships eliminates an enormous amount of cost in the supply chain process.
One of the greatest disadvantages Americans have in regards to technology is decision makers are more interested in investing in what everybody else has instead of what advantage a technology may give them over their competitors. This is why it takes us so long to catch up. It’s the main reason it takes ten years for anything new to gain public acceptance. But, every problem creates an opportunity for someone, and the decision to put off investing in the Cloud is giving competitors with greater vision a huge advantage over the rest of us.
It’s obvious, the bulk of American business people don’t possess the advantages of ‘market leaders’ like Walmart, and instead of competing, they resign themselves to operate within an environment their market leaders created, never making the slightest attempt to knock them off their throne.
In an article we mentioned in our book, we quoted Andy Grove, the chairman of the Intel Corporation, when he said, “Classical competition theory doesn't address situations like this. In fact, it implicitly assumes that the environment in which a company operates is basically a given and limits itself to suggesting ways in which a company can better its lot IN THIS ENVIRONMENT.”
It doesn’t have to be this way. Cloud Computing has opened up a whole new world and it’s taken ten years to earn the attention of the main stream media. Remember when computers first popped onto the scene? It took ten years before they gained national acceptance, and during that time, companies like Walmart built their empires on the backs of retailers who refused to change. It makes one ponder… who will be the next Walmart? Do we even dare to explore that question? Of course not. We are too busy struggling to better our lot in the environment Walmart created, when the keys to the vault were thrown on the floor for us to pick up over a decade ago.
Many of the businesses we have spoken to report back they are doing ‘many’ of the things that can be done with Cloud Computing, but at what cost, and at what level of efficiency, and most important of all, what’s next? Let me put this in a different perspective. If one is to exhaust all of their resources reaching a certain goal, only to have to go back and do it over again each and every day, how do they ever hope to advance past that point?
Friday, February 25, 2011
As we have stated in other articles, Cloud Computing has its roots in “time sharing” incorporating the latest technologies that have evolved over the past three decades. All technology we have used and will use in the future is ‘transitional’ in nature. It is ridiculous to assume that desktop computers using Windows, Linux, Unix and Mac OS are any more permanent than 8-track tapes, horse and buggies, dial telephones or even typewriters.
Desktop computers, like the ones mentioned above, only exist today because of the denial of access to computer technologies in the seventies. Maybe that’s a good thing, because it eliminated IBM’s monopoly to a certain degree and we benefited from that action. IBM didn’t simply ignore the rise of desktop computers, they avoided them like the plague, and when they discovered the error of their ways it was too late to regroup.
Desktop computers were cheaper to acquire, cheaper to implement and much cheaper to run. By the 1990s all that had changed. Companies such as Forrester Research began releasing their costs analysis using a technique called “Total Cost of Ownership” which proved PCs were more expensive than companies realized, but the analyses was doomed from the beginning because most firms didn’t have the rigor to apply the disciplines necessary to come up with accurate figures.
Too much of the cost of information technology was hidden in everyday activities. For example, how much paper does a company consume that can be attributed only to data processing? How much time in dollars is lost due to network downtime? How much additional cost can be directly attributed to the electrical infrastructure, etc., etc.
So, desktop computers gained a twenty-year reprieve so-to-speak, to mend their deficiencies and they have failed. Rather than things getting cheaper, the cost of data processing is going through the roof. It’s not just the cost of desktop computers, software programs, maintenance and downtime that are at stake here. The inability to integrate with our trading partners is killing small businesses. Interfacing using parsers like EDI and XML is not integration and integration is going to become necessary if we are to ever compete with companies like Walmart, Couche-Tard and Kroger.
Interfacing vs. integration is akin to the telegraph vs. the telephone. Telegraph required a human at each end of the line who acted as parsers between the sender and the recipient. Using a simple open and close switch, the first operator sent dots and dashes singing over the telegraph wires which were intercepted and decoded by the receiving telegraph operator on the other end, and then delivered via foot or bicycle by yet a third employee of the telegraph company. Telephone, on the other hand, connected two parties together, eliminating the middle-men and removing a great deal of the costs, not to mention the delay inherent in telegraphy.
Wednesday, February 23, 2011
In every marketing situation, COST always wins.
Not long after we began working in the convenience store industry, we quickly learned the three most important ingredients for operating a successful c-store are location, Location, and LOCATION! After a few years in the business things changed, and we decided IMAGE was as important as, or maybe even more important than location. Good lighting in parking areas, remembering customers’ names and greeting them at the door, clean bathrooms… we could go on and on. The truth is, there are dozens of things you can do that may increase sales, but still, we always come back to costs, because if you’re not making a profit, nothing else matters, does it?
I was having a conversation with a c-store operator last week, and to use his words, he said, “I have cut my costs until there is no place left to cut. When I think I have a handle on one expense, something else pops up. Sometimes I think I’m just a tax collector for Uncle Sam.”
Trying to find ways to increase sales is a never ending exercise. It’s a full-time job, tedious and oftentimes frustrating. It’s an investment, just like your inventory is an investment. And if you’re hard-earned labor only results in a short-term, two-percent profit, what have you gained?
We liken retail businesses as soldiers in a war in which they are constantly battling frontal assaults from forces much stronger than themselves. Their strengths come from determination, tenacity, agility and heart. You have to love this business to be successful at it. Their strengths also come from their numbers. It’s unbelievable, but true. Your competitors may play an important role in the reason you survive.
In our book, TCSICGM, we talk a great deal about ‘costs’ and how c-stores put little or no emphasis on providing customers with “everyday low prices,” because in our opinion, the stigma of price gouging is killing the c-store industry. We also believe micro-managing inventory is an important element of reducing costs and one that no c-store operator has yet to implement completely, but there is a network of interrelated goals that forms a conundrum of sorts. How do we reduce costs to ourselves and to our customers and increase profits, all at the same time?
The costs involved in POS devices, back office computers, networks, servers, programing, software acquisition and on-going maintenance fees have reached monumental proportions and continue to increase by leaps and bounds. Alas, the race to cut costs and increase profits has resulted in MORE costs and LESS profits. You are told, properly utilizing everything you have invested in will make a system pay for itself, but you quickly learn the man-power required to accomplish this can easily outpace the profits earned. It’s a never ending, vicious cycle that cannot be broken in the current environment.
In Part III, we’ll delve more into ‘cost’ and what part Cloud Computing will play in reducing costs and creating a more level playing field for small to medium-sized retailers.
Tuesday, February 22, 2011
Sometimes swapping explanations for advantages can be a better way to get a point across. Such is the case with a recent article that appeared at CloudComputing.sys-con.com.
The site lists the six advantages of Cloud Computing as:
- Reduced Cost
- Increased storage
- Highly automated
- More Mobility
- Allows IT to shift focus
These advantages are meaningless unless we can put them into a context that can be directly applied to the convenience store industry in particular. What good is it to know about a new technology unless it can be explained as to how it can be applied in my environment? How will these advantages affect me?
Part I sets the stage for a discussion. In Part II we’ll talk about the first advantage, ‘Reduced Cost’… and please, if you have comments or questions, asked them here. Discussions about new technologies give us all a free pass to appearing ignorant. Even though we have been involved in some form of Cloud Computing since 1990, we admit we enjoy a great deal of ignorance on many subjects, Cloud Computing being one topic where we continue to learn every day. There are no experts. Henry Ford said in his autobiography, “The minute one gets into an ‘expert’ state of mind, a great many things become impossible.” The fear of appearing ‘stupid’ in front of one’s peers is probably the number one reason people fail to learn, but if we don’t venture out into unknown worlds, we can only hope to be dragged alone by the herd, picking up the scraps as they are left behind.
Ignorance has its’ advantages. When I began programming computers in 1978, I learned by reading IBM technical manuals -an exercise akin to being strapped to a chair, having your eyelids surgically removed, and forced to watch 1,000 re-runs of ‘I Love Lucy’; but the one advantage I had, I did not know the rules that limited other, more educated professionals. Likewise, you may have a great advantage as well. If you are encumbered by the chains of being an expert in the mainstream philosophy of information technology you may have to work hard at putting your ‘engraved in granite’ opinions on hold and begin thinking outside the box, because everything you thought you knew about computers may be about to change.
In our book, “Turning Convenience Stores Into Cash Generating Monsters,” we talked a lot about ‘Technology Impact Analysis’, the process by which one maintains a constant awareness of new technologies that pose both strategic advantages and competitive threats. Cloud Computing is not just a new buzzword. It’s a game-changer, and not learning as much as you can might result in a deadly mistake.