That seems to put the focus on the individual. We’re all used to companies setting the agenda and employees following.
Yes, it’s pointing to a huge shift in the center of gravity. In the 20th century great visionaries like Henry Ford came up with a blueprint for how an assembly line should work, and the job of every individual was to figure out how they fit into that. The big shift now is that success increasingly depends on developing talent more rapidly. That makes the individual the center of attention. You have to figure out who your people are and how to provide them with platforms and environments where they can learn faster and take performance to the next level by working with each other.
With SAP, the whole thing was understanding the kinds of issues programmers were encountering and saying, how could we help them? What kind of platforms could we create to let them be more productive? It shifts the center of gravity from the visionary institutional leader who develops a blueprint that everyone has to fit into, to saying OK, we have to start with who we’ve got and what their challenges are.
Can this discussion be customized for finance executives? What should they specifically take from this in their roles?
One of the broad themes in the book is that when you’re facing increasing economic and competitive pressure, a natural response is to try to protect the shareholders. One way to do that is by adding more debt to the balance sheet so you can continue to reward them. But large debt structures have big overhead. We’re making the case that there’s an alternative form of leverage, which is capability leverage. It’s the notion of, what are you uniquely positioned to do, and how can you connect to other companies that can provide complementary resources and talent?
Capability leverage works both in a high-growth environment — it allows you to scale much more rapidly because you don’t have to build it all yourself — and in a downturn, because you can also scale back much more quickly. It’s a variable-cost proposition, which has huge value for a CFO.
Speaking of scalability, cloud computing allows you to tailor your use of computing resources as needs shift. Where does that fit into this conversation?
We’ve done a whole research stream around cloud computing. CIOs tend to be very resistant to it, in part for some legitimate reasons around security and auditability. But cloud computing also means a significant downsizing of the internal IT organization. I think CFOs have a significant role to play in understanding the economics of cloud computing and how it can create capability leverage and turn fixed costs into variable costs. They can become champions for cloud computing.