The Next Step
Automation is the most common use of technology. But taken further, computers can overhaul the way you do business
The real power of microcomputer technology is not its capacity to automate the things a business does, but its ability to change the process entirely. Believing this, Gary Whitney decided to bet his future on it.
A few years ago Whitney was a respected, almost-middle-aged senior vice-president of a classy architectural- and interior-design firm in Houston. Relatively speaking, the firm was doing all right. Times in the industry were tough, though, and not just because the Houston economy was still down in the dirt. Competition for design work everywhere was keen, labor costs and liability insurance premiums kept going up, and margins were tight. Some companies, Whitney saw, were eventually going to get squeezed right out of business, and incremental cost cutting -- a little off here, a little off there -- would only delay the inevitable.
This depressing bit of insight, along with a touch of midlife crisis, got Whitney thinking. Did design firms have a future? Did he? Yes, he decided, but only if both would accept big changes. Whether you're in service or manufacturing, there aren't many businesses to which Whitney's conclusions don't apply.
In its basic functions, a design firm does four things. First comes programming. That means finding out what the client wants or needs and writing it down. Second comes design. A creative person reads what the programmer has written, then doodles an idea that answers the client's needs. Then comes drafting. One designer can keep several draftsmen busy turning creative doodles into drawings. The other function is documentation, essentially the job of writing up the materials and performance specifications that the contractor will use on the job.
Like so many other companies wanting to keep up with the times, Whitney's and other design firms have put computers to use. Again like most businesses, they looked at each of the things they did -- programming, design, drafting, and documentation -- and noticed that two of them were particularly labor intensive. Drafting and documentation, together called production, eat up about 40% of the fee income on any job, according to Whitney. Since saving labor means saving costs, that's where design firms decided to automate. Word processors and spec-writing software have cut down on the number of people required to do documentation. Computer-aided design (CAD) has reduced the number of draftsmen. And that -- using computers to automate production functions -- is as far as most companies have taken information technology.
The designers see programming as difficult to automate, because it consists of a lot of one-on-one contact with the client. As for the design work, well, they think, that's the creative heart of the business. We're going to turn it over to a computer? No way. People still think and create better than computers.
So, automating the labor-intensive and usually secondary functions of the business is how most companies have applied computer technology.
The problem that Whitney saw as he looked around at his industry, and the problem that executives in other industries will face if they haven't already, is that the conventional thinking has taken productivity gains as far as it's going to. Whatever efficiencies they're going to see from computer automation, they've already got. Since pretty much everyone has automated all the obvious things, the cost-competitive relationship among firms has changed hardly at all. The next step, whatever it was, Whitney reasoned, would require different thinking. But what?
Well, if you believe that you've already made each function of the business as efficient as possible, that leaves only one other place to look: the space between functions. That, Whitney discovered, is where the really big gains are, but it takes a radical change in thinking to see them.
Long-established companies with hierarchies and internal turf lines don't handle radical change easily. Rather than try to change the dinosaur's habits, Whitney elected to create a new beast entirely: he went out on his own. In 1987 he, with a secretary and one assistant, started The Whitney Group Inc., in Houston -- with the usual trepidation. "You have no idea how naked I felt," he says, "just me here with a secretary and one other guy in a design firm that didn't even own a drafting board." The firm Whitney wanted to build would not conform to the conventional thinking. Yes, it would use computers to automate, but it would also use computers to integrate functions, eliminating as much as possible the cost of moving from one phase of the work to another.
In conventional design firms, each function is separate. The programmer does his job and writes a report. The designer reads it, then performs his creative doodles. When he's sketched an idea he likes, he hands the sketch to a draftsman, who, beginning with a fresh sheet of paper -- or a blank CAD screen -- converts it into a drawing. Assuming there are no changes, the draftsman hands the drawing to the spec writer, who once again begins working on a fresh sheet of paper. At each step, the same information is being changed into a new form: from report to doodle to drawing to specifications. Why not use the computer to tie them together? That, in essence, is what Whitney has done.
Set aside the first step, programming, for the moment, and start with design. Whitney Group designers don't work on sketch pads or drawing tables anymore, but at CAD workstations. When designers work out their ideas, what they produce is already a good start on a finished drawing. Consequently, the draftsman doesn't start from scratch. As the draftsman creates a drawing, pulling conventional shapes for such things as standard windows and doors out of the computer's memory, the system itself begins to transform the information in the drawing into a specification document. The person writing specifications doesn't start from scratch, either.
The firm's work, which used to be done in a series of discrete steps, is now a continuous process. Before, improving the efficiency of any one step had no effect on any other. Now, system efficiencies don't run up against functional boundaries.
Whitney has created the next generation of design firm, one that is structured to take advantage of the information-handling efficiencies that microcomputer technology makes possible. Programming is the exception. He hasn't yet figured how to bring that step fully into the system. Still, his cost savings and productivity gains are impressive. He expects this year to generate $2.5 million in revenues with 20 people. That's $125,000 per person, roughly twice the industry norm.
The advantage this higher productivity brings to The Whitney Group is not in profitability alone. If, as Whitney claims, his firm's margins are more than twice those achieved by the typical design firm, he can use those margin dollars in any number of ways to improve his competitive position. He can do more marketing; provide a higher level of postdesign service to clients; or, if he wants to and he thinks it will pay off, spend more time on the purely creative portion of the design process.
Other kinds of businesses can make similar use of information technology to achieve quantum leaps in their performance. Manufacturers are finding ways to close the gaps between, for instance, design, manufacturing, and field installation and service. Advertising and public-relations agencies tie their creative and production functions together to speed information and work flow.
The obstacles to taking this kind of quantum organizational leap -- in any business -- are not primarily technical. In most cases, the hardware a company would need probably already exists. The software either exists or, at some expense, can be created. The main obstacles would be two.
First, unless someone in the company, preferably the CEO, has the vision and recognizes the opportunity, it just won't happen.
The other problem is organizational. Whitney made it easy on himself by starting from scratch. Far more difficult is the task of moving a company from the old operating paradigm to a new one. Such a move demands not just vision from the CEO, but the leadership qualities required to change the way people work and think without at the same time threatening their security. That's the real challenge of exploiting information technology.
One man's odyssey into computer power
It might sound as if Gary Whitney experienced an epiphany complete with an illustrated vision of the technologically sophisticated -- and profitable -- company he would create. Sorry. It wasn't that fast or that simple.
* First he had his midlife crisis. "There was so little profit margin in this business, and it got frustrating. There's got to be more to life than living this way, but there's nothing else I'd rather do. So it was either put up or shut up."
* Which made him ask some questions. "It dawned on me that no one had ever looked at the computers we had as anything more than production tools. Do you suppose, I wondered, I could learn to design on one of those things?"
* The answers were pretty exciting. "If I could design on a computer, we could eliminate all kinds of redundancies. I could transform the same fee into more profit."
* So he bit the bullet. "I would make the shift only if I didn't have a crutch, so I didn't allow drawing boards in the new firm. And I couldn't lease a computer; I had to buy it, so that I couldn't send it back."
* Working with one new idea keeps giving him others. "We didn't discover computer-aided design or the computer, just different ways of using them. Now, we're into our 100th project, and we're still discovering new things we can do. The limits are us. We're having trouble keeping up with the technology."