The Typewriter, the Word Processor, and the PC

April 9, 2010

In yesterday’s post, I argued that ROI would not be an adequate measure of the benefits conferred by new-gen (or pseudo-new-gen) applications like Workday, Business By Design, or Fusion Application Suite. The previous-gen applications were all about automation. The new-gen suites confer real benefits (I think), but not necessarily benefits that fall through to the bottom line.

What benefits are they? Well, they have to do with working more effectively: making fewer errors, putting more time into work and less into busy work, making more accurate decisions, faster. Is there benefit from this kind of thing? Sure. But how do you measure it.

In the post, I suggested a hazy term, “operational effectiveness,” for the benefits one should expect. What is “operational effectiveness?” Let me admit freely that I don’t know for sure. In this post, let me propose an analogy, which should help you to understand what I’m getting at.

The analogy comes out of a historical situation that always posed a problem for ROI analysis, the transition in business from the typewriters that sat on secretary’s desks to the PC that sat on executive’s desks. This transition occurred in two different phases. First, the typewriters on the secretary’s desk were replaced with big, clunky word-processors that sat next to the desk. These word-processors automated the secretary’s document production work. Then, the secretarial position itself was eliminated, and the typing function became something that executives did themselves on that PC.

The transition to word processors could easily be justified in ROI terms. We could get more work out of the secretary or else hire fewer secretaries. Whether the justification was real is an open question. But it’s certain that that’s how people thought of it.

The next transition was much more problematic for ROI analysis. Expensive executive time was now being put into jobs that had been performed more efficiently by much cheaper labor.

At the time, people didn’t put a lot of thought into figuring out why they were funding this transition. Executives saw the PCs, knew that everyone else was using them, needed them for some functions (e-mail, spreadsheets), and just decided. “We’re doing it this way.” At least in my recollection, that’s what happened.

So were they just loony or lazy or wasting shareholder money on executive perks? I don’t think so. I think what they were plumping for was the same “operational efficiency” that I’m talking about 25 years later.

True, they spent more time typing. But they also had more control over the final product; they could change the product more easily; and they could distribute it without much overhead. And, at the same time, they were changing the form of what they were doing. They weren’t just producing typed memos; they were documents with fancy fonts and illustrations; and they were creating Power Points. True, many an executive was spending ridiculous amounts of time fiddling with type sizes so that they could get things on one page, but even acknowledging that, they thought the new way was better.

Indeed, by the time the transition was finished, justification wasn’t even a question, because the new tools changed the nature of work, and now you couldn’t get along without the tools. When executives were doing the typing, they stopped creating long reports. More and more of the time, a corporation’s decision-making was even wrapped around a full document (minutes, memos, or formal reports), it was wrapped around Power Point decks.

So by the end of the transition, ROI analysis had become entirely moot. How could you get a tangible measure of benefits when you were comparing apples and oranges?

Could we be seeing a similar transition now? It’s certainly possible. The analog to the word processors is that first generation of enterprise applications, which were funded by the automation benefits they confer and by ROI analysis. The analog to the PC is the second generation of enterprise applications.

(One caveat. As I’ve said before, I don’t think that Fusion Applications or the versions of Business by Design that I’ve seen are in fact second-generation applications. They’re more like Version 1.3. But they’re close enough to next-gen to raise the problem I’m talking about.)

If the analogy holds and if second-gen apps work as the developers hope, the benefits that businesses are going to experience will be equally hard to get your arms around, partly because the benefits are so subtle and disparate and partly because you’ll see a shift in the way work is done.

Does that mean that we won’t be able to talk about the benefits and we’ll just bull ahead with them? Well, that’s why I’m introducing the notion of operational effectiveness. It does seem to me that we can get clearer about what the benefits are.

So come on guys. Make comments. What is operational effectiveness? And how can we tell whether we are getting it?


3 Responses to “The Typewriter, the Word Processor, and the PC”

  1. Greg Quinn Says:

    Unfortunately your concept of “operational effectiveness” is not persuasive. At bottom it is reducible to an ROI analysis.

    I can understand why ERP vendors feel some disquiet about justifying their next generation of products. We now have several decades of ERP implementations and in many cases the ROI has been truly dreadful. This is common knowledge among most executives and consequently a marketing initiative based on ROI is likely to be unsuccessful. Hence the desperate need to find some other justification.

    However the vendors problems don’t end there. As more companies outsource their business processes, vendors will be selling to outsourcing companies and not to the end client. The smoke and mirrors arguments that seduced naïve business executives will not be effective against hard-nosed BPO operators. Inevitably this will mean challenging sales and reduced margins. Of course, all of this pales into insignificance compared to the real nightmare for an ERP vendor. Maybe, just maybe, the whole ERP thing is an evolutionary dead-end? Maybe cloud-computing is the way forward?

    I agree with your comments about the introduction of word processing into companies. However you don’t go far enough. It’s certainly true that the initial effect was to turn competent managers into incompetent typists. This didn’t last. The typist was soon replaced with the personal assistant, analysts and a whole army of back office grunts. Beyond a certain point in most companies executives don’t create documents, spreadsheet or presentations. They have underlings to do it for them.

  2. toppundit Says:

    I appreciate the thought that went into this comment, and I also sympathize with the skepticism about the use that application companies might make of this little concept. It is a worry.

    Greg, if it’s any comfort, I am not an apologist for software companies, haven’t accepted a dime from them for years, and am as appalled by the lack of ROI from these applications as you are. Nevertheless, I do take their work seriously. And if they do have something new for us, I think it’s worthwhile to figure out what the real benefits are.

    Now to your points. I am sorry you’re unpersuaded by my core argument. But I would have appreciated it if you could have provided an argument. When I say that these benefits are not reducible to ROI, I’m glad to know that you think they are, but I would like to know why you think so. In intellectual matters, I think, reasoning is more persuasive than merely registering an opinion.

    As a matter of principle, I think it’s clear that there are many corporate expenses that are hard to justify in terms of ROI. Think advertising or corporate donations or offices in high-rent districts. What’s the ROI of any of these? Still, people do it, and presumably they do it because they see some benefit, even if it can’t be couched in ROI terms. What is that benefit?

    As for what happened after the secretaries were replaced, I think you make a good point. At the senior level, assistants and back-office Excel and Power Point jockeys have replaced the secretary. But there is still a huge pool of people at the mid-level who would have had offices and secretaries in the old days and now have cubicles and do their own typing in the cubes. And, of course, even senior executives send their own e-mails, misspellings and all.

    What I’m arguing, of course, is that the major investment that it took to get us from offices and secretaries to cubes and e-mail is another of those corporate expenses that is difficult to justify in ROI terms. This analogy is close enough, moreover, to the situation with next-gen apps that it may actually be helpful. If those of us who are genuinely independent can come up with a formulation that explains the benefit of the PC, maybe it can also explain the benefit (or lack of benefit) provided by next-gen applications.

  3. Robert Says:

    I agree with Greg that it boils down to ROI, but I think the issue is that it’s difficult to measure ROI on a use case that doesn’t exist yet, because there is no analog. The real question is what is so revolutionary about these platforms. They probably can’t do payroll on a flat salary any better, but what if there’s a way to collaborate on payroll — e.g. make team compensation highly visible. It’s not generally done today (or maybe it’s done on whiteboards), but that doesn’t mean you can measure the increase in sales productivity.

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