Friday, March 30, 2012

Unbundling the corporation

The forces that fractured the computer industry are bearing down on all industries. In the face of changing interaction costs and the new economics of electronic networks, companies must ask themselves the most basic of all questions: what business are we in?

McKinsey Quarterly:

In the late 1970s the computer industry was dominated by huge, vertically integrated companies such as IBM, Burroughs, and Digital Equipment. ... Yet just ten years later, power in the industry had shifted: the behemoths were struggling to survive while an army of smaller, highly specialized companies was thriving. What happened?
The industry’s transformation can be traced back to 1978, when a then-tiny company, Apple Computer, launched the Apple II personal computer. ...
The story of the computer industry illustrates the crucial role that interaction costs play in shaping industries and companies. These costs represent the money and time expended whenever people and companies exchange goods, services, or ideas.1 The exchanges can occur within a company, among companies, or between a company and a customer, and they can take many everyday forms, including management meetings, conferences, phone conversations, sales calls, reports, and memos. In a real sense, interaction costs are the friction in the economy. Taken together, they determine the way companies organize themselves and form relationships with other parties. All else being equal, a company will organize in whatever way minimizes overall interaction costs.
Apple’s open architecture sharply reduced interaction costs in the computer industry. By conforming to a set of well-documented standards, specialized companies could, for the first time, work together easily to produce complementary products and services. As a result, tightly coordinated webs of companies—such as Adobe Systems, Apple, Intel, Microsoft, Novell, and Sun Microsystems—could form and ultimately compete effectively against the entrenched, vertically integrated giants. ...
The moral of the story is that changes in interaction costs can cause entire industries to reorganize rapidly and dramatically. ...  As business interactions move on to electronic networks such as the Internet, basic assumptions about corporate organization will be overturned. Activities that companies have always believed to be central to their businesses will suddenly be offered by new, specialized competitors that can do those activities better, faster, and more efficiently. Executives will be forced to ask the most basic and discomfiting question about their companies: what business are we really in? ...
One company, three businesses
Beneath the surface of most companies are three kinds of businesses—a customer relationship business, a product innovation business, and an infrastructure business. Although organizationally intertwined, these businesses differ a great deal (exhibit).


Rethinking the traditional organization
Customer relationshipProduct innovationInfrastructure
EconomicsHigh cost of customer
acquisition makes it imperative to gain large wallet share; economies of scope are the key
Early market entry allows
for a premium price and
large market share; speed
is the key
High fixed costs make large volumes essential to achieve low unit costs; economies of scale are the key
CompetitionBattle for scope; rapid consolidation; a few big players dominateBattle for talent; low barriers to entry; many
small players thrive
Battle for scale; rapid
consolidation; a few big players dominate
CultureHighly service oriented; customer-comes-first mentalityEmployee centered;
coddling the creative stars
Cost focused; stress standardization, predictability, and efficiency
The role of a customer relationship business is, obviously, to find customers and build relationships with them—for example, the marketing function of a bank or a retailer’s focus on drawing people into its branches or stores. ...
The role of a product innovation business is to conceive of attractive new products and services and figure out how best to bring them to market. In a bank, employees in various product units or in a centralized business development function are responsible for researching new products (such as reverse mortgages) and ensuring that the bank can bring them to market successfully. ...
The role of an infrastructure business is different again: to build and manage facilities for high-volume, repetitive operational tasks such as logistics and storage, manufacturing, and communications. In a bank, the infrastructure business builds new branches, maintains data networks, and provides the back-office transactional services needed to process deposits and withdrawals and present statements to customers. ...
These three businesses rarely map neatly to a corporation’s organizational structure. Rather, they correspond to what are popularly called "core processes"—the cross-functional work flows that stretch from suppliers to customers and, in combination, define a company’s identity.
With rare exceptions, managers assume that their core business "processes" ought to coexist
... Almost a century of economic theory underpins the conventional wisdom that the management of customers, innovation, and infrastructure must be combined within a single company. If those activities were dispersed to separate companies, the thinking goes, the interaction costs required to coordinate them would be too great.
Working from that assumption, large companies have in recent years spent a lot of energy and resources reengineering and redesigning their core processes. They have used the latest information technology to eliminate handoffs, cut waiting time, and reduce errors. For many companies, streamlining core processes has yielded impressive gains, saving money and time and giving customers more valuable products and services.
But managers have found that there are limits to such gains. Sooner or later, companies come up against a cold fact: the economics governing the three core processes conflict. ...
Take customer relationship management. Finding and developing a relationship with a customer usually requires a big investment. Profitability hinges on achieving economies of scope—extending the relationship for as long as possible and generating as much revenue as possible from it. ...
Contrast that kind of business with a product innovation business, in which speed, not scope, drives the economics. The faster an innovation business moves a product or service from the development shop to the market, the more money the business makes. Culturally, product innovation businesses concentrate on serving employees, not customers. They do whatever they can to attract and retain the talent needed to come up with the latest and best product or service. ...
If scope drives customer relationship businesses and speed drives innovation businesses, scale is what drives infrastructure businesses. Such businesses generally require capital-intensive facilities, which entail high fixed costs. Since unit costs fall as scale increases, pumping large amounts of product or work through the facilities is essential for profitability. As a result, the culture of infrastructure businesses reflects a one-size-fits-all mentality that abhors all customization and special treatment.
The regional Bell operating companies (RBOCs)—local telephone carriers in the United States—provide a good example of how these tensions can play out. An RBOC’s retail telephone operation is a customer relationship business; ... By contrast, the wholesale telephone operation is an infrastructure management business; it maintains the RBOC’s physical communications facilities and furnishes specialized support services such as network management. To maximize economies of scale, the RBOCs could lease their wholesale facilities to telephone service resellers, which focus on the customer relationship business. But the telephone companies are wary of entering into such alliances because they fear that resellers will drain customers away from their own retail telephone businesses.
RBOCs have, ... deliberately limited the growth and profitability of their infrastructure businesses to protect their customer relationship businesses. That decision has encouraged specialized infrastructure businesses, which operate their own fiber-optic networks, to enter the competitive fray in metropolitan areas, creating a further threat to the RBOCs.
Most senior managers make such compromises because they believe, or assume, that they have no option. ... Such a mind-set, though historically justified, is now becoming increasingly dangerous.
Organizational fault lines
A number of industries are already fracturing under the pressures of deregulation, global competition, and rapidly advancing technology
Under the pressures of deregulation, global competition, and advancing technology, a number of industries are already fracturing along the fault lines of customer relationship management, product innovation, and infrastructure management. ...Not so long ago, all three core processes were tightly integrated within most newspapers. ...
Today the industry is beginning to look very different. Much of the typical newspaper’s product is outsourced to specialized news services; ... In addition, many newspapers aspire to shed their scale-intensive printing facilities and to rely instead on specialized printers to produce the paper each day. As newspapers move away from product innovation and infrastructure management, they can concentrate on the customer relationship portion of the business, helping to connect readers and advertisers. ... Such unbundling is making the newspaper business less capital-intensive, a development that permits more resources to be devoted to building customer relationships.
An influx of specialized companies has also begun to reshape the pharmaceutical industry. Some product innovators in biotechnology..., are focusing on specific techniques such as gene mapping. Others, ... are concentrating on specific disciplines—dermatology, for instance. Larger drug companies, rather than financing product development efforts in all these areas, are taking equity stakes in or allying with such niche players. ... On the infrastructure side of the business, big drug companies have begun to outsource the planning and execution of large-scale pharmaceutical trials to contract research organizations such as Quantum. And big distribution specialists, including McKesson and Cardinal, now warehouse and deliver most drugs.
As these and other industries have yielded to the pressures of unbundling, established companies have faced a series of hard choices. They have had to rethink their traditional roles and identities, to challenge their organizational assumptions, and, in many cases, to make fundamental changes in the way they operate. Now, as electronic commerce reduces interaction costs throughout the economy, more and more companies will face equally tough, if not tougher, decisions.
Organization and the Internet
To see into the future of business organizations, you need only look at how Internet companies are organizing today. Portal businesses such as Yahoo! increasingly focus on managing customer relationships, ... Many people still think of Yahoo! as a search engine, but in fact its searching product is provided by another company, Inktomi, ... Yahoo!, ... has forged relations with ... AT&T, that manage a large portion of the Internet’s infrastructure. Yahoo! can thus concentrate on attracting customers, gathering data on them, and connecting them with both advertisers and merchants. It is positioned to become what we call an "infomediary"—a company whose rich store of customer information permits it to control the flow of commerce on the Web.2
Low interaction costs make it natural for Web-based businesses to focus on a single core activity
Because electronic commerce has such low interaction costs, it is natural for Web-based businesses to concentrate on a single core activity—managing customer relations, product innovation, or infrastructure management. ...
... Take the automotive business. Small, entrepreneurial companies, such as and are already gaining control over customer relationships. ... The sites then collect detailed data about the customers and their preferences and use that information to refer customers to appropriate automobile dealers. ... J. D. Power & Associates predicts that one-third of all new-car buyers will purchase cars using the Web by the year 2000.
As infomediaries gain further control over customer purchases and, more important, over customer information, car companies will have to rethink the role of the traditional automobile dealer. ... Car manufacturers, meanwhile, may decide—or be forced—to unbundle their businesses, outsourcing the role of customer relationship management to an infomediary, increasing the proportion of manufacturing they outsource to subcontractors, and focusing on product innovation. ...
A road map for unbundling
Although industries will fracture, they won’t necessarily break into many small pieces. In fact, ... only one of the three businesses—product innovation—is likely to be characterized by large numbers of small businesses competing on a level playing field with low barriers to entry. The product innovator’s need to provide a fertile environment for creativity tends to favor smaller organizations, as does its need for speed and agility in bringing products to market.
Since the customer relationship business depends on economies of scope, it is likely that only a few big infomediaries will survive
The other two businesses will probably consolidate quickly as a small number of large companies assume dominance. ... [It] is likely that only a few big infomediaries will survive. ... Similarly, in the infrastructure business, economies of scale create irresistible pressures to form large, focused enterprises.
Once a company decides where it wants to direct its energies, it will probably need to divest other businesses. ... Few senior managers of large companies have ever attempted a systematic divestiture program; ... The closest most companies have come to the kind of divestiture we are talking about is the establishment of outsourcing relationships in which infrastructure management activities such as logistics, manufacturing, or data processing are contracted to outside providers.
Divestiture is, of course, a radical step. In most cases, executives would need to perceive a significant and immediate threat before considering such aggressive surgery. For that reason, the first divestiture programs will probably be launched by computing, telecommunications, media, and banking companies whose markets are undergoing major technological or regulatory change. Companies in other industries will be able to learn from the successes—and mistakes—of these pioneers.
If a company has chosen to compete in customer relationship or infrastructure management, where size matters, divestiture won’t be enough; such a company will also need to build scope or scale through mergers and acquisitions. Each acquired company will probably have to go through a similar process of unbundling—shedding unneeded businesses to help finance the next wave of acquisitions and integrating the remaining businesses into the existing operation. The secret of success in fractured industries is not just to unbundle but to unbundle and then rebundle, creating a new organization with the capabilities and size required to win.
Rebundling will be a very different process from the vertical integration that has often characterized traditional acquisition programs. Because companies will be focusing on a single activity—relationship management or infrastructure management—their acquisitions will be aimed at achieving horizontal integration. ...
Senior managers will face many painful decisions as they make the wrenching changes needed to realign their businesses. Although the choices may be difficult, time will probably be short. Once interaction costs begin to fall, an industry can reorganize remarkably quickly—as did the computer industry. Sources of strength can turn into sources of weakness almost overnight, and even the most successful company can swiftly find itself in an untenable position. 
About the Authors
John Hagel is an alumnus of McKinsey’s Silicon Valley office, and Marc Singer is a principal in the San Francisco office. They are the authors ofNet Worth: Shaping Markets When Customers Make the Rules (Harvard Business School Press, 1999), from which this article is adapted. This article originally appeared in Harvard Business Review, March–April 1999, and received Harvard Business Review’s 1999 McKinsey Award for best article. Copyright © 1999 President and Fellows of Harvard College. Reprinted by permission. All rights reserved.
1We believe that the term "interaction costs" is more accurate than the more familiar "transaction costs," because the former includes not only the costs related to the formal exchange of goods and services but also the costs associated with exchanging ideas and information.
2See John Hagel III and Jeffrey F. Rayport, "The new infomediaries," on

Wednesday, March 28, 2012

How to harness bad habits to help your career

Logo of CBS News
Logo of CBS News (Photo credit: Wikipedia)
CBS News:

Amy Levin-Epstein

 (Random House)
(MoneyWatch) ... So how can you nurture good habits at work and bid adieu to bad ones?
In his new book "The Power of Habit: Why We Do What We Do in Life and Business," New York Times journalist Charles Duhigg has compiled a wealth of information on why we form habits and how they can be changed, using both scientific research and real life examples (including Starbucks CEO Howard Schultz and Olympic swimmer Michael Phelps).  Here's what Duhigg has to say about workplace habits and harnessing them to be more productive:
How can you stop bad habits at work, like web surfing or chatting with coworkers?
You can't eradicate a habit. Once a habit is there you can't flip a switch and say "I don't want it there
Habit Design Meetup: The Power of Habit
Habit Design Meetup: The Power of Habit (Photo credit: elizaIO)
anymore." But you can change it. Every habit has three parts -- a cue or trigger, the routine or behavior, and the reward (how our neurology learns to remember that habit for the future). Diagnosis the cue and the reward. If you need a break and it entertains you to talk to a coworker or surf the web and you try to power through the work and ignore the reward craving, the pressure will just build up and you'll procrastinate longer. You have to acknowledge that craving and give it an outlet. So every hour, give yourself five minutes on the web. Or after every task, schedule a short break. Unless you address this cue/reward you can't fix these behaviors. 
How can you use a "playing your video" technique to prepare for an important meeting?
What you should do is imagine ahead of time how you're going to speak up in a meeting. ... That day, when it starts living up to the video in your head, you will feel a sense of victory. Start with details like, "Excuse me, I have something to say." Everything will quiet down, just like in your head, and it will all unfold how you expected. When [it begins to] live up to your expectations, success becomes a self-fulfilling prophesy.
How can leaders use your research to motivate their team?
Think about the outcomes that you want as a group and what habits you want to cultivate to reach those. If your goal is to get someone [on your team] to habitually make one cold call every morning, you need to give a reward -- even if it's small -- for doing that cold call. It might be a pat on the back, or a five-minute break. Without that reward our neurology never makes this behavior into a habit.
What are "keystone habits" and how do they affect our behavior?
Some habits matter more than others, and they are keystone habits. When you start changing these habits it unlocks other habits in your life. An obvious personal keystone habit is exercise. When you start exercising, you start eating better. And interestingly enough, people who exercise also use their credit cards less often. How people communicate [at work] is also a keystone habit. Keystone habits establish [office] culture. [For instance, try] changing how you greet people by learning their names and greeting them properly. Or write your emails in a more friendly manner. When people begin communicating differently it sends a message about that organization -- we're an organization that cares about each other.
© 2012 CBS Interactive Inc.. All Rights Reserved.
  • Amy Levin-Epstein

    Amy Levin-Epstein is a freelance writer who has been published in dozens of magazines (including Glamour, Self and Redbook), websites (including, and and newspapers (including The New York Post and the Boston Globe). To read more of her writing, Follow her on Twitter at @MWOnTheJob.
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3 key mistakes to avoid in setting goals

CBS News

By Robert Pagliarini

(AP Photo/Shizuo Kambayashi)

(MoneyWatch) If you set goals for yourself or for others as part of your job, it is imperative you don't make the goal-crushing mistakes discussed below. … According to research from Harvard Business School, you need to avoid these common errors in setting goals:

1. Goals that are too specific. … Goals can be too specific. The biggest problem is when you set the wrong goal. You decide to lose 15 pounds. Seems reasonable, but it may be too focused on a specific number and distract from what you really want -- better health. ...

Another side-effect of excessively targeted goals is that you can become blind to important, but seemingly unrelated, issues. …

2. Too many goals. … Research shows that when we have both quantity and quality goals, we will focus on meeting the quantity goals because they are easier to achieve and measure. The lesson here is to strip away as many of your goals as possible and focus more intensively on a smaller number of objectives.

3. Inappropriate time horizon. …[If] your time frame is off, your goals may act as a ceiling to performance.

Take an enduring question that the Harvard report addresses -- why it is so hard to get a taxi on a rainy day. … Cab drivers typically set daily fare goals ... With rain comes more customers, so they hit their daily goal early and then go home early. In short, for cabbies the daily goal time-frame is not the most effective. If they set weekly or monthly targets, they could work longer hours when it rains and get off early on days when it is dryer (and slower).

What are your goals? Are they too focused? Do you have too many? Or do you have time limits that aren't realistic? Review each of your goals so you don't commit the mistakes above and to ensure your goals are designed for maximum success.

© 2012 CBS Interactive Inc.. All Rights Reserved.

  • Robert Pagliarini

    Robert Pagliarini is obsessed with inspiring others to create and empowering them to live life to the fullest by radically changing the way they invest their time and energy. He is the founder of Richer Life, a community of passionate people who want to learn and achieve more in life and at work. He is a Certified Financial Planner and the president of Pacifica Wealth Advisors, a boutique wealth management firm serving sudden wealth recipients and affluent individuals. He has appeared as a financial expert on 20/20, Good Morning America, Dr. Phil, Dr. Drew's Lifechangers and many others.

Thursday, March 22, 2012

The Magic of Doing One Thing at a Time

The spotlight model of attention.
The spotlight model of attention. (Photo credit: Wikipedia)
Harvard Business Review Blog
8:53 AM Wednesday March 14, 2012 
Tony Schwartz
Why is it that between 25% and 50% of people report feeling overwhelmed or burned out at work?
It's not just the number of hours we're working, but also the fact that we spend too many continuous hours juggling too many things at the same time.

What we've lost, above all, are stopping points, finish lines and boundaries. Technology has blurred them beyond recognition….

The biggest cost … is to your productivity. In part, that's a simple consequence of splitting your attention, so that you're partially engaged in multiple activities but rarely fully engaged in any one. In part, it's because when you switch away from a primary task to do something else, you're increasing the time it takes to finish that task by an average of 25 per cent.

But most insidiously, it's because if you're always doing something, you're relentlessly burning down your available reservoir of energy over the course of every day, so you have less available with every passing hour.

… The best way for an organization to fuel higher productivity and more innovative thinking is to strongly encourage finite periods of absorbed focus, as well as shorter periods of real renewal.

If you're a manager, here are three policies worth promoting:

Meetings are sometimes held around conference ...
Meetings are sometimes held around conference tables. (Photo credit: Wikipedia)
1. Maintain meeting discipline. Schedule meetings for 45 minutes, rather than … longer, so participants can stay focused, take time afterward to reflect on what's been discussed, and recover before the next obligation. Start all meetings at a precise time, end at a precise time, and insist that all digital devices be turned off throughout the meeting.

2. Stop demanding or expecting instant responsiveness at every moment of the day. It forces your people into reactive mode, fractures their attention, and makes it difficult for them to sustain attention on their priorities. …  If it's urgent, you can call them — but that won't happen very often.

3. Encourage renewal. Create at least one time during the day when you encourage your people to stop working and take a break. …

It's also up to individuals to set their own boundaries. Consider these three behaviors for yourself:

1. Do the most important thing first in the morning, preferably without interruption, for 60 to 90 minutes, with a clear start and stop time. … The more absorbed you can get, the more productive you'll be. When you're done, take at least a few minutes to renew.

2. Establish regular, scheduled times to think more long term, creatively, or strategically. If you don't, you'll constantly succumb to the tyranny of the urgent. Also, find a different environment in which to do this activity — preferably one that's relaxed and conducive to open-ended thinking.

3. Take real and regular vacations. Real means that when you're off, you're truly disconnecting from work. Regular means several times a year if possible, even if some are only two or three days added to a weekend. The research strongly suggests that you'll be far healthier if you take all of your vacation time, and more productive overall.

A single principle lies at the heart of all these suggestions. When you're engaged at work, fully engage, for defined periods of time. When you're renewing, truly renew. Make waves. Stop living your life in the gray zone.

Tony SchwartzTony Schwartz
Tony Schwartz is the president and CEO of The Energy Project and the author of Be Excellent at Anything. Become a fan of The Energy Project on Facebook and connect with Tony at and
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Wednesday, March 14, 2012

To Be Continued?

Five steps you can take to make sure your company survives catastrophe.

CFO Magazine
NASA Satellite Image of Japan Captured March 1...
NASA Satellite Image of Japan Captured March 11, 2011 (Photo credit: NASA Goddard Photo and Video)
March 1, 2012
Yasmin Ghahremani -
Say this much for disasters: they're educational. Some, like Y2K, may offer useful lessons in overreaction. Others, like 9/11, may remain largely incomprehensible. But most, from Hurricane Andrew to the crisis surrounding Japan's Fukushima nuclear plant, have pushed companies to develop better response plans. …

… Last July, reinsurer Munich Re said that 2011 had already become the most costly year on record for economic losses, due to the number of severe natural catastrophes in the first six months.

The lessons learned in the aftermath of so much tumult — along with technological changes and the increasingly interdependent nature of global business — have forced a rapid evolution in business-continuity planning. … "The marker was 9/11," says Roberta Witty, a research vice president for technology consultancy Gartner. "Until then I think most people were looking at IT disaster recovery and had never experienced an outage where the workforce itself would be so severely impacted."

Business continuity planning life cycle
Image via Wikipedia
As process owners and compliance executives, CFOs can't ignore business-continuity risks. … Here, then, are five ways that corporate planners are changing their approach to preparing for the worst.

1. The Really Big Picture
…Today's leading companies are integrating people, processes, data, and physical infrastructure into a holistic approach to business continuity (sometimes referred to as business resilience).
Top business-continuity measures being adopted by large companies

Citigroup (Photo credit: LoopZilla)
…John Odermatt, who was first deputy commissioner of New York City's Office of Emergency Management during the terrorist strikes and was later appointed commissioner by Mayor Michael Bloomberg, has brought what he learned in the aftermath of 9/11 to his current position as head of Citi's Office of Business Continuity: namely, that people and communications are everything in a crisis.
He's had plenty of chances to test that conclusion, one of the most dramatic coming after the Haiti earthquake in 2010. …

Workers who weren't buried in the rubble struggled to make sense of what was going on. One of them was able to contact Citi's regional crisis-management team in Mexico before telecommunications went down. Immediately, the Citi crisis-management team activated its command structure, coordinating the company's response. Citi security helicoptered in security personnel to help rescue employees and transport the injured to the Dominican Republic. Within a week the team was delivering humanitarian supplies to the area, eventually providing 15 tons of aid, including satellite phones.

Tragically, 5 of Citi's 43 Haiti employees were killed in the earthquake. But the company's response was deemed critical in providing care for other workers and getting the business back up and running quickly.
… "From a people, humanitarian, and business perspective, everything and anything that was asked for was coordinated through our central team," says Odermatt. "I think that's the secret to any successful recovery."

Of course, military-style logistics like that don't happen on the fly. Citi's arrangements were well established and practiced before the Haiti earthquake. …

Throughout the world, every line of business at Citi is involved in continuity planning. Rigorous testing and crisis planning involve everyone from the CEO down and occur at every level of the organization. "In addition, there is joint industry testing where the markets make themselves available so we can test our technology on nonproduction days," says Odermatt. "I think such testing is one of the things that set the financial industry above other industries."

Federal Emergency Management Agency
Image via Wikipedia
2. Public-Private Collaboration
A decade on, one legacy of the 9/11 attacks has been to highlight the interdependence of the public and private sectors. "Governments realize that a large portion of public services is provided by private enterprise, so government is very dependent on business," says Gartner's Witty. "And private enterprise is starting to recognize that without first responders — the police, road crews, and government — you can't do anything."

Public Private Partnership Legislation Testimony
Public Private Partnership Legislation Testimony (Photo credit: MDGovpics)
The Federal Emergency Management Agency (FEMA) created an entire division devoted to public-private partnerships in 2007. The division nurtures engagement with businesses and provides helpful tools, such as downloadable tabletop exercise materials and a free online course in public-private relationships (see "Some Help from the Big Boys," Topline, September 2011).

At the local level, liaisons in all 10 of FEMA's regions are developing relationships with community businesses to facilitate resource and information exchange. In an emergency, FEMA and local emergency officials [determine] the status of utilities, communications, medical facilities, and food and supplies, ... They can then feed that information back to local businesses, …. In turn, businesses may have resources to share, such as disaster hygiene kits or parking lots that can be used for emergency operation centers.

Verizon Wireless Amphitheatre at Encore Park c...
Verizon Wireless Amphitheatre at Encore Park credit Chris Lee when using for gtg (Photo credit: Alpharetta CVB)
The public-private collaboration "has taken off like wildfire," says Dan Stoneking, director of FEMA's private-sector division. One of the large companies that is working with FEMA is Verizon Wireless. The partnership aims to provide communications aid to disaster-hit areas. …

… More than 45 Verizon Wireless crisis-management teams are dispersed across the country to respond to local needs, while a central team and hotline coordinate requests for emergency wireless voice and data products or wireless network support.

Requests may come from, say, the American Red Cross for 20 loaner mobile phones, or from officials in remote locations needing what Verizon Wireless refers to as a "cell on wheels." "We have these mobile assets that we can deploy to help agencies set up mobile command centers without which they really could not operate as effectively," says Gabe Esposito, Verizon Wireless's director of corporate security, business continuity, and disaster recovery.

3. Shoring Up Supply Chains
Hurricane Katrina in 2005, the 2010–2011 floods in Australia, and particularly the earthquake and tsunami in Japan last year have all emphasized the vulnerability of international supply chains. "While companies were able to recover their operations [following the disasters], they may not have been able to get the components they needed to restore manufacturing," says Greg Bell, a partner at KPMG. "People have been thinking about everything from, 'Do I need more supplier diversity for my key parts?' to, 'How do I get visibility into my suppliers' business-continuity plans?'"

Goodyear Blimp
Goodyear Blimp (Photo credit: ReneS)
Goodyear, for one, has been examining those questions extensively. When the Sendai earthquake struck last March, the tire maker's operations in Japan escaped relatively unscathed. But many second- and third-tier suppliers to the auto industry were affected. That's when Goodyear's provisions for alternate sources and intraplant transfers kicked in. "Through a robust supply chain, there's a possibility you could have necessary materials in another location," explains Mike Janko, Goodyear's manager of global business continuity. "It may cost a premium to ship it, but the end goal is to make sure we're meeting the needs of our customers."

… The company estimates that 15% of all the crises it deals with are related to product-supply disruptions. With that in mind, business-continuity managers joined with the purchasing department to … [pinpoint] about two dozen raw-material suppliers in the first round, and the continuity team is now working with them to beef up resiliency planning.

… Outsourced services from managed data centers or technology providers raise concerns. … "Many companies, including Citi, outsource their services and do enormous amounts of offshoring," says Citi's Odermatt. "There's more-intense focus now on what those suppliers' supply chains are, what their business-continuity plans are, and whether they're being tested."

4. Virtually Bulletproof
In the data center, virtualization has been lauded as a boon for business-continuity planning. In this technology, multiple virtual machines … can run independently on one server. … While regular servers normally run at only 5% to 15% capacity, a server running virtual machines can operate at 60% to 80% capacity.

Because virtual machines are independent of the hardware they run on, they can be easily moved around a firm's network or to any other server deemed necessary. Copies can be saved offsite for disaster-recovery purposes.

The Texas Association of School Boards had those benefits in mind when it rebuilt its data center three years ago using virtual machines. … When it began the virtualization process, only 8 of its 100 applications could be recovered from a mirror site after a disaster. Now, 94 can be brought back up within 15 minutes.
For system administrator Toni Fowlie, however, the project generated new problems. When wildfires swept the central Texas area last summer, her concerns about the heat outside were minor compared with what was going on in the data center. "I didn't worry so much about the fires, but I do worry about power," says Fowlie.

The reason is the blade servers that run the Texas agency's virtual machines. …"Power-to-performance is greater, but you're performing more and you're condensing more," says Mark Vanston, director of business continuity and recovery services for HP Enterprise Services. …

Cloud computing, while still in its infancy, could alleviate some of these headaches, but will likely also raise new ones for disaster-recovery managers. Not only will they need to worry about the viability of their cloud suppliers, they will also have to create contingency plans regarding Internet connectivity to those suppliers.

5. All Together Now
For crisis communications, a new, democratic order is at hand. … "Social media is not just a new way to broadcast information," says John Orlando, a social-media consultant. "It reverses the direction of communications."

Researchers from the universities of Colorado and California at Irvine found that during the Southern California fires of October 2007, residents turned away from mass media and official sources of information and looked to peer-to-peer resources such as blogs, community forums, e-mails, text messages, and Twitter to find out whether a fire was headed down their street. These outlets provided better, more-timely information, as well as the means to disseminate it. In many instances, the participation of community members helped keep rumors in check and validate information from reliable sources. …

"Emergency managers have to understand that the public is going to self-manage the disaster with or without them," says Orlando. "So the challenge is to develop a collaborative model where the old assumption that the public is a problem to be managed is replaced with the assumption that the public or your employees are a resource to be harnessed."

The private sector has been slower on the uptake, but it is beginning to use social media to converse with customers during emergencies. TD Bank used its existing Twitter program to monitor consumers' concerns during Hurricane Irene. When questions about available ATMs and branch closings cropped up, the 10-person Twitter team responded with updates and links to mobile apps showing available facilities.

Still, corporate social-media programs to communicate with employees during emergencies are but a future vision for most companies. Orlando suggests that corporate Facebook pages could be used by employees of companies that have been shut down by a crisis. "Instead of just communicating information outward, it can be a way for people to coordinate their needs with one another," he explains. "They can ask, 'Can someone pick up my daughter from school?' or, 'Could someone pick up groceries for me?' And by [providing] a place where they can form a community and call on one another, you'll make it much more likely that they'll be there for you when it's time to start up business again."

Yasmin Ghahremani writes about business and technology from Austin, Texas.
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