Nanobeep Technologies Blog

Another post on Ricardo Semler’s Maverick…

Semco purchased several million dollars of computer equipment in the 80’s to ‘improve’ their systems. However, this is what happened:

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Everything has become excessively complicated and confused, which is exactly the condition computers were supposed to remedy. I can shamelessly say that Semco was swept along on the electronic tide, going from the Stone Age to the Space Age in just a few years. But the more I learned about microchip management, the more I came to fear it.

I once visited a small unit of our three days before the end of the month.

“What do you think this month’s billings will be?” I innocently asked the resident computer wonk.

“We already know. We have the number here in the terminal.”

“How can you? There are still three days left in the month.”

“Oh, no. We stop billing four working days before the end of the month.”

I was shocked. It meant inventory was tied up longer than it had to be, increasing interest costs, and orders would sit for days before leaving the plant, increasing customer frustration. Just picture Federal Express stopping for a few days each month to feed paperwork to its computers.

“Well, we have to fill out the basic invoice, send it to the head office, wait for batch processing on the central computer…”

“Wait,” I interrupted, “why can’t you just issue the invoices on your own terminal?”

“Because then they wouldn’t be automatically recorded in the accounts receivable program, which cross-references all the invoices.”

“I see,” I said, although I didn’t. “Go on.”

“The lot is batch processed after all invoices from all our units are gathered – we run them in numerical order, for tax purposes – and then our invoices are returned to us. And then we can ship the products.”

“How did you do all this in the past?”

“Oh, that was very primitive. We would wait until the last minute, then type out the invoice. Sometimes we would be here in the middle of the night, getting invoicing out of the way, to make the month’s sales larger.”

“How many invoices did you issue then?”

“About 150.”

“And now?”

“About 120.”

Two days later the unit was off the computer and back on the primitive manual system. And soon invoicing rose 15 percent, as employees got back to making last-minute shipments in all-out efforts to move finished products out the door. And within a month all the other computer terminals at our business units had been returned to headquarters, and our mainframe there was disconnected.

This much seemed clear: either you can adopt sophisticated, complex systems to try to manage the complications, or you can simplify everything. [emphasis mine]

Finally, we chose the other path.

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I’ve seen this happen to several companies. There will be a huge push to get the whole company using some big new complex ‘Enterprise’ software package that promises to be a huge improvement over the existing system. These projects often end up taking *way* more time, money, and man-power to implement than expected. I’ve seen it be so expensive that the company went out of business or had to lay off a large percentage of it’s employees because of the cost.

Alternatively, if a company focuses on simplicity by developing incrementally with continual small improvements to their system they can much more effectively manage the risk and cost of the project and make course corrections as necessary.