Brandt On Leadership -- The Importance Of Proximity

Dec. 21, 2004
Predictions to the contrary, location gains significance as technologies advance.

Remember how computers and the information revolution were going to make geography irrelevant? How the ability to do business from anywhere, with suppliers and customers from everywhere, would render the distances between you and them meaningless? How the old real estate maxim location, location, location would soon seem as archaic as chromed fins on a car or a full-service gas station? Well, a funny thing happened on the way to the future. Proximity, geography, and location matter now more than ever in business and especially in manufacturing precisely because of the information technologies that were supposed to eliminate them. This puzzling truth is composed of three Proximity Paradoxes, each with significant implications for CEOs and senior executives managing for customer value: Proximity Paradox No. 1: As computers speed the flow of information between companies, shipping and logistics become more important than ever. IT may dramatically reduce the time needed to complete a transaction, but it does little or nothing for getting those pesky atoms from here to there. Yet think about it: If you've taken all the time out of a transaction except for shipping and logistics, where should you focus your improvement efforts? More and more manufacturing customers are insisting that their suppliers co-locate, either by building a facility or warehouse next door or by locating within the customer plant itself. At the very least, your customer will expect you to be focusing intently on shipping and logistics, so that the distance between you doesn't become even more of a liability. Proximity Paradox No. 2: As computers increasingly allow you to serve customers without personal contact, personal contact becomes more important than ever. E-commerce was supposed to make face-to-face customer interaction obsolete. Yet business travel rose to unprecedented levels even as the Internet connected more than 300 million people worldwide. Why? Because scarcity always drives up the price of a product or service, and personal contact with customers is service like any other. As more and more companies automate their phone systems or push customer service online, the perceived value of personalized attention grows. Smart CEOs will leverage that value by using customer-relationship-management software and other techniques to focus this scarce resource on their best customers, using information technology to enhance, rather than replace, personal contact. These CEOs will use electronic commerce and interactive-voice-response systems as primary strategies only with their less-profitable customers, thereby extending their corporate reach without alienating core clients. Proximity Paradox No. 3: Location now matters more than ever, especially when you can track the customer's location as it changes. The advent of the wireless Internet and mobile commerce will force every business in every industry to include mobility in its value proposition-or risk obsolescence. Customers don't want to be tied to their desks or factories any more than you do. That means they'll increasingly demand that you and your company become available to them via mobile devices, whether telephone or personal digital assistant. What will customers want from you on-the-go? In short: Everything. They'll want to buy from you. They'll want to check prices, get bids, and verify order status. They'll want you to give them geographically sensitive information, such as the location of your nearest facility or truck. They'll want location-specific service from you, including mobile access to maintenance records and references, as well as remote monitoring systems for shipments, machinery, and storage facilities. They'll even want your help in selling on-the-go to their own customers, perhaps without ever taking delivery from you themselves. Are you reintegrating the concepts of proximity, geography, and location into your business model? Are you reinventing your value proposition to include mobility and the wireless Internet? Or are you still running a full-service gas station, waiting for the chromed fins to come to you? John R. Brandt, formerly editor-in-chief of IndustryWeek, is now editorial director of the Chief Executive Group, publishers of Chief Executive and dotCEO magazines.

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