A couple of weeks ago, several of us from Everest Group hosted a roundtable for sourcing executives in the U.K. The event was held in London’s Moorgate area – Moorgate is the name of the northernmost gate in the old city wall, and everything to the south and west was destroyed by the 17th century Great Fire of London – so I decided to orient my discussion on benchmarking by drawing parallels between the fire and digital disruption in the global services industry.
For context, the Great Fire started shortly after midnight on 2 September 1666 in a bakery on Pudding Lane. Over the next three days, the fire gutted the medieval City of London inside the old Roman city wall, and consumed 13,200 houses, 87 parish churches, St. Paul’s cathedral, and most of the buildings of the City authorities.
As we’re just several weeks shy of the 351st anniversary of the Great Fire, let’s all have some fun by casting today’s enterprises and two different types of outsourcing service providers as the entities trying to find a solution to stop the fire from spreading.
First, as there was no city-run fire brigade, the householders – read, the enterprises – attempted to put out the fire themselves, as it engulfed their own buildings. But their two capabilities, dousing buildings with water despite the inadequacies of the pipe network and pulling burning material from structures with bill hooks, were reactive and futile. Theirs was a sub-optimal process.
With the fire quickly spreading, the city authorities realized that a more coordinated approach was required. The city militia – read, service providers that deliver “traditional” services – was called in, and concentrated its efforts on pulling down houses that stood in the fire’s path. While this was an optimized process, it only minimally delayed the spread of the fire, and certainly was not popular with the householders/enterprises.
Finally, the garrison at the Tower of London – read, a provider that offers transformative, digitally-based solutions – offered a solution that was conceptually challenging: the creation of effective firebreaks by using gunpowder to demolish entire streets. This genuinely transformed process rescued the city by leveraging a highly disruptive technology (gunpowder).
The immediate outcome was prevention of further fire spread. Problem solved! But the solution also resulted in two unforeseen, and highly beneficial outcomes: the end of the bubonic plague outbreak that had ravaged London since 1665, and, because of the huge anticipated cost of rebuilding the city, a financial imperative to end the Anglo-Dutch war. The eradication of disease meant that London was immediately a safer place to live, so both economic and intellectual capital returned to the city. Peace with Holland created conditions for trade to thrive, insurance against risk took off (Lloyds appeared as an insurer just 22 years later in 1688,) and London’s emergence as a global city began…extraordinary value-add.
How does this connect with service providers today?
The moral to this entertaining (and historical fact-filled) exercise? Today’s enterprises are facing multiple, unprecedented forces. In order the stop the spread of the fire – or gain and maintain a competitive foothold – they likely need to partner with service providers that embrace innovative, disruptive, digital solutions.
Enterprises can always insist that service providers find better ways to prevent the spread of fire, and to optimize processes by taking a rounded, contextualized approach to reviewing the detail of an existing arrangement. In our experience, this can account for value improvements of between 18 and 24 percent of the total cost. But by insisting that service providers themselves start thinking innovatively and imaginatively, that improvement can often be doubled. While some of the consequences will be unintended, many of them will deliver benefit far beyond their intention.