Business Startup AR

Beyond the Efficiency Frontier

How technology enables Arkansas entrepreneurs to create breakthrough processes for competitive advantage

In a new weekly series, Matthew A. Waller, Dean of the Sam M. Walton College of Business, examines the state of business in Arkansas. Catch him each week exclusively on Arkansas Money & Politics. 

Technology can automate existing businesses or business processes, and that can result in improved efficiency and effectiveness. Technology, however, also can obviate existing businesses or business processes. In those cases, the returns to a business can be very high and the results can be disruptive to an entire industry. For example, the taxi industry could have used smart phones to improve efficiency and effectiveness. Instead, Uber used them to create a breakthrough business process that significantly disrupted the industry.

When an organization is using its inputs and resources efficiently on any given process, we say they are on the “efficiency frontier.” Technology, of course, can help a company move to the efficiency frontier, but moving even further becomes the bigger challenge. If they want to keep improving, they need to redesign the process altogether and many times that entails the combination of a new technology with an altogether new process. This is difficult to execute in practice, because we become so accustomed to an existing process that it’s hard to even imagine a new way of doing things. Once we see it, we think “Why didn’t I think of that? It is so obvious.” Most innovation and invention seems to be like that.

I’m going to illustrate these concepts based on the innovativeness of four Arkansas-based entrepreneurs who creatively designed new processes using technology to move beyond the efficiency frontier: Movista, Field Agent, Tango Press, and SMACK.

The current processes for managing remote employees have been automated with new technology, but Bentonville-based Movista seized an opportunity to go even further with improvements in efficiency and effectiveness. Co-founders Stan Zylowski and April Seggebruch, both Walton College alumni, are being rewarded for their innovativeness — their company’s year-over-year revenues have doubled in five of the past seven years. Movista allows companies to manage their remote workforces using smart devices, including HR, payroll and expense reporting, through to task management, file delivery, and data sharing. They are focused on the retail sector, but their software as a service (SaaS) applies to any industry that needs to manage a team in the field.

Just as Movista has changed the way companies can manage remote employees, Fayetteville-based Field Agent, cofounded by Henry Ho and Rick West, has changed the way companies can collect remote information. They re-engineered the process for collecting information from retail stores and shoppers by leveraging the power of crowdsourcing and mobile technology.

Field Agent provides audits, in-store and at-home research, opinion surveys and on-shelf availability through photo verification from their agents’ smart phones. Their clients range from Fortune 100 companies to local businesses, all of whom need fast, accurate, real-time information. Walton College alumnus Marc Yount is president of the company, which has more than 100 employees. But what is impressive is that they have a global network of more than a million independent crowdsourced agents in seven countries: the United States, Canada, the United Kingdom, Australia, South Africa, Mexico and Romania. I have seen several sources that say Field Agent was the first app to pay users, another example of a breakthrough in process redesign.

Production and manufacturing is another area of business that must deftly manage processes on the efficiency frontier, and that’s where Tango Press has excelled. The Springdale-based company cofounded by Walton College alumnus John Ballentine has created an innovative process to address one of the biggest challenges of any production facility – setup costs.

When a facility switches from one product to another, machines have to be adjusted, stages in the process have to be re-arranged or programs have to be re-set. While the setup is taking place, production is not. And if the facility is producing to capacity and selling all of its output, then the down time is even more costly because of the lost sales. A setup cost can be thought of as a fixed cost per production run, so the longer the run (i.e., the more units per run), then the lower the average cost of production for that particular product. Longer the production runs, however, result in less variety in the products you can produce and higher average inventory for the products you are producing. So, there is the tradeoff.

Production-oriented companies are always calculating optimal product runs that minimize total costs. When they find the optimal production quantity, they are on the efficiency frontier. After that, however, the only way to reduce costs, increase the variety of products at that cost, or increase the capacity at that cost is by redesigning the process, usually by using new technology. That is where the big opportunities lie, and it is exactly what Tango Press accomplished by using state-of-the-art technology to digitally print high-quality packaging and corrugated materials in industry-disrupting production quantities. Their innovative production process requires very little setup time and the cost between different production runs is extremely low; at the same time, the rate of production and the quality of their products are very high. (A few weeks ago, I wrote an article titled, “Arkansas Entrepreneurs Merge Digital and Artistic in Building Brands.” I could have used Tango Press as an example for that article, as well.)

As you can see, technology-enabled process redesign is providing substantial opportunities to entrepreneurs in Arkansas on the production side of business: (1) Movista—managing remote teams, (2) Field Agent—collecting remote information, and (3) Tango Press—printing for packaging. Technology-enabled process redesign, however, also creates opportunities on the marketing side of business.

We don’t often think of efficiency when we think of marketing, but we should. If we are trying to increase sales, we can market to consumers, retailers and shoppers. Most consumer products companies need to do all three and more, but it takes the right combination of tools to get on the efficiency frontier from a marketing perspective. Going beyond it requires new technology enabled process, and SMACK provides a great example.

The Bentonville-based media and marketing company founded by Sean Womack is pioneering processes to provide a new media — namely, “retail media.” Most related media focuses on consumers, whereas SMACK focuses on retail shoppers, especially for routine shopping.  When someone is shopping for everyday items in a store, they typically are efficiently shopping from a prepared list. So, they seldom consider new items in the store that aren’t already on that list. People who come in for eggs, butter and milk, for example, don’t usually think, “I wonder what’s new in paper towels?”

SMACK curates such products for shoppers. focuses on items of interest to men and is for women, and both are optimized for use on smart devices. Enter or in the search engine on your smart phone, and you will have a good idea of what they are doing. You can easily imagine the opportunities this creates for advertising revenue. Womack realized people want content from a publisher more than they want it from a brand, and then he creatively combined technology and processes to make that a reality.

Matthew Waller AMP Walton College

Matthew Waller

Matthew A. Waller is the Dean of the Sam M. Walton College of Business, Sam M. Walton Leadership Chair, and Professor of Supply Chain Management.  As Dean he leads the Walton College, which has over 6,000 undergraduates and about 500 graduate students.  He has been an active entrepreneur most of his life.  He was co-founder of a software company which had over 100 employees as well as a consulting firm.  He is an inventor on the following patent: Waller, M.A. and Dulaney, E.F. System, Method and Article of Manufacture to Optimize Inventory and Merchandising Shelf Space Utilization, Patent No. US 6,341,269 B1. Date of Patent: January 22, 2002. His opinion pieces have appeared in Wall Street Journal and Financial Times.  Dr. Waller is an SEC Academic Leadership Fellow.  He is coauthor of The Definitive Guide to Inventory Management: Principles and Strategies for the Efficient Flow of Inventory across the Supply Chain, published by Pearson Education. He received a B.S.B.A. summa cum laude from the University of Missouri, and a M.S. and Ph.D. from The Pennsylvania State University. He is the former Co-Editor-In-Chief of Journal of Business Logistics.  Matt is coauthoring a book with Kirk Thompson, Chairman of J.B. Hunt Transport Services, Inc. about strategy and how J.B. Hunt Transport Services, Inc. applied various business strategies. 

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