This article originally appeared on the BeyeNETWORK.
There is a conflict that has been played out in our industry in a thousand ways. Indeed, the conflict is being played out today as this article is being written.
That conflict is the push and pull that goes on endlessly between centralized data and decentralized decision making. The problem is that there is great appeal to the centralization of data and that there is equal appeal to the decentralization of decision making. These two forces are at war with each other and perhaps will always be at war. There are compromises and peace in this war, but no lasting peace. Perhaps every permutation between centralization of data and decentralization of decision making has been tried, and there is, as of yet, no standard industry best practice.
In order to understand this most profound conflict, consider the following.
A salesperson has a personal computer and a territory. The salesperson keeps track of sales prospects, sales calls and deal closings all on a very personal, very decentralized basis. From many perspectives, the salesperson is quite content doing his/her own thing. The salesperson makes local decisions.
But there are some major issues with the salesperson, localized decisions and the convenient environment of the salesperson’s personal computer. The problem is that the salesperson is part of a larger community. The salesperson is part of a sales force that, in turn, is part of a company. And there are lots of important pieces of information that are vitally important to the salesperson that are not found on the salesperson’s personal computer, such as:
- Changes in pricing strategy across the corporation
- Preparation for the introduction of a new line of products
- Response to new competition in the marketplace
- Sales strategies and tactics that work for the company in areas outside the salesperson’s territories, and so forth.
In short, there is a wealth of data and information that exists at a centralized level that is important to the salesperson. The world contained inside the salesperson’s personal computer is merely one facet of a wide range of information that is important.
Conversely, the data inside the salesperson’s personal computer has great relevance to the corporation. Information such as what type of customer is interested in the product, the actual sale price, the industries that are interested in the product and the length of the sales cycle are all important to the overall picture of the corporation.
It is then obvious that a completely decentralized approach for decision making is hardly optimal. While the salesperson certainly has a lot of useful information stored and managed locally, there are other pieces of information the salesperson needs that are not found at the local, decentralized level.
On the other hand, the opposite of storing and managing data locally and making decisions locally is the approach of storing and managing data in a centralized manner. In the heyday of high performance transaction systems, there was the attempt to build and manage all data centrally. There was great appeal to the notion of managing and storing data centrally. There are great economies of scale that can be enjoyed when data is managed centrally. There is the opportunity (a mirage in the desert if there ever were one) to look across the corporation and have all the data that was needed at hand. There was the opportunity to manage response time and availability on a measurable and controlled basis.
In short, there was a great appeal to the development and deployment of large centralized systems of information. But soon it was discovered that there was a need for locally managed data and processing. The laws in one state differed from the laws in another state. The business practices in one country are different from the business practices in another country. The people and customs in one place are different from the people and customs in another place. Business practices routinely vary from one place to the next. And the salesperson needed the ability to match the sale with the standard and local business practice.
In order for centralization to work properly, the centralized system must be built to take into consideration all the local variations. And this was almost impossible to do. In order for a large system to encompass and address all the many local variations of requirements, the system requirements were unspeakably complex. The only way to ensure the simplicity of the system was to do certain processing centrally, then let the local administration of the system have enough autonomy to address the local needs.
Stated differently, neither a purely decentralized approach nor a purely centralized approach works. Both approaches – in their pure form – have their Achilles’ heels. And these Achilles’ heels are nontrivial. So how is this dilemma resolved?
The answer is that the dilemma is resolved in a thousand different ways by a thousand different companies. There is no generic formula that serves the needs of both centralization of data and decentralization of decision making.