| An article in the March 10 Wall Street Journal, “How To Tap IT’s Hidden Potential” generated a lot of discussion in CIO circle over the past couple of days.
The feature highlights some very key issues and outlines seven steps that will help “shatter the wall between IT and the rest of a company.” The steps in the article start with the following: Begin with IT literacy -- and commitment -- at the top; hire an IT leader who sees the big picture, rotate management and executive candidates through IT, and create demand for IT solutions.
The authors have made some excellent observations regarding the cause of existence of this “glass wall.” However the solutions to those problems need to take into consideration the practical issues that may impede their proposed solution.
The authors have made a comment that “billions of dollars are blown every year on IT projects that fail to achieve the desired goals.” This is nothing new. However, the authors do not allude to the cause behind this – is it the trajectory of the IT spending or a failure to execute IT projects? A well executed, positive net present value IT project may also be a failure if it does not align to the trajectory of the business.
The authors also note that there is a tendency to think of IT “as a basic utility.” But does that mean that IT is a commoditized utility that is required to keep business as usual (an absolute requirement for all corporations) or is it a “cost center” in which there is no direct correlation to the value it adds to the company’s enterprise value?
I do agree with the first step, getting commitment from senior management. However, commitment does not come with training. Commitment comes from belief and belief comes from evidence. Competitive analysis and the impact IT has had on the competitors’ margins is a better way to increase awareness.
The second step, hiring an IT leader who sees the “Big Picture,” does not translate into a personality trait that is so obvious in CIOs. Most CIOs have either risen through the technology ranks or were appointed because there was no one else. The CIO needs to be a “business man” – an individual who not only understands why demand exists. For example, the CIO of FedEx must not only understand why people prefer a courier service over snail mail but also how they may want to send their packages in the age of digital assets -- which may indicate a decline in the use of bulk transfer services. In other words, a CIO must follow the business and the “information” business needs to sustain and grow.
Another recommendation, rotation of management and executive candidates through IT, may be possible in large companies. However, it is not practical to do in mid-size entrepreneurial companies where customer disruption due to any reason is a bad thing.
Another step, creating demand for IT solutions, is difficult. A more practical way is to decompose the business into business lines and measure the revenue potential of each one (which all corporations do). For those business lines that have the tendency to grow due to market-demand, assess the importance and relevance of technology, and then finally overlay technology solutions to innovate or improve the revenue generating capabilities of those business lines. In this way, the business will not need to be “convinced” of the value of IT. It will be a perpetual or an obvious outcome of the exercise.
I fully agree with the authors that “…there is a myth that IT investments can’t be evaluated….” They can be done using corporate finance techniques as any other type of project. However, one of the key points that the authors overlooked is collecting metrics about IT projects both successful and failed. Through statistical and predictive analytics, one can substantiate the financial justification of doing or not doing a certain IT project against another.
Sumitro Sarkar has 20 years of experience in technology consulting and product strategy. He has served in management and leadership positions in big- five management consulting firms, financial information services and technology product companies. His areas of interest are redefining technology value propositions, resolving bleeding-edge technology myths, using technology to change the rules of business. He holds a BA in Economics and Mathematics (with honors) and an MBA from Delhi, India. He also holds an MBA from the Johnson Graduate School of Management at Cornell University.
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