Successful business leaders ensure that the scarce resources available to them are best used. They focus on all aspects of spending and ask is it absolutely necessary? Is there a cheaper way of doing this? Can we squeeze out more for the same cost?
Given the challenges of the last few years, most of the low hanging fruit has already been harvested. The competitive pressure has not come off and CEOs are looking to balance an increased demand for services with a reduced ability to attract income. There are 3 main options to achieve this:
1. Transformational change. Radically changing the operating model through acquisition, amalgamation or strategic repositioning is an option. James Carlopio from the World Future Society suggests that these efforts fail 50-80% of the time.
2. Intermediation. This is where the relationships between suppliers and consumers is modified and may be as simple as consolidating suppliers to achieve discounts. This strategy can sometimes be affected with little of the risk associated with business change.
3. Incremental. Typically this involves turning the handle on business processes to make them more effective, reducing cost and improving quality. Technology is likely to be a core component and the biggest risks are around organizational change.
As a CIO I have been involved in a number of successful incremental change projects. One example was the introduction of a logistics management application in a large not for profit organization.
The new application had many technology challenges causing delays and frustration amongst the users. The business processes were standardized and simplified, which made some users feel disempowered. Fortunately there was a clear vision from senior management on what they wanted to achieve. The turning point came when a major disaster struck, requiring a highly complex logistics operation.
The simplified processes improved productivity of staff who were working 18 hours per day. The on line nature of the application meant that geographically dispersed stakeholders collaborated effectively. The biggest impact came from being able to analyse the supply chain and optimize ordering, reducing delivery time by a factor of 6 and costs by 80%.
Of course for every success story, there are litanies of disasters where IT investments have soaked up huge amounts of money. I have a few tips for making sure that you get value if you are investing scarce resources:
1. Create a business case. This clearly states the expectations behind business drivers, strategic outcomes, options, scope, benefits, costs, risks and timeframe. If the costs and risks outweigh the benefits, cancel the initiative early.
2. Assign accountability. You need to have individuals who are fully accountable for the business case and in particular the delivery of business benefits. The expectations should be clearly stated in the individual’s personal performance objectives
3. Excellence in delivery. Running IT projects is risky. The concensus from a number of surveys on IT projects is that just 1 in 5 are fully successful. A solid project methodology, experienced project managers and executive support focused on delivering the promised benefits will increase your chance of success
4. Connect initiatives. Running a series of disconnected IT initiatives will lead to lower agility and higher costs in the long run. Plan your IT like you would plan a city to make sure that your roads connect and you don’t build an abattoir in a residential area.
How confident are you about investing in organizational change?