By: Neil Ward-Dutton, Research Director, MWD Advisors
Published: 16th August 2013
This work is licensed under a Creative Commons License
There was a great piece in HBR yesterday from Robert Plant (no, not that Robert Plant): IT Doesn’t Matter (to CEOs). [Free login required]. The main message: CEOs don’t get IT, and “corporations’ technology strategies will remain ineffective until leaders acknowledge that, now as always, IT does matter.”
My discovering this piece coincided with another piece I saw, this time at The Economist: Net gains and losses. The main message here: although the development of the Internet has transformed some industries and also affected employment patterns and working environments, “there does seem to be a contrast between the initial expectations that marked the dotcom bubble of the late 1990s and the disappointing growth of developed economies since”.
Putting aside the fact that the days of the dotcom bubble were hardly days marked by thoughtful restraint and rational, impartial analysis broadly taken up (the hint’s in the ‘bubble’ moniker)—it’s certainly true that the promises of technology haven’t played out in ways that economists have let themselves be led to believe. My own perspective on this is that a big part of the gap here is down to the ways that technology is commonly implemented in business. This absolutely dovetails with the analysis in Robert Plant’s HBR article.
For my own part, I’ve come across quite a number of ‘greyhairs’ in very senior management positions in UK industry who pretty much wear their IT ignorance as a badge of pride. Hell, some still get their assistants to print out their emails and put them in their briefcases so they can read them on the train.
CEOs are expected to know about many other things—finance, sales, operations—why not technology? Of course we shouldn’t expect CEOs and other board members to know about technology in detail, but they should absolutely take an interest in the opportunities and risks associated with technology application in their business. The reason, when it comes down to it, is ridiculously simple.
Every commercial CEO’s principal imperative is to maximise returns to shareholders—that means, at its root, profit. Boards may have to work in line with other cultural objectives and commitments, and indeed strategies around customer service, employee treatment and so on, but profit is ultimately how companies stay in business and create wealth.
When technology is implemented right, it can increase revenue and profit. We’ve all seen really significant examples of that. At MWD Advisors we’re currently working on a telecom case study where analytics and decision management technology focused on reducing customer churn has returned tens of millions of pounds to the operation each year. At the extreme end of the scale, IBM is implementing a global transformation program, enabled by BPM technology, that’s returning the order of $8bn over five years (see this case study). Successful technology implementations can have very significant positive effects on profitability.
When technology is implemented poorly, it can have an astoundingly detrimental effect. In large scale failures, we can find examples of failures that have pulled quarterly profits down by 20%; led to losses of approaching $200m; and—in Ingram Micro’s infamous case—y-o-y quarterly profits down 11% in one quarter in 2011, and 19% the next. As per its 2012 annual report, its business continued to suffer for the whole of the following year—in total, profit margins were severely depressed for two years across a whole geographic region.
So if, perhaps, the difference between success and failure in a technology implementation might mean the difference between a significant profit uplift or a significant profit fall, doesn’t it make sense that senior leaders should take an active interest in technology investments, before they happen and not just when the blood has to be wiped off the floor?
Quite apart from the power of individual projects to materially affect corporate results is the potential for technology to create more systemic advantages, including business adaptability. This is hardly news, of course, but it does bear repeating—and here, witness another HBR article: Adaptability is the New Competitive Advantage. [Again, free login required].
In line with what I’ve said many times before (like in this 2008 post), adaptable technology platforms don’t necessarily translate into adaptable businesses; just as the potential of a particular technology project doesn’t necessarily translate into business success in a particular business area. In both cases, it’s human factors that account for the majority of the distance that exists between plunking down wads of $$ and delivering real business value.
Of course CEOs aren’t going to be actively involved in technology projects; indeed, they probably won’t be in the frame as the sponsor of any but the very most strategic projects. But those people who are the sponsors of projects, the shapers of projects and the beneficiaries of projects all need to work together to deliver successful outcomes—and they are all hugely influenced by the posture that their CEO takes. If CEOs and their board colleagues give out the message—perhaps completely unintended—that technology is not important, then the culture of the organisation as a whole will discount the value of technology; even if there are some pockets of very hard-working advocates.
What can CEOs do?
One simple thing I think would represent a massive step forward would if CEOs were prepared to stand up and ‘send a message’.
In my dreams, I’d like to see CEOs draft memos to all staff that encompass the following assertions:
Of course, CEOs and their boards would need to really believe these things, and not just parrot them. But I can dream, can’t I?
I’d love to see: what would you like to see in an ideal memo of this type?
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Published by: electronicdawn Ltd.