Succes and Failure of Information Technologies
According to U.S. Government statistics, American companies had tripled their per-employee expenses for Information Technology (IT) over the last 15 years. That means that those companies spent each year, on Information Technology, as much as they did on their offices, warehouses, manufacturing facilities, among others. The question is, how much of such investment can be considered successful.
What does it mean to be successful in the investment on, and implementation of, IT tools?
- To finish projects on time and on budget
- To deliver all the promised functionalities
- To achieve business results
- To achieve a competitive advantage in technology
- All of the above
Survey after survey attempting to answer this question have yielded the same results over time and geographies: only a percentage of less than 20% of IT projects are concluded on time and on budget, and less than 50% deliver the expected results. The reasons for this are seldom related to technical elements and are mainly related to lack of understanding of what the business requires:
“Success in IT investments is related with an understanding of what the business requires.”
WHY INVEST IN IT?
This question crosses the mind of every Director-General who, at the same time, knows he has to do it. Not to invest in IT is not an option because
“Information Technologies are tools that change the rules of the game; failure to invest in IT generates a competitive disadvantage.”
Concretely speaking, information technologies have allowed and enabled new ways to work, more efficient, more agile, more effective. The examples are countless and go from simple and repetitive jobs (the printing of customer invoices that formerly involved manual typing and thus an army of stenographers), to strategic decisions (models to understand business behavior based on statistical and quantitative analyses that yield conclusions for decisions on products or advertising campaigns, or even further, make decisions automatically to offer personalized visits on a website).
A corollary is that every IT project must be considered as an initiative for change. Merely seeking to automate the same process that is done currently is a wasted opportunity to capitalize the potential of technology.
WHAT PROJECTS AND TECHNOLOGIES TO INVEST IN?
The first step for success in IT projects is the management of the portfolio of initiatives for change that require an implementation of IT.
To manage the portfolio means to define the criteria to prioritize and to achieve both the optimum mix and the sequencing of initiatives that lead to the best allocation of available resources. The criteria to achieve this are numerous, but there are some basic ones that should be used.
The first one is full alignment with the business, i.e., that it complements and supports the strategy of the business. For instance, if the company’s strategy is one of productivity and efficiency, one needs to identify those processes with more likelihood of being benefitted by a change enabled by technology (for example, in consumer companies, the efficient planning and execution of the supply chain).
Another relevant prioritization factor is the organization’s ability to absorb the change. Change is never easy, especially so when companies or individuals have been successful in doing their job in a manner that has worked for them (but which not necessarily work under future circumstances). To try to
generate many changes at the same time will only cause the organization to lose focus and the implementation efforts to be weaker.
These two factors (alignment and ability to change) must be combined with other financial, risk, and cultural criteria that make sense to the realities of each business. Finally, available resources (financial, human, etc.) dictate the sequence in which the projects will be conducted.
The exercise of portfolio administration should be done by a senior management team that is familiar with the strategy, and at fixed periods governed by the speed at which the environment of each company changes.
SUCCESS FOR INFORMATION TECHNOLOGY INITIATIVES IN MY COMPANY
The selected initiatives must meet three conditions to be successful:
1. Business objective: A project that involves an IT investment must be clear about its desires. Obviously, this is no novelty. However, a very relevant point is to understand what type of objectives. The objectives need to be business objectives. For instance, “to implement within six months an application for the operations of area X” is an objective of the project leader, but cannot be a company objective. ”Improve productivity”, “increase effectiveness”, “decrease product shortages”, are business objectives with clear and objective indicators and measurements of performance before and after the change, which can be calmly compared and reflect their impact on the business.
2. Understanding of the changes in the business process: This is the most relevant condition to meet in order to succeed. A project that involves IT is not a “Systems” project, it is always a project for some business process that may in turn involve one or several areas of the business (the sole exception are communications projects that benefit every area: the phones, the internal network, e-mail, social networks, etc.).
Such projects necessarily have to generate a process change, a change in the way we work. This implies changes in responsibilities, in business profiles (new knowledge and abilities), and changes in tools. Merely automating a task that’s done currently without making changes in the people and the way they work, is a project that needs to be restated. I has become ubiquitous because it allows and enables new ways to interact and communicate, new systems for the consolidation and dissemination of information. These tools must automate and accelerate information flows, make information processing more sophisticated, and improve communication. If the project does not seek an enhancement of any of these aspects, it’s necessary to restate the initiative or challenge its value.
The concept of “process” is a key one to understand. The first thing that must be clearly stated is that it’s not the same as an area of the organization; processes may involve only part of one area or may extend to several areas. For example, Demand Planning covers from the generation of a statistical forecast to the projected demand that contemplates commercial and market initiatives. Some of the participants may be Logistics—the coordination of the process, validation of forecasts vs. operative capacity; Sales—the inclusion of commercial initiatives (changes in pricing, discounts); Marketing—the inclusion of market initiatives (“buy one get one free” promotions, media drives, etc.)
“Understanding of the process gives stronger impact to the implementation of IT.”
Conversely, to expect that the business is going to improve merely because a new system is installed is the beginning of a project that will not yield the
expected results.
Questions basic to the definition of the initiative are, What final results will come from this? What is being transformed in the process, what changes does it enable and what changes does the technology demand from the people? What profiles (skills, abilities, knowledge, experience) do participants need to have?
3. Ability to execute: Even with a clear vision of the priorities, of the changes to be made and of the business objectives, execution of the project and of organizational change is a major challenge. The execution of change Is always hard, with inertia, resistance, disagreement, lack of knowledge and of skills to confront. Ensuring that change is permanent involves training, communication and ongoing follow-up efforts.
It’s imperative for the project team to possess all of the following capabilities:
- Understanding of the business
- Understanding of technology
- Project management
- Change management
Any company can assemble a team that meets such requirements.
However, it is also important to be realistic as to the capabilities available in house and to be willing to seek a partner to fill in the gaps.
LET’S INVEST IN INFORMATION TECHNOLOGIES
Any company needs to invest in Information Technologies in order to remain competitive; moreover a creative and intelligent use of them can be a foundation for the creation of competitive advantages.
However, this investment needs to be seen as a starting point for change and improvement processes, it must be fully aligned to the business strategy, it must be understood as a business exercise rather than of technology per se, and it must assemble all the elements essential to its execution. This is a sure-bet (albeit not simple) recipe to prevent becoming another bad statistic and to achieve successful IT projects, and most of all, to be able to grow the size and profitability of the company.
Angel Hermida, Sintec
angel.hermida@sicweb.wpengine.com
About Sintec
Sintec is the leading consulting firm focused on generating profitable growth and developing competitive advantages through the design and execution of holistic and innovative Customer and Operations Strategies. Sintec provides a thorough and unique methodology for the development of organizational competencies, based on three key elements: Organization, Processes and IT. Furthermore, Sintec has successfully carried out more than 300 projects on Commercial Strategies, Operations and IT issues with more than 100 companies in 14 countries throughout Latin America. Our track record of more than 25 years makes Sintec the most experienced consulting firm in this area of expertise in the region.
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