This article is Part 1 in our Information Systems series.
Part 1: 6 Questions Executive Teams Should Be Asking About Their Information Systems (current)
Six Questions Executive Teams Should be Asking About Their Information Systems
By Jim Champy, Colby Thames, Jay Grieves, and Robert Morison
With the astounding pace of technological innovation, we tend to assume that information technology stays far ahead of businesses’ ability to use it well. That’s often true of individual technologies. But businesses sometimes have to wait for technology to catch up – wait for the technological combinations needed to accomplish things they’ve been wanting to do for a long time. We’re at such a point of technological convergence – we have the tools and techniques to reengineer how we build, manage, and capitalize on large information systems. In the coming weeks, exploring the next wave of technology-based business process innovation.
As an initial step, companies must reexamine the condition, performance, and roles of their major information systems. Here are six interrelated questions that CEOs, CIOs, and executive teams should be asking.
1. Do our major applications support our growth strategy?
Corporate enterprise resource planning (ERP) and other large enterprise systems enable one form of business growth – doing more of the same. As business volume expands, these applications can usually scale up. They can also support the biggest growth moves – mergers and acquisitions – if the company is quick and disciplined in making the enterprise systems standard across the enlarged operation. Most often, however, integration is slow and contentious. Competing sets of enterprise systems hinder coordination and operational performance, and they dilute the financial gains of consolidation.
But there’s another form of business growth – through innovation. Here enterprise systems impede growth because it’s hard to integrate innovative applications and processes with them, and because they lock an organization into one way of working and thinking.
What’s at the heart of your company’s growth strategy – innovation, expanding along familiar lines, or both?
2. Can we leverage existing applications assets in business experiments and innovations?
In a corporation equipped to innovate rapidly and dramatically, all of its information and technology assets would be available for experiments, pilots, and then implementing new ways of operating. All of its electronic data would be available for analysis. All of the business logic and methods represented in its software would be available to modify and assemble in new ways to test and implement innovations.
That ideal of modularity, connectability, and reconfigurability is old news to IT professionals. But very few companies come close to the ideal, in large part because their major systems represent a commitment to the opposite approach – closed, proprietary, tightly integrated. That’s the case not only with ERP and other large software packages, but also with most home-grown enterprise systems. Very few large applications have been built for flexibility. Rather, these systems are brittle yet critical, to be maintained and not disturbed.
If innovation is high on your business agenda, do you have the applications and technology architecture to enable it?
3. Do our applications deliver the data we need for analytics and decision making?
One of the most common and longstanding complaints about enterprise systems is that they make it difficult to get at the information needed for management. This is ironic because so much effort goes into, for example, standardizing data as part of ERP implementation. But here’s what happens: so much effort goes into standardization and installation that there’s little anticipation of what information is needed for management, or how to manage differently with the information in hand. When new information needs arise or are recognized later, they’re difficult to meet because the applications are focused on using predefined data for predefined purposes.
More and more companies are competing on analytics, differentiating themselves through their ability to generate new data and to make faster and better informed decisions, especially at the points of customer contact. Enterprise systems are major and essential data sources, but too often that data is difficult both to extract and to combine with other sources. Hence all the effort going into maintaining data warehouses apart from those applications, together with the interfaces that manage data feeds.
In what ways could your business compete more effectively if it had more complete and available data?
4. Can we take advantage of mobile applications across the enterprise?
Mobility is the rule, not the exception, these days. More employees spend more time away from the traditional workplace, both on the road and working from home. Even when in the traditional workplace, employees prefer to use their mobile devices – smartphones and tablets – to do things they used to do on laptops and desktops. And customers expect to connect with businesses via mobile devices, with their expectations conditioned by their experience with very slick consumer applications and interfaces.
The rapid rise of mobility puts enormous pressure on a company’s entire information systems infrastructure. Remote employees need secure access to corporate applications, and it’s not enough to try to “fit” everything on the smaller screens. Applications and interfaces need both to be streamlined for mobile productivity and to be expanded to take advantage of mobile capabilities such as location awareness. And given the pace of technological advance, mobile applications must be able to change quickly. Older systems, of course, were not built for mobile. Opening them to mobility is proving very difficult, and enterprise system vendors aren’t doing much to help the cause.
If your marketers identify a mobile application that will really drive sales, how fast can you follow through?
5. Do our applications and our applications development capabilities differentiate us in the marketplace?
With software packages, you get standard applications for standard processes, which suffice for most everyday business activities. With some packages you get reasonably current best-of-breed applications, but with others you get what a CIO described to us as “someone else’s outdated process design.” With some packages you have many options and settings to choose from, but with all packages you have access to the same technology that everyone else does. Thus, differentiation only comes from how well you use the software operationally, how much you capitalize on the information generated, or how effectively you “surround” the systems with distinguishing capabilities. The last two are very difficult to do, given the lack of modularity and accessibility of most large applications, whether packaged or developed in-house.
The conventional wisdom of “buy, don’t build” carries serious implications for IT skills. With heavy reliance on packaged applications, IT organizations can see their systems development capabilities decline, even if headcount hasn’t been reduced. It’s common to find a majority of “developers” maintaining older homegrown systems and the complex of interfaces to the ERP, while very few are current and practiced in agile development techniques. Yet talented developers are key to business differentiation through IT.
Can your IT organization deliver new capability at the pace of business need and opportunity?
6. Are we getting our money’s worth from ERP and other enterprise systems?
The “bottom line” question can be trickiest to answer. Companies spend tens and sometimes hundreds of millions of dollars on ERP implementation, and all enterprise systems are significant investments. It takes a long time to recoup the initial investment, and in the meantime the ongoing maintenance and upgrade fees, and the large cost of maintaining interfaces, continue to mount. Once these systems are in place, it can be prohibitively expensive to replace them in whole or in part, and “sunk cost” thinking can impede even necessary change.
All that said, if your enterprise systems have injected consistency and discipline into major business processes and raised their performance, they may well have paid off in terms of operational gains. However, what are the opportunity costs of keeping inflexible applications in place? The costs of curtailed innovation and growth, of less-than-fully-informed management, of failing to capitalize on the productivity of mobility? Such opportunity costs cannot be calculated precisely, but they should be recognized and discussed.
Can you develop an investment and action plan for a more agile computing platform?
In most companies, the answers to most of these questions are “no.” But the answers can be “yes” – not all at once, but steadily and soon. It requires a different set of goals for individual applications and the computing environment as a whole. It requires fresh perspective, tools, and methods for systems development and management. It requires different relationships with vendors – and taking back control over technology assets. It requires daring and commitment to do things differently.
In the rest of this series, we detail ways to get started – or accelerate your progress – revitalizing your information systems to keep pace with change and amplify business value.