Archive for the ‘business advantage’ Category

CIOs Need To Use Lessons Learned During The Dot-Com Crash To Do Well Now

Wednesday, June 23rd, 2010
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Cisco Has Some Lessons For How CIOs Need To Exit The Recession

Cisco Has Some Lessons For How CIOs Need To Exit The Recession

When you become a CIO, you will have the chance to be leading the IT department when the next global recession hits. I don’t care if you’ve got a list of Cisco technical certifications as long as your arm after your title and the fanciest MBA degree available, there’s no training for how to deal with this. Good news: the folks over at Cisco are in the process of blazing a trail that will show CIOs how to deal with this type of situation.

What Cisco Did During The Dot-Com Disaster

Everyone knows that Cisco is a huge company that is now and has been quite successful. What we’re interested in is how they’ve been able to survive the past two dramatic industry recessions – the dot.com event and the 2009-2009 global recession.

The fact that they made it through the dot.com technology downturn means that Cisco came into the most recent downturn with a lot of experience. It’s what they did back then that can help CIOs figure out what they need to be doing today.

Back in 2001, Cisco’s leadership made the difficult decisions early on. In March of 2001 they decided to roll off 18% of their workforce. Because they made such a big cut early on, Cisco didn’t have to make any additional cuts during the entire dot.com crash. There’s something for CIOs to learn from this.

When the dot.com crash had passed through its darkest days and a small glimmer of a recovery started to become visible, Cisco got aggressive. What they did was to start to make investments in new businesses that they thought would be significant markets.

Although as CIO you might not be buying up other companies, the idea of starting early on projects that are going to make the company stronger as you come out of the recession is something that can make or break your CIO career.

What Cisco Is Doing At The End Of The Current Recession

Cisco says that the #1 thing that they learned from the dot.com downturn that they are applying today is that they need to move quickly. They say that back then they spent too much time looking at how dismal the current market was and not enough time looking forward at how the market was going to be in the future.

For CIOs this is a key piece of advice. Since you’ll be rubbing shoulders with the CEO and CFO in your CIO position, you’ll be getting a lot of negative vibes during the recession. It will be your job as the company’s technology leader to rise above the doom & gloom and set your sights on what’s coming your way once the recession is over.

There are tactical things that you’ll be able to do also. Hopefully it goes without saying that if you are able to keep your IT team together, then having an experienced team on board will make getting through a recession that much easier. At Cisco they’ve been able to keep 45 of the 65 executives who were with the company during the dot com days still on board.

Additionally, freezing hiring early on will make it that much easier in the event that you need to do some downsizing – there will be fewer heads that need to be cut.

What All Of This Means For You

If the world was perfect, then when you became CIO the company would have nothing but smooth sailing ahead of it. Clearly this is not the world that we live in.

There will be another recession and with a little luck you’ll be a CIO by then. In order to make it out of the recession stronger than when you went into it, you’re going to need to take action. This means doing the right size downsizing and knowing when to start the projects that will position the company to be successful when the recession is over.

It is possible to hold on to your CIO job even when the global economy is not doing well. The folks over at Cisco seem to have come up with an approach that CIOs would be well advised to follow!

- Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World IT Department Leadership Skills

Question For You: Do you think that laying off large amounts of your IT staff just once early on is better or worse than multiple smaller cuts over time?

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What We’ll Be Talking About Next Time

What if software was free? Every CIO has to stop and ask themselves this question every once in awhile. With the cost of ERP and database systems constantly increasing, software costs can quickly become a significant expense for any IT department. The “Open Source” software movement, born in the days when Napster was giving away commercial music for free, is one way the IT departments can get high quality software for free. But should they?

CIOs have a difficult decision to make when it comes to using open source software: do they risk using software with no formal support in order to cut IT costs

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Welcome To 2009: Does IT Matter This Year?

Monday, February 9th, 2009

Lots Of Firms Invest In IT, But Does This Make Them Competitive?

Lots Of Firms Invest In IT, But Does This Make Them Competitive?

I’m not sure if you remember, but way back in 2003 Nicholas Carr wrote a piece for the Harvard Business Review called “IT Doesn’t Matter“. Man o Man did this set off a firestorm in the IT community – it was sorta like someone calling your sister ugly. However, time has passed since then and so perhaps it’s a good time to stop for a moment and ask ourselves, was Carr right after all?

Carr’s point at the time was that the tools of  IT have become so standardized and available to everyone that IT can no longer provide a company with a competitive advantage. At first glance, it looks like he’s got a good point here.

What do we spend most of our time on today? Keeping things up and running, meeting legal compliance issues, and trying to reduce IT costs. Sure doesn’t seem like there is a lot of innovation going on there.

The arrival of Cloud computing and web-based services such as Salesforce.com seem to drive the point home even further – anybody can get their hands on the same sets of IT services. So are we just technicians these days?

Well hold on just a moment, all may not be as bleak as it seems at first. Jeanne Harris over at Accenture is the author of a book called Competing on Analytics: The New Science of Winning in which she makes a couple of good points.

It turns out that some companies know how to use IT to get value. Some don’t. If you average out all companies, then you end up with a result that says that companies don’t get much value from IT. Harris points out that what Carr seems to be missing is that many firms do get a lot of value out of IT because they know how to use it.

Given all of this, here is a quick list of firms that “get” IT and have been putting it to good use. Yes, the components that they are using are available to everyone, it’s how they are using it that makes the difference:

  1. Walmart: has used IT tools to create set of a supply chain management applications that has allowed it to grow to occupy the top spot on Fortune’s top 500 list of largest firms.
  2. FedEx: used IT tools to create an integrated package tracking system that allowed it to offer greater visibility to its customers and thus zoomed by UPS to become the world’s biggest cargo airline.
  3. Citibank: used the new technology of ATMs to double its share of the New York City market back in the early 1980′s.
  4. American Airlines: used its inside IT resources to create the SABRE computerized airline reservation system that went on to become an industry standard.
  5. Harrah’s Entertainment: IT has been used to create their Total Rewards customer tracking database and their Fast Cash real-time incentive gambling management program.
  6. Toyota Motor Corp: IT has been used to create their just-in-time supply chain and its associated management systems.
  7. Exxon Mobile Corp: IT is being used to help search for the oil and gas deposits that are becoming increasing hard to find.
  8. Proctor & Gamble: IT provides the analytical tools that are needed for data mining that is required to track product sales and adjust pricing and promotions.
  9. Boston Red Sox: use IT to perform sophisticated data analysis of players, stadiums, other teams, and salaries in order to remain competitive.

Well there you go. In the end, Carr makes a good point – lots of IT shops are making the investment into IT hardware and software; however, they aren’t getting any real benefits from this investment. However, there is a subset of firms that are using those generic IT parts to build tools that help them to be highly competitive.

Does your firm do a good job of using the IT resources that you have? Which of the firms that I listed do you think has made the best use of IT? Who did I forget and leave off of my list? Leave me a comment and let me know what you are thinking.

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What Toyota Can Teach IT About Dealing With Change

Thursday, December 18th, 2008
Toyota Has Developed Three Ways Of Dealing With Growth And Change

Toyota Has Developed Three Ways Of Dealing With Growth And Change

It may seem odd to to be talking about growth during this time of economic downturn, but once this cycle is done you had better have a good plan for learning to deal with growth. IT has always been about change, but that doesn’t mean that IT leaders are any better than anyone else in dealing with constant change (and growth).

We’ve been talking about Toyota lately and interestingly enough they have a great deal that they can teach IT about how to deal with change and growth. They realize that as an organization becomes larger, communication is one of the first things that will start to deteriorate. After this, it starts to become more difficult to coordinate operations and projects that stretch across the entire company.

In order to deal with problems such as these, Toyota has implemented three separate “forces of integration” that have allowed Toyota’s IT department to be able to keep its focus on Toyota’s mission. These three forces are the founder’s original values, how they manage promotions, and their use of open communication. No high-tech stuff here, but perhaps they still have something to teach IT departments…

The values that have been handed down to Toyota by their founders include the famous kaizen (continuous improvement), respect for fellow employees and what they can accomplish, the power of teamwork, the spirit of humility, the importance of putting the customer first, and finally, just how important it is to see something with your own eyes.

Developing the next round of IT department leaders is done differently at every company. All too often, firms use the “up-or-out” approach – either you get promoted or you eventually get shown the door. This is not the way that Toyota runs their business.

Toyota actually still has a basic guarantee of lifetime employment for its workers. Employees who are under performing are not terminated, rather they have their capabilities upgraded through on the job training. At Toyota, IT workers are asked to think as if they were really operating at two levels above their current rank. This allows all employees to have more context added to their perspective.

Open communication is critical to everything that Toyota does. They have actually been able to accomplish what every IT department would like to do: have information flow freely both up and down the hierarchy as well as across both seniority and functional boundaries.

In the 21st Century, Toyota still feels that human to human networks are of the highest importance. Executives go to the lowest levels in the company and have discussions with the workers there in order to understand what is going on.

At Toyota it’s ok for IT workers to speak up when they disagree with what someone is saying – even if it’s their boss. The ultimate assignment for every employee is to do what they think is right – not just what the boss is telling them to do.

In the end, Toyota is a hard company for any IT department to try to emulate. The reason for this is because Toyota’s success does not just come from doing (or not doing) any one thing. Instead, it’s really about a culture that Toyota has created that allows all of its departments to be a success. Even though it may seem impossible to replicate this environment in your IT department, keep in mind that at Toyota they view trying as the greatest achievement and failure is just one step towards success.

Does your IT department have any values that it has inherited from past management? Do you work with employees that are not ready to be promoted in order to get them ready – or do you just let them go? Would you say that your IT department has open flows of communication? Leave me a comment and let me know what you are thinking.

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From Plumber To Partner: How IT Can Become Part Of A Company’s Success

Wednesday, July 2nd, 2008

How To Make IT Less Like A Plumber and More Like A Partner

Current industry wisdom estimates that companies end up spending 5% – 10% of their gross revenue on all things related to Information Technology. Ouch! That means for every $1M in revenue, the IT cost could reach up to $100,000. You do the math!

In a recent article in Baseline magazine, Cary Westmark who is the VP of Technology for golf course management firm Troon Golf talked about what he’s done to make IT a key part of his company’s success. I liked one of his points about simply changing the vocabulary used withing the IT organization. How many times this week have you heard the phrases “cost savings”, “expense avoidance”, “improving the bottom line” used in your department? If you haven’t, then perhaps it’s time to start using them.

Cary realizes that IT spending is sorta like trying to run up the down escalator: it will get you further ahead for awhile; however, your advantage will dissipate as your competitors adopt the same technology that you are using. However, the steady and continuous application of IT to real business problems can result in reductions in operating costs and can improve efficiencies. Cary goes on to revel his top 6 suggestions for making IT a vital part of the way a company does business:

  1. TCO – Live It, Love It, Learn It: the rest of the company is always talking about Total Cost of Ownership (TCO) and IT should be doing the same. Within IT we realize that the cost of a server is not just its purchase price. Rather it’s the purchase price + operating system maintenance + electricity + cooling + 3rd party software costs + etc. Some studies say that the cost of just powering a server are 3x the initial purchase price over the life of the server. An IT device’s life expectancy is roughly 3 years — after that everything starts getting much more expensive (Windows 95 support anyone?). Having an IT plan to refresh your IT assets is key to managing these costs.

  2. Standards Rule!: How did Southwest airlines get to be such a successful airline? One of their main secrets is that they fly only one type of airplane — Boeing 737s. This simplifies pilot training, maintenance, ticket sales, etc. The more standardized you can keep your IT environment, the easier it becomes to manage. Standardizing also allows you to (1) reduce costs and (2) buy hardware/software in bulk and get bigger discounts. Once again, industry wisdom is that by standardizing you’ll need only 1/5 the support staff that you would need to be paying for otherwise.
  3. Pull It Over Buddy – Software License Management: This is an issue that nobody likes to talk about because we all suspect that we are probably using software that we don’t have a license for. The flip side of this is that we are probably paying for licenses that we aren’t using. Getting this issue under control and presenting it to the rest of the company as a cost savings program helps IT to better align with the rest of the company.
  4. To Outsource Or Not: Welcome to the 21st Century where everyone needs to be considering how much of their IT operations they should outsource. Cary uses the following metrics to make project by project outsourcing decisions. If a job will last at least 12 months and will require more than 700 hours of effort, he hires an employee to do it. If the role is part of a strategic project (e.g. custom development) he once again uses employees to do it. Everything else is up for outsourcing consideration.
  5. Custom vs. COTS: Developing a customized application to support a part of your business is very much like having a baby — it signs you up for a lifetime of responsibility. Implementing large enterprise applications can be difficult and they are constantly undergoing changes. Here’s a different way of looking at things: use commercial off the shelf (COTS) products and instead of changing them to fit your business, change you business to fit the products. Every time that you can do this, the savings in development and support will make the effort well worth the pain of change.
  6. Data Center or Closet?: Where should you put your precious servers? The instinctive IT answer is to co-locate them in a data center. However, if you only have a few servers, then perhaps creating an on site computer room will allow you to save roughly 50% what co-location would cost. Please remember: if you use a computer room, you will need to have a very good off site data backup plan.

There you have it. Six simple tips on how IT can adapt and become more of an integral part of how your company operates. Consider these just the starting point on your road to alignment success!

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