Closing the business strategy/technology gap

Pulp & Paper, Sep 2003 by Mersereau, Susan

INFORMATION TECHNOLOGY

Within our industry, technology is redefining every segment of operations-from how we interact with customers, suppliers, and employees, to tracking and managing inventory, to manufacturing product and taking it to market.

That's both good news and bad news.

The good news is that technology offers the opportunity to conduct our business more reliably, quickly, and cheaply through effective management of supply chains, inventories, and information.

The bad news is that the rate of technology implementation often outpaces the understanding of business managers about how to optimally apply technology to meet strategies and attain targets, resulting in a "disconnect" between the information technology (IT) department and business lines.

DISSECTING THE DISCONNECT. One source of this disconnect is IT's tendency to view new technology as a way to improve business processes and business's lack of understanding about the large degree of business process and structural change needed when a new technology is implemented. This causes frustration for both groups as they address issues caused by the disconnect, including:

Poor data (or "garbage in, garbage out"). Many IT systems are implemented without standardizing and rationalizing data. By the time the system is in place, the information it provides doesn't meet business requirements. The system may create more work and cost, such as re-keying or translating data to make it usable.

System inflexibility. Most systems are developed to support a particular business model. As the market changes and technology evolves, a business's ability to change its business model is hampered by the existing system's constraints.

Return on investment. In the 1980s-1990s, companies implemented technologies without really understanding the business case for them. As a result, they are not seeing the expected returns.

FUNDAMENTAL CHANGES ARE NEEDED. Changes in how businesses and IT view their roles and how they interact to achieve business strategies are required for our industry to take advantage of technology, as the following four sections describe.

Consider IT an enabler of business process change. Both business and IT need to think of IT as a tool to achieve business strategy and not just a communication link or a data-storage/interchange capability. Technology enables changes in business processes where the real cost savings exist.To put in new technology without taking out steps and people in the business process typically adds costs.

After the business identifies its strategywhether it is better customer service, working effectively with vendors, or communicating with employees-it should then consider the requisite business, operational, structure, and process changes.A technology discussion should be next, in which the business looks at how technology may enable its strategy with IT in a consulting role.

View IT as a strategic investment. While IT budgets should be scrutinized for reduction opportunities, IT should also be viewed as a strategic investment and not just a cost. Decisions about IT spending should be business driven and focused on what specific costs will go away or what revenue will be generated as a result of implementing a particular IT system. Looking at IT strategically may also mean evaluating "bricks and mortar" capital investments and technology investments and looking at trade-offs between the two based on which will contribute more to the bottom line.

In concert, there must also be a recognition that business is responsible for providing the justification for technology investment, not IT, and is ultimately accountable for the value IT delivers.

Address IT overcapacity and undercapacity. Some companies now find themselves requiring more storage and network capacity than anticipated. This is especially true for geographically dispersed organizations with local area networks where overcapacity can lead to problems in email delivery and other network performance issues.

At the same time, we've established technology capability that is underused. For example, studies show that many employees use laptops primarily to send and receive email when wireless PDAs (handheld devices) may be more cost-effective.

To address overcapacity and undercapacity issues, business and IT need to work jointly to:

Review infrastructure and network requirements as each new application project is considered to assess the ongoing sustaining costs.

Examine software licenses to eliminate buying more capability than is needed.

Understand different classes of end users to "rightsize" the desktop, mobile device, etc.

Include user training to realize IT benefits. Business is upgrading its technical capacity but cutting back on training at the same time. Technology needs support from good business change management, which, in addition to training for technical support, should address user education, company culture, communication, and impacts of process changes resulting from new systems. Lack of followup means many benefits will not be realized.