Improving IT's support of business strategy

Pulp & Paper, Jan 2005 by Lail, Paul W

RECENTLY, PETER DRUCKER GAVE an interview to the Financial Times. At age 95, Professor Drucker is still very much at the forefront of business thought and literature. Scanning the article, I noticed that when asked about the impact of information technology (IT), Dr. Drucker stated that things had gotten "Worse, much worse...Executives are totally flooded with inside data to the exclusion of outside data." This unexpected comment made me pause and reflect.

A production of data, not information

Reading Drucker's latest book, Management Challenges for the 21st Century, published in 1999, provides insight into what is meant from the above comment. In his chapter on Information Challenges, he explains that in the 1950s, management gurus who foresaw the impact of computers on business strongly agreed that the most profound change would be in the executive realm, in the setting of business policy and strategy.

Nearly 50 years later, Drucker acknowledges this early thinking missed the important changes IT has had on business operations, and, yet, the impact on business strategy has been minimal. Drucker states that, "for top management tasks, IT so far has been a producer of data rather than a producer of information-let alone a producer of new and different questions and new and different ideas."

In the rest of the chapter, Drucker explains why accounting and information systems have assisted in control of operations and costs but have not addressed business strategy, which is about creation of wealth and, by nature, is based on data that comes from outside the organization's corporate boundaries.

Not answering the right questions

In thinking about the systems and projects on which I have worked, I must admit that far more effort was spent on collecting and organizing data internal to the corporation than in seeking new sources and views of external information. When external data has been collected, it has typically involved either automation of an existing information flow (e.g., purchase orders) or came in the form of comments, articles, or reports. These latter types of data are notoriously difficult to capture and organize systematically and to present in a meaningful way to management.

In the 1970s and 1980s, the IT organizations I was associated with were concerned about increasing the scope of their systems. Indeed, gains from automation were achieved in each new area that was tackled. These systems were frequently customized and tailored to the unique needs of an organization.

In the 1990s, the cost of maintaining the IT organization was scrutinized more, partly because systems offered limited help in addressing questions executives needed to answer. Software vendors began offering packages that promised to standardize processes and reduce support costs. While these systems were able to automate business functions and processes, none were designed to address key strategic questions. In the "right product-right time-right place" world, these systems measured what was delivered against the customer's order and quality specifications, but they couldn't answer questions such as, "How are my products perceived against those of competitors?" or "What are my customers buying that I'm not providing and why?"

Looking outward, not inward

I have witnessed several IT efforts at providing better information to senior managers, usually under the guise of an "Executive Information System" or a similar moniker. These systems typically tried to summarize data collected by other systems and present it in a more meaningful way.

While some of these systems generated a lot of initial interest, none have seemed to stand the test of time. That's because they could provide nothing new that the organization didn't already know. In the future, such systems must be outward looking, not inward looking and must organize and summarize data collected for the purpose of addressing strategy and policy.

System architects must get on the same page as senior managers, who must spend adequate time with their IT staff to clearly communicate what is important regarding strategy. Collecting data from the outside is not easy. It involves creativity, collaboration, and influencing without direct control. It also means creating an environment of trust with other organizations.

In his book, Drucker says, "The purpose of information is not knowledge. It is being able to take the right action." If our past efforts did not create ways for senior managers to make better strategic decisions, we must ask, "Why not?" I believe that creating an environment where external information is collected, organized, and presented to help set business strategy will be a major field of effort for the next 20 years.

PAUL W. LAIL is operations service manager for coated/sc papers at International Paper.