Innovating is Key in a Recession
Well known IT Futurist and CIO Solutions Gallery co-founder Thornton May kicked things off by equating the current economic conditions to war. But this war is all about innovation, cash and change; not bombs and bullets. Still with bombshell after bombshell coming from the business world these days, it is an appropriate analogy.
Like September 2001, the world changed forever in September 2008. In one day all of the old rules of finance and investing were transformed. The resulting credit crisis has tranformed how companies run their operations and look at risk. The problems this historic moment wrought are the same for everyone in the C-suite: how to make sense of what happened; how to survive what happened; and, finally, how to benefit, if possible, from what happened.
Most exec's are still in phase I & II of our new reality. How to benefit from the current situation is still a bit opaque at best. Continuing his war-time analogy, May talked about the OODA Loop; something fighter pilots learn early and do continuously. OODA stands for observe, orient, decide and act. Like many things military, businesses have picked up on OODA as a way to mitigate risk and take measured action. In these times, nothing could be more important. While survival is the paramount concern these days, how you survive is equally important. The old way of getting through downturns by, among other things, cutting IT to the bone may actually prove immensely damaging to your company once things begin to turn around.
The best way to survive this downturn--if you have the resources--is to prepare for the inevitable rebound by investing in change. Obviously, change is a mailable term but in this context if it doesn't positively effect the bottom line, the top line, increase efficiencies or generate cash in some other way, then it is not the change your company needs right now. Simultaneously, this change has to help make your company better prepared to handle the turnaround. Luckily, many of today's most popular trends--SOA, data center consolidation, SaaS, managed services, open source software, Cloud computing, etc.--can, if done right, do just that.
According to May, innovation should be at the heart of CIO's thinking these days. "Innovation is the re-conversion of invention into cash," said May. In many businesses today IT is the driving force behind innovation and, as the head of IT, the CIO needs to be the standard bearer. This means it is up to you figure out what the business needs from IT and then work to get it done. You do this by asking and listening. Forming committees, as one guest speaker does, that meet monthly to review projects so everyone on the business side knows where IT stands and what it being done.
Speaker X, as I will call him since the conference was not open to the public, leaves 90% of the IT decisions up to the business. The 10% IT decides revolves around what technologies will be deployed, not their purpose. He uses his CFO to kill pet projects so IT doesn't become the heavy in the eyes of the business. He cultivates relationships and demands business sponsors for all projects. He reports to the CEO but also works very closely with his seven presidents and embedded business analysts (BA) to ensure IT is providing each division value and benefit. From an IT perspective, he has transformed a once hodge-podge, ad-hoc, one-of-everything, order-taking IT organization into a model of shared services and platforms.
To accomplish this, X's IT governance process leans heavily on both the business and finance to come up with a shared vision. His BAs supply him with the business opportunities IT can influence and then X involves finance to get them on board before any project moves forward. He then holds a monthly meeting where all of the division presidents are expected to attend. Twice a year the CEO is there, as well. "If you want your project to get done," says X, "you better show up." And, surprise, surprise, they all do. It helps, of course, to have the CEO and company owner squarely on your side but this approach can be replicated even if you do not have such an enlightened management team.
To keep projects on budget, X adds a 30% buffer to every proposal and makes finance, not IT, report on ROI. This keeps management happy and allows X to practice "fire prevention" not fire fighting. And this leads to a proactive, innovative IT department that is viewed as a center of value creation, not a cost center. But, first things first, says X: you have to get the business behind IT and drinking the Kool-Aid, as the expression goes, before you sell the budget and the capex.
According to X, innovation starts with governance. Without it, all of your efforts will not be as effective. Speaker Y, on the other hand, looks to project management and business process re-engineering to keep the IT departments she manages on track and in line with business needs. Y defines portfolio project management (PPM) as knowing what people are doing and how much time everything takes. She leans on SDLC and ITIL methodologies to keep things on track, and she uses dashboards extensively to keep everything flowing and the business informed. "If management doesn't have good data, they can't make good decisions," she said.
Because businesses are still highly inefficient entities that are only now seeing the value IT brings to the table (maybe because it is only now that IT is providing that value - something to think about) revamping inefficient business processes can provide you with the opportunity to show your worth in troubled times.
Now is also a good time, according to one of the presenters, to be finding the best and brightest and recruiting them. Right now, people are worried and, therefore, most of them will be at least willing to listen to an offer. While they may not move away from job that appears stable, in today's world, stability is an illusion. Everything can and does change in an instant and everyone knows it. You can use this to your advantage by partnering with HR and having them supply you with a dedicated IT hiring specialist. Someone can train to find the right candidates. This way HR can provide you with value instead of just resumes. One caveat: in good times 60% of people pad their resumes. In bad times, ie, now, look for that number to increase.
While it may seem counter-intuitive to be bringing people on in the midst of a crisis, you still have to be preparing for the turnaround. Having smart people ready to go with new ideas and vision will be a huge asset.
The buzz word today is "smart" sourcing. "Strategic" sourcing is passé. What smart means in practical terms is looking to vendors to provide value, not just low cost. Cost is important, of course, but you can't just focus on the lowest bid.
If you want to work with a smaller, less-well-known company, make seeing their books a contingency in the contract. That way you at least have some idea if they are going to be around in a few years. Working with lesser known firms can also be a part of your innovation strategy since most of what is truly new in IT comes from these quarters.
It's always a good idea to set out a list of expectations, not just SLA metrics, of what you want from a vendor. This way you have an agreement in spirit as well as by the numbers.
For high profile projects, incentivise your vendor to do better by having them take on more of the up-front risk. Put the incentives on the back end so if the project comes in early or under budget they get a bonus or some other form of reward. Many vendors are cash-rich right now so they may be more willing to help with up front costs.
Another idea floated by the sourcing panel, which was moderated by Solutions Gallery co-founder Bruce Barnes of Bold Vision, is to conduct reverse auctions for commodity type purchases. This idea was greeted with a little less enthusiasm than most because reverse auctions can be very time consuming and costly to implement. It does force you to consider new vendors, however, and it can save you a lot of money in the long run.
And, finally, the message that ran through most of the day was getting back to basics: best practices, governance, quality, value, etc. Communication is another key area that IT often ignores. Think of yourself as an internal consulting group. This may help reshape the conversation in your mind about what IT does and for whom.
Like it or not, major change is upon us. This is disruptive change, not the kind that unfolds incrementally with a new technology but the wholesale change brought about when titanic forces are unleashed. Interestingly, though, new paradigms are not needed to address this new reality, but a return to the things everyone understands: trust, communication, win-win, value.
In this light, IT is not about technology, it is about business. IT is not about blades and racks and software, it is about enablement and innovation. IT is not about automation, it is about doing things better at a reasonable cost with a reasonable expectation of success. IT is a means to an end and that end is bringing us full circle back to the place where IT began: helping the business run better, run faster, and run cheaper.