Monday, August 29, 2016

How can you expect returns if you are unwilling to invest ?

Business is hurting from the lack of the right tools and enablers, we need a good dose of IT to create efficiency. We acknowledge the need to transform and that is why we are talking; the team also agrees with the direction and the way forward. The benchmark results are well received and we would like to be in the top quartile of the industry. We should create the framework for evaluation of options to our specific requirements before we finalize on the best option and let’s work to an aggressive time line.

The CEO intuitively knew, to take performance to the next level, technology has to play an important role. Coming in of global competitors had started slowing growth and put pressure on profitability. Operating margins and other business metrics were lagging behind; survival was not at stake but to stay relevant to major customers, the business begged for technology. The absence of mature IT leadership posed additional challenges in execution of the strategy defined through a technology consulting engagement.

Early investments in technology solutions had not delivered to promise; early decisions were taken by the business based on promises made by vendors on business benefit. Business participation in the project waned quickly as technology formalized processes and exposed lacunae in operations. People on the ground resisted the change creating roadblocks – real and imaginary – towards deployment. The cycle repeated itself a couple of times leaving everyone frustrated and wondering if technology will ever deliver.

That was before global players invaded the market changing the way business was done, improving customer satisfaction and driving profitable growth became an urgency. Even with higher overheads and manpower cost, they delivered; in came Consultants offered a mirror to the business and helped them with a well-crafted plan and strategy; technology strategy followed. A new CEO added to the excitement with experience at competitors. Culmination of events necessitated that the company reach a decision rather quickly.

In a perceivably low margin business where the average margin was half of the best, it was evident that operational efficiency can gain significantly with the right IT interventions. Industry specific solutions and generic options competed on functionality and price with a wide variation in between. An all hands meeting agreed to the strategy and initial steps enthusiastically committing resources and time. With negligible investments thus far, in parallel the Management decided to approach the Board for budgetary approvals.

The Board members had diversified business interests with business operations of varied size; they were also parsimonious in their approach to investments especially technology which was seen as necessary but not essential. Thus while their companies had grown in size and reputation, they had not been able to realize the true potential while newer competitors had moved ahead. The minnow in the family thus started from a disadvantage when the CEO put his case across for investments in technology.

Discussions went back and forth on various technology options, merits of one over the other, cost of acquisition and support, TCO (Total Cost of Ownership) and business benefit; the figures appeared obscenely high even though they were competitive and in line with benchmark investments. For the Board reality was that other larger entities in their bouquet too had rarely invested similar amounts barring the initial stages for industry standard ERP solutions. They finally approved a significantly reduced number which turned the project into a non-starter.

The business case was clear in identifying the benefits – financial, customer satisfaction, growth, profitability – the ROI was less than a year; but past experience made the Board wary of committing to the investment. Ensuing “What if” had no answers beyond a point; there are no certainties, only probabilities of success. The sanctioned budget did not cover basic costs even if executed in phases to demonstrate potential success. Risk mitigation strategies can be created for most action plans, the keyword being “action”.

Except in cases of some of the new technologies and innovative digital models, most of the solutions – vertical or horizontal – have successfully established credibility to deliver business value with discipline of execution and leadership oversight and endorsement. Phases can reduce risk if logically broken down with continuity in the journey. Processes if left out of design consideration will fail to provide the end result. Analysis paralysis can miss opportunities that become clear only in the future, status quo breeds mediocrity.

Years have passed since the above happened; they are still at the same milestone the debate continues, they are yet to decide and the industry continues to grow rapidly !

1 comment:

  1. Very well said sirji. Interestingly this is a case every where...CFO steps into look into budget cost instead of value creation....He chops off support post go live think IT is like a medicine pill and the same will heal the issues in business. He does not take into account that every solution takes it time to settle down.