Monday, July 13, 2015

Myth #3: IT is not Core Business

This post is the third and final piece of my series on "The Three Most Harmful Myths Companies Have About IT".
------------------------------------------------------
In 2005, I was just finishing the first year of my term as the CIO for a multi-billion dollar energy company in Texas.  It was our regular practice to have a monthly all-day meeting of VP and above employees. During these meetings we would discuss issues and future strategies for the company.  Although not required, each of us was given the opportunity during the day to present and talk about topics that we deemed important to the company.  During one of these sessions I decided to share my opinion on how important IT had become to the viability of the company.  My goal was to highlight the criticality of IT, in part to pave the way for some projects I had in mind for mobility and information security.

I stood up in front of the group of 30 or so people and said, essentially:

"In many ways we have stopped being a pure energy company.  With the amount of automation we have installed, combined with our reliance on digital data to drive our processes, many could consider us a technology company that just happens to produce energy as a by-product of the information we create."

Although I had expected to create some "buzz" due to the controversial nature of my comments, the result was more akin to enduring a barrage of rotten tomatoes followed by a chorus of boos.  I had anticipated a negative reaction, so I then followed up by saying:

"I'm not trying to reinvent our identity.  Yet, I would challenge anyone in our group to name a part of our operations, whether in the office or field, that could remain viable longer than 36 hours without any functional IT."

At that point, the head and senior vice president of our fossil generation group stood up and said:

"Christopher, we successfully ran all of our operations long before computers were in the mix.  If required, I could run this business indefinitely with nothing but pencils and paper."

At that point I sat down and let the conversation run on to other topics.  Yet I never wavered in my belief that IT had become indispensable to the operations of my company.  Because IT was necessary to facilitate every facet of our business, I could literally see how we had become completely dependent upon information technology.

Now, one decade later, we find ourselves in 2015.  If IT was important 10 years ago, it is absolutely and completely interwoven into everything we do today both in business and our personal lives.  As I was thinking about how to illustrate this point and which examples to use, the answers literally fell into my lap on July 8.  Three very significant events happened, all on the same day.  Rather than spam you with multiple links, you can get a summary right here.

On 7/8/15 United Airlines, one of the world's largest airlines and a $39 Billion entity, had its entire fleet of jets grounded due to a "glitch" in their scheduling software.  At the same time, trading on the New York Stock Exchange (NYSE) was suspended for several hours due to an undisclosed "technical issue".  And finally, the web site of the internationally renowned Wall Street Journal, was unavailable for almost half a day.  If you asked the executives and more importantly the customers of these businesses how important IT was to their viability on July 9, the answer would be a resounding, "MISSION CRITICAL!"

Now let us take a look at just a few other examples of the reliance of business upon information technology.

1.  Amazon.com - Probably the most important e-commerce (or regular commerce for that matter) retailer on the planet, everything this company does is based on some form of IT. Whether it's the front-end portal, the sales & banking system, or the logistical planning module, information technology is its lifeblood.

2. UPS/FedEX - How do you think all of those packages get delivered overnight or within two days?  It's through complex algorithm-based management of multiple components throughout the entire distribution networks of each company.

3. Walmart/HEB/(insert your grocery store here) - The average gross margin for products sold in a grocery store is just about 1%.  How can an entity operate on such a razor-thin line of profitability?  It is accomplished by automated tracking of inventory and a pricing system that can be adjusted dynamically.  It takes complicated information technology to make it all work.  Try doing that with a pencil and paper!

The truth about the importance of IT is all around us, in everything that we do.  Yes, the world can survive with information technology.  But the truth is that almost nobody wants to live in that reality.  If you need proof, go to a third world country where people live in shacks with dirt floors.  I've lived that existence and I can tell you with a level of certainty that almost anywhere you go in the world, no matter how poor, you'll see that everyone has at least a cell phone.  Even the most humble of us will find a way to integrate modern IT into life.

Myth #3, this myth, is perhaps one of the easiest, yet most dangerous fallacies that companies believe, even today.  The belief that IT is not part of "Core Business", and thus cannot and should not be integrated in the strategic planning and management of the organization, can lead to problems on an enormous scale.  And at the very least, it can lead to blind spots and many missed opportunities.

After July 8, I hope that at least three major businesses have begun to see the light.  Has yours?

2 comments:

  1. Great post Christopher and an amusing anecdote!

    The examples you mentioned from the airline/retail industry which are probably a bit more receptive to seeing IT as part of core business. Although perhaps this is beginning to change (albeit more slowly) in the energy industry, particularly with the recent focus on IT/OT convergence.

    Have you seen these attitudes change in your company and how are you seeing the impact of this IT/OT trend?

    Leonie

    ReplyDelete
  2. Hi Leonie! I've been monitoring the relationship between IT and "core business" for about 10 years. Being in the energy industry, I've seen information technologies becoming a larger concern for management teams because of the importance of OT (operational technology) to overall production and profitability.

    Unfortunately, I'm not seeing a large shift in attitudes. At this point, I think that good/great talent in IT has begun an exodus out of the corporate environment into the consulting world. (Lawyers did the same thing in the 60s and 70s. How much trial litigation is done these days by in-house counsels?)

    I'm not sure that there will ever be harmonious existence between IT professionals and "core business" within the corporate world. I'm beginning to see the day when most IT done at companies happens by contract. And that's not a bad thing. Ultimately, it may be the model the generates the most satisfaction for both parties.

    ReplyDelete