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Supporting decisions through sound data management

Posts Tagged innovation

Actionable Business-IT Alignment

Jun 22

Posted by Tod McKenna in Business & IT Issues

geek & pokeFor several years I’ve been following the Business-IT alignment movement. Alignment is necessary for fostering innovation and realizing greater profits as IT resources are used to their fullest to satisfy business goals and objectives.

But many organizations still struggle to make the connection.

Some suggest varying 3-, 5-, and 7-step approaches for better alignment. They typically consist of diving into new organizational structures, or implementing new frameworks and service models. Other sources say that the business is to blame, that IT is misunderstood and underutilized. While finally, some say it is a dead issue altogether.

I’m not convinced this is a dead issue, nor am I convinced that the business is to blame (especially nowadays). I’m also not convinced that 3-, 5-, and 7- step plans will magically work.

A few basic actions, initiated by IT, must happen first.

The Actions

Business has long ago recognized that better alignment with IT is essential. We can argue about how well they’ve understood IT and how it can best be utilized, but across the board, the recognition is there. IT, after many years of making the case for alignment, seems to be coming up short during this crucial period. I hope that the following actions, from an IT-perspective, can help:

  • Understand: Learn the language of the business. Plainly put, this means you need to become more financially intelligent. All businesses exist to earn a profit, and understanding how this works is the first critical step. You must understand where the estimates and assumptions are in the numbers, when you would want to depreciate or amortize, and what constitutes a capital expenditure or operating expense. Among many things, you must understand ROI, cash conversion, and how to use profitability ratios.
  • Participate: Take part in strategic and other long-term planning initiatives. IT professionals must be able to see the company’s vision and turn the vision into actionable IT initiatives. If a representative from IT is not present during steering committee and other board meetings, make this a priority. You will need to convince the business that IT is capable of playing an important role in all long-term decision making. Fortunately, businesses already realize this need, but in many cases don’t feel that IT can effectively contribute (perhaps because IT doesn’t understand the business language).
  • Contribute: Provide business with the ability to make fast and accurate decisions. This means pioneering smart business intelligence initiatives that can provide decision-makers with the tools and reports — distilled — that business can utilize. You need to prove your flexibility, agility, and ability to understand what the business really needs. Much of this is tied to understanding, and extended with participation. These initiatives also include business process improvements; tighter integration of business, meta, and master data; and managing performance.

If IT can take action, better alignment can be achieved. This isn’t to say that the business can’t do more, but before the business can make IT a full partner, understanding, participation, and contributions from IT are a must.

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Innovation Interrupted?

Jun 5

Posted by Tod McKenna in Business & IT Issues

Michael Mandel writes in his June 3rd cover story for Business Week that “During the past decade, innovation has stumbled. And that may help explain America’s economic woes”. From Facebook to flat-screen televisions, we’ve been lead to believe that we’ve entered into a new age of innovation unmatched by the past.

But like Mandel, I disagree. I think we’re spinning our collective wheels. Biotech, alternative energy, health care, and in almost every other industry, has produced little impact on the innovation front. While we’re all still enamored with the Internet, social networking, and cloud computing, old and inefficient systems in other key industries have remained in stubborn place. The US government owns 60% of GM as a result. This is one example in a sea of many sad cases.

Then there is the problem of rebranding. While I believe that corporate America has had opportunities to make real impact, they’ve taken the straighter path to profits by rebranding old models and technology. Cereal, automobiles, and financial products come to mind.

Perhaps motivation and risk tolerance have taken a hit. The dot-com burst, 9/11, Enron, and the housing crisis are all black-swan type of events that have the ability to change the way people think and do business.

  • After the dot-com bubble burst, investors steered clear of companies that had no product, no customer base, and no real ROI plan (ok, this is a good thing). Where would the speculators place their efforts next? Housing?

  • After 9/11, US foreign policy became a sticking point for many foreign investors, who perhaps don’t like to be told “us or them”.

  • Enron led to Sarbanes-Oxley, an innovation choker that had (and has) the potential to punish organizations for taking R&D risks. But Enron and other failures of its time exposed some serious flaws in how US companies are allowed to run their finance departments.

  • And while people were making money in the late 90s and in the early part of this decade, banks were lending to anything with a heartbeat. The Fed was a major facilitator, keeping interest rates too low. The resulting foreclosure rate today is unbelievable (how many on average per minute?). Investors — including banks — will be far tighter with credit, stifling innovation even more.

Moving Forward

I would like to see the US — and other nations — create an Office of Innovation. I would like to see companies (private and public) free to explore new R&D projects. I would like to see universities continue to get large grants for scientific study and research. And I would like to see more kids enter the fields of science and mathematics.

I would also like to be alive when quantum computing becomes reality.

Things are generally slower in mainland Europe (as I can attest), so the EU has to double their efforts on the innovation front. While the European Commission has a good innovation policy, and has recognized that the EU has great potential, there is still a lot of ground to cover.

I hope to talk more about this in the coming months.

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SOX to Go the Way of Gitmo Bay?

May 26

Posted by Tod McKenna in Business & IT Issues

While the Obama administration is making a lot of changes — foreign policy and the economy are taking center stage — the business world is eyeballing the US Supreme Court’s latest decision to review the constitutionality of the Sarbanes-Oxley Act of 2002.

I wrote about this topic last year for Advisor Media, “Auditing Your Warehouse For Sox Compliance” as well as in my post “Formula 409: Private Companies Must Comply with SOX“. In my blog post, I said that innovation would take a series hit due to Section 409’s mandate that companies “must disclose material change events that would impact their financial condition or operations”. These material changes could include failed R&D projects: Not good for a public company looking to experiment. Imagine, for a second, what the technology world would look like if Bell Labs in the middle of the 20th century had these restrictions. Or Apple, or Microsoft, et al.

So will SOX be repealed? Is it unconstitutional? Time will tell, but I’m sure many CEOs are keeping their fingers crossed. Investors still need protection, but SOX just isn’t quite right.

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