Identify the Required Outcome Before Applying an IT Solution.
I discovered early in my career that there are different ways to look at a business challenge. How you look at those challenges determines: a) the degree of success that can be achieved in overcoming them, b) the speed at which they can be overcome, and c) the degree of pain associated with overcoming the challenge.
Early in my career, as a systems implementation specialist with a large Hospital Information Management Systems software company, I traveled the country installing dozens of systems and witnessed one life-changing event. One of my client hospitals, (Hospital A), had a profitability problem. Another hospital (Hospital B) across town also had a profitability problem.
They solved their nagging profitability problems by “exchanging” procedures. Low profit procedures at Hospital A were exchanged for procedures that were low profit at Hospital B each hospital taking in exchange only profitable procedures they were good at. It was a huge, painless win-win.
The impact of this is illustrated in the Before and After graphs below (the figures used are fictional, but the principle is the same). In this example, each hospital exchanged their unprofitable procedures for profitable ones. By doing so each hospital significantly increased Total profitability.
The HIS system I was installing would never have solved that fundamental business problem; while it certainly would make the hospital easier to manage, management efficiency wasn’t the problem.
“It was at that point I realized that what is ultimately important is achieving a company’s needed business outcomes – not installing hardware and software systems.”
Achieving Your Needed Business Outcomes
Here are six ways to think about your business challenges before deciding their solutions are more and better IT.
Outcomes: A clearly communicated corporate outcome is invaluable and must be the “North Star” of all investment and effort. It must be the prime gravitational influence on all that is done. Sometimes, it can be encapsulated in a tag line like, “When it Absolutely Positively has to be there Overnight”.
If there is no North Star, investments become misaligned and move toward their own goals – ultimately making their realignment, once it becomes obvious they have strayed too far, extremely difficult.
Process Effectiveness: If your fundamental business processes are not sound, efficient, and consistently producing quality outcomes, IT won’t solve that problem. Fix the process first.
Business Model: If your fundamental business model is not sound, efficient and consistently producing quality outcomes, IT systems won’t solve that problem, either. Fix the business model first.
Operational Bottlenecks: The Theory of Constraints says that you can only process as much of anything as the processing capacity of the slowest and least productive operation in a chain of operations. Widening bottlenecks is the fastest route to increased revenue and corporate earnings. That is typically a process or quality problem – not a systems problem.
Data Quality: Fast and efficient software and hardware have the potential to quickly deliver the information you need to make a sound decision only if the raw data it is processing is accurate and timely. Assuring the Quality of the data first is essential.
Data Security: The number of separate repositories for data geometrically increases the probability for data to be mislabeled, misinterpreted, unavailable for compilation and susceptible to mishandling or breach.
Implications and Advice for CEOs and Business Owners
It is too easy to hide behind the “delegation” word when a business leader is not an expert in a specific aspect of their business. If you are not an information systems specialist, (and few CEOs are), I respectfully caution and recommend a few questions when you are approached by your team with requests for information and systems investments. These questions simply follow the five ways to think about business challenges.
These are the tough questions that are too infrequently asked. To your IT manager, impatiently awaiting approval of his/her next project, they may seem a stalling tactic.
- How does this proposed information systems initiative align with our intended Corporate Outcomes?
- What have we done to assure our business processes are effective and optimized before we invest in automating them?
- How, and how long ago, have we challenged our business model to assure its still valid?
- How does this information systems investment relieve any operational bottlenecks we have?
- What are we doing to assure the quality, consistency, integrity and security of our data?
They are not! They are essential, admittedly tough, business questions – the answer to which your firm’s future success depend. I challenge you to have the courage to ask them.
Identify your path to CFO success by taking our CFO Readiness Assessmentᵀᴹ.
Become a Member today and get 30% off on-demand courses, tools and coaching!
For the most up to date and relevant accounting, finance, treasury and leadership headlines all in one place subscribe to The Balanced Digest.
Follow us on Linkedin!