Monday, June 11, 2012

Staying Ahead of the Wave of Irrelevance

Nicholas Carr wrote in the May 2003 edition of the Harvard Business Review that "IT doesn't matter."  (The full text of the article was provided online in 2007 by Mr. Carr if you wish to read it in its entirety.)  Recently, this article was resurrected for a discussion on LinkedIn after which input was solicited by the group of CIOs and senior IT people that were members of this particular group.

Predictably, everyone said "yes, IT does matter!"  Well, almost everyone did: I was the lone contrarian, which is humorous considering that IT paid my bills for 18 years, and now that I'm involved with sales to IT groups it continues to do so albeit in a more circuitous fashion.  Am I biting the hand that feeds me?

As a disclaimer, I had not read the article before this question was asked of the group nor had I read (although my management has been strongly hinting for over a year that I should) his book The Big Switch (link to Amazon).  You would think, then, that I would be against his opinion given my professional background, but instead those three words make a lot of sense.

Don't believe me?  Read on!  Of course, it will require that you accept what I've said in previous blog entries but I haven't yet heard any complaints about the premises on which my blog entries are based or the conclusions I draw so hopefully this won't be terribly difficult.

Let's quickly review a few basic postulates that I've put forth in the past:

  1. Companies exist to make money.  This is the most important statement and holds true even for non-profits because, even though they do not distribute the money they make as profits, they do make money so that they can continue to provide services to their clients.  For example, a faith-based health center isn't going to be able to provide much of anything to a sick person under the poverty level if they aren't making money.

  2. Lines of Business (LOBs) exist to make money.  LOBs are experts in market verticals or specific types of business activity and, as such, they know how to devise and execute initiatives that help the company achieve its goal of making money.

  3. IT exists because the LOBs needs them.  Without IT the LOBs would be challenged in their quest to make their initiatives successful.

At the end of the day, the only thing that matters to the Executive Management Team is the answer to the following question:  are you still on track to bring in the revenue that you committed to?  This is obviously because the only purpose of the entire company is to make money.

Having said this, the LOBs could theoretically be viewed as a black box in the following sense:

EMT:  are you going to make money this year?
LOB:  yes.
EMT:  how much money are you going to make this year?
LOB:  1...billlion...dollars!

From the perspective of the EMT, they don't care how the LOB accomplishes its goal. As such, if the LOB chooses to use a room full of monkeys with typewriters (and can convince them to do data entry rather than write the works of Shakespseare) then the EMT doesn't care as long as that goal is met.  This does require, however, that the LOB have a 100% success rate, which never happens in the real world.  As such, the EMT is required to know the details to understand the risk of failure for its own financial forecasting.

Understanding the risk of failure is the only reason why IT has any value in a company.  As long as IT is able to provide value in the sense that they reduce risk for the LOBs then they stay ahead of the wave of irrelevance.  But the moment that the Chief Innovation Officer reverts back to the Chief Information Officer role of yesteryear then the wave engulfs them and the search for a new CIO begins.  (Cue the surfing theme and Wipe Out on the iPod.)

"Wait!  Did you just contradict yourself?"  In a word, "maybe."  I would argue that I've simply shifted the question from "does IT matter?" to "to whom does IT matter?"  At the end of the day the only people whose opinion really matters is the EMT.  But since they are putting the onus on the LOBs to generate the revenue that determines the viability of the company going forward and the LOBs have a symbiotic relationship with IT - IT helps the LOBs make money and the LOBs continue to justify IT's existence to the EMT - then IT does matter but only indirectly.

Do you disagree?  Leave a comment!

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