A New Look at IT

In the context of information technology, terms like SCM, CRM, PLM, etc. seem rather passé today.  They fail as meaningful arbiters (they always have been rather arbitrary) of focus for information technology vendors and their customers.  I may be overstating the case to make a point, but, in fact, many of the three-letter acronyms are much less important than they used to seem, even if they are not actually completely irrelevant.  So if the acronyms devised by analysts, consultants and software vendors are not meaningful, then what is?

We may get to the answer to that question by way of answering another question, “What can we say about the state of information technology in business today?

Here are some answers:

  1. Every company is in the information business, no matter what they manufacture, sell, distribute or do.
  2. Information and data are quite different (although I’m not ready to agree that knowledge is different from information or that “knowledge management” is any more useful a category than SCM or CRM).
  3. Almost all (I don’t know of an exception) manufacturing companies of any significant size have a formal sales and operations planning process (S&OP) in place or are working to implement one.  This is a well-defined process that holds little mystery anymore.  Its importance has been recognized precisely because SCM, CRM, PLM and other XXM’s have all failed to deliver their promised benefits.   As a result, companies are re-focusing on making high level decisions based on information, collected any way they can get it.  The ready availability of the information to support S&OP, along with the cultural challenges stemming from myopic reward systems, are what make doing S&OP a lot harder than it might appear.
  4. Once decisions are made or validated regarding how to run the business for the next 18 months or so, those decisions are often disconnected from the day-to-day decisions and execution of the business.  It’s a bit like connecting one end of an electrical cable to a powerful generator, but having nowhere else to go with the other end, even though lots of other people need the power being generated (in this case through executive decisions about the direction and priorities of the business).

The key thing to do with information is to connect the rest of the company to the executive direction coming out of the S&OP or some other executive decision process.

One does not have to be exceptionally bright to intuit that a bunch of software focused in different directions off of the enterprise resource planning (ERP) backbone will not meet that challenge ( e.g. SCM, CRM, PLM, etc.).

So, then, what will meet the challenge?  How can a company precisely create the information it needs from the huge amount of data stored in its servers, being analyzed in spreadsheets, and summarized in presentations?

Conceptually, it’s pretty simple.  A person who is junior and subordinate to the executive decisions taken in the S&OP process needs to know how well he or she is performing against his or her goals and how those goals impact the value of the company.  Similarly, executives need to know how the value of the company is being affected by various functions . . . not only so that they can “light a fire” under the feet of the slackers (sometimes a necessary part of the proper response), but also so that they can provide the leadership and clarity necessary to empower the lagging function.  Commonly, that information is just simply not there.  Proponents of the “balanced scorecard” were onto something, but the information has not been available to support it because the software written to provide balanced scorecards was disconnected from the data generated and used by those doing the work of running the business.

The data, however, exists, along with the information technology to put it together.  Every transaction is trapped electronically in some computer system.  It is being summarized and analyzed in spreadsheets.  We know how to calculate the metrics by which each function (and most people in each function) are governed.  We also know how to calculate the impact of metrics like manufacturing lead time on service level and the impact of service level on revenue and margin, as well as the impact of revenue and margin on economic value added or some measure of enterprise value.

In practical terms, if I am running a press, I should be able to see at any point in time how my productivity and quality, together with pricing and sales, are affecting return on assets, or at least the asset that I am working on.  It will often be the case that many small deviations in my work will not affect the larger, aggregated metrics of corporate value, but the very association forces everyone to think in terms of how their task fits into the overall mission.  Of course, compensation needs to be similarly aligned.  Paying one person to make as many pieces as possible, regardless of how many are needed by customers renders such information useless.

For years, application software vendors and their representatives have preached that companies should get their business off of spreadsheets.  (I think I’m also guilty here.)

That is a little like telling your body to stop digesting food.  The digestive process is all your body has for getting nutrients from food.  Similarly, for many employees, spreadsheets are the main way that they create information out of data.

Perhaps it is about time we stopped asking how we can get off of the spreadsheets and how we can get the business to really run on the innovation and analysis that spreadsheets allow knowledge workers to perform.

Maybe, that is where information technology should be focused.  Maybe, we need to evolve our thinking to realize that the spreadsheet is not the enemy.  Maybe, spreadsheets are a part of the solution that we just need to figure out how to leverage. 

There are some new, small software companies that are on the leading edge in using Excel as the user interface to enterprise systems.  Companies like Oracle and SAP have acquired companies that do some of this.

Is that the end or only the beginning?


About Arnold Mark Wells
Industry, software, and consulting background. I help companies do the things about which I write. If you think it might make sense to explore one of these topics for your organization, I would be delighted to hear from you. I am currently employed by Incorta, but I am solely responsible for the content in Supply Chain Action.

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