- Introduction
- Services Is the Mega-Trend
- The Need for a Services Blueprint
- Digitization at General Electric (GE)
- Digitization at Wal-Mart
- Digitization Execution Is a Senior Management Issue
- Seven Points to Ponder
This chapter is from the book
This chapter is from the book
This chapter is from the book
Digitization Execution Is a Senior Management Issue
Services Blueprint = Focal Point + Services + Processes + Applications. If any one of these is missing or not in sync, the digitization effort will either fail or deliver less than expected ROI. As a result, all forays into digitization have to be carefully planned and managed. Whose job is it to oversee digitization in your company? Most people respond that it is the CEO's job, but it is really not. Most CEOs don't have the time or expertise to manage the digitization of processes. If digitization is considered important, then the CIO needs to step up to the plate.
The CIO function is changing and becoming more and more process oriented. It is hard to see how any modern corporation can operate without some sort of digitized foundation in critical functions, such as invoicing, billing, payroll, inventory, and customer service. As a result, the annual spending on technology infrastructure and applications worldwide—1.5 to 3.5 percent of revenues across most industries—is growing and is estimated to be around $1 trillion.14
Blueprint execution has moved up the agenda as companies demand better return on investment. Yet technology execution is not well understood or even taught. As far as we know, no university teaches a course on the basics of execution—the art of getting things done, surprisingly, given that execution is a fundamental managerial skill.
A few years ago, innovation was lauded, and execution was considered a foregone conclusion. We encountered few senior managers interested in the details of technology execution, let alone acquiring a superior understanding of it. However, the economic downturn of 2001–2002 changed everything. All eyes have turned to execution, as "nice-to-have" projects are replaced by "need-to-have" initiatives. Also, with the digitization of enterprise-wide supply chains and customer interactions, the locus of technology-enabled value creation shifted from transactions to complex processes. As a result, technology-enabled execution has inched its way to the top of management's agenda.
Not paying attention to execution issues can prove very costly. Consider the problems at Agilent Technologies, a testing equipment and chip maker, which resulted in roughly a $105 million revenue shortfall and $70 million in reduced operating profit. In June 2002, the former division of Hewlett-Packard began to roll out the first phase of its corporate-wide initiative, Project Everest, which included migrating 2,200 legacy systems to an Oracle ERP platform. This complex implementation covered more than 50 percent of the volume and virtually all of Agilent's financial processes, as well as functions such as order handling and shipping. Although the company had spent nearly 18 months working with roughly 100 consultants to install the program, integrating financial and operational data turned out to be more difficult than anticipated. It had to spend an additional $35 million in programming costs to cover the unexpected hitches in implementation and rollout.15
The case of Agilent Technologies is not an anomaly. Enterprise applications are so intertwined with day-to-day business operations that executives have no choice but to understand them. As technology implementations get bigger, managing them is getting harder. After paying lip service to technology, senior management and corporate boards are taking a closer look at technology investments and the link between planning and execution.
In a changing economy, every corporate board wants to make sure that technology investments result in business benefits. Executives recognize that they need to understand better the process digitization principles and tools that will allow them to create organizations superior to those of their competitors.