This is the fourth installment of a five -part series on global corporate leadership. This article focuses on Information Technology
Economics (Debt)
Environmental Factors
Political Factors
Technology
Social Factors
The series taken as a whole should help you define the answers for your company to these nine questions:
Who are the customers of the future?
How will my company distribute its product or service in the future?
Who will be my competitors in 10 years? 25 years?
What will the source of my company’s competitive advantage be in the future?
What skills or capabilities will make my company unique?
What role will strategic alliances/ mergers/acquisitions play in its strategy?
How will my firm alter the nature of competition in its industry?
How will my organization redefine the boundaries between industries?
What can my company do to create a new industry?
The Opportunity
For many years, companies have devoted more than half of their capital budgets to information technology, and have acted under the simplistic assumption that ‘improved information’ results in increased productivity. The same companies have not based their computer investments on careful calculations of returns or added value, but rather on cultural and political concerns. Successful information systems must focus more on relationships and interaction than on the information itself.
The Solution
Tomorrow’s strategic technology investments will present more choices for organizations than they will know what to do with. Companies will be able to set up the technology that best fits their organization rather than the other way around. The value that organizations gain from these investments will depend on the foresight and intelligence that go into determining how their people will use technology.
There is a cliché that goes something like the following: If organizations only had greater quantities of cheaper, faster, and more useful information, they could increase their profitability and enhance their competitive positions in the global marketplace, etc., etc. On the surface, that seems to make sense. If you offer employees greater quantities of better information more quickly and at a lower cost, you should reasonably expect their performance to improve as a result.
Although in many situations where better performance resulted, even the improved information access often had little or no impact on people’s behavior. Most of us are aware of the risks of smoking. Yet millions of people still pick up the habit. Though there should be strong links between information and behavior in the enterprise, the real problem most executives face isn’t inadequate information, it’s the organization’s unwillingness to change behavior in the face of good information.
On an industry-wide level (micro level), some companies get strong returns on their digital technology investments. What seems true, however, is that on a macro level more money has been wasted on computerization than has been created.
No one denies that computerization and networking can add enormous value. But when we look at the numbers, it is clear that companies are not basing their computer investments on careful calculations of returns or added value. Other factors such as culture, politics, fashion, and competition also come into play. Best-practice methodologies often are irrelevant benchmarks for many companies investing tens or hundreds of millions of dollars in computers and networks.
There’s a fundamental difference between managing an information system and running a business on information, just as there’s a difference between operating a rivet gun and making airplanes. Managers intent on establishing technical systems subscribe to different values and practices than managers trying to set up productive business environments for their workers. Operating a business on information has a much broader array of interaction and interdependence than managing an information system.
When managers try to fit inflexible, mechanistic systems into organic contexts, they need new vocabularies to explain how people in organizations really use these systems.
Indeed, the word information loses its edge when redefined in business contexts; culture and politics and relationships may generally become at least as important.
Does the organization want to use its networks to centralize or decentralize responsibility? Does the enterprise want to make every bit of data accessible to everyone all the time? Or does it want to build a new information-access hierarchy into its intranet? Should individuals be rewarded for sharing information? Should people be encouraged to strike up electronic relationships with employees in other departments? Or should interdepartmental fraternization be deemed an inappropriate use of the network? For now, these rhetorical questions provide food for thought, however some of us encounter them in our daily business lives.
Conclusion
If an organization does decide to improve the way it shares information, it should focus first on changing the culture of sharing. Most information managers know little about designing incentives for enterprise collaboration, much less invoking it. That’s why responsible information departments have to insist from the beginning that effective enterprise computing and groupware don’t depend on transparency, replication, and semi-structured databases. They depend on how individuals are rewarded and punished for sharing and withholding information. They are about behavior, culture, and politics.
By: John F. Williams
Ten Reasons to Sell Your Information Technology Company
January 28th, 2010 by admin 1 comment »For the past 20 years you have built your information technology business. Your company has become part of your identity. Even when you are not at work, you are working, thinking, planning. You never stop. If you sell you are leaving behind much more than a job. In this article we will discuss some reasons that might indicate that it is time to sell your information technology company.
1. Late in your working life you are faced with a major system re-write, sales force expansion or capital requirement in order for your company to maintain its competitive position.
2. A large competitor is taking market share away from you at an accelerating pace.
3. Your legacy system or competitive advantage has been “leap frogged” by a smaller, nimble, entrepreneurial firm.
4. A major company just acquired a direct competitor and will be aggressively growing the business.
5. Your fire to compete at your top level is not burning as brightly as it once did.
6. Your kids are not interested or are not capable of running the business.
7. You have had a health scare and have decided to smell the flowers.
8. You have lost a major client of a key employee.
9. The market is hot and you decide to take some chips off the table for asset diversification.
10. You exit in an orderly fashion and from a position of strength as you intended.
Lets look at these in a little more detail.
Major capital investment, system upgrade or sales force expansion required – You are supposed to be diversifying your assets, not concentrating them even further. Think about a simple payback analysis. Does that extend beyond your retirement date? You want to be able to defend that investment with the energy and intensity you devoted when you were originally growing your business. Maybe it is time to bring in an equity partner with smart money, an industry buyer with the management depth, infrastructure, or distribution network to protect that investment. You might consider selling now with a three-year employment contract. Let the new owner fund the required capital investment and defend that investment with his larger capital base.
A Large Competitor is Taking Market Share Away from You – Believe me, the news is not going to get better. As an investor you would probably sell the stock in a company you owned if Microsoft or GE decided to assume a presence in that market. Business owners often struggle with objectivity when a similar event takes place in their own company’s industry.
Your Legacy Systems have been “Leap Frogged” by a Nimble Entrepreneurial Firm – This happens all the time and can cause an erosion of your customer base. Your inertia will sustain you for a while, but eventually you will begin to experience customer defections. You can either rewrite, acquire or sell. If you decide to sell, do so before losing too many clients.
A giant company in your industry just acquired one of your major competitors. Watch out, they did not make this acquisition to maintain status quo. They want to grow their market share. They will be coming after your clients. The good news is that as a defensive measure, one or more of their competitors will be compelled to make a similar acquisition. It is best to be aggressively ahead of the curve and get acquired while the market is hot and prices are being bid upwards.
Your interest and competitive fire is eroding. Let’s face it, if you are not growing, you most likely are contracting. Your competition was tough when you were on your game. Your family’s net worth is under attack if you are no longer fully committed.
Your original plan was to turn your business over to your children. They may not be interested or capable of competing at this level. Perhaps the greatest legacy you can leave to your kids is to convert your company into a diversified portfolio of financial assets that are far less risky than turning complex company in a highly competitive industry over to inexperienced managers.
You have a health scare and all of a sudden you start thinking of all the sacrifices you made and all the things you want to do before it is too late. Your list of goals is immediately changed from financial in nature to family, friends, travel, experiences, philanthropy, etc. You might want to listen to your heart this time.
You have lost a major client or a key employee. That can be a real blow to a business. The owner, by nature, is optimistic and believes that the lost business will soon be replaced and does not ratchet down the expense level to match this new sales level. If he does cut, inevitably, it is not fast enough and not deep enough. Maybe it is time to seek a buyer that could replace that business before your company’s value is severely impaired as your profits erode.
The market is hot and you decide to take some chips off the table for diversification. You may be thinking of retiring in four years, but a consolidation is occurring in your industry and valuations are up 20%. Sell at the top and sign a four-year employment or consulting contract. The odds are that if you exit on your original schedule, valuations will have settled back down to the norm.
You ring the bell and exit on your own terms, from a position of strength, exactly like you planned. You are well aware of the competitive forces in the market and the relative strength or weakness in valuation multiples. You have prepared your business to be attractive to a strategic buyer. Everything is going your way. You hire a good M&A advisory firm to present you confidentially to the most likely buyers. Several recognize your value and show interest. You are able to get a little competitive bidding going. Your transaction value rises and your terms improve. You pull the trigger and complete the sale. Mission Accomplished.
By: Dave Kauppi
Information Technology in Hospitality Industry
January 26th, 2010 by admin No comments »Traditionally, hotels were largely dependent on cards and paperwork at the front desk to keep in touch with old and current customers. They were largely at the mercy of the desires of vacationers to arrive, and on their own efforts and staff to be ready for potential surges or long droughts of occupancy. Luckily, such inconvenience and old-fashioned methods are long since past, thanks to advances in information technology.
The first area in which information technology became important was in regards to billing. Old-fashioned paper-based book-keeping was time consuming and inefficient, and was not able to quickly tell a hotel owner what the situation of their hotel was. Luckily, advances in modern record keeping allow for a hotel owner to keep track of what they have on hand, how much of it they have, and how much it costs. Accounting is complicated, but advanced accounting software, especially that tailored to the unique needs of the hospitality industry, helps to enable hotel owners to make smart decisions. Services and products that are no longer used can be quickly cut off to save money, while those who show demand can be increased in quantity or modified so as to reduce the heavy usage.
Most hotels are familiar with booking rooms and reservations over the phone, but information technology has expanded well beyond that. Hotels can now work with various online travel companies and booking services to have their rooms booked online, with no need to employ expensive staff. This also allows a hotel to advertise their open rooms and special deals directly to persons who would be most likely to purchase them, instead of wasting lots of money advertising in an unfocused manner. High quality information technology thus allows for better arrangement and management of bookings in order to allow a hotel to better maximize occupancy, and to know in advance when large groups or lean times are approaching. This allows a hotel manager to make plans regarding temporary staff, good times to renovate or expand, or other concerns, because he/she can determine the state of their hotel currently and for the next few months with only a few clicks on the computer.
The advances in information technology extend well beyond booking, however. The internet is essential for vacationers who wish to contact those back home, and for those traveling on business to get in touch with the office. Therefore, wireless internet has become a very common and very useful service for hotels to provide. Many business minded persons even require that a hotel offer internet services so that they can keep working while on the road. Luckily, such services are easy to provide, as all that is required is a wireless router and various devices to ensure the entire hotel is filled with the network. Modern advances in wireless internet also allow for the wireless internet provided for hotel visitors to be used to network the hotel itself. Security cameras, door locks, and other devices essential to hotel security and safety can be wired into the network, so that staff are alerted whenever a door is propped open, a fire alarm goes off or suspicious activity occurs. Though the hotel guests are wholly unaware of it, this sort of added safety and security keeps them safe, and in the event of a problem they will most certainly appreciate the benefits of such a system.
As advanced as it is, information technology in the hospitality industry is still going forward. Intelligent booking systems enable rapid and efficient guest feedback, along with the ability to predict who is likely to use the hotel again and inform them via e-mail or text messages when good deals arrive. Hotels with room service or other guest services can offer their menus online, allowing for quick updates, high-quality photos, and other ways to allow guests to see and order services before they even arrive. There are also advances in terms of payroll and inventory which make information technology a valuable asset for saving money and maximizing profits. The unique nature of the hospitality industry makes it a great place for new and emerging information technology, and forward-thinking hotel owners and managers are always looking for smart equipment and software to invest in.
By: Nick Nikolis
