Enterprise: The Chickens Have Come Home to Roost

TORONTO (04/27/2000) - Management's reluctance to develop e-commerce and e-business on the Web is becoming a matter of concern to business commentators and others who track the Canadian economy. What's the hold up here? Is it a lack of capital? Technological skills gap? No, it's not. It's management, specifically senior management. And some chickens that have finally come home to roost.

Here's my take on it. With Y2K behind them, senior management breathed a big sigh of relief and set aside their anxieties about information technology. But just as they got back to business, business headed for the Web. Now they're mulling around, not sure what to do. Why is that? It all goes back to Big Iron.

Senior management's view of information technology hasn't changed in 30 years.

Oh, Y2K may have opened their eyes to the importance of information technology to the organization; but it didn't change their perception of it. Senior management still considers IT as a tool. And because of that, their expectations about its business value is generally limited to its tactical benefits, like improving the efficiency of specific business processes or functions. That's what mainframes did, right? And that's what the financial module they bought last year does, right?

But business on the Web is all about the strategic value of IT and most senior managers have never learned to look at IT as a strategic resource. They never had to develop a management capability that could shape and execute the strategic decisions that enable IT to improve a business on all fronts, not just individual business processes.

Don't believe me? Look at where most organizations are to date in exploiting Internet technologies. Their company has had their Web site up and running (untouched) for two years. While their company manuals and the price lists are up on their intranet, the site contains the old policies and price lists as well as those that superseded them. Their idea of "Web-enabled customer service" is having their 1-800 number up on their Web site.

Senior managers may admire the e-business capabilities of Wal-Mart and the e-commerce smarts of Amazon.com Inc., but they aren't ready to go there and they know it. On the Web, the first order of business for senior management is not to use IT to improve discrete business processes. It's to exploit IT for strategic business advantage on an ongoing basis. Will our current infrastructure support a business model that is more consumer friendly than the one our competitors just put up or do we need new technology? What are the costs and benefits of moving to a new business model this quarter rather than next quarter? What are the second-order benefits of such a move?

Tactical benefits are not ignored, of course, but the hunt for these begins much further down the agenda. With Internet technologies, the management challenge doesn't begin and end with the development and execution of new business models based upon new technology. That's just the front end of the business. Getting the full set of benefits from these technologies requires much more. To get the full set of benefits of a new business model, management must concurrently seek opportunities to improve the organizational structure, the management framework, the back office and corporate systems. Such an approach is about as far away from management's traditional and narrow focus on the tactical value of IT as you can get.

The most important lesson from the fast movers in successful clicks-and-mortar organizations is this: Nothing is sacred in the organization except your values, brand and credit rating. On the Web, everything else is in play. It's ironic to note that the management smarts needed to realize the strategic value of IT were out there years before the Internet came on the scene.

Unfortunately, very few senior managers had the wit to learn them. Now they can't hope to survive without them.

Chuck Belford is president of Management Smarts Inc., a Nepean, Ontario-based management consulting and training company. He can be reached via e-mail at cbelford@managementsmarts.com.

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