The business and IT have had a love/hate relationship the past 20 years. One day, the business sees IT as a strategic partner, giving the CIO a seat at the decision-making table. The next day, the CIO finds the seat pushed away, and the IT department put back to a supporting role. The pendulum swings back and forth every few years, but it’s time to stop. AMR Research, at its annual Executive Leadership Conference, unveiled a new way for companies to organize their people, processes, and technology in a manner that will allow them to compete now and into the future. “We have long talked about bridging the intersection of technology and operations,” AMR Research president and CEO Tony Friscia said in his opening remarks. “The bridge is built in the best companies, and it’s no longer about building bridges, but about building an integrated organization.” This is the foundation of AMR Research’s new business model. A new business model for a new world Called the Performance-Driven Business Network (PBN), this new business model is about synchronizing business strategy, organizational principles, and enterprise architecture not just within a company, but up and down the greater business network with suppliers, customers, and other partners to better compete—no, to compete at all—in the new global economy. “If you aren’t already working on this problem, you are falling behind,” said Peter Bigley, vice president of IT innovation at Safeway. Mr. Bigley was one of several CIOs and business leaders on hand to discuss the new IT story. Not falling behind was the essence of the keynote from former Sen. Bill Bradley, who discussed how many of the principles of today’s business world and this new story are reflected in the world of politics and the state of the United States today. In fact, The New American Story is the title of Sen. Bradley’s recent book, in which he details how we, as a nation, need to work together to tackle the issues we’re facing. “The old story was one of ‘can’t do,’” Sen. Bradley told the 300 IT and business leaders gathered for the conference. “We can’t fix healthcare, we can’t have good schools, we can’t have reliable pensions. The new story is a ‘can do’ story. It’s a basic American story. It puts the country ahead of the party and tells the people the truth.” Translating this to the business world means leaders stepping up to take on the issues companies face today and will face tomorrow. It will take leaders willing to tell their constituents and executive management the truth before they find themselves at a company mired in old ways, unable to compete in a changing world. The truth helps And what is this truth? What are the issues that will spur a radical change in business models? Consider the following: - Globalization—In less than 40 years, the emerging economies of Brazil, Russia, India, and China outstrip the G6, dominating growth.
- Changing workforce—The workforce is shrinking as highly skilled workers of the Baby Boom era retire. In some industries, like chemical and A&D, not enough of the younger generations are going into fields to replace them. With fewer employees, companies will have to find ways to collaborate more to compensate.
- Reputation and regulation—Sarbanes-Oxley was only a blip. Regulations will continue to grow around the world, and corporate reputation in an era of social responsibility will become more vital to brand reputation. Your partners are your brand.
- Corporate churn—In 2015, the average CEO will only spend five years on the job. Today, mergers and acquisitions are accelerating and markets are constantly shifting. Only the companies that can react quickly and have the infrastructure in place to deal with it will survive.
To be a player in the world described above, companies will need to react more quickly to change and anticipate it when needed. They need to stop being project driven and become performance driven, in which change is a constant, and people, technology, and business processes are changed in concert for the betterment of the business. “You need to take a hard look at these three dimensions (business strategy, organizational processes, and enterprise architecture) when assessing technology,” said Keith Gregg, vice president of program management at retail leader Kohl’s. “They need to be intertwined so that you aren’t just changing your business strategy, but also changing your technology and organization to match for maximum value.” The result: Faster, predictable response to business shifts, a performance-driven collaborative culture, risk and compliance management embedded into operations, extended influence beyond traditional ecosystems, and much better use of assets, including information and knowledge, technology, internal and external human capital, facilities, and returns on invested capital. As former Secretary of State and retired General Colin Powell said at AMR Research’s spring Supply Chain Conference in May, if you can change the rules as fast as competitors can make decisions, you can win. The performance-driven business network makes companies more agile, even if you are a $40B global company, as one of the model’s developers, AMR Research’s Bill Swanton, told the audience. Keyword: network It’s also not just a single company issue. Building the company of tomorrow means building the business network of tomorrow. The new business world demands these principles be spread beyond just the four walls of a company. It also requires businesses to sit down with their partners and synchronize people, processes, and technology across corporate boundaries so that all players in the value chain are operating toward common goals. This is where the IT and operations world merge. The principles of demand-driven supply networks (DDSNs) are all about visibility into upstream and downstream data, which means suppliers and customers up and down the value chain synchronize for all their benefit. None of this can be done without the infrastructure in place in and between each company. This is where the demand-driven company also becomes the performance-driven company. You can’t be one without the other. “It’s going to take all of us, the collective industry coming together to solve the problems,” said Cathie Kozik, corporate vice president of IT at Motorola. Getting started So, how do you go about this? What do companies need to do to meet these challenges the next 3, 5, or 10 years? “It’s really about IT sitting side by side with the business and identifying which business problems need to be addressed, which business questions need answering, and finding a meaningful solution together,” said Ms. Kozik. This is a first step in moving the pendulum of the IT and business relationship in favorable direction—permanently. Ms. Kozik and her peers all agreed that a big part of the effort is IT reestablishing trust with the business, improving the reputation of IT so that its seen as a partner and a part of the business rather than a necessary evil or, worse, a hindrance. Paraphrasing AMR Research’s chief strategy officer (CSO) Kevin O’Marah and his recent visit to Motorola’s team during a strategy session, Ms. Kozik said, “Kevin told us IT as an industry should be embarrassed. We are holding up the business from moving forward. We should all take it up as a personal challenge to move forward, to move faster, and help the business move faster. That is fundamentally what we are here for. I took that to heart, and I hope you all do too.” It’s just the behavior that Kevin referred to that led many business people to stop trusting IT in the first place. “Business and IT were not united,” Donagh Herlihy, vice president of supply chain and planning and CIO at Wrigley, said of his company, saying that, like many companies, Wrigley had a culture in which the business didn’t trust IT. “Unification comes through relationships, and relationships started with me and the team. You unify through people. We had to get the right people and build a much more business-savvy IT organization.” On the flip side, business also has to be involved in the IT process. As Mr. Herlihy added, “Just as you get the government you deserve based on your participation in the process, you get the IT department you deserve based on your participation in the process.” Rockwell Automation also learned this lesson. As Lou Klein, executive director of IT at Rockwell told the audience, today’s organization takes a “blend of IT and business functions.” He said his organization found great success when, in moving toward a single instance of SAP, it “stopped thinking about the application and started thinking about the business.” “We initially started calling it application rationalization,” Mr. Klein continued, “but it was clear early on that’s not what it was. It was business transformation. It’s a business, not an IT project.” IT and the business as one To help unify business and IT, Wrigley took the bold step of unifying them into one organization. Mr. Herlihy represented the future of IT in which he runs not only the IT department, but also the supply chain operations of Wrigley. Yes, IT and operations are so united at Wrigley, they are one. To build this organization, Mr. Herlihy searched for people with just the skills that will be vital now and in the next 10 years: people who are “energetic, innovative, and committed,” people who could put the good of the company over any departmental politics and internal squabbles of old business models. “It comes back to what Sen. Bradley said: they need to put country first. Only here it’s they need to put the company first.” Companies can also start now on some of these moves. Terry Brown, vice president of information systems at General Mills, discussed how his company has taken the collaboration it has long done with retailers and moved it downstream to suppliers. He said one of its suppliers of bulk items is now given access to General Mills’ operations data so it can monitor inventory. When inventory dips to a certain level, the supplier can take responsibility for replenishing it. Perhaps before you start that next project, why not take a more holistic approach? Why not address business, technology, and the organization together? That’s what makes a performance-driven company. This is the behavior of tomorrow’s innovative leaders—leaders willing to look at the whole and take the bold steps to move toward 2017 at the helm of a performance-driven company. As Sen. Bradley advocates, all of us—business leaders, citizens, members of the human race—need to write our own story, our own destiny. It’s a call to arms for us all. AMR Research sets the foundation for the performance-driven future in its new book, 2017: The End of IT as We Know It. For copies of it and to see the other books in our series, click here.
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