IT matters – but not in the Boardroom it seems

Years ago at business school, we were told a story about a board of directors that had spent two hours discussing the arrangements for bike sheds at the back of the factory but only ten minutes discussing a multi-million pound cyclotron investment.

When challenged on the direction of their effort, they admitted that most of the board didn’t really understand the cyclotron… but everyone had an opinion on the bicycle shed.

Amazingly, it still goes on today. The cyclotron has been replaced by information technology, but the end result is the same.

A recent survey showed that 50% of companies rarely or never discuss IT at boardroom level. This despite the fact that 95% of businesses believe that the successful deployment of IT is vital to their long-term business success; that IT is seen as being capable of delivering significantly greater value than any other form of investment; and that IT is the second biggest cost, after people, in most businesses.

It seems crazy doesn’t it. Yet I see examples of this head-in-the-sand approach to e-commerce on a regular basis. Nobody is ever interested in discussing the computer or software platform, the coding language, the database structure and all the other technical issues that will really determine the viability of the project.

But once we start talking about the colour scheme on the front page, everybody has an opinion.

In an environment where 95% of all workers use a computer for all or part of their daily work, the cost of inadequate IT provision can be very substantial. Anybody who has spent time fighting with a computer that keeps crashing, or a critical database that keeps freezing, knows that it can easily waste 10% of their time, as well as being a major source of frustration.

Historically, of course, IT was primarily about cost-cutting and efficiency and, therefore, reported into the traditional gatekeepers of such a role – the accountants. More enlightened companies took IT out of finance when its broad strategic utility became obvious. But there are still too many that have not recognised the change in role and reflected it in their organisational structure. This will seriously restrict the business’s ability to innovate.

Modern-day strategic opportunities are often built around data access as local companies www.Powerplaydirect.com and www.newsstand.co.uk have shown. Each has managed to leverage access to information from their core businesses – respectively CDs and magazines – into successful e-commerce businesses that are growing very fast and creating further opportunities.

Then there are the questions of relationships with suppliers and customers and even competitors – supply chain management in the modern jargon. There is an old saying that ‘you should keep your friends close and your enemies even closer’, but today we can have secure data exchange which blurs the distinction between companies and, for example, enables a merging of your supplier’s stock, your own stock, and your client’s stock.

But we cannot afford to be carried away by a technology that enables this to happen, without being very clear about the business issues that can arise, such as:

• Legal implications as to ownership of the stock – especially in the event of somebody in the chain going bankrupt.
• Mechanisms for untangling the relationship in the event of any of the parties falling out.
• Risks associated with ownership of the software that enables the process.
• Ownership of the data generated by the project.

This is why many arrangements that are technically feasible fail to materialise in practice. The ground rules are inadequately mapped out at the start leaving the board surprised by the risks at the end.

It’s wonderful to create business arrangements that enable cost reductions and/or service improvements. But managing the detail to protect the strategic interests of the business has never been more difficult or more important.

Effective IT governance requires a board that is able to ask the right questions and understand the answers. Unfortunately this requires a level of knowledge that many do not possess.