Rule # 3 – Save Money On Your Computer System – Drive Implementation with ROI

For years, businesses have used return on investment (ROI) as a decision-making tool. By computing ROI as a percent, businesses could (theoretically) compare projects. A project with a ROI of 10% was better than a project with ROI of 9.75%.
I remember a number of formats for calculating ROI on technology implementation projects. Most began with the assumption that employees could be eliminated, hours could be reduced, costs could be eliminated. In the 1990s, many software companies sold software exclusively with ROI calculations.
The problem was that the business rarely received the benefits that had been included in the ROI calculation. Over time, we began to realize that many of the benefits were “intangible” and we stopped talking about ROI.
That’s unfortunate.
Not because ROI is a good decision-making tool; it simply isn’t in many situations. ROI is an ideal implementation tool.
Because it focuses the implementation in the areas where it is most likely to produce a tangible return for the company, and it keeps the focus off areas that don’t need focus.
Example: A company estimates that it can save salespeople 8 hours per week by increasing inventory accuracy and eliminating manual calculations that they are currently doing. In order to do this, the company needs to install new inventory and order entry software. Without a focus on ROI, the installation often degenerates to an attempt to recreate the old software. By focusing on ROI, the implementation can be designed to focus on (a) inventory accuracy, (b) eliminating calculations, and (c) [MOST IMPORTANTLY] creating the management structure that will assure that the salespeople use the hours they save to generate new business.
It is (c) that generates the return for the business–the increase in sales. Without a focus on ROI, many implementations degenerate into trying to “make something work like the old system worked.”
Try it. You’ll like it!

Rule # 2 – Save Money On Your Computer System – Technology Lifts Limitations

Rule # 2: Good technology investments lift limitations. No limitation lifted equals bad technology investment.
This hasn’t always been obvious to me.
A business is a series of dependent events. A chain, if you will. Prospects go in one end of the business chain; profits come out the other end. If you pull hard enough on a chain, it will break, and it will always break at the weakest link. If you think about it, there can only be one weakest link. This means that there is only one place in any business where limitations choke the business and prevent more profits.
Here’s the way I think about it: suppose a business wants to increase profits. The Sales Manager sends the sales force to training. They come back all trained up and close a bunch of deals. Will the profit of the company increase? Not necessarily.
If manufacturing cannot physically make more product, the sales revenues will not increase in spite of the new orders.
Many businesses use technology in the same way. One part of the business implements a new technology, but this results in local optimization. Only when the weakest link is strengthened will be business grow stronger.
Eliyahu Goldratt says, “Technology can provide business benefit if and only if it removes a limitation.”
If a business invests money in a technology that does not strengthen the weakest link in the business, the money is wasted.

Rule # 1 – Save Money on Your Computer System – Part 2

Rule # 1 is simple and complicated at the same time: No Strategy, No IT Investment..
Another way to say this is, “Drive IT investment with strategy.”
Some people hear this to mean, “I never have to update my IT unless there is a business strategy reason for it.” Literally, that’s what it does mean, but there are two types of business strategy that relate to IT.
First, there are IT-strategic items. Things like reliability, backup, security, speed, and compatibility with software applications. These are strategic items just like business strategy items.
Second, there are business strategic issues. These include things like meeting vendor or customer requirements (for example, RFID or EDI), increasing accuracy (to elimate charge-backs), increasing efficiency (doing more work with the same staff), increasing space utilization (in a warehouse, for example), or simply communicating better with customers, staff, and vendors.
Both of these areas of strategy (IT and business) are key; ignore either at your peril. How does this save money?
Here’s a list of things that are not strategic reasons to invest in IT:

  • A new version is out, we need to have the latest version.
  • My IT Outsource firm said we need to update.
  • New systems would be faster.
  • The vendor has a list of new features; we’re sure we need them.
  • Because the IT department wants to upgrade (new toys)

As a technology enthusiast, I can tell you that “new toys” are a powerful draw. As a business person, I often say “No” to some toys in order to be able to say “Yes” to some toys that will improve my business.
Rule #1: No Strategy, No IT Investment.

How To Save Money on Your Computer System — Part 1

Lately, I’ve been working on a more detailed presentation on the first S in STATICS (strategy). I’m planning to do a podcast on, a seminar in November or December, and use the material for a presentation next year. A few years ago, I took a course from an Institute that had developed short, pithy “Rules” to help you remember the content. As I thought about strategy, I thought it would be a good exercise to develop my own “Rules” for Strategy.
It turns out that the rules are really best practices. As I’ve developed them, I’m amazed at how close my own thinking comes to the things I’m reading about IT strategy.
The next few blog entries will provide the Rules. Remember, these are a work in progress, so they may change. Comments are welcome.
Also, if your Memphis area Rotary Club needs a speaker, I’d be glad to do a presentation. Practice makes perfect!

Is Your Business Oversoftwared?

I wish I’d bookmarked the article that had my new favorite unword in it: oversoftwared. The word appeared in the following sentence (as I recall), “Most businesses are oversoftwared.”
The author didn’t define it, so I’ll give it my own definition.
Oversoftwared: The business owns more software than it needs or uses.
The antidote to “oversoftwared” is strategy. Software–at the end of the day–is just a tool. How many hammers do you really need?
My $0.02!