Taking a Hard Look at IT…..

An article titled “Why So Many Big IT Investments Do So Little for Shareholder Value” from Knowledge@Wharton, reporting on a talk by James Blyth on the “Management Challenges of Technology”, some of the highlights from his talk:

High IT failure rates

“He cited figures from Gartner Research showing that “on average, 20% of the corporate IT budget is spent on initiatives that don’t achieve their objectives……..In the U.S. alone, he said, total spending on Customer Relationship Management has reached $10 billion, “but analysts estimate that more than half of CRM projects fail.” In addition, more than 90% of companies are dissatisfied with the results of their Enterprise Resource Planning implementation.”

Technology Alone is Unable to Provide Competitive Advantage

“Technology alone “will not provide companies with a competitive advantage,” Blyth noted. “Too many companies out there are prepared to sell you innovative technology that they sold to somebody else…….instead of getting “profitable differences” for all this spending,…. the outcome is usually just “expensive similarities” — i.e., companies invest huge amounts of capital without gaining points of differentiation…..it’s difficult to sustain a technology-based competitive advantage…..IT is easily replicated and “any advantage gained quickly erodes over time as competitors catch up.” Even knowing this, companies still put as much as 85% of their IT investments into infrastructure and only 15% into innovation. It took competitors six weeks to imitate Intel’s latest chip technology, he said, and yet one hears CIOs evaluating IT proposals based on 10-year paybacks.

Lack of Management Discipline

“….companies often lack the management discipline they need when evaluating technology proposals.”…….According to McKinsey research on Fortune 500 companies, 64% of the CIOS interviewed did not undertake any follow-up to determine whether IT projects failed or succeeded.

Technology Mingled with Sound Management Practices Provides Competitive Advantage

“Real competitive advantage is provided by managerial innovations, either to increase productivity or to build on operational strength. Fundamental business changes are much more difficult to replicate. When technological innovations are fused with fundamental change in business process, real competitive advantage can be achieved.”……..Blyth brought with him the results of research conducted last year by McKinsey and the London Business School. The study examined the impact of management practices and technology on the financial performance of 100 companies in the U.K., Germany, France and the U.S. Results show that companies with the top-quartile IT departments increased productivity by 2%; companies with the top-quartile management practices increased productivity by four times as much, or 8%; and companies that successfully combined good management practices with good IT increased productivity by 20%. “These conclusions are intuitive,” he said. “It’s obvious that companies should focus on their strategic direction and on enhancing management practices. Technology is one of the tools that can help deliver the strategy.”

Technorati Tags: Projects, Management, Technology, Project Management

Related posts:

1. Research Reveals Collaboration Is a Key Driver of Business Performance Around the World
2. Competitive advantage is an ongoing process
3. 4 key factors that impact on organisational productivity
4. Implications of Poor Collaboration within Organisations is Weak
5. Leader, are you taking enough time out to think?

Tagged as: Research