OPINION: Seize the moment

9 May 2011

It may seem counterintuitive, but a downturn like this is the best time to make strategic IT investments for the future of your business, writes Graham Fagan.

It is well recognised that periods of economic prosperity create substantial waste and bad practices, as organisations tend to be too busy chasing growth and are less focused on their own business efficiency. IT, in particular, can suffer during such a period in an organisation, as the market is moving fast and infrastructural cracks are easily papered over with readily available money. That often means many organisations enter recessionary periods with IT capabilities that are unable to support the organisation as it adapts to new market conditions, let alone ready it for any potential upturn.

We firmly believe the best possible time to break this self-perpetuating cycle is actually during a recessionary period – that’s the period most appropriate for strategic investments in IT. That might sound strange to the business executive who may be thinking that ‘survival’ is the best possible outcome. Organisations that build the IT capabilities of their business (at a competitive price and with better quality than they could have ever done during a boom) show strategic vision. Crucially, these organisations are fully focused on the market with enhanced capability when an upturn does arrive.

So it’s that easy then? If only. Timing, with a healthy dose of luck, plays a key part in the process. Beyond luck we should pay close attention to some other factors. Recessions don’t last. The cycles globally have dramatically shortened over the last 20 years, so we tend not to spend too long (hopefully) in a period of recession. We can use this shortened window:

·        to leverage the excess capacity of our staff for strategic IT planning

·        to locate more proactive and creative suppliers willing to show flexibility

·        to secure lower interest rates and financing options not available in periods of high inflation.

It’s the combined effect of these factors that creates favourable investing conditions.

Based on a series of engagements with senior Irish executives, we identified three priorities that largely captured their investment concerns.

Strategic Investment Priority 1 – Cost Transformation: Cost cutting is not cost transformation. Crude cost cutting takes expense out in the short term but robs you of capability in the medium to long term. For instance, deferring essential IT upgrades destabilises customer-facing services. Cost transformation, through a series of linked tactical and strategic measures, is a well-planned approach that leaves you with a reduced cost base while improving your business.

Strategic Investment Priority 2 – Customer Experience: The temptation in a recession is to focus on being efficient and profitable at the expense of serving your customer, eg, cutting back frontline staff without providing the customer with access to self-service options. Research shows if the customers feel they are not getting the service they expect, the vast majority are capable of leaving you in a recession – and it’s an expensive business to win them back.

A recession drives a more focused and prudent customer. Businesses that put the customer at the centre of what they do invest strategically in good customer relationship management (CRM) systems and analytics across all contact channels. This allows them to remove cost of failure and use self-service to manage calls effectively. Thus allowing human channels (branch and contact centre) to add as much value to the customer as possible, particularly since the self-service approach tends to create more complex contacts.

Strategic Investment Priority 3 – Innovation: This is the key to delivering sustainable competitive advantage and improved business performance in an increasingly complex business environment. Successful innovation is the application of new ideas and/or new technologies to a specific business challenge to increase revenues, improve productivity and/or reduce costs. Innovation is no longer an isolated activity to be managed by the R&D team. Successful innovation requires the whole organisation to share ideas, collaborate together and make strategic use of IT.

A good example of this cross organisational innovation effort is flexible working. The property management, human resource and IT teams within organisations work together to let staff work from where best suits them. With this ethos at the heart of any organisation, significant potential exists to reduce property requirements, achieve more with the staff you have (20-40pc increase on average) and cope with the challenges the elements throw at us, eg, snow-bound staff.

Our resourcefulness is never more evident than in a recession; it brings out the best in us and our suppliers. While some people have their eyes fixed on the negative headlines, the resourceful ones have their eyes fixed on the significant opportunity that now presents itself. It’s an opportunity to fully maximise the favourable investment climate to gain a significant long-term advantage on the competition.

Resourceful people gain this advantage by strategically using IT to address a broad range of business problems, eg, minimising channel switching by improving self-service. ‘Strategy’ has no high-brow connotations in this instance. Every organisation can be strategic and can look at investments in this manner. It’s simply a case of having clarity on where you want to get to and working out the small (tactical) and big (strategic) steps you need to take to get there.

Graham Fagan is a client principal with BT Ireland