Category Archives: Just Questioning

The Peril Of IT Overinvestment – Is It Worth Considering?

We have all been victim, at some point or another, to that familiar ‘post-modernist’ urge to consume the ever newer, better, and more satisfying product in the marketplace.  We all understand (or almost all), that there is a great deal of manipulation that goes into the making of the perfect consumer – from birth onwards – and that this effort is usually repaid by a lifetime of shopping loyalty.

Businesses are not exempt from this cycle of consumption, and consequently, this cycle of aggrandizement. How do we, as consumers (or as businesses), insulate ourselves from this potentially insidious outcome?

The answer is not simple. Why? Because so much occurs at the subconscious level, where we are programmed to expect (or want) the best of all possible outcomes or solutions. If we are dealing with the simplest of issues – like choosing a new pair of shoes – then the answer is equally simple. If we are dealing with a more complex issue – like the purchase of a plane or enterprise software – then the answer is commensurately more complex. But what of those issues that lie somewhere in between?  For example, an SME that is looking to expand its IT profile to a level that is in step with the growth of its business? How best to approach this business decision that could potentially have long term and costly implications?

This is probably as good a time as any for us to collectively say – ASK QUESTIONS!

  1. Learn as much as possible about the product ahead of a vendor’s visit
  2. Attempt an estimate of the utility of the product to your business in the short and medium time frame (cost of initial investment vs. growth in productivity and potential ROI)
  3. Be aware of the pitfall of being oversold on a product

This final point is critical. Even when you have done your due diligence and know exactly what you want, you may not always find it. For example, in the software or services market, despite the wide selection, there are essentially two types of offerings: less than you need and more than you want. A third option is to buy a “package” and add “a la carte” options, which can quickly become very expensive. Also, “special offers” are a favorite entrapment – buy a pack of 4 pieces, even though you may only need 2 or 3. The price per piece may indeed be lower when you buy the pack, but now you have purchased additional product that you may never use.

What can you do to avoid being oversold too much and downright unnecessary product?

ASK QUESTIONS – as many as you can from all different contexts and perspectives!

Start by asking yourself, what can your business realistically afford? How much would this investment in IT contribute to the overall productivity of the company? Unfortunately, there appears to be a dearth of statistical evidence for SMEs on the productivity payoff of IT investment (Brynjolfsson, 1996).

When the time comes to sit down with a vendor, beware of sales pitches – we may be dealing with a more sophisticated product than a new pair of shoes, but the sales pitch is similar. “This is a good time to buy as prices have come down!”, “Your competition has this product! How will you remain viable?” or “It will make your business more productive and competitive”. All such claims, we know, are unsubstantiated by facts but are capable of influencing a decision that should be based on more concrete variables.

Finally, an investment in IT should not be the reason for overlooking the more ‘conventional’ strategies to reach desired objectives. According to a study by Brynjolfsson and Hitt (1996), SMEs that just invest in IT without adapting their organizational structures to make better use of existing resources, i.e. flattening their structures, empowering their workers and other related measures, could actually be worse off.

In conclusion, it is probably safe to say that the running of a business is a complex, multi-layered endeavor that deserves attention from many different perspectives. IT investment may be a powerful tool for the successful administration of a business but cannot replace or substitute the benefits of adapting a business to its present environment by ongoing organizational design and training (as examples). We strongly believe that businesses that attend to these vital areas will be in a position to enable IT to deliver the expected productivity increase to their bottom line.

Wikimedia Foundation Servers-8055 22.jpg
By VictorgrigasOwn work, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=20348441

Should you know your company better than you know your competitors?

When we think of competitive intelligence, we may tend to assume that it’s all about knowing your competitors. While it’s obvious why you need to know as much as you can about the competition, we may assume that we already know everything we need to know about our company.

That may not always be the case though. Here are a few examples why knowing your company better may be more important than knowing your competitors:

–          If one of your competitors is very expensive and you think that you can offer a better price, you need to make sure that this strategy is sustainable in the future. Is your company capable to support this strategy on the long term?

–          If you learn that a competitor has a weak sales team and you have some “rock stars” who can sell anything, you need to make sure than you can deliver what you sell otherwise the initial success may turn against you

–          When your strengths are mainly based on technology that is very likely to become obsolete on the long term, you need to know how your company can adapt to change

In order to know your company better, you need to focus on the human factor more than on the technical or economical ones. Your different types of capital are an important competitive advantage but it’s the human capital that’s the most unpredictable and has the most impact on the future of the company.

Probably the most important challenge when analysing a the employees of a company is that fact that we tend to separate them into categories or see them as a collection of individual employees. The holistic approach is preferable since it’s based on the idea that natural systems (including social and economic) should be seen as wholes, not collections of parts. Companies are legal or economic entities but are rarely seen as an entity characterised by interdependence (relationships between people who depend on each other)

This is why the skills and experience of a decision maker, leader or superstar employee needs to be analysed in the context of the interdependence with the others employees of the company. Similarly, the untapped potential of the employees can be assessed by taking into account the importance it may have in the interconnected company.

These exercises are not usually seen as an important part of a competitive intelligence initiative and we tend to take employees for granted or evaluate them individually. While this approach may reveal conflicting interests in the company as well as a different (even opposite) understanding of its direction and values, these challenges need to be acknowledged in order to be addressed.

The employees or a company can be found in all four quadrants of a SWOT analysis: strengths, weaknesses, opportunities, and threats. Do you know how many of them are in the weaknesses and threats quadrants? Do you have a plan to move them to the other quadrants?

SWOT en

By Xhienne (SWOT pt.svg) [CC-BY-SA-2.5 (http://creativecommons.org/licenses/by-sa/2.5)%5D, via Wikimedia Commons

Does the BCG-matrix apply to CRM?

The BCG matrix or the growth-share matrix was created in the seventies to analyse the correlation between the use of cash and the cash generation by the products of a company. Boston Consulting Group concluded that there are four types of products, depending on the level of investment that they require and the amount of cash they generate.

The matrix also summarizes the lifecycle of most products, which starts with problem children or question marks (products which require high investment and generate low cash flow), which become stars when they are successfully or dogs/pets when they’re not. Stars can only become cash cows (whey they are less successful but still generate a lot of cash) or dogs/pets (when they stop being successful).

BCG matrix

Image of the growth-share matrix from a BCG Perspective. Author or copyright owner: The Boston Consulting Group, Source: http://on.bcg.com/12PLAlh

Without even knowing it, you may be applying the same logic when you decide how you treat your customers. As you know, in order to get cash from your customers, you need to invest in your relationship with them. All new customers are questions marks, which become stars in the best case scenario. The loyal ones will eventually become cash cows. Most of your customers are probably pets and you may not be sure what to do with them because they don’t buy a lot from you but they don’t cost you much either.

You may think that the customer experience revolution that everyone is talking about will make this logic obsolete, but can you realistically provide a great customer experience without investing in people, tools, training, maybe new facilities, marketing and PR, etc.?