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Remove Complexity in IT Decisions

Author(s):

Chad W. Autry, Ph.D.
Chad W. Autry, Ph.D. is associate professor of logistics in the Department of Marketing and Supply Chain Management at the University of Tennessee in Knoxville, Tennessee.

Randy V. Bradley, Ph.D.
Randy V. Bradley, Ph.D. is assistant professor of IS in the Department of Marketing and Supply Chain Management at the University of Tennessee in Knoxville, Tennessee.

April 2012, Inside Supply Management^® Vol. 23, No. 3, page 14

Tapping Into ... Supply Management Issues and Trends
When considering a new technology investment, supply managers should know the risks and rewards.

Decisions related to the sourcing, procurement and implementation of new information technology (IT) can be quite complex, but they are important drivers of organizational success. Over the past decade, IT has become a key enabler of adaptive organizational designs, forward-thinking management practices and supply chain process integration. The task of choosing an appropriate IT solution also has become increasingly daunting because there are many risks — both at the technology and organizational level. However, some organizations derive greater value from their IT investments than others. The differences in expected and realized IT performance often boil down to a few critical elements that require attention before the investment decision is finalized.

Critical Decision Elements

When considering a new technology investment, three important elements should be examined by supply management and IT professionals.

Strategic fit. A key consideration is the strategic fit of the technology with your company's overarching business strategy. When making IT investment decisions, it's necessary to know how and in what ways an investment could support the execution of the company's mission, and how the investment enables the accomplishment of nontechnical goals, such as improved responsiveness to customer demands.

Realistic recognition of desired capabilities. An IT investment is often viewed (incorrectly) as a silver bullet for resolving a specific business process failure. Here's a secret — it's not; implementing technology cannot "fix" a broken business process. Rather, technology should be seen as an opportunity to increase an organization's informational capabilities. It should generate better information flow, storage, access and the like for users within functional areas.

Enhance organizational effectiveness. Another important consideration is understanding how the proposed IT investment could enhance organizational effectiveness. The appropriateness of an IT investment hinges on decision-makers' understanding of the gap between the organization's existing IT capabilities and desired capabilities. Inability or unwillingness to perform this gap analysis, or a lack of understanding of how the potential IT investment can/cannot close the gap, can lead to overinvesting or underinvesting in IT.

When to Walk Away

As country music legend Kenny Rogers once sang, "You've got to know when to hold 'em, know when to fold 'em, know when to walk away and know when to run." The advice in the song also rings true in the context of IT investments. What should happen when it becomes apparent that an IT investment no longer yields desired benefits? Unfortunately, it may be difficult to know when and whether an IT solution is "past its prime." However, there are a few clear-cut signs that it may be time to walk away from an IT investment:

• When/if maintenance costs are greater than the tangible benefits derived from the IT solution
• When the supplier is not willing to be a "partner" in the co-development of IT capabilities
• When maximum assimilation among user groups fails to lead to desired productivity and/or efficiency
• When the use of the IT solution greatly threatens or negatively affects user morale.

However, supply managers should note that the decision to walk away from one IT investment and into another could be costly from both a financial and political perspective. Another "walk away" challenge relates to internal salesmanship. In other words, how can users help those in the C-suite realize the company's existing technology is costing productivity, and/or persuade executives of the benefits associated with changing to a new technology?

We propose developing an IT assessment grid that outlines potential levels of impact versus performance (see box below). The vertical axis of the grid should include key strategic, tactical and operational factors, and where possible, items that tap into behavioral factors of IT use, such as employee adoption or perceptions of usefulness. Once factors have been determined, a team of business leaders, including supply management and IT executives, and process owners, should develop objective metrics for each item, and score each investment using the metrics.

When reviewing and using the results of the matrix to make an IT investment decision, focus on where the check marks are placed. This will indicate where, and to what degree, you are likely to derive value from the IT solution. Ideally, the majority of the check marks should be in the "medium/often" category or in the "high/almost always" category to substantiate the decision to move forward. One caveat to this is when the number of check marks in a particular performance category is greater than those in the desired performance category.

For example, let's say the grid indicates an IT solution is more likely to yield "high" benefits in the operational category. At face value, this appears to be a good result. However, if the objective of the investment is to provide more strategic benefits than the grid appears to indicate, the investment should be avoided. Users should interpret the matrix in the context of where and how you expect the IT solution to add value to your organization.

This approach enables organizations to clearly understand to what degree each IT investment yields desired benefits. This approach is useful for evaluating an existing system either post-implementation, or during the consideration phase.

Be a Champion

A successful implementation requires effective IT governance. In other words, business executives or process owners should serve as champions of IT initiatives to ease perceptions that supply management and IT are forcing yet another technology on users. Champions of new technology projects must understand and articulate the new technology's role in the organization.

For more information, send an e-mail to author@ism.ws.

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