IT for Profit

There’s no doubt in my mind that the most profitable companies are always those that make the very best use of modern IT.

However, this comment always seems to create debate. Which came first, the chicken or the egg? Cynics are always keen to point out that it is only the most profitable companies that can actually afford to make the best use of modern IT.

In reality, the most profitable companies are those that pay closest attention to their business processes. To be profitable you must be efficient – and usually efficiency is measured in comparison to the competition, with the most profitable companies having the most up to date and lean business processes.

However, every business is different. Even businesses that look the same are in fact different in many ways. Each business comprises hundreds of operations; some are big and important while many are small and negligible. And yet, they all play a part in defining the efficiency of the business.

The old sayings are all true: If you continue to work in the same manner as years gone by then you can only expect the same results. If your business is not growing and moving forward then in reality it is shrinking and falling back – businesses never stand still. In other words, if you want to grow your business then you must continually improve the processes that run it.

Documenting your processes is a laborious and time-consuming task which must be why most companies don't bother – and remain, at best, average. If you can’t document a process then you can’t improve it. The most profitable companies break every process down into the individual elements, recording as much detail as possible.

Having documented all of the processes, it is possible to examine and improve them. However, it is not always essential to use IT to obtain these improvements. In fact, I would never advocate using IT for the sake of it - and any proposed expenditure must always have a valid return on investment. But in reality it’s nearly always IT that enables the process to be improved most easily - and with greatest effect.

Many companies have already computerised the vast majority of their business processes and demonstrated best practice in years gone by. This can often lead to complacency and the belief that there’s nothing outstanding to improve. Generally speaking, it is fair to say that nothing can be further from the truth.

The most profitable companies review every process each and every year and identify inefficiencies from log jams that cause delays to data that has to be duplicated and everything that is labour intensive. You must bear in mind that ‘labour intensive’ is a matter of comparison and perspective. Something that took X minutes labour five years ago might have been considered efficient then. But today half X might be inefficient in comparison to how your competitors deal with the same issue.

I promise you that if you examine all of your business processes you will be a better managed, more efficient company. If you examine them every year then you have the opportunity to be a leader in your field. If you drive significant improvement in each of the processes under inspection you will be more profitable.

What’s more, you don’t necessarily need a big budget but if you are serious about improving the efficiency of your company, and you are prepared to take a long term view of your business, then you should start today.

Alistair O'Reilly

Comments

[Dennis Howlett]

An interesting set of thoughts Alistair but I don't agree with the approach for all businesses. The fundamental problem with documentation is the minute you get done, someone wants a change. Does that get documented as a matter of routine? I doubt it. Is it automated? Almost never.

Most of the real problems I see are more to do with process failure you can't see except through discovery. This is particularly true when processes are 'in-flight.'

No amount of documentation will help because by definition, documents record the result of past events.

I'm not saying documentation is useless. If you're in a regulated environment, it's mandatory. I'd argue that while useful and a good discipline, it is much harder to solve process problems than people imagine.

[Mark Fermor]

I think to look at your processes closely to examine their effectiveness is a key part of any business. If you need to document them to examine them then that is probably a reflection on the size of your business.

If processes are documented to establish their effectiveness in achieving clear set business goals, then the document, if done effectively will be a vital business tool. If someone ‘wants a change’ then hey, let’s review the required change against the business goal and if the change is justified, then let’s be grateful they wanted the change.

One of the first things I learnt at university is that there is something in life called the 99% completed syndrome. It refers to something being almost done for its entire life. System reviews have the danger of dying a death from this syndrome if they don’t have a clear cut-off date. If this is established from the start and then stuck to; the business can at least achieve some improvement. If a review is constantly held back because the possibility exists that someone wants change; then change will never happen.

If process failures are not clear to see I would suggest the business lacks a clear direction of where it is going. If you don’t know where you are going it’s really hard to see where you are taking the wrong turns, even if you have a map. If you have a real good understanding of where you are going you will quickly know when you have taken the wrong turn.

[Dennis Howlett]

"If process failures are not clear to see I would suggest the business lacks a clear direction of where it is going."

That's not true. Processes are almost always documented at design time but rarely are they reviewed 'in flight.' Significant numbers of failure occur due to unexpected or unforseen problems that only surface 'in flight.' they need not have an impact on direction but they almost always have implications for the bottom line.

The most common one I see relates to spreadsheets where complexity gets layered over time but which goes undocumented. Then some poor sap tries to use the sheet, making assumptions along the way. Happens all the time. 99%??

Speaking of which, businesses only need to get 97.5% 'right' to meet most of their objectives. I agree though, the search for Nirvana is a stupid idea, guaranteed to waste a ton of money.