Do It Smart: Seven Rules for Superior Information Technology Performance
224
Do It Smart: Seven Rules for Superior Information Technology Performance
224eBook
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Overview
In Do IT Smart, experts Rolf-Dieter Kempis and Jürgen Ringbeck along with the McKinsey team identify four cultures of IT users -- stars, big spenders, cautious spenders, and laggards -- based on how efficiently and effectively the users manage IT. The stars stand out because their strong command of IT means they are better able to manage core processes such as R&D, sales and service, and order processing, which in turn produces tangible payoffs in profitability, growth, and market share. From their study of star performers, the authors formulate seven rules for developing a superior IT organization. First, they argue, managers must make IT a top management issue and, second, a priority in product development. IT must be viewed as a strategic tool so that IT strategy can be aligned with business strategy. Clear objectives must be set, and core business processes redesigned. Warning that IT is reaching saturation in administrative applications, the authors describe how it is far more profitable to integrate IT into marketing, sales, and customer service. Finally, they describe how all these elements must be brought together into a lean, customer-oriented IT network.
McKinsey's breakthrough study shows that as organizations are increasingly overwhelmed with data, IT will become more of a dividing line between the winners and the losers. IT stars will make quantum leaps in effectiveness, while poor management of IT results in a cost explosion. Managers and information officers who want their business to keep and gain the competitive edge IT offers need this unprecedented insight into how to Do IT Smart.
Product Details
| ISBN-13: | 9780684869216 |
|---|---|
| Publisher: | Free Press |
| Publication date: | 12/22/1999 |
| Sold by: | SIMON & SCHUSTER |
| Format: | eBook |
| Pages: | 224 |
| File size: | 4 MB |
About the Author
Read an Excerpt
INTRODUCTION
Over the past two decades, almost no other subject has been discussed in the manufacturing sector as passionately as the use of IT. IT enthusiasts paint the opportunities for IT in glowing colors; they wax poetic about paperless offices, fully automated plants, and virtual enterprises. The skeptics respond with sarcasm: "There are many different ways to ruin a company. Speculation is the fastest, IT the most reliable."
Quotations from survey interviewees quickly indicated how divided the camps are, from top management through to operations:
* R&D. "Our new engineering information system will offer on-line access to all patent databases. Users can learn to operate it in one day using a CAD interface," say the supporters. Using their IT, R&D has created so many variants that we can't handle them anymore," production complains.
* Sales. "The product configurator has significantly improved our customer service. It has reduced the number of special requests enormously," argues the one side. The other: "Our sales information system is so inflexible that it's hampering the vital restructuring of order processing."
* Purchasing. "For the first time, our integrated materials management system enables us to evaluate suppliers comprehensively on a daily basis, analyze make-or-buy decisions reliably, and optimize logistics planning." This is mirrored by the opposite opinion: "In our sector of industry, IT support for purchasing doesn't make any sense. Interfaces with our suppliers are so complex -- excellent personal staff contacts are all that count."
* Production. "The new integrated standard software will improve our production stability, boost our delivery reliability, and increase stock turnover tenfold," declares an IT protagonist, while an IT opponent replies: "Our production planners use their entire energy trying to outwit the enterprise resource planning system. It is totally inappropriate for a manufacturer of product variants."
* Administration. "Our extremely flexible executive information system is based on the data warehouse concept. It allows us to analyze problems systematically on screen in precise detail. This improves decision making -- and saves a mint on paper!" A colleague's reaction is the complete opposite: "Interfaces between the financial accounting systems of our plants are weak -- every transaction has to be checked again manually."
We constantly encountered these conflicting attitudes in the course of our interviews. Why is there such a gap between aspiration and reality across all lines of business in the manufacturing sector? Before our survey, no systematic correlation had been shown between the use of sophisticated hardware and software systems and the operating results of companies, although isolated cases have time and again demonstrated the cost and competitive advantages that can be captured from professional use of IT.
Our research project, Benefits of IT in the Manufacturing Industry, was designed to close this gap in the field of IT research.
Together with the Institute of Production Engineering and Machine Tools at Darmstadt University of Technology, we conducted in-depth interviews with top managers of over seventy leading industrial companies in the manufacturing sector from Europe, the United States, and Asia. The spectrum of industries ranged from component manufacturers, automotive suppliers, mechanical engineering companies, and electronics firms to companies in the process industry. We also interviewed experts at another thirty companies on specific themes, such as the use of integrated standard software, outsourcing, rapid prototyping, and product configurators, and held discussions with selected suppliers of these IT products and services.
We developed a new, strictly empirical methodology for measuring the impact of IT on corporate success. Analysis of the survey results revealed that although IT efficiency is important, IT effectiveness makes a particularly powerful contribution to a company's bottom line. We found that highly effective IT organizations seem to share an understanding of seven key principles.
This book describes those seven rules for superior IT performance. It is addressed to managers in the manufacturing sector who have to make fundamental decisions on IT strategy and investment, and to executives and users from departments and functions who wish to learn more about the strategic and operational benefits of IT. We hope the factors for success described in this book will help readers tap the enormous productivity reserves that can be opened up by smart IT management.
Copyright © 1998 by Wirtschaftsverlag C. Ueberreuter GmbH
FOREWORD
In the age of the Internet, the use of sophisticated information and communication technology in industry has become second nature. But what contribution does this wealth of hardware, software, and networks actually make to a company's bottom line? How far do the benefits of IT depend on its functionality? What impact do factors such as quality of the infrastructure or the design of individual business processes have? And what level of expenditure on IT is reasonable?
My colleagues Dr. Rolf-Dieter Kempis and Dr. Jürgen Ringbeck decided to investigate these questions with a team of McKinsey consultants and staff from the Institute of Production Engineering and Machine Tools at Darmstadt University of Technology, focusing on the manufacturing industry. In the course of a 15-month research project, they examined leading international companies and supplemented these analyses by countless discussions with top managers and experts.
A key finding of the survey is that smarter solutions to the question of what IT is used for -- IT effectiveness -- make a much greater contribution to corporate success than concentrating on the how of IT support, IT efficiency. Leveraging both virtues simultaneously is the best strategy of all, of course. But only around 25 percent of all companies analyzed demonstrated both above-average IT efficiency and effectiveness, earning the title "IT stars." Even within this group, there were differences between the "simple" stars and the best of the best. But the stars provide outstanding benchmarks in many respects.
One of the main breakthroughs of this study was the development and application of a methodology for measuring IT effectiveness. Now a metric is finally available for a variable that every manager sensed intuitively, but could not express in figures. The quality of IT in individual core processes in terms of its functionality, availability, and utilization can be used to quantify IT effectiveness for specific processes. Whether for product development, marketing, sales, order processing, or service, numerous indicators were combined to make an effectiveness index -- a highly ambitious empirical and analytical achievement.
The decisive link in the chain of cause and effect between IT effectiveness and corporate success is process performance in the business processes supported by IT. The prerequisite for improving these processes is their design or redesign. Many companies have recognized this connection, performing reengineering projects in an attempt to lay the foundations for more effective IT support, which -- if implemented professionally -- is also more efficient, i.e., cheaper and faster. The special feature of this book is that it crystallizes the findings of the McKinsey survey into seven rules for successful IT management in every company.
Dr. Kempis, Dr. Ringbeck, and their team do not limit their perspective to the survey results. They also consider the future perspectives of IT. Instead of succumbing to the usual IT euphoria, they draw sober conclusions from practical experience and observable trends. Courage to innovate will continue to reap rewards, but understanding and controlling the new information and communication technologies will become even more important than ever before. In view of the ever increasing performance of IT and its shrinking innovation cycles, this means the ability to move fast, and to concentrate on the essential: the systematic integration and standardization of a company's different information technologies.
New webs of integration will develop both internally and beyond a company's borders. Learning communities within companies will open up their intranet solutions even further, extending them from R&D through production to marketing, sales, and service, for example. These communities will also successively integrate selected external business partners. A healthy dose of skepticism is needed toward prophecies of an Internet-dominated future, but communication networks such as the "Automotive Network eXchange" (ANX) of Chrysler, Ford, and GM are witness to the enormous productivity reserves that can be captured via the smart application of these new technologies.
Integration of the different IT systems must be closely interconnected to their standardization. Agreement on uniform, binding communication standards and data (exchange) formats is just as important as the growing use of integrated standard software until "brainware" standards have been established that allow the coordination of companies in virtual enterprises. Standardization will then become a guarantee of flexibility.
The design and guidance of such all-encompassing integration and standardization initiatives is a top management affair. The more management attention is focused on IT issues of this kind, the more successful a company will be.
Detlev J. Hoch
Director, McKinsey & Company, Inc.
Copyright © 1998 by Wirtschaftsverlag C. Ueberreuter GmbH
Table of Contents
CONTENTS
Foreword
Acknowledgments
Introduction
PART I. SEVEN RULES MAKE THE DIFFERENCE
The Four IT Cultures
How the Four IT Cultures Perform
Seven Rules for Managing Superior IT Performance -- An Overview
PART II. EFFECTIVE USE OF IT IN CORE BUSINESS PROCESSES
Rule 1 Make IT a Priority in Product Development
Rule 2 Integrate IT into Marketing, Sales, and Service
Rule 3 Use IT Selectively to Integrate Order Processing Across the Company
Rule 4 Shift the Focus of IT in Administration to Business Planning and Management Development
PART III. SUCCESSFUL IT MANAGEMENT
Rule 5 Make IT a Top Management Affair
Rule 6 Create a Customer-Oriented IT Service Network
Rule 7 Introduce Integrated Standard Software on a Fast-Follower Basis -- But Redesign the Business First
PART IV. OUTLOOK ON THE FUTURE OF IT
Incessant Dynamics of IT Development
New IT Applications
New Challenges for IT Management
Summary
Appendix A: About the Empirical Research
Appendix B: Measuring the Performance of IT
Glossary
Index
About the Authors
Reading Group Guide
Discussion Group Questions
1. What are the characteristics of excellent IT management? How does technical performance translate into business success? What are the value drivers top managers should look at? How powerful is the real overall impact of IT on business performance and core business process excellence? (Introduction, pp. 3-10, 189-193)
2. Why should managers give IT priority in product development? What distinguishes a superior product development process, and what are the differentiating IT systems that IT stars have in place/are planning to introduce shortly? (pp. 27-52)
3. What are the critical applications that are currently revolutionizing the marketing and sales process? What are the most important performance levers that IT stars focus on? (pp. 53-65)
4. What are the crucial conditions for successfully applying IT in manufacturing and logistics? To what extent does the type of business matter when using IT for planning on the shop floor level? (pp. 66-79)
5. What are the most important guidelines for organizing IT management? When does it pay to outsource IT services? How do IT stars excel with a sophisticated IT planning and control process? (pp. 103-129)
6. Every month new software and hardware releases/products claim to improve technical performance. What is the right approach for planning replacements of large standard SW packages? When does it pay to be an early adopter, and when should a company search for individual innovative IT solutions? (pp. 130-163)
7. Is there an ideal way to introduce large complex SW packages like SAP? Why is it usually a must to redesign the business first? (pp. 133-138) What are the success factors of superior IT megaproject management? (pp. 150-160)
8. What does the emergence of new IT technologies like the Internet mean for future IT management? What are the critical future IT application areas a company should be looking at now? How can a company migrate its IT management to world-class operations? (pp. 167-186)