After decades of talk about information technology’s importance to corporate strategy, many C-suite executives remain skeptical about the value of it. What can be done to change that equation?
Smart CEOs appreciate a little truth in jest. So for some pithy insight on aligning business strategy and information technology, they should pay close attention to a quip delivered last year by the CIO of operations for international cosmetics leader L’Oréal.
“Don’t start any such project without a bodyguard,” CIO Jacques Playe wryly advised.
Playe was relating his own experiences in implementing L’Oréal’s prize-winning Isis project, a massive IT initiative that ties together the company’s SAP ERP system with its Apriso factory floor software across Europe, Asia, and North and South America. Isis, named after the Egyptian goddess, helps the company efficiently and intelligently churn out everything from perfume to shampoo under brands including Garnier, Giorgio Armani, Lancôme, Matrix, Ralph Lauren, and Redkin.
His wise words convey the often-neglected truism that many enterprise IT initiatives succeed only if a C-level executive champions them. The backing of top brass can help the project persevere through the rough-and-tumble of deployment. Playe’s “bodyguard” at L’Oréal was Executive Vice President of Operations Jean-Philippe Blanpain. A project of Isis’ scope requires such an endorsement because it results in sweeping changes in the way many L’Oréal employees across the globe conduct their daily work lives.
Any manager in IT, operations, or supply chain knows the importance of a C-suite endorsement.
“Nothing happens if ‘the man’ doesn’t want it to happen,” says Carlos Eduardo DaSilva, global quality manager for Freudenberg-NOK, the Japanese-German manufacturer of seals and gaskets, who has helped implement lean practices at the company.
And yet, the great conundrum facing IT organizations at manufacturing companies is that many C-suite executives still don’t place a high strategic value on IT investments. The reasons for this are many and varied. In some cases, the IT investment may simply be tactical, as in the case of automating a specific business process that will yield predictable cost savings, but won’t fundamentally change a business’ prospects or results.
In more pervasive IT initiatives, return on investment and competitive advantage may take years to accomplish, leading to impatience and skepticism within the C suite. In other cases, an IT project may have ultimately failed to meet expectations, often leaving an indelible, negative impression. Finally, competitive advantage may indeed be achieved through some investments, but will not be as sustainable as expected as competitors figure out ways to duplicate the achievement.
Many believe what Harvard professor Michael Porter says about IT. “Process standardization has led to large gains through scale, efficiency, best practices, and consistency, but IT has driven homogenization, convergence, and zero-sum competition,” Porter says. “IT is table stakes.”
C-suite attitudes about the value of IT are borne out in Manufacturing Executive reader polls. Year after year, the polls have shown that only about one-quarter of C-level executives believe IT to be “strategic, clearly providing competitive advantage.” Likewise, in a new report titled, “Time To Raise the CIO’s Game,” research firm McKinsey & Co. found a considerable gap between how European executives say they value IT and what they actually do about it. While 71% of executives polled said that business strategy and IT “should be tightly integrated,” only 27% said their companies are actually implementing such a scheme.
