It may be a cruel myth, but it is said that if you put a
frog in a pan of cold water and slowly raise the temperature, the
frog will not move - even if the water boils.
If we think of the frog as a growing organisation and the
boiling water as the changing business environment, we have a
pretty good picture of one of the challenges thrown up by
growth.
n all of the turmoil that inevitably comes with growth and
expansion, it is easy to miss the obvious: that the processes and
IT support systems no longer match the new demands of the
business.
There are, of course, ways around the problem. Many
organisations patch up their ageing processes and systems to try to
keep pace and end up with a fragile support infrastructure that
needs constant attention. At some point, however, the growing
complexity and creeping obsolescence cause the IT infrastructure to
collapse, followed, in some cases, by the entire business.
At best, the organisation is overtaken by more dynamic
competitors or new entrants into the market who are not encumbered
by old technology. Identifying the best moment to invest in new
processes and IT support systems is, therefore, crucial to the
successful transition from a smaller company to a larger one.
The first challenge is to spot the signs that point to the need
for wholesale change. The second is to justify what could be a
significant investment in new systems. It is not enough just to see
the problem.
In an increasingly cost-conscious business environment, the
solution must be backed up with a clear business case to justify
the investment.
Long gone are the days when the IT department could call on
unlimited budgets and build whatever it liked. Now shareholders
want to see real benefits and a quicker return on their investment
in IT.
Some of the signs of growth-stimulated change are easy to see
and it is easy to justify additional investment. Any project
involving the automation of manual processes with associated staff
reductions is easy to justify.
Business managers can see the benefits of a lower head count
quite clearly. Increasing transaction and data volumes are also
obvious signs of growth, and it is a simple exercise to make a
quantifiable business case for more investment in processing power
and storage.
Similarly, growth in call centre activity, as a result of a
rapidly-expanding customer base, is easy to spot, and again it is
easy to justify further investment. Stakeholders in the business
can see clear benefits from such investments and will support
them.
Another example of easily justifiable investment comes from
external market change. If the market in which a company operates
changes radically and new systems are needed just to keep in
business, it is simple enough to persuade senior management and
stakeholders that the investment is necessary.
The shift to online retail operations is a classic example. In
the wake of Amazon, no serious bookseller could survive without an
online presence.
The travel industry offers another example. The growth of the
independent traveller market, where individuals put their own
holiday packages together rather than relying on the services of a
travel agent, has changed the business model for travel companies
fundamentally.
Like Amazon in the book market, Expedia and Octopus have created
a new online model which everyone else must follow to stay in the
game. In all these cases, the signs of change are easy to see and
new investment is easy to justify.
But there are other signs of change which are less obvious and
put businesses in the same position as our unfortunate frog.
The changes either happen very slowly or they are the result of
subtle combinations of events, making them much harder to see.
The business case for investment, therefore, is much harder to
make. Nevertheless, growing businesses cannot afford to ignore
these more subtle changes that can lead to a complete disconnection
of processes and IT systems from new business needs.
Ageing technology might seem an obvious sign, but often it is
not so easy to see. If a system was installed three years ago, the
odds are it will still be current. But if it is 10 years old and
applications are written in obsolete code, it is almost certain to
need replacing.
The problem is that, if it still works, the business case for
replacement is not easy to sell. It is also often the case that
such black and white situations do not exist in reality; the system
may not be that old, the language or database may be in decline but
not yet obsolete.
In these situations the IT director has the biggest challenge. A
large professional services firm, for example, found itself in
difficulties when it made the transition from being a
nationally-based organisation to an international one.
Its systems functioned adequately enough, but a combination of
out-of-date technology and restrictive IT applications led to a
gradual dislocation between the new business needs and the
capabilities of the IT support systems.
The two "killer" problems were a lack of multi-currency
processing - unnecessary in a national environment, but essential
in an international one - and the inability to extract management
information quickly. The systems were unable to produce adequate
performance data across the larger enterprise, which made it hard
for senior management to make decisions, and more importantly, hard
to motivate staff with appropriate key performance indicators.
If they are unaware of how they are performing and where
problems lie, it is difficult for employees to find solutions.
A retail chain faced similar problems when it grew by
acquisition and trebled the number of stores almost overnight.
Prior to the takeover, the company was still small enough for the
chief executive to manage it intuitively. Sufficient management
information was available to support such a hands-on approach.
The chain had grown gradually with individual stores or
distribution centres coming on stream one at a time. But suddenly
it was faced with a step change in the size of its business which
moved it from being an SME to a major player.
With hindsight, the IT systems and processes were sorely
challenged to provide the additional management information
necessary in an organisation where sheer size prevented the
previous approach being effective. There are doubtless plenty of
similar examples in every industry.
In some cases the point where the pain becomes too much is also
the time when it is too late to do anything about it. Companies
must therefore make sure they do not share the fate of the boiling
frog and learn to spot the signs which say: reinvest now.
Five reasons to update your technology
Ageing systems and obsolescence: The old adage "if it
ain't broke, don't fix it" does not work for IT systems. The world
is changing, technology is advancing and competitors are snapping
at your heels.
So while everything might seem fine today, it might not be
tomorrow.
Increasing volumes: It is usually pretty obvious when
transaction levels and storage requirements are rising.
It is the inevitable result of dynamic growth. Similarly,
increased call centre activity is a good sign that a company is
growing. Nevertheless, some companies can get caught out. Monitor
volume growth and anticipate demand for increased resources.
Market change: The rapid growth of the online sales
channel has turned many markets on their heads and companies have
had to move quickly to keep pace with technology changes.
Always look ahead and anticipate structural changes in
markets.
Step change in business: Often the result of a merger
or acquisition, sudden exceptional growth or international
expansion can sorely test old systems.
However, such changes can be anticipated and plans laid to
ensure the minimum disruption.
Combination of extraordinary events: This is without
doubt the most difficult challenge and the hardest to spot.
The combination of low-cost, high-speed networks and the
simple-to-use web browser, for example, spawned the dotcom
phenomenon - a massive change in the global economic environment
which we are still dealing with.
Chris Digby is head of IT strategy at Deloitte