Firms need technology annual report - McKinsey

How to overcome the understanding gap between those who run business and those who run technology

McKinsey, the management consultancy, believes the way to overcome the understanding gap between those who run business and those who run technology is to produce an annual technology report, along the lines of the financial or corporate social responsibility report.

"The document would not only provide a candid overview of our ability to extract business value from technology but also substantiate that analysis with hard metrics," it says.

The authors point out almost every business process is underpinned by technology, but the support is not always visible. They suggest drawing an "anatomical" picture to show what technology is used to improve processes and make the firm more agile.

They suggest tying the report to stated business goals from the corporate annual report. For example: goal ("increase sales and total life cycle value of customer"); technology cause ("improve precision in predicting low value customers"); and effect ("15% increase in sales; 2% cut in customer churn; 3% increase in high-value customers").

They also argue for a technology balance sheet that includes tangible and intangible assets. This would show the shareholder value embedded in the technology as well as return on that investment and other financial metrics, they say.

"Examples and anecdotes (of the contribution from technology) will make the numbers come alive," they say. This will allow executives and other stakeholders to see how technology fits into the company, with a shared vocabulary about the value that technology creates.



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