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 / Second Quarter 1997 / Issue 7(originally published by Booz & Company)


The C.E.O.'s Information Technology Agenda: Seizing the Right Opportunities

Today's C.E.O.'s are facing an in-creasingly difficult set of challenges. The pressures for strong short-term earnings and enhanced stock market performance are building. At the same time, many industries are still reeling from the pains of the consolidations that occurred during the wave of major business restructurings and cost-reduction programs over the last three to five years.

To meet these pressures, C.E.O.'s have shifted the items on their agendas. In our discussions with leading C.E.O.'s around the world, we have found that they are no longer emphasizing cutting costs; instead, they are committed to growing the business. As C.E.O.'s try to transition their corporations from a cost-restructuring mind-set to one of exploiting new growth opportunities, their focus tends to be on the familiar (e.g., market share gains, globalization, new product innovations, time-to-market, customer satisfaction). Information technology (I.T.) and its potential for building advantaged, market-driving capabilities are rarely, if ever, considered as a key part of the C.E.O. agenda.

Depending upon their own experiences, most C.E.O.'s view the world of I.T. -- including such emerging technologies as enterprise-wide software, global communications infrastructures and the Internet/intranets -- with varying degrees of skepticism. The reality is that many C.E.O.'s have been burned by "big ticket" investments in I.T. projects whose promise has far outweighed the end results. Too often, C.E.O.'s and their senior management teams do not recognize value from I.T. investments for two reasons: they are not up to speed on the potential of today's information-enabled capabilities and/or -- as a result of their own organizations' track records with recent I.T. investments -- they are decidedly conservative and refuse to invest any more.

Not surprisingly, C.E.O.'s generally fall into two camps when it comes to I.T. One group focuses on keeping I.T. costs down on all fronts, while the other takes a "pay as you go" route. Although the end results differ, both approaches are inherently flawed. In the first case, the organization forgoes opportunities to build market-driving capabilities; in the second, management actually over-scrutinizes and over-manages risk on every big proj-ect with a large I.T. component.

Nevertheless, there is good I.T. news to balance the bad. Because the I.T. landscape has undergone a dramatic transformation over the last few years -- much more substantial than in the previous 20 years combined -- the good news is that the ante has been raised on the need for I.T. issues to find a home on the C.E.O. agenda. Indeed, for corporations that have not yet positioned I.T. in its appropriate place on that agenda, the downside risks are much greater than ever before.

The rationale here is simple -- I.T. investment stakes are now too high to ignore. As I.T. bets have risen to the $100 million range for many corporations, both the cost/payback opportunity and the risk/reward scales can vary widely. At the same time, the corporation's I.T. agenda has become more complicated than it used to be. The days of the singularly focused I.T. project (i.e., "just build the system") are over. I.T. is now a fundamental lever that C.E.O.'s and senior managers can deploy to effect major transformations -- whether the objective is to reduce costs or build competitive advantage via market-driving capabilities.

In short, the inconsistent levels of management attention, priority setting and scrutiny devoted to I.T. in the past are not up to the task of coping with today's I.T. investment requirements, the risk/reward profile or the scale of impact on the corporation's customers, products and capabilities.

Three key factors have been the drivers for this transformation:

The stakes that I.T. investments represent are now too high to ignore. Five years ago, a corporation's typical I.T. project mix included two or more projects in the range of $10 million to $20 million, depending upon the size of the corporation, the level of I.T. deployed and the potential for leveraging I.T. as a source of competitive advantage. Today, in the same corporations, there are much larger dollar figures attached to fewer projects; it is not uncommon now to find two or more proj-ects substantially larger than $50 million. Many corporations are pursuing single projects with price tags greater than $100 million.

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