Wednesday, March 3, 2010

Putting Your Money Where Your Mouth Is

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Here is a classic: we know the problem, we know the root cause, but we don’t want to do anything about it, and I am not even talking about our waist lines!

The current recession has definitely laid bare a lot of weaknesses in our supply chains and exposed opportunities where addressing these past weakness can lead to competitive advantages of the future. That should have galvanized us into action, however, the collective corporate short term fixation on Wall Street and the Next Quarter takes its toll and capital investments that could help are actually cut to project phantom profits and cash-flows! One of the companies I worked for was, in fact, so fixated on the Next Quarter that it re-planned all its IT projects every quarter – the teams were disbanded and brought together every quarter as the projects started, stopped, re-started or fell by the way-side. Not a very efficient way of doing business or investing capital, but who is watching? As long as the numbers are met for the Next Quarter, all is fine, right?

Here are some charts, firmly supporting the phenomenon:

1. While we recognize that fractured planning makes us less efficient, (Source: RSR research paper titled: Retail Merchandising: Buckling Down in a Tough Economy). The referenced paper shows that 47% of the companies identified “fractured planning processes make us less efficient” as a business challenge.

2. We also realize that existing technology is preventing us from moving forward with new solutions (see the second bar on chart), (Source: RSR research paper titled: Retail Merchandising: Buckling Down in a Tough Economy). The referenced paper shows that 39% identified “the existing technology/infrastructure is preventing us from moving forward with new solutions” as a major organizational inhibitor.

3. But when the going gets tough and budgets need to be cut, technology is the first to be dropped! The following table shows data from an AMR survey showing IT costs were cut during this recession across most industry vertical across all budget categories. Quoting from Lora Cecere’s article, “The Bottom Line: Although companies state that IT budgets are strategic, they became a cost to be managed when firms felt pressure from the recession.” (Source: AMR Research titled: The Impact of the Recession on IT Spending)

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