Let's Get Fundamental
Finn says that when chief executives and their management teams formulate strategy, particular attention should be paid to fundamental information systems capability. "Nothing would be more frustrating than to find that our ability to react to a market of competitive pressures is inhibited by information systems limitations. It's just not acceptable," he says.
Once the strategy is formulated, however, Finn recognises that there are opportunities to apply new information systems to boost competitiveness. "There is no doubt that the information systems investments we've made in the past three to five years have paid off handsomely," Finn says. "Our distribution systems are superb and they give us a very real competitive advantage in terms of cost and ability to get our products to market quickly. Similarly, our winemakers are able to react quickly and make the products demanded by consumers and our channels of distribution because of the effectiveness of our systems."
Southcorp is currently being touted as a potential takeover target following a share price plunge after a poor profit performance (a wine discounting strategy that soured and the company's managing director being sacked were catalysts). If Finn is right about the value that information systems add to a company, he should still be able to use it as a bargaining chip in order to negotiate a good price for the company.
But can CIOs prove IT's value or its (and the CIO's, for that matter) contribution to the enterprise? The CFO has the audited balance sheet to point to; the CIO, it seems, has nothing so substantial. As CEOs and boards put the thumbscrews on CIOs to demonstrate the business value of IT, CIOs must find "proof of the pudding" management, measurement, and monitoring tools and methods.
According to industry analyst META Group, as IT organisations migrate from providing efficiency towards allowing business effectiveness (that is, competition), there will be more need to quantify IT value. META suggests that some of that will be possible through service level agreements with the business.
"I certainly believe that the CIO's contributions can be measured - after all, if you can't measure something how can you expect to manage it?" Finn says. "However, I don't have any universal set of criteria. It seems to me that the CIO, working with the top management team including the CEO, should figure out what are the measurements to apply and then assess performance against them on a regular basis."
The fact that information technology systems are perceived as having an effect on the valuation of a company demonstrates that they are far more than corporate utilities. "IT is too often seen as a support function - which it is. But technology [also] provides new opportunities to add value and make a company more competitive in the marketplace," Dodgson says.
He acknowledges, though, that the competitive advantage of IT has been oversold in the past, leaving more than a few senior executives cynical. "Often with the introduction of new thinking there is a period when it is oversold," says Dodgson. "We see it with marketing fads such as total quality management or business process re-engineering. First they are oversold and there is a massive period of disillusionment. But when the hype retreats the kernels of value are retained." And for business, those kernels of value are that information systems can not only underpin current strategy, but also be used to enhance competitive stature. Dodgson, however, does not believe this message has penetrated far into this country's boardrooms.
"In Australia there is a very long way to go. Periodically we get some good rhetoric from the Business Council of Australia [regarding innovation]. We have had some interest from major business, but it has been very piecemeal," he says. "In contrast with the European, Asian and US firms, Australia is a long way behind getting the message that it is innovation and access which leads to competitive advantage. A lot of business schools are still pretty conventional and teaching distribution as a competitive tool. They are teaching the old way rather than the new ways.
There are some improvements in the MBA curricula and the message is getting through slowly."
Slowly is not good enough, however, Dodgson warns. "We are complacent at the moment because the economy is going very, very well, courtesy of the microeconomic reform of the 1980s and 90s - the workplace reform. But the main game has moved on since then. Now companies have got to use innovation and knowledge to drive competition."
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