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E-Business Begins
with Strategic Planning and Budgeting, Not Technology
The power of e-business technology to out perform
traditional "brick and mortar" business processes
has made the need for companies to become e-business
enabled inevitable. Companies that learn to integrate
IT resources into their strategic business plans will
have a significant competitive advantage over those
that lag behind. Companies that ignore this reality
will find it increasingly difficult to communicate with
customers, vendors and business. Many will fail. The
fourth quarter is the time of the year to engage in
strategic planning and budgeting. Company CEOs need
to include IT in this planning and budgeting process.
Parsippany, NJ (November 21, 2003) -- The fourth quarter
of the year is the time when many companies engage in
the strategic planning and budgeting to support business
priorities for the coming year. It also represents a
time when CEOs can rethink their use and deployment
of information technology (IT) assets.
Most CEOs have come to realize that the future viability
of their company will depend on learning to use IT resources
to reduce costs, increase operating efficiency and deliver
quality service to their customers. Indeed, they know
the need for change is inevitable. However, many CEOs
have found it difficult to find a practical strategy
to guide the transition from “brick and mortar”
to enterprise wide e-business enablement. Dr. John T.
Whiting, the Director of E-Business Enablement Services
at Parsippany, NJ based IND notes “The mismanagement
of this critical process can lead to significant consequences,
loss of business and unnecessary costs to the company
that engages in this process without access to the right
knowledge and methodology.”
Dr. Whiting explains, “There are three basic reasons
why companies have experienced risk and loss related
to the purchase and deployment of IT resources. First,
the decision was made at the tactical technical level
of the company, not the strategic business level. Second,
IT was not integrated into the strategic business plan
and treated as a strategic resource; and third, the
use and deployment of IT was not managed at the CEO/P&L
level following the same due diligence applied to other
mission critical resources.” He notes further “E-business
enablement starts with strategic planning and budgeting,
not technology.”
Dr. Whiting offers two examples of failures that could
have been prevented had they been managed as strategic
initiatives, the Hershey Food Corp ERP failure that
occurred in 1999, and the McDonald’s Innovate Project
failure in 2003. Dr. Whiting observes that “Apparently
many of today’s companies have not learned the
lessons from the Hershey failure.”
In the first instance, Hershey invested $112 million
in an ERP program. When the system went live in July
of 1999 it failed. The failure caused Hershey to miss
much of the prime Halloween, Christmas and Valentine
Day sales experiencing $150 million in lost sales, 19%
drop in profits and a drop in stock value from $58 in
August 1999 to $38 in January 2000.
Dr. Whiting notes “Wisely, Hershey top management
did not place the blame on technology. By escalating
IT decision making to the strategic business level Hershey
was able to achieve a turnaround in performance.”
How was the turnaround achieved? A representative of
the ERP service provider stated “We made sure we
had alignment between information technology and the
business.” “It’s not seen as ‘we’re
going to do a technology project.’ It sounds simple,
but a lot of companies don’t get there…. In
this project, we had the proper management commitment.”
McDonald’s, the world’s largest fast food
company, experienced a similar fate. McDonald’s
had planned to spend $1 billion over a five year period
to tie all of its restaurants into a global digital
network. After spending $170 million it became clear
that the project was not going to succeed. In January
2003 the company terminated CEO Jack Greenberg and announced
that it would take a $170 million right off caused by
the failed project. They did not learn from the Hershey
experience.
Dr. Whiting observes that “McDonald’s duplicated
the mistakes made by Hershey 3 years earlier. They approached
Project Innovate as a tactical technical project, not
a strategic business initiative; they did not integrate
the project into their strategic business plan and did
not manage the project at the CEO/P&L level.”
What are the lessons to be learned from these failures?
Dr. Whiting advises that “If CEOs are going to
avoid risk and optimize ROI they must escalate IT decision
making from the tactical technical level to the strategic
business level, integrate IT resources into the strategic
business plan as key driver of business goals and closely
manage IT at the CEO/P&L level based on management
by objectives (MBO) and return on investment (ROI) criteria.”
This can be more easily accomplished than most CEO’s
realize. Dr. Whiting notes “The IND E-Business
Enablement Methodology™ was designed to guide CEOs
in integrating IT into the strategic business plan based
on MBO and ROI criteria.” He further states “The
starting point is the adoption of corporate policy that
directs that IT be purchased and deployed within the
framework of the strategic planning process.”
If your company is engaged in the strategic planning
and budgeting process during the fourth quarter it might
be time to capitalize on the lessons learned from Hershey
and McDonald’s by integrating IT into your strategic
planning and budgeting process.
About IND
Since 1990, IND has provided the complete range of E-Business, Network and Web Services required to become fully E-Business enabled. IND is the recognized leader in providing a strategy to guide the integration of technology into the strategic business plan via the IND E-Business Enablement Methodology™, a road map for businesses to gain control and manage their e-business assets. As a direct result of our corporate governance and employee's dedication to uncompromising quality, IND was awarded 2003 New Jersey's Finest by NJBiz Magazine.
For more information about IND, visit http://www.indcorp.com, e-mail sales@indcorp.com or call 973-227-5020.
Press Contact:
Eric Speidel
Tel: 973-227-5020 ext. 130
E-Mail: customercare@indcorp.com
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