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By Dan Farber
April 16, 2004
Surprises can be a thoroughly unwelcome occurrence. For example, the CEO learns near the end of the quarter that actual sales missed the forecasted target by 30 percent. Or, the board discovers that a competitor beat the company to market with a new technology that will change the market dynamics for the worse. Or, the executive team fails to understand what is happening in the supply chain and ends up with huge warehouses full of parts awaiting orders.
These aren't on the scale of surprises like Pearl Harbor or 9-11, but they spring from the same source-a lack of essential insight and analysis. Many companies suffer from this plague of data blindness, which ends up producing negative results. It's the major differentiator of the sickly, underperforming companies from those that lead and prosper. The leaders minimize surprises--and the associated reactionary behavior--because they have a better handle on extracting the meaningful information from the terabytes or petabytes of data. We are living in an information age. Five quadrillion kilobytes (exabytes) of new data were created worldwide last year. Some people will point to information overload and the complexities and expense of setting up data warehouses, deploying analytical tools and instrumenting applications to spit out the real-time or historical data vital to decision making. But these are fundamentally short-sighted excuses. There is no lack of technology to solve most of the information-mining challenges. Hundreds of firms are developing products and services for improving business intelligence, business performance management, competitive analysis, and a host of other analytical functions. Any company with a modest budget can acquire tools and build the taxonomies to extract some actionable insights from data to improve the bottom line. However, even with an investment in the best technologies, the majority of companies don't know how to achieve a 360-degree view of their businesses. They might have some proficiency in managing data for tactical matters, such as inventory management or financial accounting, but are sorely lacking in strategic analysis--finding the patterns and trends that lead to major opportunities or anticipate potential disruptions.
Most companies don't have an emphasis on strategic thinking built into their corporate DNA. The focus horizon is constricted, information sharing among all the key stakeholders is insufficient, and the organization doesn't have "dashboard mentality," constantly monitoring, analyzing and responding to key metrics. According to Kenneth McGee, a Gartner analyst and author of Heads Up: How to Anticipate Business Surprises and Seize Opportunities First (Harvard Business School Press, 2004), it's bad processes and culture that lead to business disasters. In his book, McGee characterizes business culture as "satisfied and complacent in using outdated and often irrelevant information when making decisions." He posits that, unlike many of the remedies proposed for the corporate accounting scandals that focus on regulatory or government oversight, changing corporate culture requires that managers and executives focus on getting the right information to the right individuals in real time. "Business surprises, the unexpected events that rule the business world every day, should not be surprises," writes McGee. "The information that would allow managers to turn these currently unexpected events into opportunities is available. If managers and businesses focus on capturing and presenting certain material information in real time they can 'predict the present' and put an end to the devastating consequences that follow in the footsteps of business surprises." The recent trials and tribulations of the U.S. intelligence community provide an extreme example of how culture can undermine competitiveness. The group of agencies that make up the U.S. intelligence community-the CIA, NSA, DIA, and FBI among others-have billions of dollars in technology capability. Some of the agencies, such as the NSA, employ some of the most advanced technologies, while others-such as the FBI-have been ineffective because of poorly designed and utilized IT systems. According to the U.S. General Accounting Office, the FBI has had five CIOs in the past 24 months and about the same number of chief IT architects. "Given the poor state of the FBI's information systems, field agents usually did not know what investigations in their own office, let alone in other field offices, were working on," said a report from the National Commission on Terrorist Attacks Upon the United States (also known as the 9-11 Commission), which was formed to investigate the circumstances surrounding the September 11, 2001 terrorist attacks. The FBI has been unable to fully deploy its new, $458 million Trilogy network and applications that supposedly lay a foundation for improved information sharing. A 9-11 Commission statement also characterized the intelligence agencies as lacking in imagination and having a bureaucratic culture more appropriate for the cold war. More importantly, the various three-letter agencies weren't able to put the pieces of the puzzle together that might have prevented the terrorist attacks. Among the other criticisms leveled at the intelligence agencies by the 9-11 Commission were:
The constant chatter among businesses and the intelligence community about insufficient budgets, technology complexity and regulatory compliance is valid, but it masks the underlying failure to inculcate a culture that can overcome those problems with a clear and strategic focus on identifying the key business levers and extracting the relevant data. Without that focus, companies are doomed to live in the past and have a very uncertain future.
You can write to me at dan.farber@cnet.com. If you're looking for my commentaries on other IT topics, check the archives. |
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