By Richard Joseph
Early in my career, I worked for a 100-year-old retail chain that maintained hundreds of high-end department stores around the country. I remember the orientation and training focused on loss-prevention and inventory management. This company spent a good portion of their operating budget on loss-prevention measures, training, and enforcement. They considered this their biggest area of risk.
This was in the early 90’s and the organization had begun to invest in electronic systems to manage their operations only a few years prior. Financial systems tied to inventory, purchasing tied to receiving, point of sale tied to warehouse and inventory, etc. With all this new technology, the organization realized increased efficiency, better visibility and control over their operations and inventory. They were able to make more intelligent decisions across their network of stores based on real data. More and more, this organization became more effective and more dependent on those electronic systems.
However, as many organizations came to realize, with all that efficiency and dependency on an ever-increasing technology portfolio, there comes risk. Now all your critical business operations are dependent upon the integrity and availability of those electronic systems. These are the systems and capabilities that help to make you more competitive in your industry.
How will your investments in technology provide value to your customers?
As this small team of newly minted technology professionals worked to support more systems and promote more automation in business processes within this organization, it occurred to many of us, we may have helped create a monster which we now had to figure out how to manage. Time and time again, leadership from this small technology group would present to management, proposals to mitigate risks to these now critical systems. Unfortunately, almost every time the response was the same, “We don’t have the budget” or “We’ve operated for 100 years without all this technology” or “We’re not in the computer business”.
Yet, the budget allocations for Loss-Prevention and Marketing were continually increased year over year with no articulable plan as to how it was to be applied or without measure to its efficacy.
How did IT let this happen?
Over the years, there were quite a few occasions when a simple system update brought the entire network of stores “down” or unable to operate at full capacity. There were “hacks” of the credit system, customer data was breached, sales were lost, inventory was misrouted and accounting for inventory was thrown into chaos. The response to these incidents also became predictable; “How did IT let this happen and what is IT doing to fix this?”. The loss of revenue was not quantified as a business loss, but as a loss “caused” by technology.
The leadership in the company failed to realize, the responsibility was with them for failing to proactively invest in robust infrastructure, redundancy, information security, and talented and experienced technology personnel to provide preventative maintenance and support of these, now mission-critical systems.
This Department Store chain was ultimately outpaced by competitors who were able to more effectively provide robust and secure technologies to serve their customers first, while also supporting the ever-increasing level of capability and efficiency in their operations. They were later acquired and a 120+ year old, landmark organization became a faded memory.
Sure, the moral of this story is, 'invest in preventative measures and to articulate the value in all your investment'. (If there is no value derived from that initiative, it’s not worth doing.) The REAL point here is that was 30 years ago! Yet we still hear leaders of organizations say they can’t afford it. Leaders who don’t understand the value in risk avoidance and business continuity because they only see it as a cost to their business. They do not yet understand the impact of the LOSS of business in the event of a disaster.
Some simple questions to ask yourself and your leadership:
How much will a loss of a day, a week (or more) of revenue be to your organization?
How will a data breach or outage impact your customers and your image?
Will you still be seen as a dependable supplier to your customers?
How will your investments in technology provide value to your customers?
In the end, the real goal is to help educate organizations in measuring the true value of technology and the inherent risks to their business. Let’s make sure we’re investing in a customer first strategy where everything we do will have a positive impact on how we are able to serve our customers. Let’s start thinking about more than the immediate need. As technology professionals, we need to help organizations realize the value of better long-term planning and how the decisions we make today can impact the capability and cost of our technology investment tomorrow.
Richard Joseph is a technology and business strategist focused on supply chains, digital transformation, and the intersection of economic policy and modern enterprise.