Chapter 20 – Can Your IT Systems Provide An Obvious Economic Benefit For Your Business?

There are clear signs emerging that your back office operations have outgrown your current IT system. You send a request for information to various vendors to obtain information and pricing. This leads to a discussion within the management team about cost of ownership and how long an implementation will take. Management wants to know the cost, the timeline to implement the system, and the risks of the project.

The potential rewards of automation are extraordinary. By reworking IT architecture, a company can scale its operations without having to divert personnel away from value-adding tasks such as tax planning or activities that require human interaction, such as financial planning and analysis. But the risks of automation are enormous. IT project overruns and delays are the primary cause of cost overruns in the corporate world. A lot can go wrong with system tools. Complexity, interdependence, or an overly optimistic plan can wreck an implementation. Once you commit to a tool you are forced to invest no matter the cost. Should the tool miss the mark or take too long to implement, the market may have moved on before the new system goes live. 

Why is it so hard to implement new system tools? First, managers often overlook obstacles to change. And they rarely take a hard look at their processes. Launching new products or winning new customers is their priority, achieved by adding new layers of product features and procedural requirements. This thinking yields complex business processes that are difficult to automate. Second, product introductions, acquisitions, and regulatory changes leave back offices with a complicated IT architecture. Third, IT departments often have different agendas than their customers. IT managers may be inclined to use familiar tools or to select the most technically exciting solutions, while IT vendors and system integrators have no incentive to reduce the complexity of the integration. Finally, companies may lack the project governance capabilities to introduce new processes and tools. 

Faced with these challenges, few companies have an appetite for updating their back office IT tools. Eventually however, growth and competition will require more efficient back-office operations.  With customers and regulators pressuring for greater transparency and expedited data processing, management eventually realizes that it must take a different approach.

Taking the lean approach will dramatically reduce the costs and time it takes to reengineer your IT architecture. Lean methods enable teams to automate end-to-end processes in half the time, and with half the investment typically required.

 The Lean approach always starts with a review of your current processes and tools. Having a truly cross-functional team consisting of  IT and functional experts analyze existing processes from customer, efficiency, and risk perspectives will uncover several issues: much of the work contains errors and requires rework; work often gets stuck in a data-verification step for days before being processed.  Because of a lack of any IT integration, back-office staff has to enter data manually from several systems into the workflow.

The team will then need to define what they want the process to look like, giving priority to operational impact (i.e., how many work hours could be saved through automation) and to feasibility (such as how many new systems integrations or changes to legacy systems would be required). Have the team, with strong project governance, focus on simplifying process steps and procedural requirements at each stage – streamlining the information required from the customer – to reduce the complexity of the IT solution.

Have the team carefully evaluate the possible integration options. The team will soon discover that automating inefficiencies embedded in historical processes is pointless. By first defining the best processes from customer, business, and risk perspectives, they can significantly reduce what needs to be automated. 

Integration is not straightforward. The team will feel pressured to integrate all end-to-end and back-office processes. All too often, internal customers push to automate everything everywhere as soon as possible, without proper planning and evaluation. These pressures spread IT teams thin, diverting their attention from the largest areas of opportunity. 

To overcome these obstacles, the team must design and orchestrate projects that are prioritized and sequenced for maximum impact on customers and operations. It also needs to define a vision for the IT ecosystem (both applications and infrastructure) that integrates a variety of system tools.  A successful ecosystem requires a thorough understanding of where time and waste can be eliminated. 

Once the team completes the design of the ecosystem, it can implement new processes in three-to six-month phases, which include a detailed diagnostic and solution design for each process as well as rollout of the new automated solution.  During this period, schedule daily huddles and weekly builds which can be immediately tested by users, to ensure that the solution can meet the requirements and keep users engaged.

Automating an end-to-end process in less than a year is not fantasy. In a competitive world, where managers need to find fast and economical ways to reduce costs, scale operations with the growth in the business and improve customer service, Lean implementation methods and a well managed project can deliver rapid results. These methods will deliver operational benefits while keeping implementation risks under control.  

Examples of real catastrophes: 

• https://www.theguardian.com/business/2017/may/29/british-airways-ceo-will-not-resign-despite-catastrophic-it-failure
• https://hbr.org/2011/09/why-your-it-project-may-be-riskier-than-you-think

Takeaway Questions:

• Have you decided whether processes should be fully automated, partially automated, or fully manual? Is the process too complex to automate? Does regulation required human intervention (e.g., the financial review process)? Is the process dependent on multiple human interactions?

• Have you designed the necessary computing, storage and security capabilities for your future state architecture?

• Have you built a business case for the project and defined the rollout plan?