A Brief Early History of the IT Organization

 (note: This is the first in a series of posts on the topic of the Strategy-Focused IT Organization)

Many date the modern use of information technology to the introduction of the general-purpose IBM 360 computer in 1964. Organizations quickly realized that computer technology was a path to direct money savings, with the ability to quickly automate routine and time-consuming tasks such as accounting and payroll and inventory control.

As the large corporations that could afford mainframe computers began to embrace and employ the technology, a curious thing happened. The technology didn't manage itself. Suddenly there were decisions to be made that required expertise and technology beyond simply operating the machines. A new profession, EDP (alternately, MIS, information systems, information technology, and finally, IT) arose during the 60s and 70s. When I first started working with computers in 1978, whole information technology departments with management and staff organized according to job function and technology discipline had arisen inside corporations.

Early decisions about employing computer technology were very different than today. These decisions generally had to do with making the a choice whether to take an existing manual process, and use the computer to automate it. These simple cost-benefit decisions could be made on the basis of the large upfront investment amortized over the expected savings on an ongoing basis to reduce labor. More sophisticated organizations recognized that the labor charges was not a direct reduction because at the same time they were replacing legions of relatively low point low-paid clerical employees, they were hiring technology professionals with scarce skills who commanded higher salaries to match.

As the use of technology grew, so did the profession of technology management and the corresponding information technology organization inside the enterprise. There was little guidance about how to manage the technology beyond that offered cheerfully by the hardware and software vendors, who had a clear vested interest in influencing the way companies organized and managed their use of technology. With vast sums being spent on the technology, the technology vendors increased their efforts to have an influence on the design of the IT organization. At the core of the information technology organization was computer operations; running the expensive equipment on a day-to-day basis (which often required considerable skill), as well as maintaining and installing equipment; in short "keeping the lights on."

Although computer hardware vendors, like IBM and Digital Equipment Corporation, provided operating systems, rudimentary systems management utilities, and even applications, the norm during the 1970s and 80s was for companies to substantially write their own computer applications with in-house computer programming staff. The emergence of the role of computer programmer as a sought-after desirable professional took place during the 1970s. Methodologies for developing computer applications arose, while the cost of doing so escalated with ever more comprehensive complex applications that were highly specialized to unique businesses.

During this period the use of technology evolved from being simple replacement for labor to being the essential driver of business processes. The insurance company that I joined in 1978 depended on its computer systems on a day to day basis to process premiums, issue new policies, process claims, and account for the financial condition of the firm. Naturally these functions were seen as operational in nature, as opposed to being strategic. Technology certainly wasn't looked upon to drive decisions about what the business itself would do next.

Things are very different today. Information technology is so intimately woven into the very fabric of value creation in every enterprise. To change the way the firm creates value requires change in the technology itself. The value proposition of the firm often directly depends upon, and would not otherwise be possible without, the information technology.

(read the next article in the SFITO series)

Numbers, Perception, and Motivation

I was reminded a while ago that how we look at numbers really affects how we consider the rationale for a proposed change. Congress is currently considering legislation to provide consumers with vouchers of up to $4,500 to scrap their gas-guzzlers and replace them with more fuel-efficient cars.

Here was an excerpt of the proposal:

Light-Duty Trucks: The old vehicle must get 18 mpg or less. New light trucks or SUVs with mileage of at least 18 mpg are eligible for vouchers. If the mileage of the new truck or SUV is at least 2 mpg higher than the old truck, the voucher will be worth $3,500. If the mileage of the new truck or SUV is at least 5 mpg higher than the old truck, the voucher will be worth $4,500.

Wow. It sounds like a windfall for a very slight improvement in gas mileage. But it may be because we are looking at fuel efficiency backwards. Americans evaluate fuel efficiency different than how those do in most other parts of the world.

MPG (miles per gallon) implies that given a fixed amount of gasoline, and we drive as far as we can on that fixed amount. In reality, we usually drive a fixed amount of miles (as a function of commuting patterns to work or school, etc.), and change our driving habits only slightly in response to more plentiful (e.g. cheaper) gasoline.

In Europe and elsewhere, consumers consider the ratio in reverse; quantity of fuel consumed per each fixed distance driven. So let’s use a nice round number of 10,000 miles (roughly the average passenger car distance driven in a year), and consider consumption in GP10kM (gallons per 10,000 miles).

One can save about 100 gallons by upgrading from 18 MPG to 22 MPG, but only about 28 gallons by going from 36 MPG to 40 MPG. This is not a revelation, just a different way of looking at the same information. Watch the four minute video:

The U.S. auto industry has resisted using fuel per unit of distance ratio in favor of distance per unit of fuel ratio to describe fuel efficiency. This may have led to the proliferation of inefficient cars in the U.S. (and perhaps indirectly the stress on the U.S. industry). Researchers at Duke University argue that the EPA should provide consumers with additional GPM information along side MPG when making auto purchase decisions.

What's the takeaway? Measurement is an important part of motivating people to change. How we present measurements affects perception and behavior. Tenacious change agents in organizations will challenge traditional performance measures and ask what behavior is each measure motivating. Traditional measures promote the status quo, and new measures are needed to drive change.

The Tenacity of the Tortoise

Leaders seeking performance improvement are often unrealistic about the capacity for change in their organization. Each change initiative is undertaken with urgency. Tangible results are elusive. Patience runs thin. Good intentions are thwarted by impatience.

Members of their organization know the tune, and are tired of the dance. Why change, when last year’s initiatives have been abandoned? Apathy and cynicism are widespread. Leaders are seen as lacking the determination and the patience to stay with a good program long enough to see results.

One of the greatest challenges in counseling leaders is to gain their buy-in for the long haul. “I like everything about your plan except the part about going slow!” said one memorable client, and I was quickly reminded of Aesop’s fable of the Tortoise and the Hare:

One day a hare saw a tortoise walking slowly along and began to laugh and mock him. The hare challenged the tortoise to a race and the tortoise accepted. They agreed on a route and started off the race. The hare shot ahead and ran briskly for some time. Then seeing that he was far ahead of the tortoise, he thought he’d sit under a tree for some time and relax before continuing the race. He sat under the tree and soon fell asleep. The tortoise, plodding on, overtook him and finished the race. The hare woke up and realized that he had lost the race. The moral, stated at the end of the fable, is, “Slow and steady wins the race.”

The tortoise was an easy choice to symbolize the necessary work of change in every organization. The tortoise is not about slowness. He is all about patience, determination, clarity of purpose and goal, focus, strength, wisdom, longevity (some are known to have lived over 200 years), and success (many species date back to before the dinosaurs), a bit of stubbornness; in short, tenacity.