Boardroom debate: Following the herd can lead you astray

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I do not want to be the bearer of bad news, but I think there is sufficient economic uncertainty for it to be prudent to revisit our strategic objectives.

There is a tendency for business leaders to mimic their peers: following the herd is a safety mechanism. Should the herd start running, one instinctively follows, regardless of the threat. More often than not this makes sense, unless the threat has changed but the herd responses have not.

So we see talk of innovation and competitive advantage instantly replaced by sustainability and survival. “Bringing costs into line with revenues” becomes the new mantra.

But what if this impending recession is actually one of a series of seismic adjustments that can be attributed to inevitable realities such as globalisation or the web? If so, then simply battening down the hatches until the storm blows over is at best a tactical response and at worst one that might permanently damage an organisation’s ability to cope with turbulence.

While the IT budget might look like a soft target, particularly given the difficulty some CIOs have in expressing the value their budget delivers, it is recommended that you take a more circumspect approach before reaching for the scalpel.

There is a great temptation to terminate any IT initiatives that relate to innovation and move attention to projects that drive costs out of the business. But the role of innovation in business is to deliver better, yet affordable solutions for the business and its customers.

The fact that it is unclear when there might be a return on this innovation investment should not be reason to abandon it – periods of inactivity do not just halt progress, they reverse it. Fair weather innovators, like fair weather athletes, never reach their full potential.

Organisations that perceive investment in the innovative use of IT as “a nice to have” will slip down the leader board. Their smarter competitors, through the innovative use of IT, will change the rules of the game and shrewd investors will steer clear of companies that appear to have assumed the “crash position”.

Of course, one cannot turn a blind eye to IT when it comes to driving down costs. Cost management should be no more seasonal than innovation. But organisations often lurch from one to the other depending on the economic climate.

A downturn provides the right conditions to fix inefficient business processes and make changes. For example, given the amount of power the IT function uses, it seems appropriate to give the CIO responsibility for paying the electricity bill. There is much scope here for driving down IT power costs.

The IT function can also advise on process improvement and deliver an automated solution. In fact the IT function itself needs to review the efficiency of its own processes.

It should consider a web-centric future. Those organisations that work towards this model, regardless of economic climate, are most likely to have a future. Thus all initiatives involving the web – including supply chain management, brand management and collaboration (both internally and with the wider world) – need to be kept on track and not fall prey to the cost-cutting scythe.

It is also worth reflecting on what constitutes the core business. If someone else can do something more effectively, it is reasonable to outsource that element. If IT is seen as an ancillary function whose role is purely to provide e-mail, security and data access, many third party providers have the economies of scale to provide a more cost-efficient approach.

Alternatively, if a company believes IT has the power to future-proof its business through improving the productivity of its users, enhancing the customer experience and reducing the cost of doing business, it needs to consider its options carefully.

The IT industry has suffered heavily in past recessions, where new technology was seen as an optional extra and thus easily discarded. More recently, IT was seen as sufficiently non-core to be happily handed over to an organisation that could do it at lower cost.

Enlightened business leaders will see economic clouds as an opportunity to steal a march on their competitors. They also recognise that IT has a critical role to play in providing the tools to achieve this.

Herd behaviour thus is of limited merit in a rapidly changing environment. In any case, herd theorists will no doubt be aware that those who choose to follow the group spend most of their time wading through the mire.

Ade McCormack is founder of Auridian (www.auridian.com) and author of ‘The IT Value Stack – A Boardroom Guide to IT leadership’.

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