Researchers have shown that UK companies are still not making the most of information technology. What's needed is a new breed of manager, a hybrid who combines a knowledge of business needs with an understanding of the technology and its potential. Only when these are developed will companies get a full return on their investment in IT.
Local 24-hour filling stations that have turned themselves into corner shops as well have proved a hit with motorists. But the garages have not had an easy time of it.
Selling bread, milk and newspapers requires very different skills from ensuring your petrol pumps are safe and working properly. Garage managers have had to learn how to persuade customers to buy produce before the sell-by date and how to avoid running out of stock. Crucially, they have had to master the computer systems that make these tasks possible.
Esso is about halfway through a project to computerise its retail outlets. 'All stages of the project so far have been 100% on time and within budget,' says Ian Glenday, divisional director for information technology at Esso UK. In fact, during the past three years, every IT project at Esso has met its time and cost goals. 'Most companies are still trying to work out whether they have any projects that come into that category,' Glenday points out.
IT projects at Esso have been successful, Glenday believes, because the people leading them have all worked in other parts of the business. They are so-called 'hybrids' - people who understand the needs of the business as well as the technology and its potential. Glenday is a hybrid himself, having formerly worked as a refining manager and corporate planner. He had never done an IT job until he took on his current role. Hybrids are better able to take a business view, he argues. They can focus on what IT is able to do to further the business needs. Esso has cultivated such people for the past six years, and they now number 14 of the 18-member top team.
This expertise across the various managerial disciplines has enabled Esso's IT managers to understand that operational excellence is more important than pioneering technology. 'The need for safety demands outstanding service levels,' Glenday says. 'This may sound obvious, but in many organisations most of the IT effort is expended on romantic new developments rather than prosaic operational effectiveness.' The retail hybrids are familiar with shop managers' problems in coping with inventory control, he says. 'They also have direct experience of how easy or difficult these individuals find computers.' Esso's IT track record has gained it a place among six model companies identified by the IT Skills Forum, an industry-funded body aimed at seeking out good practice and sharing its discoveries with its members, each of whom pay an annual subscription of £14,000. The Forum was formed following a research study of 720 UK companies by the West London Training and Enterprise Council. It found widespread disenchantment with IT and a mounting number of aborted projects. Bad practice was rife because 90% of the companies did not have a core team of IT people to support them and were relying on suppliers for advice. Suppliers, meanwhile, were cutting back on support to save money, leaving users to learn on the job. Not surprisingly, companies weren't getting the best from IT, seeing scant return on investment.
Around 75% of the general workforce were found not to be using IT to maximum advantage, says the Forum's managing director, Meenu Vora, who conducted the original research. 'IT professionals were seen as cold, remote and bad at mapping technology on to business needs.' She concluded that bad training was largely to blame.
Little has changed since Vora carried out her main study two years ago. A recent survey (One Minute Briefs, Management Today, August 1995) found that 70% of users reckon their IT systems are not providing any return on investment. Between 30% and 40% of projects are reported to realise no net benefits, by any measure. Some 20% of IT spend is wasted, and only 31% of companies regard their experience as having been 'very successful'. In the words of Bill Brant, group IT director at Grand Metropolitan and chairman of the Forum: 'UK plc has got to be much better at exploiting IT if we are going to succeed in the 21st century. It is a matter or urgency for boardrooms throughout the country.' As one of its first projects, the Forum looked at a number of organisations which had achieved significant success thanks to their deployment of IT. In addition to Esso, these were Lloyds Bank Securities, Thomas Miller & Co (underwriters), HP Bulmer, EDS and John Laing Construction. Hybrid managers were prominent in all these companies, says Vora.
These six companies all promote the whole organisation as a brand, rather than specific products. And they are very focused on business alliances with suppliers and customers, and on using IT to support these relationships. They also exemplify the move towards virtual organisations, with employees coming together for specific tasks irrespective of their physical location.
For example, at Thomas Miller, which provides insurance services for the professions and the transport industry, staff have to work closely even when they are on opposite sides of the planet. One hundred of the firm's 500 employees are based in offices outside the UK base, ranging from the Far East to the US. 'The main challenge we have had to overcome has been to become a genuinely global business, not a multinational one,' says Mark Holford, group director of information. 'If I ring up the office in Hong Kong and ask someone to do something for me, I have to know that they'll respond immediately and not start wondering who will pay.' To make this possible, the firm has a global electronic mail network linking everyone in the organisation. The network makes it possible to run very small offices which wouldn't be viable if you had to do everything by telex or fax, says Holford. 'I can send a memo to all 500 staff at the touch of a button. Otherwise I would have to make 400 copies for people in the UK and send 15 faxes or telexes to different offices, probably finding numbers engaged or unobtainable. Then, at each end, the memo would have to be printed, copied and distributed.'
Now that the network is in place, it is also being used to create and share a growing database of corporate expertise. If an apparently new insurance problem is met, a staff-member can look in the database to see whether anyone else in the organisation has ever worked on a similar case. This avoids constantly re-inventing the wheel.
Holford is currently expanding the network - a combination of the Internet and dial-up lines - to move closer to customers and suppliers, many of which are small companies in far-flung parts of the globe. Proof that the e-mail system and global networks are working can be seen by the fact that if you took them away it would become impossible to run the business world-wide, Holford says.
Another characteristic of the Forum's exemplar companies is their ability to change. This is not in the manner of a conventional business process re-engineering exercise. Indeed, such schemes were seen as fatally flawed 'silver bullets' by the respondents in Vora's research. They are doomed to failure 70% of the time, the survey found. What the six exemplar companies demonstrate, on the other hand, is the useful ability to keep changing in harmony with the business.
Lloyds Bank Securities, for example, specialises in the increasingly competitive global custody market. Two years ago, when IT director Mike Overgage set about the development of systems to automate the labour-intensive process of managing portfolios on behalf of clients, he wanted the software to be capable of rapid development. The applications also had to be easy and cost-effective to maintain, for preference by non-technical staff.
In building the systems, Overgage was determined to avoid the lengthy 'Victorian novel' method of development whereby production work doesn't even begin until the users have signed off a detailed statement of their business requirements. 'Then, when the system comes back, it is often not quite what people wanted, even though it meets the specification,' Overgage explains. 'The result is frustration all round.' Instead, Overgage gets users to outline what they want and then passes it on for a rough version to be produced quickly by programmers - a technique known as Iterative Rapid Application Development. The idea is to produce a basic prototype which can then be shown to users for them to make comments and say what needs to be changed. The technique has enabled Overgage to make radical cuts in the time taken to produce prototypes and make changes. They can now be made in two days, or even in two hours. What's more, users can keep on changing their minds, making it easier to respond to changes in market demands.
Such good practices are not easily introduced, however. In the case of rapid application development, for example, there can be immense cultural problems, says Overgage. Many IT professionals feel uncomfortable with showing users systems that are still in the early stages of development. They like to come up with something that is as close as possible to the end result. Nor is it necessarily older people who find this difficult - often it is younger members of the team. 'We have to remind development staff continually that they should not be making design decisions,' Overgage says. '"Let the customer decide", is our constant rallying call. Get them to show you how they want to move the business forward.'
The other problem with this more interactive method of development is that users may be reluctant to put in the time required. It is not as though they can just take home a printout to check over the weekend; they have to be available to look at and comment on each version of the system on screen. Direct feedback is essential, but getting this level of input from users can prove difficult.
Being at the 'bleeding edge' of technology can also be painful, says Holford, whose constant battle is to ensure that the telecommunications links for the global network are fully operational. He also finds it tough coping with problems on the world-wide network from his office in London. 'Very trivial things can make everything go wrong,' he says, with obvious frustration. 'Someone installing a flying-toaster screen-saver can knock out a whole system, but you often can't see the cause of the problem when you're operating from a distance.' Even creating hybrid managers is a tough task and one which cannot be achieved overnight. Such people, by their very nature, take time to grow. You have to be able to stick with a decision to cultivate hybrids for the long haul, says Glenday. 'It often means moving people between departments and you won't see the benefits until six months after you're committed to it.'
However, the Forum members clearly believe the benefits of good practice outweigh the problems of introducing it, and are determined to learn from each other. GM's Brant is particularly keen on the Forum's aim to demonstrate how business managers can get a better understanding of IT and to provide a road-map for members to follow. This will be invaluable for GrandMet, says Brant.
'Some parts of the company where a knowledge of IT is already present, such as the Burger King chain, have been very successful,' he says. 'But where people are more resistant, it is a real struggle to get them to see the opportunities.' The Forum also aims to develop a systematic way of defining and evaluating IT skills for managers at various levels. Brant is looking forward to using it as a basis for the management development programme at GrandMet. 'Some of my general managers need more in-depth knowledge,' he explains. 'Others can take the high road.' The Forum guidelines should cover 80% of what's needed, Brant reckons, with the rest being developed to suit GrandMet's specific requirements.
Richard Sykes, head of IT at ICI, also hopes to benefit from the Forum's skills stock-taking system. The IT section at ICI had developed a bad reputation, says Sykes. 'It was seen as costly, over-staffed, not very good at solving problems, and short of people who could understand what applications were needed to improve business performance.' The Forum's work should help create the all-important hybrids. It won't be before time. 'We are short of such people,' says Sykes. 'Over the next year or two we could fill up to two dozen such jobs, but it will be quite hard to find them.' Spreading the word about good practice isn't going to be easy, as the Forum members are well aware. But they believe it has to be done. And they recognise that, individually, they cannot create enough hybrids to go around. By highlighting the need, they hope more organisations will pick up the challenge. That way there might be some hope that boardrooms of the future will be just a little less disillusioned with IT.