Many companies struggle to optimize their information technology (IT) functions, and few understand how best to use IT to transform their companies. This is where MIT researcher George Westerman and his colleagues at the MIT Center for Digital Business (CDB) excel. The CDB focuses broadly on two themes: teaching senior executives to maximize value from digital technology within their companies, and using new digital technologies to drive new growth.
“The biggest challenge in IT is that business executives don’t feel they are getting the value they want, the responsiveness they want,” Westerman says. But his research finds that getting value out of technology is not an IT problem. Instead, it’s a management, leadership, and communication problem. “The way to solve IT problems is not to get new technology or even to get a new IT function leader,” he says. “It is to find a better way to communicate.”
Transparency drives communication
“When we see companies that are transforming their IT function well, the best process involves transparency,” Westerman says. “Companies need to be clear on what performance is, what costs are, and how they compare to one’s industry, and then be really clear on why they are investing in things, and then go back and see if they have what they expected.” Though it can be painful to insist on it, Westerman assures executives that transparency helps everyone know what is going on, so that they can have the conversations that drive positive change.
Westerman notes that companies with perceived-as-broken IT functions often suffer from one of three major mistakes business executives commonly make. Number one is to ask IT to be all things to all people. “There is real value in having a standardized platform you work on and then building some changes on top of that, instead of adopting varied technologies desired by different groups in a company,” Westerman says. The second offense is to ask IT to do it alone without executive involvement. “Instead, the real value is how you change your business because technology is there,” Westerman says. “It is reworking the way your processes go, and that is the business executives’ responsibility.” The third major problem is to ask IT to be effective on a shoestring. “If you are skimping on digital technology, you are skimping on a critical tool that everyone else is already using to go forward,” Westerman says. “It will only let your competitors get ahead of you.” In fact, Westerman suggests adding a little extra spending if IT is going well, since IT is a highly scalable investment.
Learning from the digital masters
Westerman and colleagues have identified a group of companies, the “digital masters,” that are getting 26 percent more profitability from their operations largely because they are managing their digital technology better. These aren’t just smaller-sized technology and software companies — they are also large companies that are creating a lot more value from digital technology, including social media, mobile, and data analytics.
Digital masters successfully perform two key essentials. One is that they invest in technology and increasingly do more with digital technology. The other — more important, according to Westerman — is that they are leading the technology, by having a strong vision and strong company governance, making the organization ready to change, and driving that change through. Digital masters excel in pairing their digital technology investment with strong vision and leadership.
Westerman cites Nike as a clear digital master. The company is end-to-end digital, from supply chain to design and marketing. It combines custom-designed social media with a digital supply chain. By creating its Nike Digital Sport group, Nike linked all of these functions together, and the company is able to launch more products, customize products, test new designs, and customize advertising to a highly personal level.
Caesars Entertainment is another digital master. Within a Caesars venue, customers are supplied with a concierge on their personal phones that immediately responds to any need, perceived or actual. And the largest copper company in the world, Codelco, is using digital technology both to track production in its copper mines and to update customers about orders. Digital technology also allows Codelco to use driverless mining trucks, and it may even help increase production while minimizing the volume of human activity underground and corresponding safety concerns.
Sponsored research and executive workshops
Companies come to the CDB with an interesting research question that translates into sponsored research activities. “The key reason people come to the Center and work with us is to put world-class management research from the Sloan School together with practical problem-solving,” Westerman says. “We approach it in a way to get some really great academic work done, and the sponsors get real value for their question or problem.” Nearly 20 companies across multiple industries have chosen to sponsor CDB research.
Research within the CDB involves both the IT professional with a problem to solve and the non-IT executive who suspects the company is not getting enough value out of IT but doesn’t know what to do. “Companies sponsor our research center to look at some of these challenges,” says Westerman, who personally leads a popular course at the MIT Sloan School of Management, “Essential IT for Non-IT Executives,” in which presidents, CFOs, and business unit leaders learn to perform their roles better and work more effectively as a team with their CIOs. Westerman also leads workshops where senior executives learn to drive technology value in their company and play their role more effectively.
“These executive workshops are fantastic because it brings everybody in a large company up to the same speed,” Westerman says. “They walk away empowered to drive change through the organization.” Westerman has summarized his years of research on the topic in a book, “The Real Business of IT: How CIOs Create and Communicate Value" (2009).