IT Must Think About Stealing Market Share, Not Just Keeping Lights On

Stealing market share from competition is what manufacturing companies are constantly worrying about. Dale Hagemeyer, Managing VP, Gartner, in discussion with Biztech2.com, outlines how IT can help them gain competitive edge. He also stresses on the importance of why IT should figure out how to grab market share and not wait for the functions to tell CIOs what they need.

Do you think IT in manufacturing has been more supply chain-centric rather than being customer-centric?

Yes, it has been. But think about it, by 2008-2009 we saw we were in a downturn. That’s the time when companies needed to tighten up. They had the production schedule coming down, requiring scaling down and cutting back on supply chain. And, hence the focus on supply chain-centric IT.
But, one must now realise the fact that if we have managed supply chain effectively over the last three-four years, there probably isn’t that much efficiency left to wring out of supply chain. In 2008, when demand and supply were very far apart, companies started becoming more efficient on the supply chain front. After two-three years of doing that the lines have come closer, and I don’t think that there is that much more value around supply chain for many companies now.

They key now is how you can steal the market share that exists from competition. This requires the CIOs to move from a supply chain-centric IT to customer-centric IT. However, I would also like to add here that the two are not mutually exclusive.

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What challenges do manufacturing CIOs face today?

IT today doesn’t have a seat at the table. Whereas, when you see the sales, marketing, supply chain, and finance functions, then each of these reports in to the CEO. The way it works is that these functional heads meet together with the CEO, understand the company’s vision, and then call IT to help them with what they are going to do.

Right now most IT set-ups within the enterprise are being perceived as technology trolls that tell ‘why I can’t do this or that’. For instance, if the marketing function comes up and says that it wants to explore social then usually IT’s response is ‘you can’t do this’ as opposed to saying ‘we are going to drive this business forward’ and ‘yes, we can do that for you’, ‘we can help you with that’, ‘let’s prioritise about the solution’. And, that’s because they get caught up in brands, and also because investing into the technology means taking a risk.

So, what are your suggestions for the CIOs?

The way forward for the IT organisation within the enterprise is to proactively start looking out for what are those key initiatives that the various functions are working on, and work itself into the needs of these functions. The big word here is competitive advantage. So, it’s basically figuring out what is needed to steal market share away from competition and not wait for the functions to tell you what they need.

For getting there IT needs to start focusing on the business problems and business opportunities as opposed to keeping the lights on. CIOs need to be very well versed so that they can go to any of these functions and suggest them the ways to drive their business forward. As a CIO you should set up the IT organisation such that you have your feelers into the entrusted members of the sales, marketing, supply chain, etc. and ask them open ended questions: like, tell me about your pains, what’s causing you to not meet your quarterly objectives, what are you working on, etc.

Overall, CIOs need to drive home the fact that there is a technology component to every business process, and that for almost every business problem there is a technology component of the solution. At the end of the day I see the CIO as a hub and spoke sort of organisation - the CIO being the hub and spokes support the various functions like marketing, sales, supply chain, finance, etc. This helps build a case for CIO reporting to the CEO.

How does IT evolve to provide competitive edge to manufacturing companies?

In the manufacturing world just having an ERP or transactional systems in place doesn’t really provide much of a competitive advantage. As the companies do the transactions - take orders, take complaints, whatever the case may be - they need to start analysing those and assume the capabilities to look at these transactions and be able to say whether they’re doing better or doing worse. Analytics is a key piece, and once the organisations are analytical they can begin to optimise their business process.

Being analytical, simple stated is understanding the past. It’s a filter for the past historical data. Optimisation is talking about what should happen - it’s the future. Use the past data to predict the future: what’s the right price point, what’s the right product, where is the market going? And, then in a while being able to do it more real-time, thus taking the latency out of the system. I don’t mean to demean the role of transactional. It is the base foundation and you can’t live without it, but it’s not a differentiator. You need to keep building on that.

The focus on the transactional systems is more prevalent in the manufacturing set-up, and more so in the Indian market because of a lot of CIOs reporting into finance. Then, there is also the challenge of budget constraints as the move up from transactional systems requires investments.

How do the CIOs make this transition from where they are currently to where they need to be?

From being not at the table and totally reactive, wherein executives come out of the meeting and tell you what they want, the next level is trying to be more involved, and trying to help them with their problems. Still somewhat reactive, but engaged. The next level is being actually proactive and recognised among the business. These are the three stages across which the manufacturing CIOs move.

What should the CIOs not be doing?

A hitch that I see is that CIOs consistently tend to get too focused on brands. More often than not when the business comes up with a need, IT immediately goes to the brands and buys everything they can from one vendor as opposed to what’s the right fit. And, that’s because they are not comfortable in a world that is outside of those brands. While brands is IT-centric, needs is user-centric.

Many a times the business might need to go in for the best of breed. But, the classic conundrum one experiences with the best of breed is the need to do some integration, and you are going to have a brand that you are not totally familiar with. And, that means taking some risk.