Cost reduction projects are the easiest to measure, and therefore, the CFO's favorite. One of my favorite cost reduction tools is robotic process automation (RPA). RPA automates repetitive and mundane tasks by replacing work done by people with a software bot. For example, a bot can be programmed to log into a financial system, look up a past-due amount for a customer, format a personalized letter requesting payment, and email that letter directly to the customer. The first time I implemented RPA, I feared a backlash from the people doing the work manually. However, the opposite happened: because the bot replaced the most boring and thankless tasks, people were thrilled and thankful for RPA. Employees could now dedicate their time to more meaningful and fulfilling work.
Increase Revenues and Enable Opportunities
If a company’s bottom-line projects are the CFO's favorites, then top-line projects are the CEO's favorite. Projects that increase revenue have much more upside. The sky is the limit on top-line growth. A project that delivers new capabilities can put you ahead of the competition and increase your market share.
In the heat of the Coronavirus pandemic, Vitamin Shoppe commissioned a project to sell on Instacart. Instacart allows a customer to order products on their phone and have them delivered to their home the same day.
It took fewer than 90 days to implement the Instacart project with an exceptional ROI. This is IT at its best. If the tech team had been overwhelmed with KTLO, this project wouldn't have been sanctioned. If IT was over-budget on its capital expenditures, this project wouldn't have been sanctioned. If the prioritization process had been inflexible, this project wouldn't have been sanctioned. And if IT wasn't agile, the project wouldn't have been completed successfully and ahead of schedule.
Some IT projects are known as opportunity enablers. Although these types of projects don't have a direct ROI, they are necessary prerequisites to projects that do. A good example would be a content management system for your company's website. The content management system will enable the company to personalize experiences for its customers. Personalization is the real value creator, not the CMS system, itself, that enables personalization. Be sure to combine these types of projects when computing the project's true value.
Reduce Risk
Risk-reduction projects don't directly add to the top line or the bottom line, which sometimes makes them harder for CIOs to justify. Do not let this deter you. Reducing risk is an important undertaking, and projects that reduce risk are arguably more important than projects that fall into other categories. On the infrastructure side of the house, risk-reduction projects include upgrading to supported operating systems, building out redundancy for your network and servers, implementing cyber-security tools, and moving key workloads to the cloud. Applications also benefit from risk reduction efforts. Building fallback systems, modularizing code, and test automation are examples.
Major system failures are costly and embarrassing to companies and harm the reputation of the CIO. Don't wait to reduce risk until after an incident occurs. A mature enterprise risk-management process will help you identify areas of concern for your particular situation.
9 Let's Innovate
To successfully innovate, organizations first need to achieve the bottom three steps of the Laudato Hierarchy of IT Needs: keep the lights on (KTLO), operate a lean and efficient IT Department, and create value for your business.
To foster innovation, you need stable and affordable systems, a process to prioritize projects, and a method to deliver those projects successfully. When IT is a well-oiled machine, it is ripe for innovation, and giant leaps forward will occur. Welcome to the top of the pyramid. As shown in Figure 9.1, it’s time to innovate!
Figure 9.1 Laudato Hierarchy of IT Needs
© 2017 Andrew Laudato All Rights Reserved Hierarchy of IT Needs
In 2010, we implemented point-of-sale email receipts at Pier 1 Imports. I was quite excited, and at dinner that night, I bragged about it to my teenage daughter. She looked at me and said, “You didn't already have that?” Clearly, she was not impressed. Omni-channel capabilities like buy online, pickup in store (BOPUS), curbside pickup, ship-from-store, and universal returns don't impress anyone these days. In healthcare, online records, electronic scheduling, and telemedicine are the new norm. Yesterday's innovations are today's expectations.
To invest in innovation successfully, you must be willing to develop an innovator’s mindset, dedicate resources, and embrace risk. Only then can you move on to generate ideas, prototype, and turn your vision into reality.
Develop the Mindset
In most companies, especially large ones, a return on investment (ROI) calculation is performed before a project is undertaken. Risks are documented, and contingency plans are drawn up. A project is treated as an investment, and a solid return on the money is expected. Sure, there are consequences for failure: When a project fails, people lose their credibility, their funding, and sometimes even their jobs. However, if you want to be an innovator, you must take calculated risks. When you're able to consider a failed project a valuable learning experience, you have developed an innovator's mindset.
Dedicate Resources
Companies don't innovate; people do. For innovation to work, the company must create a nurturing environment. Sticking a group of people in a room and telling them to innovate is no better than putting a seed on a concrete floor and telling it to grow.
What if you took your best and brightest people away from their day jobs and had them focus 100% on innovation? To even approach this discussion, you must have an extremely reliable infrastructure, a well-managed IT budget, and a steady stream of value creation. In other words, before a CIO can ask the CEO to allocate people and money for a high-risk venture, things better be operating smoothly. On the other hand, if you can only spare the new person and a few interns, your innovation will fizzle. When you're overly reliant on a guy named Brent7 to keep your systems running, there's no chance he can be assigned to an innovation project.
Embrace Risk
Innovation doesn't exist without risk-taking. If you truly expect to innovate—and to thrive, you better innovate—you must embrace the idea that many of the initiatives you support, fund, and advocate for will be abject failures.
This goes back to the Laudato Hierarchy of IT Needs pyramid: when your foundation is solid, your IT costs are low, and your team is constantly delivering value, you have earned the right to take risks. When taking on a high-risk endeavor, be clear that there is a good chance it may not work. Be confident that the upside is worth the risk, and only gamble with the amount of money you can afford to lose.
When you examine today's most successful companies, you can easily correlate their results with their willingness to embrace risk.
Idea Generation
When you're in a good place to innovate, you need to generate ideas. Here are some thought starters on the best places to find ideas:
Talk to your front-line employees. The employees who deal directly with the customers understand the customer best. Sharon Leite, CEO at Vitamin Shoppe, holds roundtable discussions with store, distribution center, and corporate employees. This keeps Sharon close to the team—and