Baylor University || Baylor Business Review || Enterprise Decision-Making (original) (raw)

Business leaders face a paradox today, one that can define how a company will fare when the economy begins to grow again. Many of today's executives - the CEOs, CFOs and CIOs of companies large and small - are products of American business schools in the 1970s and 1980s. Back then, we were taught that during a downturn you pull back, stop spending and essentially ride it out.

Not only does that advice not make sense in our current reality, companies following it right now - in 2003 - will see no better than mediocre results when the economy rebounds. Instead, the companies that are continuing to drive process and technology change throughout their organizations are not only going to be winners when the economy rebounds, they are winners now.

FedEx is effectively navigating this paradox, using the current economic downturn as an opportunity to advance on the competition, gain market share and prepare for the stronger economy ahead. Its performance has continued to be strong.

FedEx knows an important truth: in the current environment, business leaders must use information more effectively than ever before. The way FedEx does that today is a competitive advantage - information and the use of it to drive business results is so ingrained, it's part of the company's DNA.

Five years from now, an integrated approach to enterprise decision management will no longer be a competitive differentiator, but a simple requirement. Companies that aren't already evolving toward this vision today may be too late. Vision and leadership, not technology, are the crucial components of an enterprise approach to decision management.

Riding out the Economic Downturn. Many companies are taking the 1970s business school approach to operating in this difficult economic environment, hoarding cash and reducing or delaying capital expenditures.

The sad fact, though, is that companies that think this cautious approach will allow them to "live to fight another day" may already be doomed. A 2001 Mercer Management study tells the grim truth. Companies that went into the 1980s recession with this approach may have survived, but they didn't emerge strong enough to take advantage of the explosive market of the 1990s.

Of the 700 companies surveyed by Mercer Management, 80 percent of those that "played it safe" during the 1980s recession experienced an increase in market capitalization of only 20 percent or less during the 1990s, a decade in which the NASDAQ grew by more than 250 percent. Playing it safe, it turns out, is not safe - it's dangerous.

Advantage: Innovators. Even though the economy is still struggling, smart business leaders are moving to take an innovator's advantage. Companies that want to make a quantum leap forward need to do it now, not six or nine months from now when the economy improves. A true enterprise decision-making platform - an enterprise data warehouse like the one FedEx uses to run its business - is built, not bought. It can take six to nine months to put this kind of platform into place. Starting now is imperative.

Like the companies in the Mercer Management study, the bet-your-business decisions you make now will have a multiplying effect in the long run, particularly if your competitors are frozen in their tracks waiting for the economic rebound. Innovation becomes the key to strengthening your assets. Companies that want to grab the lion's share of growth when the market rebounds are investing today in their businesses, specifically in the processes and technologies that enable better, faster, more accurate decision-making.

Rapid-Cycle Decision-Making. Why do organizations need better decision technology? Recent research by NCR's Teradata division illustrates the challenge. Of over 900 senior business executives and IT workers surveyed during the past two years, 85 percent said that the number of daily decisions they must make has increased over the previous year. At the same time, 65 percent reported that they have less time to make those daily business decisions. More decisions in less time could spell disaster for companies not prepared to facilitate great decisions quickly at all levels of the business.

While employees are making more decisions faster than ever before, the data they must analyze to make those decisions is growing exponentially. In fact, more data will be created in the next three years than in the last 40,000 years of our planet's history. Of the international business executives and IT professionals surveyed by Teradata, 57 percent said that the amount of data they must deal with has doubled or tripled in the past year.

Successful businesses are turning all that data into relevant information and getting it into the hands of the employees who need it to make good decisions. Rapid-cycle decision-making must be simplified for the employee who is customer-facing, and it must happen quickly.

The company's collective wisdom should be available in one single view of the business that is accessible to front-line employees. Without that collective wisdom, you may be unable to analyze a decision until days after it happens, far too late to ensure the right decision is made. Sub-optimal decisions result when a decision misses the customer window or meets the customer window but is not profitable for the company.

Fractured Decision-Making Environments. A second standard business school doctrine is having an impact on how companies today manage their customer information. In most business schools, managers were taught to drive decision-making into the organization and make decisions at the lowest level - closest to the customer. Many companies reorganized to reflect this belief.

Organizationally, it makes sense to empower front-line employees to make good decisions and put them in organizations that foster creativity and innovation. From a data perspective, though, if companies allow information to become siloed in fractured decision-making environments that don't communicate with each other, the entire business suffers.

Many companies' decision-making environments reflect this fractured approach. In some large organizations, department after department has created separate small databases (known as data marts) to support disjointed operational systems. Vital information - correct and incorrect - exists in dozens or even hundreds of separate, unrelated data marts making an integrated view of the business impossible.

Vision and Leadership. Oddly enough, information silos exist for reasons that have nothing to do with information technology. Individual departments often have little control over the budget for an enterprise-wide approach to information management, but a great deal of control over the budget for their own silo within the company. Breaking down the organizational barriers is often more difficult than surmounting the technical ones.

The exciting news is that an enterprise approach to information can actually drive individuals within an organization to work differently with one another. FedEx experienced this phenomenon when itsimplementation of an enterprise data warehouse allowed users to "unlearn" traditional constraints in order to conceive and ask breakthrough questions. Strategies like these must be devised, promoted, budgeted for and driven by the company's leadership team.

Economic Rebound. Regardless of when and where the economic recovery begins, the companies that take best advantage of a return to economic health will be the ones that have already fueled their businesses for new growth and new markets.

Leadership, vision and the strategic use of information can drive exceptional, take-charge customer decisions. This is how companies become unbeatable giants. The technology and information exist - they are just waiting for leadership.

Mark V. Hurd is president and chief executive officer of NCR Corporation. He is a 1979 graduate of Baylor University.