Information Technology and the World

The name of this blog, Information Technology and the World, may seem grandiose. It probably is, but then my plans for it are also grandiose. I want us – you and me – to explore three issues: (1)the impact of information technology on business and society; (2) the impact of society on information technology; and (3) the lessons that each domain can teach the other, including both the possibilities and the limits of what technology and society can accomplish.

Location: Chicago, Illinois, United States

I have worked in construction, petroleum, software and consumer electronics. Professionally, I am a physicist, and engineer, and an IT professional.

Wednesday, February 28, 2007

Save Money the Easy Way – Stop Doing Useless Things

Most organizations spend a lot of time and money doing things that are totally useless, and they don’t even know it. If you eliminate these things, you can save a lot of money, with little up-front expense. It is not hard to identify these opportunities, but it takes some effort and a lot of courage to eliminate them.

In the days of mainframe computing, one of the biggest tasks at the computer center was printing and distributing reports. Large companies had multiple high speed line printers (24,000 lines per minute was a standard speed) and platoons of messengers with carts to distribute them.

Everybody knew that most of these reports went unread, (there weren't a lot of 24,000 lines per minute readers) but most users were unwilling to give them up just in case they were needed. So some CIOs (then known as data processing managers) developed the tactic of simply not printing some arbitrarily chosen set of reports for a month or two. If no one complained, he permanently deleted the reports and proceeded to the next set. This continued until the complaints started. The computer operations departments saved a lot of money and the businesses got along just fine.

This particular problem ultimately went away as online systems and desktop displays made most printed reports obsolete. But there are a lot of other activities that are equally useless and are carried on because no one has had any incentive to curtail them. Here is one example.

I did some business process consulting a few years for a company that had headquarters in the United States and did business in about twenty-five companies around the world. In the course of our analysis we found that all sales contracts above $10,000 from one of the overseas offices were routinely sent to headquarters for approval. Our analysis showed that if the local approval limit were raised to $50,000, about 90% of the headquarters work would disappear, yielding substantial savings in time and money with very little added risk.

We recommended this change to management and were told that the local approval limit already was $50,000 and had been for a number of years. Further investigation showed that on one occasion, five years before our study, a contract approved locally had gone bad and local management had been blamed by headquarters. Local management took the understandable position of “never again”, and routinely sent everything above $10,000 to headquarters just to play it safe. Locals were protected, but the company spent a lot of money on useless work, and customer service suffered in the bargain.

This a common situation. A one-time problem arises and a business process “fix” is installed. The fix becomes permanent and continues long after the original problem has disappeared. The first task is to identify these things and kill them.

The standard way to go about this is business process redesign. (We don’t call it reengineering any more because that has become a four letter word.) But that is an extensive and expensive process. The trick is to pick a place to begin where you can see some immediate benefits, benefits that you can get without spending much time or money.

Here is one way to start. Ask each of your workers to identify the three most useless things they do. Use the results to decide where to start. Then pick the low-hanging fruit – the easy wins. When you have completed that process, you will know enough and have saved enough money start a real business process design project.

Or not. In many companies your can find enough low-hanging fruit to keep increasing your profits for a long time without ever going through the pain and disruption of a major business process redesign.


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