Fighting IT’s “The Grass Is Greener” Syndrome

by drjim on August 28, 2008

When an IT department lets a business leave its core market to seek higher profits, the company can stall.

When an IT department lets a business leave its core market to seek higher profits, the company can stall.

Businesses and IT departments can be going along just fine when all of a sudden, the business goes into what is called a “stall”. Just like being in an airplane that goes into a stall, this is by no means a good thing! When a business goes into a stall, more often than not it won’t recover. The most dangerous part about a stall is that you don’t see them coming – everything is fine until it isn’t. We’ve talked about some different causes of stalls including having a premium product; however, there’s another reason and the IT department plays a big role in this one.

Most companies have a small set of products or markets that they currently serve. If the company is successful, then they are probably doing a good job. The IT department has probably become optimized to support both the products and the teams that are serving these markets. All is good. Then the “… grass is greener on the other side of the fence…” syndrome strikes senior management and they decide to take the company in a new direction in order to pursue more profitable markets. Of course what this means is that you need to abandon the core markets that are currently serving you so well. By doing this you won’t be able to exploit any future growth that occurs in your existing markets.

Now lets be honest here, these kinds of right hand turns made by businesses rarely show up all that dramatically – at first. Instead they have a habit of sneaking in from the sides as purchases of other companies or top down mandated growth initiatives in brand new areas of business that seem to have nothing to do with the company’s current customers, or products, or partners (can anyone say “Ebay buys Skype?”).

If you are looking for proof that this kind of abandonment of successful markets still goes on in today’s modern business environment, just open the paper and see all of the articles that are talking about public companies being bought out by private equity firms. Clearly something went terribly wrong and outsiders were able to step in. In almost every case when this kind of takeover happens, the new owners of the firm will implement a strategy for returning to what originally made the company successful and growing the core again.

Why do companies and their IT departments make these mistakes? There are two primary reasons. The first is that the company mistakenly believes that their core market(s) has become saturated. This belief is due in part to the information that the senior management is receiving from the IT department. It’s the CIO’s responsibility to evaluate the data that his/her department is producing and understand what it is saying. Just because it looks like a market is all tapped out, does not necessarily mean that it is so. Instead, this is when the CIO needs to work closely with the marketing team to find different ways to measure the market.

The second cause of a firm leaving a successful market is because they feel that there are operational impediments in their core business model. This happens when senior management just despairs of being able to solve business problems that are currently confronting the company. Instead of trying to solve them, they instead decide to move to other markets which won’t have the same problems. Once again, the CIO and the IT department play a big role in this decision. There should be no business problems that the IT department can’t help the rest of the company come to grips with. Whether it’s tracking sales and who is buying products more closely or collecting data on how the competition is doing, the IT department can help to create solutions to almost any business problem.

Leaving a successful market is never a good idea. IT staff should be on the alert whenever they start to hear the word “mature” being used to describe the company’s business situation. IT has a role to play in making sure that the company sticks with markets and customers that will serve it for a long time.

Have you ever worked for a firm that left it’s successful market in search of greener pastures? How did this all turn out in the end? Has a IT department in which you worked ever been able to stop a company from making a bad business direction decision? Leave a comment and let me know what you think.

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{ 3 comments… read them below or add one }

Jay August 29, 2008 at 4:41 pm

Hrm… this topic seems more attuned to strategic management than IT specifically. Of course, it requires some subtle shifting of terminology, but the content is all there.

“The IT department has probably become optimized to support both products and the teams that are serving these markets.” Isn’t that what they are supposed to be doing? I think the more relevant point here is that the company institutionalizes the processes, and standards in such a way that it forms core competency rigidities. This tends to negatively impact derivative innovations within that market so that employees discontinue questioning the norms when creative opportunities present themselves. So even if the IT department is providing efficient and effective data to support shifts, the culture, tacit knowledge and skill sets have been hobbled by infrastructure.

Shifting from one market to another is definately the discussion domain for strategic management. Realizing a present-state, envisioning a future-state, and forming goals to facilitate transition all fall into place. Identifying/qualifying core competencies should be a fundamental first step in assessing a new market penetration plan.

Failing to do so will only increase the possibilities of failure. Core competencies are considered by many as the most significant value-creating skills and represent key areas of expertise which are distinctive to a company and critical to the company’s long-term growth. Entertaining projects or markets that are ‘competency-destroying’ are rarely a good choice. Successful companies are often able to differentiate themselves from their competition in how well they locate, leverage, and combine their available explicit knowledge with internally generated tacit knowledge.

Qualifying core competencies has already been researched and defined by Prahalad and Hamel related to 3 competency tests:

“1. Is it a significant source of competitive differentiation?
2. Does it transcend a single business?
3. Is it hard for competitors to imitate?”

Teece and Pisano produced research that notes, “a particular firm’s path dependencies related to innovation patterns are not just technologically determined. Paths are identified by technological paradigms and trajectories and constrained further by the complementary assets the firm has already built or can readily acquire. Establishing assets directly affect the decision-making calculus by reducing the actual or perceived relative costs of ‘close-in’ innovation alternatives. These assets serve to raise perceived and actual costs of a broader search in two ways: 1) they cause firms to focus on competency-enhancing innovations, and 2) they cause firms to guard against competetive-destroying innovations.”

In relation to another comment I saw in the thread, ‘abandon core markets’ smacks of product cannibalization to me. I would chalk this one up for the poorly planned product entry timing. The importance of lead time in relation to market entry considers many things, including the degree in which innovation can be protected.

I feel IT’s relation to market entry strategy relates specifically towards internal and external-facing business intelligence tools that can provide deep insight into future skill acquisitions and expose potential product opportunities.

I find it difficult to believe senior management switches markets because they refuse to problem-solve internally. Commitment levels like that partially explain what once successful organizations go astray. No top-down support. With everyone looking to jump ship… who’s trying to keep the current one afloat?

I agree, there shouldn’t be any problems the IT department can’t help resolve… but first, they need to be aware of the problem. Difficult to do when you aren’t included in strategic meetings.

They also need to be able to have the skills and knowledge to capture, generate, and utilize requirements and expectations. If senior management won’t commit, doesn’t want to discover the ‘real’ causes of existing market problems, it makes gathering requirements and expectations a difficult endeavor.

Just my thoughts…

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Dr. Jim Anderson September 1, 2008 at 9:09 pm

I got you on this one! The main point is that if you’ve ever seen one of those jugglers who can keep multiple plates spinning at the same time, everything is fine until one plate starts to wobble. When this happens, there is a very good chance that they will all come crashing down as the juggler tries to make changes to keep the one plate spinning.

The same thing can happen in a company as management attempts to adjust to the failure of a single product or a drop in share of a single market. These adjustments can impact the entire company.

The point that you missed was that I think that IT can no longer spend its time doing only what its been told to do. Yes, we are talking about corporate strategy here and IT needs to play a big role. The CIO needs to set up a way to monitor markets and collect info for the rest of the senior management team. We’re not talking about a “skunk works”, but rather a partnership with Marketing, Finance, etc.

Let’s have IT come out of the server room and take our rightful place at the big people’s table!

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Jay September 11, 2008 at 4:06 pm

Interesting example for a complex balancing act as it relates to managing business. I see how it fits. The juggler relies upon the information received through his/her eyes to determine whether or not things are fine while performing the act. Visual perception is a poor choice for the juggler in my estimation. It confines him/her to a posture of reactive instead of proactive, curative vs. preventative (in the medical field) responses.

I agree, the decision support mechanism is only as good as the information it has at hand when course alterations are required. Without insight into the complex business models though, IT departments are ill-equipped to service this particular need. “I think that IT can no longer spend its time doing only what its been told to do” is a circumstance IT cannot alter on its own without additional conflicts of interest.

You once advised me to become successful by finding out 3 issues that are important to my employer, and work diligently towards resolving them. If I don’t ‘do’ what was requested, how am I to remain employed? What is the order of importance set on, ‘the CIO needs to set up a way to monitor markets and collect info for the rest of the senior management team’ in relation to other tasks they have set?

Is is possible for IT personnel to know which data from which markets to collect and monitor without the guidance of the respective subject matter experts? I don’t think it can be efficiently done without extensive knowledge in the related field. The approach to ‘capture everything’ seems a bit excessive, but without explicit knowledge, we are left with little choice either.

Your point was not lost on me, I do understand the necessity of partnering with these departments in order to provide them with relevant data for informed decision-making. But within the relationship, our actions are dependent upon their suggestions because we lack the knowledge necessary to select the appropriate course of action. It reciprocates, ‘doing what we are told’ all over again.

I don’t think anyone wants to come out of the server room more than I do. I want to make a positive impact. I want to prove we are more than just a cost center within the business model. Until they trust us though, I think we are stuck ‘doing what we are told’ because we are not sitting in a position where we can become proactively involved.

Just my thoughts…

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