When IT Isn’t Strategic
3 June 2004
by Michael Mah, Senior Consultant, Cutter Consortium
Every other week I fly from Albany, New York, to a major banking client in the Midwest of the US. This client is in the midst of a multimillion-dollar project designed to “bet the company” on an entirely new way of doing business. It’s absolutely strategic. The company is going after new markets in a way that will apply major pressure on its competitors when the project is eventually deployed.
Arriving at the airport on my last trip, I walked past the long lines for an airline that I used to fly and checked in at Continental Airlines using a self-service kiosk. I slipped my Discover Card through the scanner, tapped through about four or five screens, and got my boarding pass in exactly 32 seconds. Darn — last time it took only 26 seconds.
Off I went up the escalators to security. Looking down, I counted the folks waiting in line at the ticket counter for the other airline. Twenty-six people, all looking rather stressed. There were six employees at the counters, punching the same check-in keys over and over again. They looked bored and unappreciated by the angry line of 26 customers. I glanced at the steady stream of fliers at Continental. There were two counter people, plus one who was steering customers through the kiosk check-in procedure. They were doing the work of six people with three.
This all rings true with IT’s role in the current economic recovery as well. Companies are doing more with less. During Q3 last year, labor productivity grew at the incredible rate of 9.5%, the largest quarterly leap in 20 years (although it resumed at a lower rate of 4.4% in Q1 2004 — still remarkably high). Continental now checks in 66% of its airport customers using the kiosks, built by a tiny firm called Kinetics, Inc., based in Lake Mary, Florida, USA. Fast Company magazine wrote, “Tens of millions (70 million, actually) of airline customers checked themselves in on machines that were designed, produced, and supported by just 67 [Kinetics] employees.” Last December, Northwest Airlines saw 70.3% of its customers use the kiosks and the Web; all made possible by Kinetics software. Kinetics CEO David Melnick said, “People don’t perceive it as technology, they perceive it as enablers in their life.”
I think about the value proposition for this IT system and consider whether automated check-in satisfies its users. Does it satisfy what Gane and Sarson describe as IRACIS criteria? Does it:
Increase Revenue — Yes. I will not fly that “other” airline without the kiosks. Continental gets my money, and lots of it.
Avoid Costs — Seems like doing the work of six with three meets that criterion easily.
Improve Service — Twenty-six seconds for check-in beats waiting in a line of 26 people, hands-down.
Imagine going back in time, and pretending that you’re the IT person pitching this as-yet-to-be-funded project to your management for approval. You’re going to have to justify why you think this is a high-value project to the company and put forth a ROI analysis. How in the world could you 1) even come up with the forecast numbers, and 2) get management to believe them?
It’s extremely difficult; especially when IT is pressed to make the case for it alone. They need others, like the business analysts. Without that collaboration, no one might believe the ROI predictions. I’m not sure this collaboration is possible in the way most companies are set up. The process demands reliable data, market trends, and almost magical forecasts.
Melnick found this out the hard way. After leaving NCR and then Siemens, he started on his own. He used start-up money from people like his mother-in-law. He waited on tables and lived off his wife’s salary. (With a passion for marine biology, he was also once known as “Flipper Boy” when he performed with dolphins at the Miami Seaquarium.) Eight years later, his persistence paid off when Alaska Airlines became his first customer after Melnick’s pitch with a cardboard mock-up. It took those eight years for the airline industry mind-set to catch up to Melnick’s vision. (Are there really long lines waiting to fly to Alaska?)
Automated check-in is a killer app that turns the old way of getting to a plane on its head, eliminating a major bottleneck for consumers. EZ-Pass does the same thing for highway tolls. Speedpass for gasoline at Mobil stations. These examples drive revenue skyward while dramatically cutting expenses and improving service. Many mundane tasks previously done by humans suddenly go away, freeing them from life in the matrix. (Some may argue that it frees them to stand on the unemployment line, but I have a more optimistic view.)
Moreover, it requires a strategic vision for IT, not a cost-cutting one! Ironically, the financial windfall of something like automated check-in is astronomical; one could argue that development costs are a rounding error on most company balance sheets. But some executives are stuck in a view of IT as an unfortunate but necessary expense. They see only cost cutting, often with good intentions, but more often to the harm to their organizations. This attitude comes from fear. The next killer app could be in the minds of their people, stacked against a senior management with more negotiation leverage and focused on cutting expenses, while demanding unpaid overtime from tired employees. Sometimes these same employees are being asked to work harder under the threat of outsourcing.
Imagine if a visionary company decided way back, that automated check-in could be so powerful that they should keep it for themselves? If that were the case, they’d have that operational power while their competitors didn’t. But that didn’t happen. Instead, Melnick worked out of his proverbial basement to fulfill his vision. Ultimately, he succeeded the way that passionate entrepreneurs often do. And now, many airlines can have it, instead of only one. Then again, maybe the world is better off that it turned out that way after all.
— Michael Mah, Senior Consultant, Cutter Consortium
© 2004 Cutter Consortium. All rights reserved.