McAfee says that in the "late 1990s, companies often bought huge quantites of IT for reasons that had nothing to do with their business models or long term strategies" because they believed it was safer to "follow the pack" and spend heavily on e-business, ERP, CRM and networking technologies, than it was to do nothing.
As an antiodote he tells the story of successful Spanish clothing manufacturer and retailer Inditex Group who have demonstrated "that it is possible to masterfully select, adopt and leverage IT while spending very little on it". Despite "running an information-intensive business with remarkably little technology" and having only 0.5% of its workforce working in IT, compared to an industry average of 2.4%, Inditex has higher operating profit than its competitors Gap, H&M or Benetton.
McAfee says that the companies business model does not work despite their minimalist approach to IT but to a large extent because of it.
He suggests 5 generic principles that we can all learn from the Inditex case:
- IT is an aid to judgement, not a substitute for it. This reminds me of my previous TOC success story post where the company turned off many of it's clever ERP scheduling calculations and used a combination of well-trained brains and spreadsheets instead.
- Computerization is standardized and targeted. Keep IT things simple and minimalistic.
- Technology initiatives begin from within. Business goals always shape IT decisions, not vice versa. The IT department doesn't suggest initiatives, rather they suggest solutions to problems raised by the business, and they don't build bloated applications.
- The process is the focus. Get the process right then make the IT support the process. This too reminds me of my previous TOC success story post where they figured out how they wanted to run their business first, then made the technology fit those rules.
- Alignment is pervassive. I like this: "At Inditex, the general managers all talk like technologists, and the technologists all talk like businesspeople".
It's a good article.