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CEO’s Transformation Nightmare

Blog: Brian's Blog - Enterprise Strategy, Architecture and Management

This week I had an interesting time creating a detailed scenario and storyboard for circumstances enterprises face today.  It’s a mashup of several brainstorming techniques I learned while in a Think-tank decades ago and from time to time get ask to participate in again due to the insights and opportunities it creates. With that context here is a fragment of the fictional narrative I came up with. 

 

One of the chief executives in a rather large firm called me up in the middle of the night; this has really happened in the past, but not late at night.  He was concerned with their recent transformation efforts.  The CIO, CFO, and him had agreed to a course of action to transform the business by moving to the cloud.  The logic being big consulting firms, analysts, trade press, and vendors all were touting going to the cloud, so they should also.  After several months of preparation, execution, and significant expenditure of funds the majority of the enterprise was now “In the cloud”.  The CIO was happy, the CFO was happy, all seemed right but something was bothering him.  It was only a couple of months to the annual stockholders meeting and the board of directors meeting the week past left him with an uneasy feeling.  One of the questions during that meeting hung in the air like the feeling you get from oppressive heat and humidity:

 “You’ve spent X dollars this year decommissioning the data center just several years ago you argued we needed and an additional sum migrating our data and applications to the cloud.  What will the stockholders think about what they got for the money?  Sales and margins have not changed significantly from last year.  Our net profit is lower due to the additional expense.  While our IT expenses in the future will be more elastic changing from CAPEX to OPEX.  Are we going to be able to meet Wall street expectations and dividends our shareholders were expecting from completing the datacenter build out we’ve been touting up until the beginning of the year?  How is this going to grow the company?

 The discussion we had could have been the general business version of the book “The Goal”.  James relayed the discussion with the board and his concerns to me.  As in the book, I asked several questions knowing the answer already, but to have him consider his actions from a systems approach.  This was difficult for him so I reframed the questions into a more concrete example.  He had already read “The Goal” as captured its lessons when he was the VP of Manufacturing years ago.  So I asked if your IT Capability was a CNC machine on your floor would you have made the same decisions?  What?  He exclaimed.  Would you sell your CNC machine that you just bought two years ago and lease a new one today?  A few minutes of thought.  “Well no”  So I asked why then sell you “information machine” and lease a new one?  “Well it changes our costs structure from CAPEX to OPEX and it provides us a more elastic capability.”  Oh I see, so you’re planning to lay people off in the next few months and preparing to be acquired?  Are you about to ask about how to play the M&A game?  “NO! I had nothing like that in mind”  Well from the outside of your executive staff room, that’s what I’d assume is being prepared for.  “No, we’re preparing to utilize the cloud’s capabilities to expand our business and grow”  I ask one final question. How?  I could see his heart immediately sink.  This was what his subconscious was telling him about the board and upcoming shareholder’s meeting.  He’d gotten caught up around the hype and focused on the tool rather than its use.

 This small little nightmare is on the verge of happening all over the landscape as I watch “Cloud Transformations” occur.  If your about to “transform to the cloud” what you should be asking as the chief strategist is “How am I going to exploit this capability to improve the business?  Not the cost structure unless your cost structure makes you uncompetitive”       

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