Integrating IT with Business Goals is Only Marginally Easier than Reaching the Summit of Everest.
So why bother? Japanese companies have found there is a better way to manage IT: make your IT people-centred.
Written by Dick Stroud, London Business School
Excerpt from Strategy for Business, issue 15. - Summer 2004
LET'S DISPEL SOME MYTHS
Myth number one
Japan has trailed behind the West in its use of IT and hasn't benefited from its contribution to improving productivity.
Wrong on both counts. Harvard Professor Dale Jorgenson, showed that the acceleration in the rise of Japan's productivity, like the US, was mainly supported by IT innovations. With Japan's IT spend on a par with the US, the view that Japan is an IT laggard is based on the difference in calculating national statistics. In fact, where Japan differs from the US and Europe is how and where it has directed its IT spend.
Myth number two
Japan's communication infrastructure lags behind the US and Europe.
This statement could not be further from the truth. As the UK crawls into the era of broadband, the Japanese are adding new subscribers at a rate of half a million a month.
When it was in vogue to have an 'e-strategy Japan aimed to have 30 million households within reach of broadband by 2005. That target was hit long ago, probably by providing a service that costs about half that of the UK's but is twenty four times faster!
Myth number three
Europe is the epicentre of mobile communications.
A view that is difficult to support when you consider that Japan has 80 million mobile subscribers, 60 million of whom are internet enabled. Contrast that with the anaemic uptake in the West of WAP phones.
Japan introduced camera and email capable phones to the market over two years ago. Only now are we seeing them achieve any level of acceptance in Europe. Even mobile broadband has achieved over 8 million users.
The Japanese economy and stock market have undoubtedly performed badly during the past five years. But it would be wrong, and commercially dangerous, to believe this also applied to the country's use of IT.
'IT DOESN'T MATTER'
The IT industry has been going through a period of 'soul-searching' over how effective it has been in delivering business advantage. For years, McKinsey and Gartner have been publishing articles that have questioned how well IT is managed.
What made this a public debate was an article by Nicholas Carr in the Harvard Business Review (HBR) that went to the heart of the matter by suggesting "IT Doesn't Matter". Carr believes companies must be ruthless in deciding how and why they spend money on IT. He suggests companies should focus more on the risks rather than the opportunities of IT investments. Carr even questions the notion that IT provides a company with any long-term competitive advantage.
What became clear from the furore that followed Carr's article, is a deep unease about whether the models we apply to target and manage IT are still relevant in today's world.
Strangely the Japanese have not become involved in this debate.
THE JAPANESE DO IT DIFFERENTLY
When professors Earl and Bensaou researched how Japanese companies grapple with the IT issues faced in the West, they found these fascinating answers.
Japanese companies:
…don't attempt to integrate their IT and business strategy. Quantified individual performance improvements are the primary criteria for IT investment.
…don't believe new technology will lead directly to competitive advantage. The ability of the technology, new or old, to help staff achieve their performance goals is the only consideration.
…don't experience the 'us and them, divisions between IT and business departments. Business managers spend time working in IT and IT staff are collocated with the users.
…don't believe that a fully integrated company-wide, software solution is necessarily the right way to proceed. SAP generates only 5% of its revenue from Japan. The US, with twice Japan's population, buys four times as much from the company.
It is fascinating how the Japanese approach has so many similarities with the views expressed by Nicholas Carr.
Perhaps some of these philosophies have reached the West. This year we learnt that DuPont decided to make IT part of its marketing and sales organization. The rationale for the change was to "focus more energy on providing IT solutions for finding, communicating with, and retaining our customers".
Earl's and Bensaou's research is published in the HBR, titled "The right mind set of managing information technology". This should be compulsory reading for every CIO.
MY BETS ARE ON THE JAPANESE
What does a country need to excel in the digital economy?
A true high-speed communications infrastructure that is priced to encourage mass adoption – Japan has that.
Consumers prepared to pay and use mobile data services – Japan has many over 63% of its population already active (80 million of the 126 million population).
An obsession with understanding and satisfying the customer – this is in the Japanese DNA and is where it has focused its IT spend.
Distributed supply chains, spread over multiple companies – the Japanese invented the concept.
A magic formulae to enable companies to get the true potential of their IT investments – Japan's people-centre approach seems to deliver the results.
This is a powerful combination of strengths for running a successful business in 2004 and beyond. Global businesses are already tapping in to the Eastern potential, whilst some executives are just beginning to consider looking outside the Western world for their technology solutions.
If you'd like to consider a global reaching IT company who's already number one in Japan you can talk to Fujitsu on: 0870 242 7998 or email: askfujitsu@uk.fujitsu.com
