Management was more than a bit surprised when we reported their $300 million acquisition of a major parts distributor was running on a hardware platform abandoned by the manufacturer in 1994, more than 20 years ago.
“You know the IT department gets their spare parts on eBay,” the CEO was told. Although the firm had conducted thorough due diligence on other key aspects of the business, the firm had not conducted an assessment of the information systems and associated hardware. Ultimately it would be a $5 million miss, and would consume the organization for the next 18 months.
So how do organizations minimize such surprises?
Make the information technology and how it aligns to business strategy a priority
Alignment is difficult, not only because it’s generally neglected, but also because in today’s environment of agile business models, ever-changing market shifts and the difficulty in changing “line of business” systems, being out of alignment is more the norm than not.
What are the top business strategy initiatives? Can they be succinctly articulated? Are they understood by the IT management? Ask the questions. Once you understand the business initiatives, ask IT managers about how they’re working to align to them? If answers are not forthcoming, then bringing them into alignment is your first priority.
Review the information architecture with the non-IT management
Start by asking the operational management to draw the processes and indicate how the technology integrates at each step in the process. Ask them what works and what doesn’t, their comprehension of the processes and their view of the information systems impact on business processes will tell volumes about how well the processes are aligned.
How much focus and attention does technology get within the executive ranks? IT should be represented in senior management, otherwise it’s tough to have the business strategy aligned with the technology strategy..
Meet with the IT department and seek counsel
Now do the same thing with the IT staff, concentrating on the business processes, not the IT processes. Are they speaking the language of business or are they mired in the minutia of the technology?
IT processes should be able to be discussed clearly and unambiguously by the staff. Seek advice on how the business processes, not the technology, could be improved. A well-aligned technology department will have a comprehensive understanding of the business processes and will constantly be seeking ways to align the technology to those processes to improve the entire operation.
Check the documents
How well are processes documented? Are there accurate process diagrams which completely outline the current processes as they are currently in place? Is there good technology documentation: an accurate data context diagram indicating how all the systems are connected at the data level?
Are there good data diagrams indicating what data elements are defined within the organization? An organization which takes the time to insure that documentation is accurate is an organization that is generally well-run.
Evaluate the IT staff
This is somewhat difficult, since It generally takes a skilled technology practitioner to evaluate the technical competence of another technologist, but you can get an understanding about how the staff fits the culture, particularly what you envision as the “new” culture to be put in place.
Are they risk averse? Do they have long tenure with the current technology, which can be a problem if you’re anticipating a wholesale change in the technology? This is perhaps the most difficult part of the assessment because you want to retain the institutional knowledge, but you also want to insure that you have proper alignment with the business.
Change is inevitable, but managing it is critical
Obviously in an acquisition or carve-out, there is going to be a change of strategy and focus. Managing the change and creating an environment and culture amenable to change is the challenge for the acquirer, Insuring that the underlying processes and technology align with the new strategy, focus and culture is the key to success.
It’s obvious that it is difficult for the acquired organization to assimilate the change in focus or strategy, but what’s not obvious is the difficulty for the acquirer to manage the change within the new organization.
Dan Gingras, a partner at Exceptional Leaders International, is the former CIO, CEO and COO of numerous public and private companies and has taught computer science at Boston University. He helps companies achieve measurable return on their information technology investments. He can be reached at [email protected].
