Technology is a means to better performance but, too often, laments Oswaldo Lorenzo, it is regarded as the ends rather than means. Lorenzo, professor of operations, business process management and enterprise systems at IE Business School in Spain, calls on businesses to take a fresh look at how they view technology and large scale projects. Even in these difficult times, he calls on organisations to look to the future rather than becoming fixated on the present.
One of the terms you use is the long conversation. Can you begin by explaining what you mean by it?
Our research has been investigating different ways to approach challenges in organisations. Many organisations work on the basis of short-term objectives and short-term actions to tackle the challenges they face. This could be good in some contexts but, in the long-term, we think we need to create internal capabilities in the organisation to survive and creating these capabilities implies working in a different dimension with a longer perspective than the traditional one.
When you look at the current crisis you can see that there's a temptation in companies to work in the short-term, resolving immediate issues or urgent things. They often overlook that we need to survive beyond the crisis. They should not forget about creating sustainable internal capabilities. And this can be in conflict with short-term needs and concerns.
For example, if you need to reduce human resources, some processes or business units, are they important for the future, for the long term? You could take the option of cutting them now but it could be a big mistake in the long-term. We think that companies, even in a crisis like this, should think of creating and developing a sustainable capability for the long-term. That is, in general terms, the idea behind the long conversation.
And has your research identified companies that have done this successfully?
Yes, there are two companies, in particular, we could mention. One of them is Ericsson. When you look at the way Ericsson approached the technological crisis, the burst of the technology bubble in early 2000, you can see that they made big changes in their organisation, but with the intent of trying a create a sustainable business model for the future, not just for dealing with the crisis at that moment. And they were changing the operational model; they were changing the technologies, or using current technology to support the future.
For example, in terms of technology, they reconfigured the ERP system they had worldwide, moving from a decentralised model to a centralised model, while keeping the technological capabilities they had. And they decided to outsource some part of support to IBM, while retaining another part internally. They achieved a balance of dealing with the crisis, with the urgent things, and also thinking of the future, thinking of keeping the capabilities and developing them beyond the current situation.
And the other example?
The other example I have in mind is a bank in Latin America. They now have operations in four countries. In the financial crisis in Venezuela in 1994 and 1995 half of the banks disappeared in six months. So, this bank was working on the urgent things -- dealing with criticism and challenges to their reputation. In parallel they were working on internal capabilities, investing in training, investing in the process of engineering and in new technologies.
And from 1994 to 1998 they created something called the Factory Project which was focused on the implementation of manufacturing practices in the service industry. This involved them redesigning their processes, working in creating capabilities in terms of technology and human resources. Remember, this is a bundle of things and it's not just about mastering one of them.
After the crisis they were stronger and merged with other banks and acquired others. In all these mergers and acquisitions they had better capabilities than their counterparts -- better knowledge, better processes, better people to manage the projects. Finally, they were the dominant bank. Now, they are the leading bank in Venezuela with operations in Panama, Puerto Rico and also in Miami. And they are working on the second phase of creating new capabilities relating to internationalisation, to a multicultural framework.
Of course, there's another political and social crisis in Venezuela. After doing several interviews recently, the bank is dealing with this local context but again still working on developing and keeping their key capabilities.
So, you need to work on the short-term and the urgent things, but you should also keep working on long-term perspectives and thinking. The crisis is going to finish. And you want to emerge, at the end, with a better company, a stronger company.
Where should the long conversation happen in the organisation? Is it a conversation heard in the boardroom?
Definitely you need the commitment from the board, from the CEO, from the top managers. And, using these two cases again, the boards were pushing the need to create sustainable capabilities. It was a top-down process but with key actors or players in the next tiers of the structure.
For example, in the bank they realised that they needed support staff to develop new capabilities so they created the concept of Project Office, as part of the strategic department of the Vice President. And the Project Office was a staff of people to execute the strategy of creating capabilities related to implementation, processes, performance, human resources and skills. This group, working in parallel to the day-to-day operations of the bank, was critical to the process.
Are there characteristics of organisations that are able to do this long conversation?
Yes, they need to have a level of entrepreneurship and some specific internal values. In the end you need to create capabilities, processes and technology, but people are managing processes and technology. You need skilled people -- people with specific skills -- but you also need people with an aptitude for developing long-term capabilities.
Entrepreneurship, I think, is very important. By entrepreneurship, I mean people who are creating value in different ways internally -- thinking of customer needs, thinking how to change the processes and adapt the processes, what technology we need to satisfy customer needs and what product to create for doing that. This is something that happens in day-to-day operations. It's not something that could be done following a top-down approach. You, as CEO, could say, I want to do this, but you need the people to do it. An entrepreneurial attitude is critical.
But there will be CEOs reading this who think we'd all like to have a long conversation, but there just isn't time in this crisis; if I don't do something quickly to stop losing money, I'm going to lose my job, this company's going to close. What would you say to them?
I'm not saying that you need to focus only on a long conversation. I'm not saying that you should forget the short-term. There's an urgent situation in many companies. Perhaps you should focus for a period of time on the short-term, but you should keep one, two, three, or four projects working on creating or keeping your main capabilities.
You need to work in parallel. In that sense, it's a big challenge; it's hard. I know that people are asking, where am I going? Or, what is going to happen in six months? This year and next are going to be hard for companies and for people, but please keep investing in the important things in your companies because if you survive this crisis by working on the short and long terms in parallel you're going to be stronger.
To be honest, it is a gamble in the sense that you need to put time, effort and money on both things. You need to keep working on the important things, as well as the urgent things. Of course, the urgent things are pressing but, if you have the opportunity, please don't kill your company now.
SOMETHING TO SAY ABOUT THIS? TELL US HERE