What is Really Strategic?

This same struggle for process/technology alignment plays out with a different result in our next vignette. In the previous story, Wilson described how a company elected to customize packaged software to fit their specific business processes. These modifications ended up costing millions and delaying the project for years . The alternative, Wilson noted, was to embrace process management and forgo expensive customization, to leave the software as is, and instead to change the processes to fit what the application delivered out of the box.

Since no custom work is involved, this option immediately sounds appealing. But before you can let an enterprise software vendor dictate exactly how your company does business, you first have to ask a key question: What is really strategic? If the process you're considering changing is crucial to the business model, and a source of competitive advantage, it's probably best to let it drive technology changes. If not, however, the simplest solution may be to leave the software alone, and instead transform the processes accordingly .

Honorio Padron is President and CEO of Business Services at Exelon, an energy giant that was created by the merger of ComEd and PECO. During the merger, Padron tackled a project that seemed straightforward on the surface: implementing an integrated financial system for the newly merged business. But because employees didn't do a good job of evaluating what was really strategic, they almost fell into the same trap that Wilson described ”customizing technology with great cost but small benefit.

It's human nature to magnify the importance of the things that take up most of our time and attention. It's no surprise, then, that during his integrated financial system project, Padron found that employees overemphasized the importance of unique business processes:

In Exelon, you have two energy companies that are identical in what they do. Yet their financial processes had some significant differences that didn't really bring any strategic advantages. And in trying to merge these two types of financial processes, people were trying to come up with a third different way of doing things. Which, again, wouldn't have had any strategic advantages.

Some employees ”we'll call them the "customizers," ” pushed for making highly specialized modifications to the ERP package so that it could support a new, third version of financial processes that was a mix of PECO's and ComEd's old ways of doing things. But to Padron, this seemed like the wrong approach: "These are really primitive processes. Unfortunately, even for these primitive processes, the perspective always starts from 'what I want to do' as opposed to 'let me see what the technology brings '."

Padron recognized that Exelon's unique HR processes weren't essential to the business, and eventually steered the team on a course that reflected this conclusion. Instead of making high-cost software customizations to fit low-value processes, he pushed the alternative approach: customize the processes to fit the software out of the box. As a result, Exelon was able to avoid the high cost of modifying their new HR software without any downside to the business.

In Padron's story, the customizers, who pushed for expensive software alterations, did so because their view of what was important was limited only to processes; in other words, there was a disconnect between the processes they had designed and the business objectives for the project (see Fig. 1.3). By not making this connection back to the business (and presumably forward to the technology where they would have figured out the true cost of sticking to their processes), the customizers failed to ask a crucial question: What is really strategic?

Figure 1.3. Customizers pushed to modify technology to fit custom processes, while Padron elected to standardize low-value processes

There's often a wrong assessment of what is strategic and what isn't. In my experience the things that are very strategic are also very proprietary in nature, like a Coca-Cola recipe. But beyond these obviously strategic things, what's really important is the ability to implement. It sounds very pragmatic, but it's essential.

This mistake is a common one in IT projects, Padron explains, because of how technology has been put to work in the business environment in the past:

At first we developed code from scratch that automated the processes that we were already doing. So we went from doing things inefficiently to doing things inefficiently but faster. Gradually, we've gotten to saying "now that I've got this tool maybe I can do it a little different." But this requires systemic thinking, and a lot of people have not moved to that level yet, of thinking of it in an integrated fashion.

Exelon's integrated financial system demonstrates this bias. The team took a myopic view that was based on the old paradigm. They approached technology as a tool to automate the processes that they designed in a vacuum . But Padron encouraged a more systemic approach: align business objectives with processes and with the new technology being implemented, and then make trade-offs based on an analysis of the complete, end-to-end picture.