Managing risk is a constant balancing act for successful businesses. Choices need to be made because business decisions are often constrained by cash flow, credit availability and amount of risk. IT can be just a small part of these decisions. IT needs to be able to provide risk-related information to the business so more informed decisions can be made. In many cases this work will involve the use of predictive modeling tools to perform sensitivity analyses on IT systems.

Why is this work important? IT processes the transactions, records them in general ledger or similar repository for financial/audit purposes, and then archives them at later date in compliance with regulations and laws. For example, IT can process a gazillion sales orders but if the supply chain can’t deliver the parts or the shipping department can’t ship the product in a timely fashion, IT’s work could actually be hurting the business by creating large numbers of unsatisfied customers. When trying to address the problems, sufficient cash or credit may not be available if computer system upgrades are needed at the same time the warehouse or supply chain needs to expand. Business executives will have to balance the costs of increasing business volumes versus the inherent risks of not being able to deliver their quality products or services. The executives may choose to expand the warehouse and have lesser performance on computer systems if that action provides the least risk and best opportunities for the future.

Capacity Management and specifically Predictive Modeling helps your business executives make those tough decisions. Using modeling tools and techniques, capacity managers can predict individual service performance at different transaction volumes. Costs can be applied to those different points in time and supplied to your executives. This work is no different than what the warehouse manager, supply chain director or loss manager is doing in other areas of your business. By providing this information, you become a partner, not just the “IT guy or gal”.

Until the next time

Ron

I frequently see IT professionals struggle when trying to quantify intangibles.  We deal with accurate, precise data on a daily basis so it goes against our nature to provide less precise information to our stakeholders.  We tend lose sight of the fact that we live in a fast-moving, imprecise business world (I know I am guilty at times).  When you really think about it, we often complain that our business leaders cannot precisely quantify their goals.  We forget that one cannot accurately predict what consumers will do next month much less next year.  Since it usually takes IT staff some time to gather data from real-time sources, business situations can substantially change during the time IT performs the analyses. In many cases that means that the project has to be in place and operating in order to gather accurate data.   In order to accommodate the shorter business turnaround times, IT professionals may need to find quicker and better ways to quantify intangibles.

The American television game show “Wheel of Fortune” provides a good example of a how one can deal with intangibles.  The show is based around a series of word games.  The contestants start with a blank set of tiles representing the letters in words; similar to the age-old game of “Hangman”. The contestants each spin a wheel to get the opportunity to ask if a certain letter exists in the word or set of words.  If it does, the contestant can try to solve the puzzle.  Sometimes a contestant can solve the puzzle with just one or two letters exposed; other times all letters must be revealed.

The game is not unlike the position business leaders often find themselves when trying to make a decision.  They have a lot of unknowns but each element of information they acquire gets them closer to an informed decision.  Today’s competitiveness means they may need to make those decision more quickly; before all information is available.

The game concept can be a good example of how IT can deal with intangibles.  Rather than being unwilling to provide imprecise information, sometimes providing management with just a portion of the total is sufficient for them to make an informed decision.  The leaders have more information than when they started, thus can better understand the risks involved in proceeding with the new venture. They will take your information and combine it with that of other departments, giving them a clearer picture of what they are facing, facilitating the decision-making process.  So the next time one of your executives asks for information that is not readily available, don’t say “no.” Consider ways to more quickly provide portions of data, perhaps at lesser precision than normal, and ask if that lesser level of precision satisfies their needs.  Think “Wheel of Fortune.”

Until the next time,

Ron