IT Reuse Helps Companies Thrive

IT Reuse Helps Companies Thrive

Organizations should encourage technology sharing among business units and departments

PETER WEILL, STEPHANIE L. WOERNER AND MARK MCDONALDPeter Weill

Oct. 20, 2013 4:59 p.m. ET

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Everyone knows that reinventing the wheel is a bad idea, but apparently many large organizations haven’t gotten the memo. When faced with a new business issue or challenge, these companies typically rush to build something new, instead of exploring whether technology, data or business processes deployed elsewhere in the firm could be part of the solution. “We are different,” they say, to justify starting from scratch.What their executives may not understand, however, is that it is faster, cheaper and less risky to reuse existing digital resources than to build an entirely new system. In a study of 1,500 firms in 77 countries, MIT’s Sloan Center for Information Systems Research found that firms that share business technology across units and departments grow faster and have lower costs than rivals that don’t do it as much. By taking advantage of what they already do well, these firms can devote more energy to real innovations and deliver what executives are paid for—results.

If reuse is so great, then why aren’t more big companies good at it?

For one thing, reuse isn’t sexy, so it takes a sustained effort to convince employees that relying on technology they didn’t build will actually improve, not reduce, their clout within the firm.

Here are some things companies can do to encourage employees to reuse.

Make Reuse Easier

Companies should create a shared-services group to manage supply and demand for technology and other digital assets across business units. Financial-services provider USAA Group, for example, has an information-technology unit whose job includes developing reusable components. Now, 50% of all functionality in new USAA systems comes from reused components.

 

Companies also should design technology solutions that are easy to reuse, such as cloud services. They should push their largest business unit to adopt these technologies first and then expand reuse from there.

Finally, firms should consolidate data, reusable code and other digital assets into a single place, so that others can access them easily.

Clean Up the Politics

To avoid confusion and inefficiency, firms need to specify who makes reuse decisions and what metrics will be used to compare groups and managers.

Companies should create mechanisms to encourage or mandate reuse at the level where they want it implemented. For example, scoring proposed projects on their level of reuse during the capital-approval process is very effective because that is when managers are most agreeable to compromise.

To ensure reuse across the enterprise, companies must bring high-level groups and leaders into the decision-making process. One organization we studied put both its chief information officer and chief financial officer in charge of the approval process for business-unit IT requests.

Perhaps most crucial, companies must measure reuse and the resulting performance improvements, and compare reuse levels across business units and departments, encouraging the laggards to catch up with the leaders.

Change the Culture

Companies should trumpet reuse success stories through dashboards, case studies and regular reviews. One U.S.-based IT-services company installed screens in public areas that scrolled reuse metrics, reinforcing the message constantly.

It also pays to create financial incentives that encourage reuse. Some companies make the first user of a technology pay to develop it, and let all subsequent users deploy it free.

Another good way to promote reuse is by encouraging employees from different business units to get together regularly to exchange experiences and share their knowledge.

While reuse may slow things down for the first interested party because it takes extra time and thought to build a component or system that can be repurposed for a broader range of applications, it will speed things up for every other group afterward. The successful companies we studied found ways to balance the slightly longer time for the first user versus the benefits for all.

Dr. Weill is senior research scientist and chairman of MIT’s Center for Information Systems Research. Dr. Woerner is a research scientist at the center. Dr. McDonald is a managing director at Accenture. They can be reached at reports@wsj.com .

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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