Let's look at one failing business model: record sales. See Ars Technica for one summary: Legal music downloads soar as CD sales fall . That's news from 3 years ago. Look at Digital Media Wire's report from this year "Digital Music Download Sales to Pass CD Sales by 2012 ".
What does this mean?
It means the business model is blown.
Here's the order of events: (1) New Technology, (2) Dumb Reactionary Stuff (RIAA lawsuits, etc.), (3) Business Failure. [Look at the Leaked RIAA Training Video for fun.]
Currently, this is the way all failed projects are characterized. I think it's wrong.
The Standard Scapegoat
Many IT projects are labeled "failures" because the technology choice didn't match the business model. The expectation is that business provides the leadership, and IT follows along behind, dutifully providing the implementation. Read Reforming Project Management "Pay Attention to the Business when Doing Projects " for another version of the party line.
If IT ever gets out in front, then it's "disruptive" and a "failure".
The Same Old Story
The business owner wants a way to sell product. Someone it IT builds a system for downloading the product instead of pressing it onto plastic disks. Business rejects this technology and cancels the project, labeling it a complete failure. To explain the money wasted, the business says that IT failed to understand the central role of the plastic disks. Disks are in the contract terms and conditions, it's part of the measurement of performance, it's how executives get their bonuses.
The retrospective on the project failure says that if only we'd put the Business First, we wouldn't have wasted all that money.
Technology Push
What has recently occurred to me is the idea that technology can lead the business. The problem is that the business will adopt one of the following postures:
- Push Back. Declare the IT effort a failure as well as a waste of money.
- Drag Feet. Take years to figure out how to use the new technology.
- Embrace the technology. This is the hoped-for response, and doesn't need further analysis.
- Push Back.
- If the business utterly rejects the technology, responding with strong, negative criticism, then there are fairly serious organizational issues. Lessons learned from the music business: executives are trying to preserve a business model they don't really understand.
In the case of the music business, the artist produces New Works. Not plastic disks of works frozen in time, but new stuff. When records were rare, complex and expensive, you sweated every nuance of every minute of music. Now that music is cheaper to produce, we want our artists to produce more, and more quickly. The record company executive oversight is of almost no value.
How do you apply this lesson learned? Get out before the ship sinks while you're still on it. Or, if you have enough influence, try to make some changes. Or, if you're patient, wait for everyone else to fail around you and be the last person standing. (This is actually pretty easy to do; you merely have avoid failure long enough for "not failing" to look like "succeeding".)
- Drag Feet.
- I encounter this fairly often in big IT projects. Everyone wants some fancy data warehousing or some fancy SOA solution. The first project opens the door, but no one else wants to pursue the second or third project.
The Executive Attention Deficit Disorder kicks in; usually midway through the next calendar year. Once the first project is in production, we wallow in the false assumptions and lies told at the beginning and decide that the technology "is overrated". [Love the passive voice construction. No one says "I overrated the technology"; they say "it's overrated".]
After mid-year, we drop the approach, the technology and the architecture, relegating it to become the next legacy.
It's not that the technology is bad. It's not that it won't work. It's just that it takes a LONG time for the business to realize what's happening and what the possibilities are. If record sales were declining and downloads increasing in 2005, why does it take three years for Sony BMG to develop a music download business ? And that's just the announcement that they're going to start development.
IT Investment
IT technology investment has to have a long-term view. But, IT is a cost center, and the scapegoat when technology gets ahead of the business. So a long term investment has no return to IT.
Worse, as the technology gets better, investment in new business models shrinks. See The VC Quandry: Too Much Money . And VCs Adjust to Facing More Competitors for Fewer Companies
The only way around this is to find a way to have IT make investments in the business that have a return to the IT budget. I have no idea how to manage "share of the business" approach.
Here's an insane notion. IT needs to own shares of each line of business. The business needs to pay dividends back with IT. If IT has an idea and creates technology, IT should be able to "sell" it to the business for shares in the business. If the technology grows the business, IT makes money for future investments.