Have you ever played Jenga, a game marketed by Hasbro? In the game you have 54 wood blocks and you start by stacking them in rows of three at alternating right angles to build an 18-level tower (for more details and illustrations, click here) . Then you take turns removing a block from a lower level and adding it to the top to make the tower taller. Eventually the unstable and weakened lower levels won’t support the height of the tower, and the whole structure falls over. The loser of the game is the person who made the tower fall. The winner is the person who played just before the loser.
I see a lot of parallels between this game and our current situation in IT. In a bad economy we have to survive with a lower budget, yet the demand for IT projects hardly slows down at all. The only way we can extend our IT capabilities is by cutting back somewhere else in our budgets. So we cut back on maintenance or on infrastructure or maybe on support, and we hope that we aren’t weakening our IT organization too much. Just as in Jenga, we take something from a supporting area and then try to extend our IT capabilities by building on that increasingly weak area. The tower grows taller, but since the number of blocks hasn’t changed, the tower structure gets weaker and weaker.
So what’s the equivalent in IT of our tower falling over? Sometimes it’s catastrophic: our systems fail at a critical time, we have a major security breach, or a critical person leaves the company and we don’t have a backup. That’s when we see how thin and frail our capabilities really are. That’s when see the error of playing Jenga with critical parts of the business.
Just as in Jenga, the loser is the person who was in charge when the tower fell over. But the winner isn’t his or her predecessor. No, in the business version of Jenga there are no winners. Everyone loses – the business, the IT organization, and your customers.
You wouldn’t play Jenga with a real skyscraper. You wouldn’t deliberately sacrifice strength in the lower levels of the structure in order to make the building taller. So why would you sacrifice strength in an IT organization in an attempt to “satisfy” the business needs of your company?
You’ve got to recognize that there is a limit to how much you can safely cut back on mission-critical areas of your organization. Your CEO won’t know what that limit is – you’ll have to determine the limit yourself. But a CEO can definitely understand that there is a limit, just as there’s a limit in other parts of your company. A key aspect of your job as a CIO is to assess those limits, and to make sure that you don’t weaken your organization or your infrastructure too much.
4 Things IT Should Do in Bad Economic Times
Here’s my advice for bad economic times:
1. Deal with the situation as best you can.
If you’re asked to cut your budget, then do so (see tips in my August, 2008 newsletter article, “9 Ways to Reduce Business IT Expense”). But don’t go too far (see the Jenga discussion above), and watch out for things that will cut IT costs but raise costs in other parts of the business. A smart corporate cost-reduction plan will look at the big picture and not just impose a standard percentage cut on every department. If you’re forced to make an arbitrary budget cut, make it clear what services and projects you’re cutting back as a result. Be transparent – don’t take a cut without passing some of the pain back to your business users.
2. If resources allow, then build for the future.
Business is down for a lot of companies, so it’s a buyer’s market. If you’ve got the funding to do it, this is an ideal time to invest in your company’s future. Vendors are eager to negotiate lower prices, and consultants are widely available to help. If you’re sure you are going to need new systems and capabilities for the future, then spend the time and money to build or buy them now.
3. Emphasize flexibility.
Flexibility is critical right now. Ideally you want systems that will scale up to handle much larger volumes, but also scale down to support lower volumes with a reduction in infrastructure cost. An automation project often replaces a variable labor cost with a fixed infrastructure and maintenance cost. That might make sense if the fixed cost is much lower than your labor cost under most conditions. But if the project justification requires a high volume to break even, then the project won’t be a good investment if your volume drops. Avoid projects like this, and focus on projects which increase the flexibility of your work force instead.
4. Be optimistic.
A recession is a downward spiral in the economy caused by negative expectations. Things are bad, so people cut back on their spending. Then these spending cutbacks make things bad for other companies. The resulting downward spiral is only reversed when people begin to see improvements in the economy and in their business. In effect, a recession is a state of mind. Make sure you make your own contribution to halting the recession. Be optimistic, encourage others to look forward to better things that will happen in the future. Be realistic, but don’t panic, and don’t make cuts that will cripple your business when the spiral reverses.
There are a lot of people playing Jenga in their companies right now. It gives the illusion of growth at no cost. But the hidden cost of playing Jenga is the loss of structural integrity of your systems, your infrastructure and your support team. There’s a huge risk in playing this game, and there are no winners.
To deal with a bad economy, focus on the four things I’ve listed above. Then when the economy turns around, you’ll be positioned for growth without having to rely on a weak foundation.