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|In: Leadership|Last Updated:

And now for one of those current events columns you like so much — you know, the ones that use “lessons for IT” as a pretext for spouting off (the last for awhile, too — I promise!):

Topic #1: Global Warming. If you’re interested in the politicization of global warming, read “The Truth About Denial,” (Sharon Begley, Newsweek, August 13, 2007). It reveals how, over more than twenty years, companies in the energy industry created and disseminated disinformation on the subject — funding think-tanks, phony grassroots organizations, and pay-for-publication schemes that turned fringe scientists into freelance writers rather than researchers.

If the distinction isn’t clear: Research grants require scientists to investigate a topic, not to reach a predetermined conclusion.

Lesson for IT: Yes, there is a lesson for IT — a real one. An ExxonMobile-funded think-tank offered scientists a paltry $10,000 to write global-warming-denial papers earlier this year. Much more than $10K changes hands when technology vendors subscribe to services from the various IT research firms. Connect the dots.

Topic #2: Funding infrastructure maintenance. Earlier columns on the subject led quite a few readers to suggest there is plenty of money. The problem, they said, is setting the right priorities.

Subtopic A — Priorities: Those complaining about bad priorities were right on the money, as it were. According to “Funding for bridges served with side of pork,” (Kevin Diaz, StarTribune, September 13, 2007) pork exceeded kosher spending in the Senate’s transportation appropriations bill by a factor of 1.5 to 1. “Pork served with side of funding for bridges,” would have been a more suitable headline.

Lesson for IT: Businesses spend on pork, too. Even barely profitable businesses frequently “invest” in pet projects (earmarks, if you will) whose only value is scratching the itch of an influential executive. If you work in a company that funds lots of earmarks, lobbying for your share is a required skill. Playing this game is bad enough. Losing is worse.

Subtopic B — Is there enough money? The recent Senate appropriations bill allocated $2.5 billion. That’s roughly a quarter of what will be needed annually for the next 20 years, according to the best estimates I’ve read.

This year’s projected federal deficit is $200 billion, not including the government’s considerable off-book spending. It’s the smallest since 2001. Unless you think there is enough waste to eliminate this deficit we need a serious redefinition of “enough.”

Lesson for IT: Business leaders often make the same argument to IT — “your budget is enough if you just set better priorities.”

It isn’t only government that’s often governed by wishful thinking coupled with rationalization. I recently heard an off-the-record account of a company that turned down IT’s request for funding to protect it against data loss. After a bunch of highly sensitive data went missing, guess what the CIO heard? Hint: It wasn’t, “I guess we should have funded your request.”

Subtopic C — Asymmetric investment: The cost of overbuilding a bridge is the cost. The cost of under-building a bridge is, as Bill Beery explained in a perceptive letter, the cost of replacing the bridge.

On the other hand, as was pointed out in this space in “Cottonwood now or hardwood too late?” (Keep the Joint Running, April 28, 2003), sometimes a cheap solution is the right answer, as it gets you to business benefit faster. The logic: Get the benefit enough sooner and it more than pays for the cost of rebuilding a better system later on.

Lesson for IT: You can’t strike the right balance between investment in infrastructure and investment in immediate business functionality by applying a simplistic rule. Too little infrastructure means business functionality becomes unnecessarily expensive, unwieldy and fragile. Too much infrastructure and the business becomes slow, stodgy, and top-heavy.

Topic #3: Second-guessing can be more important than guessing: Sometimes, forecasting matters less than accurately forecasting the forecast. Commodities traders, for example, don’t need to forecast the weather. They need to forecast what the weather bureau will forecast, as former meteorologist and commodities-trading-company employee Steve Kauffman points out. That’s because the weather bureau’s forecasts drive commodities prices, so accurate forecasts of those forecasts turn into highly profitable trades.

Lesson for IT: CIOs who are good at forecasting the forecast will know whether to spend early or spend late. If you expect a bad year, spend early so they can’t take your budget away from you. If, on the other hand, you expect a good year, spend early, because you can ask for more budget later on.

Oh, wait …

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|In: Leadership|Last Updated:

“Economists have predicted ten of the last three recessions.”

Political pundits haul out this tiresome bit of ridicule every time an economist warns that colossal trade or federal deficits might not be such a good idea.

Ridicule is fun, persuasive, and best of all demonizes the group of people called them. It’s the more emotionally satisfying alternative to understanding what’s really going on. It combines scapegoating and ad hominem argument — two of the most trod upon paving stones in the road to becoming an idiot.

Your turn: Imagine your data center’s wiring has frayed insulation, overloaded outlets, and circuit breakers that haven’t been tested since Edison and Westinghouse battled it out.

The company ignores your concerns. You continue to warn of serious problems until at some point a fire breaks out.

You and your staff extinguish it. You again recommend rewiring the data center. And some mouthy executive points out that you have, “… predicted ten out of the last one fires.”

That’s the problem with risk.

Businesses can invest in three value creators: Revenue enhancement, cost reduction, and risk mitigation. One almost always dominates, not because it is the most important, but because it’s how the company and CEO are wired. They’re usually wired so that risk comes last. Here’s why:

Entrepreneurs usually focus on revenue. When you’re first building a business you need cash coming in the door more than anything else — not only to finance the company but to create confidence and credibility.

Entrepreneurs often get cost wrong — they either ignore it, at which point it can quickly get out of control, or they obsess, running the company so lean they choke off growth.

Those running large enterprises have a different perspective. They are accountable to the board of directors, shareholders (in theory) and various Wall Street analysts (in practice). That means having to justify all spending decisions.

Other than sales and advertising, the connection between expenditures and revenue can be very hard to demonstrate. The investments required to build sustainable revenue –in product quality and customer relationships in particular — can’t be linked to business success in a provable way. Among other challenges, the payoff for these investments can take years to arrive. Until they do, all you have is cost.

Few entrepreneurs spend time on risk, beyond buying insurance and some other basics. They figure they need luck to succeed. What’s a little more?

Those running large enterprises are more likely to acknowledge its importance — in theory. In practice, expenditures for risk mitigation don’t build shareholder value — the only true goal among the business Illuminati. And so risk mitigation generally takes a back seat to cost reduction.

You, in contrast, live in the world of risk. When your job is to keep the joint running, it’s your neck if the bad wiring ignites.

Persuading those who run your company to let you mitigate risks is always going to be a challenge. When significant expenditures of capital or effort are part of the request it’s tough. When changing how employees are supposed to behave — usually part of the plan — it’s even tougher.

Risk mitigation might be your top concern. To those responsible for business results it’s probably a distant third.

Worse, they might be right. Too often, those responsible for risk mitigation misunderstand their goal, trying for risk elimination instead. The result: They design ultra-low-risk environments that strangle innovation, ingenuity, and the free flow of information — all risk-creating activities.

Often, they write policies and procedures that make doing useful work, let alone innovating new and better ways of working, aggravating enough that many employees won’t see a reason to bother. So your first step is to keep your own perspective in balance.

Your second: Don’t be too successful.

To illustrate with an example: The business refuses to upgrade a seven-year-old server farm. You have a talented staff, adept at keeping them running through a combination of duct tape, memory juggling, and day-to-day ingenuity. You’re proud the business experiences no disruption. Right up until the day the whole farm fails catastrophically.

Better to have had a succession of small, visible outages. When each happens, explain that as the servers age they’re more likely to fail. The business impact this time was x dollars in unnecessary costs and y dollars in lost revenue. Next time could be worse.

You’re converting risk, which they don’t care about, into revenue and cost, which they do.

Risk turns you into a meteorologist. At the beginning of the day you figure the odds: There’s a 60% chance of rain. At the end of the day, either raindrops kept falling on everyone’s head or they didn’t. Meteorologists receive frequent ridicule for this reason.

Welcome to their world.

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