Companies must improve margins not revenue: expert

Toronto – Companies can best weather the recession by maximizing existing information technology resources, both human and material, Dr. Peter G. W. Keen told an audience at the ninth annual CIO Summit on Monday.

Keen, founder of Keen Innovations and author of a number of books on IT, said companies should concentrate on improving gross operating margins rather than growing revenues.

“CRM (customer relationship management) is based on raising revenues. That won’t work,” he said. “You can’t force people to get on airplanes or to stay in hotels.”

Keen said managing the recession, which he said we are definitely experiencing, by cutting innovation spending would also be a mistake.

“The best time to innovate is during a recession,” Keen said. “The companies that are cutting innovation won’t be well positioned to come out” of the recession.

He said CIOs need to show where IT spending will have an impact, rather than trying to show a return.

“Much of what we do in IT enables something in the business and you don’t see the return,” Keen said, comparing IT to railroads. “The key measure for IT now is reduction in working capital. Working capital is not an asset; it’s a liability.” The top companies in any industry use half the working capital of their median competitors, he added.

Though it may be fashionable, Keen said it would be ill-advised to write off the whole dot-com phenomenon, as there is much to learn from both dot-com failures and successes.

“We can look at the dot-coms, at what doesn’t work, and help us focus on a couple of things,” he said.

Keen said things to focus on include slashing working capital through common-sense business-to-business e-commerce and increasing staff productivity by properly equipping the mobile workforce.

“I need to be able to get knowledge on demand, where I’m doing the work,” he said. He noted that PCs have traditionally been the domain of white collar workers and lamented the fact blue-collar workers, including those in the field, are often without cellular phones or personal digital assistants connected to the corporate network. “Where in your company is the work done that matters?”

The principle of maximizing resources extends to equipment as well, Keen said. He said companies need to do a floor-to-ceiling analysis of the complexity of their IT operations, adding that most companies don’t even know how many servers they have.

He added that the only reason to have IT is to join-up the disparate arms of the business.

“The join-up business is what we’re here for,” Keen said. “If the join-up business is not our goal, we do not need a CIO.”

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