How dataflow diagrams can increase business value
I get a lot of questions about technical due diligence reporting and standards. There are also questions about our IT Due Diligence reporting and how our reports help buyers and investors. I shared this small snippet, from one of our IT Due Diligence reports, with an investment banker. His comments made me think that others might benefit as well. It is critical that a business, should not allow the technology department, so far removed from the business decision maker, to make decisions that may not be in compliance with the mission and vision of the organization.
(Note: This information comes from a client in Southern California. The purpose is to show a real-life example. Then demonstrate how a few simple diagrams can turn a technical problem into a business problem.)
In our report, we look at the technology we use metrics for:
- Business Scalability
- Usability (Customer, Vendors, and Employees)
- System Reliability
- System Accessibility (internally and remotely)
- Connectivity/Interoperability* (the ability to share data across internal systems)
- Data Security (Internal and External security)
*This snippet comes from the interoperability section of our report.
In our report, we want to show the buyer or the investor where the organization is today. In this present state diagram, we look at data interoperability. (Note: Business lines for this company include: warehousing, vending systems, and hotel/motel supply.) The first diagram shows the present state of the companies ability to communicate across business departments and divisions.
This present-state diagram makes it much easier to see that the data connectivity problems have broken down. (Note: See the big red Xs) The difficulty in reading this diagram is evidence of a problem. It is tempting to ignore the issues in this diagram and expect the technology team to fix them. Savvy management will ask further questions though about what this means.
The nice thing about technology is that it either works or it doesn't. The red Xs represent these failures in interoperability. Without knowing anything else about technology, any reader knows that red Xs mean there is a problem. The obvious question for the manager is to say, "Why are there red Xs. What does that mean?" A Seasoned CTO or IT Operations manager should be able to explain the problem. The problem is that most technology technicians can't.
In our meetings with managers, employees, and others in the organization, we learned that:
- There was no ability to create real-time reporting for the organization
- Differing sales teams were selling the same inventory to different customers
- Managers were making decisions based on their experience rather than the numbers
This, and more, is what we would expect when we see big red Xs in the data flows.
Risks & Consequence:
When we see these types of problems, we can expect that:
- The cost of organizational reporting is much higher than it should be. (Probably the company is run by maintaining hundreds of manually created spreadsheets.)
- Reporting is limited. No in-depth assessment of the company was able to be performed
- Confusion between departments on what the actual data is. (i.e., sales teams re-selling the same inventory)
- Innovation is lost because analysis of company information is expensive and not real-time
Company in the future
Based on the companies five year plan, this is how we think the company should evolve. In this report, we had to show a dramatic change in the Data flow.
Click image to enlarge
In the future, there are no red x's. Interconnectivity means real-time reporting for management and roles inside the company. With real-time inventory reporting, regular customers can order products without talking to a sales team through a customer portal. Sales teams can focus on new customers. Account managers for customers can track purchases and pro-actively follow up on service. Technicians can track problems with equipment before customers are even aware of a problem. Customer invoices can reflect the details of what everyone in the company is doing for the customer.
Time and cost reductions
Using the ERP Server, we reduce or eliminate the need for spreadsheet creation. In the case of this organization can free up 25% of the accounting departments present workload. The Accounting department benefits, but every team can spend their time in organizational, departmental, and other types of company analysis. We have seen an initial 15% improvement in worker productivity from these types of deployments. As employees improve their skills, we see further improvements in worker productivity.
What this company will see in the future include:
- An eCommerce site that allows customers to serve themselves
- Automation of purchase, distribution, and 80% of the customer service support
- Expansion and industrialization of customer support using a CRM incident ticketing system
- Customer tracking, projections, and new services to the customer through purchase Analysis
- The ERP system will allow expansion of the company by,
- Expanding into new product and service lines
- Acquisition of new companies with minimal technical problems
As a business investor and advisor, the IT Due Diligence Report gives you a new tool for assessing a business before buying. It also gives you a tool for evaluating your present investments. Finally, it helps you see new ways to recoup that investment faster.
Sometimes the IT department is ignored by management. Often with the thought, "If it isn't broken, don't fix it!" But, in technology, the opposite is true. A minor technology fix or change can improve employee productivity dramatically and often unexpectedly. This improvement in employee productivity directly impacts revenue as the cost of sales goes down. Increased employee productivity means that the owner can re-invest or pocket more of these profits while building business value.
The goal of this article is to answer the question, “How can IT Due Diligence help me?”
There are two ways. First, by looking at the technology, the buyer can identify problems before the purchase. We understand that every system has problems of some type. Because the owner and management are not technology experts, these problems go un-noticed. Does it seem like the IT experts should have reported the problem? Anticipating business problems is not part of their training. Because the IT expert is not a business expert, they will design the technology to make their life easier. The problem is that technicians are not trained to align the technical systems into the organization's mission, vision, and profitability.
To learn more about this example or how these ideas impact your systems, contact us. We are always open to sharing information and the wisdom gained over the years.