There’s no end to the ways a company can get into trouble. A new competitor changes the commercial landscape. Fresh business processes bypass standard operating procedures. Acquired units fail to merge. Executives get caught with their hands in the cookie jar.
No matter the ailment, the turnaround is a catch-all phrase that captures what usually happens next, a term that (for optimists anyway) signals there’s a decent chance corporate leaders can right past wrongs and enlighten dim-looking futures. And because big companies rely on information technology to run their business, IT changes tend to show up during turnaround time.
In recent years, CIO has profiled several organizations that said IT was vital to their turnaround strategies. As you will see in our follow-up coverage revisiting four of those companies, turnarounds are difficult and IT alone can’t save a company, especially in tough economic times. And it takes leadership and patience to right a sinking ship.
Some turnaround stories end happily. Harvard Pilgrim Health Care, a Wellesley, Mass.-based HMO, was just emerging from its darkest days when we first visited in March 2001. New systems were being implemented and a tight team of executives?including former CIO Louis Gutierrez?were working day and night to pull the troubled HMO into the black. Harvard Pilgrim did post an operating profit for 2001, and today the current CIO, Deborah Norton, is working on what she calls “the usual business cycle of technology refreshment.”
Other outcomes are not so black and white. Two years after we spoke with A&P, the grocery chain is still in the midst of its $250 million technology turnaround project. A new CIO reports that the project is on track but stresses that training people to use the new systems remains a challenge. “It’s not a matter of loading new technology into a box,” says John E. Metzger, A&P’s CIO since February.
Andrew McAfee, associate professor in the technology and operations unit at Harvard Business School, says that when a company has fallen behind because it is less efficient than its competitors, technology can help that company turn around. “Companies need to ask themselves what their turnaround will hinge upon,” McAfee says. “Are they slow and sloppy compared to competitors?” If so, they should consider a large IT implementation that improves business processes, he adds. McAfee notes, however, that management is as important as technology spending. “Throwing tech money at a problem even where appropriate won’t work by itself,” he says.
What have these four companies learned during the past two years? Here are some broad lessons learned from our revisits: 1) You can’t spend your way out of trouble. Ripping and replacing infrastructure won’t always work. 2) A tough turnaround requires teamwork. 3) You need support from upper management. 4) You’d better be lucky.