Saturday, June 25, 2005

Business Problems Only, Please!

As a long time professional in the software development "industry", it's easy (and even seems natural) to get caught up in the tool-du-jour or development paradigm-of-the-moment, an addict constantly needing a new IDE feature "fix". I've seen in the cubicles of software developers libraries and software boxes that spanned every programming language and IDE available, all obviously attempted within a short time frame. Software development has been called the most difficult of all human endeavors. As a group, software developers are geeks who revel in creatively solving complex problems with elegant code using the latest cutting edge methods.

It wasn't long into my career before I was being drawn more and more out of my geek shell and into the leadership roles that have been the norm for the last 20 or so years, culminating recently with cofounding and running a thriving information techonology company. Given that, I'd now like to make an announcement:

The ability to effectively wield technology to manage information in pursuit of profit is a good predictor of company success. There are no technology problems, only business problems.

How did I come to this conclusion? The Western Capitalist Economy (WCE) is driven by profit, that is, the amount by which a company's revenue stream is greater than the cost of doing business. In the WCE, profit is the true measure of success; thus, much attention is focused on increasing revenue and decreasing cost. A company that does not generate a profit may not immediately die, but it will certainly not live very long; this is not to be confused with so called "non-profits", which are profit-makers that simply return that profit either to the company itself or to their customers. A true non-profit, that is, a company that cannot sustain revenues greater than costs, is either a future dead company or someone's hobby.

If solutions to technical problems are only evaluated in terms of technology itself, without regard for basic business principles like return on investment and risk management, then it is quite possible to solve a technical problem that leads to ruining the company; you won the battle but lost the war. We can illustrate the principle and it's effects with a contemporary example: securing your web servers. It is impossible to absolutely ensure that a web server cannot be "hacked" or otherwise compromised, other than either (1) disconnecting it from all networks or (2) turning the power off, neither of which are acceptable to most firms. Some companies have information assets (large banks, governments, health agencies, the military) that, if compromised, can bring the company (and others) to its knees. Much money is spent on firewalls, physical security, sophisticated software, highly paid people, redundant hardware, etc., to attempt to minimize the risk. Spending money affects profits, and profits are what makes a business a business. How do you balance the need for security with the cost to accomplish it and the need to sustain a profit? How do you balance risk with cost and the need to make a profit? Sounds like a business problem to me. Working backward, an important component of successful profit-making is a plan to spend money wisely, including, of course, spending money on technology.

Here's a true-life illustration: a good friend and business partner once ran worldwide research and development for a large, well-known specialty manufacturing firm. His group was basically composed of some very smart people who invented things for the firm's clients, things that the client dreamed up and were generally very hard to create. A very important client (read: generated a lot of profit for the firm) called one day with an idea, something they they wanted the firm to "invent" for them, an idea that was potentially worth tens of millions of dollars to the client. My friend dutifully took the request to his scientists, who dutifully assessed the technical possibilities and dutifully came to the conclusion that it couldn't be done. Upon hearing this unwelcome result, the client threatened to pull their entire business away from the firm and find someone who could fulfill the request. At this point, dear reader, the request is no longer a technical problem, but has become a well-defined business problem, one worth untold millions of dollars in future revenue. My friend took this news back to the scientists, careful to instruct them in the finer points of profit-making and it's relationship to the ability for each and every one of them to pay their mortgages and car payments each month. Within thirty days, a prototype was built and delivered to the client.

There are no technology problems, only business problems.

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