The ubiquity and pervasiveness of IT in business today presents a dichotomy when it comes to an organisation’s strategic planning; like the chicken and the egg, should IT dictate your business plan or should it be a vice versa?
Having been a finance director at five housing providers, three of which involved me acting as the senior management lead for both finance and IT, it is a dichotomy that I’ve had to wrestle with many times. Fortunately for me, I virtually had total control over the business planning in all three organisations and was able to happily fudge the issue!
The challenge for most organisations is that while IT is universally accepted to be the lifeblood of every organisation, to the extent of it posing an existential threat to the organisation if it’s not got right, IT is also very technical and very complex. As a result, planning for IT initiatives is necessarily the preserve of IT experts.
Even finance directors can’t claim to be conversant enough with what is going on half the time. However at the same time, strategic planning is the preserve of the board through the senior management team and ultimately the finance director.
The business planning process
In most organisations, business planning starts with the board and senior management conducting a review of the organisation’s direction for the next five to 10 years. From this, the finance director formulates a business plan, usually with financial forecasts for the next 30 years. The 30-year planning period is based on a standard requirement for lenders (especially lenders of transfer housing providers) over which to judge the organisation’s long-term viability.
The big spenders
Depending on the organisation’s lifecycle, most of the ramping up of expenditure in a housing provider’s business plan falls within two areas, new development and major works.
Indeed, in terms of financial modelling, peak debt (which determines the maximum amount of borrowings you need to have in order to survive) was always determined by the level of new development and major works included in the business plan.
However, over the last ten years, spending on IT and IT projects has tended to be the third largest area of spending. The main reasons for this are:
- The speed of change that housing providers have had to endure, mainly due to ever-increasing regulatory pressure to deliver value for money, year on year;
- The growing demands for improved customer experience;
- The speed at which IT has had to evolve in order to deliver more for less has meant most legacy systems have had to be replaced.
It is a combination of these three pressures that has raised IT’s importance to a level unforeseen even as recently as 10 years ago.
When I started off in housing, there was one thing that my then-boss and finance director used to say (and I’ve heard repeatedly over the years): “if there is one area of our operations where a single mistake could sink us, it is [property/building] development”.
Indeed, over time, a number of providers have failed due to mistakes made in either the controls associated with one or more large development schemes or quite simply getting their financial assumptions wrong.
The prominence of IT
Today, the threat of getting your IT wrong has risen to a similar existential level of risk for both housing providers and commercial organisations. IT failures are now, or should be, high up in the rankings of any organisation’s risk map.
From a regulatory point of view, the HCA continues its pressure on housing providers to deliver VfM and also publish their VfM metrics, and the government’s recent Green Paper suggested that housing providers should publish a consistent set of KPIs, and both of these metrics require accurate data. Furthermore, these metrics are likely to form the basis of future league tables, on which access to grants for development may be predicated.
The HCA has also put housing providers’ boards on notice that they are accountable for ensuring that the evidence they see in VfM reporting is accurate, timely and supports both compliance with the regulator’s current VfM standard and the probable new reporting requirements to customers on service-delivery performance.
The prominence of data
As a result, swift access to accurate data is becoming fundamental to any housing provider’s ability to perform efficiently. Why? Because it empowers them to make sound, data-led decisions which in turn underpin good governance, compliance, assurance and the ability to manage risk.
Access to accurate data is also essential to delivering services effectively online so that customers can self-serve without the need for housing staff to intervene. This is what improves the service provided and liberates staff from many routine tasks.
Is IT a business-plan enabler or catalyst?
It’s a tough dichotomy. As stated above, IT can pose an existential threat similar to development risks because of the large amounts of money now involved and the organisational paralysis that can result when the wrong system has been deployed or a perfectly good system has been implemented wrongly.
At the same time, IT is crucial in delivering the operational efficiencies required for any business to survive. It therefore follows that IT plans must necessarily inform the financial plan, or at least for the next ten years of the business plan.
It was fortuitous for me that at three of the housing providers I’ve worked at in the last 20 years, I was the finance director with responsibility for both finance and IT; it was therefore unnecessary for the IT manager to come ‘cup in hand’ to request funding for the IT programme. I was able to obtain board approval for the IT programme by simply explaining to the board that we either funded and implemented the IT programme or we would die!
It was on the back of this combined finance/IT role that, at one of the organisations I worked, we were one of the first housing providers of our size to implement server virtualisation well before some of my colleagues could even spell virtualisation, data management systems (including workflow) using the latest technology, and replacing our IT department with a fully-managed service provided by one of this sector’s most successful outsourcing companies.
Each of these initiatives not only involved large sums of money over the life of the business plan, but each was also a ‘game-changer’ in its own right and required a step-change in the way everybody in the organisation thought and worked.
The current status
Here is a quote from a recent study from The Economist entitled ‘Data is the New Oil’: “The world’s most valuable resource is no longer oil, but data. A century ago, a ‘new’ commodity spawned a highly-lucrative, fast-growing industry that probably impacted the world’s economy more than any other. This commodity was oil”.
Now, similar statements are being made about data, which is the oil of the digital era. This is evident from the fact that today’s most valuable businesses in the world are Apple, Amazon, Google, Microsoft and Facebook.
A recent survey from Altair of 50 housing providers’ use of technology to effect change found that the top three drivers of transformation are improving customer experience, increasing efficiency and the implementation of a new corporate strategy. The survey reported that:
- 98 per cent of housing providers are planning or are currently implementing some form of transformation programme;
- 90 per cent of respondents described themselves as either ‘early adopters’ or ‘early majority’ in terms of their approach to innovation and transformation;
- 61 per cent described themselves as either ‘digital fashionistas’ or ‘digirati’ in terms of their approach to digitalisation;
- But 89 per cent of housing providers currently have less than 40 per cent of their customer transactions completed online.
When the respondents were asked to look forward to 2025, the results were as follows:
- Over 75 per cent of housing providers expect to be using technologies such as smart devices, chatbots, offsite manufacturing, big data and apps as part of their core approach to service delivery;
- Over 50 per cent of them see an opportunity for greater use of artificial intelligence in the delivery of services.
Folks, this is just six years away!
And that’s far too slow in comparison with leading commercial organisations. Indeed, let’s turn to the commercial world is to see what the brave new world might look like.
It’s well-known that the volume of data we need to handle today has exponentially grown to a degree beyond human capabilities to process.
Most of the factors that we need for digital are in artificial intelligence and in the cloud. These technologies require massive computing power, the likes of which our in-house data centres will no longer be able to cope with.
More and more commercial organisations are deploying data analytics to solve the most complex problems; big data underpins these powerful analytics, with data science enabling AI-based solutions.
And while the need to drive efficiencies has been a key driver for innovation, technologies are already moving onto the next phase which is being referred to as ‘living services’. A ‘living’ business is one which is wired for flexibility and has the ability to shift and reshape as the external environment and expectations change.
In this brave new world, being efficient is no longer the main goal; being adaptable is. This involves rewiring the organisation around achievement of the best possible customer experience. Customers will want to engage with you via all of their channels, not just on yours. And in this new brave world, your customers are the innovators, and millennials (as your future employees) are not too far behind.
In housing, we need to start thinking, planning and catering our services to millennials as our future tenants, most of whom are teenagers at present.
In my view, a lot depends on the level of IT representation within the organisation; for example, IT representation is often missing at board level. The finance director tends to exert more influence at board level because he or she produces and presents the business plan and can override all other directorate priorities, including IT.
Thankfully, this is changing in large corporate entities where IT professionals are learning to be less geeky and more commanding in their presence on the board.
So, in conclusion, whether IT in this context can be viewed as either an enabler or a driver of the business plan can perhaps best be answered by this question: would any organisation survive by burying its head in the sand and hoping that the torrent of IT developments and new ways of working are nothing but a fad that will pass sooner or later?
I think we all know the answer to that question!
Harneck Chilemba is the managing director of the HAC Housing Consultancy.