From Waterloo to Wall Street: The Evolving Role of IT in Business Success and Failure
According to legend, the Duke of Wellington ascribed his historic victory in 1815 by saying, “The battle of Waterloo was won on the playing fields of Eton.” A century later, George Orwell opined, “Probably the battle of Waterloo was won on the playing fields of Eton, but the opening battles of all subsequent wars have been lost there.”
Talking to past employees, the overwhelming opinion favors the latter explanation. However, many also identify a common theme of 20-plus years: a double helix of extremely poor management intertwined with abysmal information technology strategy.
An LTL carrier such as Yellow is an extremely complicated business. Similar to the railroads, the enterprise software was developed internally — often over decades — because there simply is no “off-the-shelf” solution.
In many industries — ours included — as Y2K approached, IT rose to a board-level concern of ongoing viability. During that period, several strategies emerged.
- One was to throw money at the problem. Past inhibitions to spend were overcome by outright fear. The widespread development of enterprise resource planning (ERP) systems was a frequent outcome.
- The other was to seek to monetize existing IT infrastructure and solutions. Visions of billion-dollar spinoffs of its IT capabilities usually failed to materialize. (See Union Pacific’s plans for its UP Technology subsidiary.)
‘Vision without a strategy’
Some companies, such as Yellow, followed a hybrid strategy to simultaneously monetize its IT capabilities and modernize its IT infrastructure. They established a subsidiary — and spent an enormous amount of money purchasing the URL transportation.com. Unfortunately, they failed at both.
Similar to many IT projects, it was a hallucination: vision without a strategy. The disconnect between management and the IT staff was monumental. There was no plan other than “just make money.” One IT professional from that era pointed out that there were more directors, assistant vice presidents and vice presidents than programmers. And nobody ever defined what the business was — e.g., was it a marketplace or a broker? At the peak of the dot-com frenzy, Bill Zollars — CEO of what was then known as YRC Worldwide — gave a presentation at CSCMP espousing this “strategy” by stitching together Hollywood movie clips that lacked any continuity.
When that failed, Zollars turned to a merger with Roadway Express, where Yellow paid a 49% premium. While this merger was intended to gain economies of scale, it ignored the cultural, operational and social issues that were all manifested in a discombobulated IT infrastructure.
It was Penn Central on tires.
Although both were LTL carriers, the companies had diametrically different operating models — and decades of competitive hatred. The intention to “continue to invest in and grow the brands of both businesses” failed as the merged entity totally failed to “implement best practices over a broader customer base” and to “leverage service capabilities and technologies for the benefit of customers.”
If you add in the subsequent disastrous purchase of USF and misadventures in China, Yellow’s failure was inevitable.
There have been companies with more obvious — and spectacular — IT strategies exposed by M&A. Fritz Companies, CP Ships and Norfolk Southern (after Conrail) all come to mind. NS was the sole survivor.
IT as a ‘strategic essential’ has receded since Y2K
Since the Y2K fin de siècle, information technology as a strategic essential seems to have receded. Rather, companies that have “overspent” on IT projects are held up to ridicule — or worse, if they are public companies. I fear this pendulum swing is just as dangerous as the other extreme.
A generation ago, IT was a competitive advantage. While initially, it was a means to economies of scale, it rapidly became a way to develop new products and generate sustainable advantage. American Airlines’ development of SABRE transformed passenger airlines and was a means to combat early interrupters (e.g., Peoples Express.)
Today, IT is literally the ticket to the dance. It is impossible to survive without a core competency. Nevertheless, there are still CEOs that eschew IT investment “in order to save cash.” If they are paired with an IT-know-nothing board, the results can be disastrous.
In the meantime, the ecosystem is clogged with vendors and consultants all pitching their solutions. While many have valuable products, there are still a number of snake oil charlatans. The combination of clear strategy, excellent management and delivered IT success are the battles that will determine the victors in the ongoing war for success in our industry.
by Ted Prince at Tri-Cities Intermodal