Last week I attended an event organized by Gartner Executive Program for our CIO clients in a very nice location, in the middle of a famous wine districts in the country. There, I led a session about the euro crisis, sharing the scenario planning exercise that David Furlonger and I did at the end of last year, and commenting about the preparedness (or rather lack thereof) of business and IT executive around Europe. During the session I asked for a show of hands from those whose companies actually had a program in place to deal with possible changes to the eurozone, but only very few hands were raised.
The second half of the session was devoted to a real case study, by one of the regional CIOs of a large multinational company, who was a welcome exception to the rule of indifference I have observed so far on this topic.
At the end of 2011 his company decided that the uncertainty surrounding the euro in a number of countries were simply too big to be ignored, and the board decided to run scenario exercises in selected countries, which were deemed to be most vulnerable, and act upon them. The CIO was responsible for two countries exposed to an exit scenario. He and his colleagues in other selected countries were given the task of implementing a response strategy in 12 weeks, after which the corporation should be ready to deal with a variety of scenarios. They went through a typical scenario planning process, looking at scenarios ranging from an orderly exit of one or more countries from to euro, to a disorderly exit. The focus was on application triage and on minimizing the dowtime for the most business-critical, which were deemed to be those affecting the company top line. The triage led to identify application that are supposed to work immediately after the changeover, as well as those that should be converted within one or two months. In case of disorderly exit, where there would a unilateral decision to immediately abandon the single currency, the company would be able to be read in only four days, just the space of a “lomh week end”. This would be required to implement data conversion and replace the base currency for high-priority applications. In order to meet this goal, applications have already been converted to new local currencies and tested, and they are being maintained in parallel to the operational, euro-based ones.
The CIO shared that, while some people reacted with disbelief when the program was announced, the strong drive from the board wiped out any doubt and coalesced all parties involved around making this complex exercise a success.
The question that some people asked was about the ROI of such an exercise. Being prepared to deal with uncertain and potentially disruptive events is good, but if nothing ends up happening some may regret that it was a waste of resources.
However the CIO showed how the exercise offered immediate value, well exceeding the costs incurred. One example was about strengthening and somewhat reshuffling the supply chain. Suppliers were asked to be part of the exercise and come up with plans in 12 weeks. Some felt this was not a priority, which triggered the company to look for alternatives tha, in some cases, proved to be cheaper and more responsive.
While the company must now decide about for how much longer high priority systems need to be maintained in both version (euro and national-currency denominated), the benefits of running a readiness exercise have become very apparent.
My observation is that the euro situation is only one of the many uncertainties that private and public organizations will find themselves dealing with in the next several years. The ability to anticipate risks and seize opportunities earlier than the competition will be a critical success factor, and IT can play a pivotal role in both making sure that the enterprise is ready and to capture the weak signals that allow it to understand what scenario is unfolding.