People debate the value of IT to an organization. Some say that IT is no more than a content management system with a very expensive calculator attached. Those people would be on the side of IT being a cost center. In this manuscript we will discuss the differences between cost/profit centers and then we will discuss how big data, or data, can be seen as a vehicle for generating revenues for an organization.
I remember my days working for the Microsoft Retail Consulting Practice when our manager used to always say "In retail you are either growing you're dying." No doubt, he was correct. However, I added something to what he said: "In retail you are also growing and innovating, or you're dying."
A cost center does not provide revenue for the company and is a business entity that is necessary to run the business. They have indirect impact to an organizations ability to generate profit in more of a support role. Cost centers think more like a utility, meaning I manage costs to a budget, I take fewer risks, and I don't always consider my value to my sibling entities.
More so I think that people who work for cost centers are prone to giving up, letting the problem or opportunity win. It is not their fault, it is the way the organization is managed. Employees of cost centers more than likely do not share in the profit of the organization, so putting in extra effort is not high on their priority list.
Some say that IT is the business. That IT is an enabler and a vehicle for innovation for the organization to provide customer information, competitor insight, market awareness, and finding new ways to create revenue out of data and information. Profit centers think more like a business, I want to increase value to my organization and stakeholders through managed risks, I want to better my peer entities, and I want to better manage my costs.
Profit centers are entities that create revenue for a company. They also contain cost centers so that a profit center manager can mange revenues and costs to an organization. Profit centers have their own metrics with respect to revenue, profit, and cost and eventually roll up to the enterprise profit metrics.
Some of the pros of a Profit Center:
Cost management: Profit centers are trying to increase value and service while always looking at cost avoidance. This does not mean that profit centers are always trying to reduce costs. What it means is that they are carefully leveraging resources in a way that optimizes investment with respect to the revenue potential. They think of the lines of cost/benefit analysis.
Innovation: Profit centers are seeking innovation and not just managing technology. They think differently. The act differently. They hire differently. A cost center is going to reduce risk and manage existing resources to a budget. A profit center is going to proactively seek out partnerships with the business and participate in activities to generate revenue, exploit ideas and resources, and take intelligent business and technical risks.
People: Profit centers are going to hire big thinkers, creative people, and people with strong work ethic. These people are driven to results and paid to results. They have a piece of the action. They are not a commodity. People who work for profit centers should never complain about extra work load, working weekends, and perspiration. Why? Because they should be vested in the organizations success.
So how does BIG DATA, or data, play a role in transforming cost centers to profit centers?
Partnering with the Business: IT profit centers should partner with engineering, product design, product research, and other profit centers to enable data to to work for the organization. If your organization has a manufacturing line, sells a product online or in stores, has a contact center, or has any interface that captures client/customer interaction data beyond the transaction then you have an opportunity to impact costs and revenues of the company. I call this "reactive data management". Meaning that the IT profit center is looking for opportunities that already exist in the data services being generated by the organizations channels. They are asking questions like: How can data help me reduce waste along the manufacturing process? How can I combine in-store POS data and online clickstream data to develop customer buying intelligence: golden path to purchase, or cart abandonment? How can I improve my network so that callers have a better quality of service by looking at bottlenecks?
Proactive Ideation: Proactive Ideation is the process of bringing ideas to the business. They think about adding data and data collection points to the product. How can I sell that as a part of the product and how do I make it valuable to a customer base? This is all about the so called internet of things. This is about innovation and creativity. Think about how organizations are attempting to exploit data as a service to their client base already. Fitness is a great example. Look at all the watches that capture biometric data and the services that are generated as a result: activity monitoring, how much sleep you are getting, heart rate, blood pressure, and body temperature. Not only can these companies sell that back to you as a service but they can also collect this data on a collection of people and combine this with other demographic metadata to sell to other organizations.
Gamification: People love to play games. Collectively, people spend millions of hours annually managing virtual worlds, this time does nothing for them other than entertain. Some people go out of their way to ensure their SIMS are happy. Add in always on devices. The number of devices in the world and the types of activities/applications proves this fact. People love to play games and many times that game is not doing much for them. Imagine if you could create products that produced and used data and made people feel like they are playing a game of Farmland? Especially with products that are frequently purchased or used. How do I use gamification in the organization to make people feel like they are playing rather than working? Organizations that figure this out are going to survive, grow, and beat their competition. People will do things just because they want to win the game.
I think about data all the time. How do I make it valuable for organizations? What can I do with it? Is it going to add value be generating profits or reducing costs? If I can generate an output can I work with the organization to make it operational? How can I better understand customer/client behaviors through interactions and transactions?
It is an incredible new data driven world.
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