Editorial: March 2002

By Ellen Pearlman  |  Posted 03-01-2002

When will cost-cutting stop being the IT issue? When the economy shows sufficient signs of recovery that companies begin spending again? When companies realize that they've cut to the point where they won't be able to take advantage of the coming recovery? Or perhaps simply when there's nothing left to cut? We believe it's already time to reassert the importance of what IT can do for the top line. To that end, the lineup for this month includes several stories that analyze how information technology can aid in the process of increasing revenue.

While perfecting the art and science of analytics will ultimately do wonders for just about every aspect of a corporation's income statement, the technology comes into its own as an aid to increasing revenue and, most importantly, increasing earnings. In "Analyze This!", contributing editor Terry A. Kirkpatrick looks closely at some of the companies using new techniques of business intelligence to increase the flow of information throughout the company and out to partners and customers. Done right, analytics lets you react faster than competitors to changing business conditions and new profit opportunities.

Some companies are starting to use that kind of IT-enabled fast footwork to boost revenues by manipulating prices both online and off. A recent McKinsey & Co. study found that a 1 percent change in the price of a good or service could result in an 8.6 percent change in profitability. That insight is the basis for Amy Cortese's "Price-Flexing". Yield management has been a part of the pricing strategy of a number of industries, including financial services and the airlines, for years; now the ability to adjust prices based on what you know about individual customer groups is coming to any number of traditional businesses through smarter use of their online channels.

But like anything else, technology can't do it alone. You need proper management to pull off even the most ambitious profit strategies—and happy campers inside the organization to help achieve them. In this month's case study, we investigate DaimlerChrysler's long and culturally contentious push to make its $36 billion, three-year-old merger live up to what executives had wanted in the deal: a way to cut costs and design new products quicker and cheaper. To that end, IT was to be both part of the cost-cutting and a catalyst when it came to knitting the two camps together. But DC is facing flagging earnings and poor shareholder returns. Can CIO Sue Unger—a 29-year Chrysler veteran and one of the few top Chrysler executives still at DC—enlist her IT department in the cause of rescuing this troubled marriage?

Information technology in the service of the top and bottom lines can be an elusive goal. But only when it is achieved can IT claim to be an integral part of corporate strategy.