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Part 2

By Allan Alter  |  Posted 05-31-2006 Print

Companies have more information than ever, but they are ill prepared to use it when unexpected situations arise. If companies want their information to be more useful, their information must be more agile, says MIT's Stuart Madnick.

: Bad Answers, Bad Decisions">

CIO INSIGHT: Why is making better use of information such a high priority now?

MADNICK: There are a number of factors that are interrelated. One is the issue of competitiveness, spurred on by globalization. The second is productivity. The U.S. economy has made amazing productivity gains, but companies are always under pressure to do more. The third factor is effectiveness. More and more, people don't want to deal with hassles; they want businesses to be effective without being too complex. Regulation is also a factor. All these forces are putting pressure on companies. In all these cases, you can do the job better by using information more effectively.

The amount of information we now have access to is enormous compared to just a decade ago. Think of it as winning the lottery: You've won $200 million. Now, what do you do with it? It's a question we haven't thought about before. What is feasible has changed.

What does making information more useful actually mean?

Running the business better and responding better, being more resilient. The challenge now is to be more agile in using our information, to be able to use it for purposes we haven't anticipated before and at speeds far faster than before.

I'm concerned about what I call "ad hoc" decisions, That is, decisions that are unlike anything you've ever had to make before. The levees are breaking in New Orleans. What do we do? I think CIOs have gotten better at building institutional decision-support systems where we have a decision to make over and over again, like bank loans, but we have still have difficulty with ad hocs.

The example I use is when Russia froze all its debt payments six, seven years ago. The chairman of the board of one of our research sponsors, a large financial services company, said, "How much money do we have at stake?" It took them three weeks to get an answer. The financial information existed, but the company had 200 systems scattered around the world, and nothing was in place to feed the information on Russia.

I would say that at best, most companies are fighting the last war. If a case like the Russian one happened to your company, you would build a system to deal with that decision. But what about the next decision that you haven't anticipated? I don't think we're any better able to do that now than we were two decades ago.

But we now have the Internet, we have search engines, we have much more integration between our systems. Isn't it easier to make decisions when unanticipated questions arise?

The kind of information needed to make such decisions is inside the databases in a company, not on the general Internet. And what is the organization's total exposure to Russia is not a question Google could answer. Adopting standards is a non-trivial issue, just from a pragmatic point of view: there's so much inertia and difficulty and cost involved. Organizations go through terrific efforts to standardize data throughout their organization. But what happens? They become acquired by a different company, or they'll acquire another major company. When you talk about access to internal information, and tying together a whole host of systems in the organization, I would say we're not making a lot of progress.

Next page: Aggregating the Data


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