Recently GM announced with pride that it had reduced it’s IT expenditures by 25%. The company’s IT spend to sales ration has dropped from 2.4% to 1.6% – a 33% decline. This was held up as a sign of great progress. But, as Baseline recently reported, because GM is looking at the wrong metrics this fact doesn’t matter much.
During this same period, GM’s employment declined by nearly 50%. And the amount of work outsourced (as a percent of revenue) increased from 67.7% to 75%. As a result, the number of transactions undertaken at GM declined markedly. So, while IT costs declined, at the same time the business supported by IT declined even faster. The net? IT costs per transaction actually INCREASED by almost 74%.
Businesses tend to Lock-in on the metrics used, just like they lock-in on behaviors and processes. If they keep looking at the old metrics, they miss the changes necessary to actually improve the business. Often one of the most critical Disruptions is Disrupting the metrics used. In the case of GM, they were caught bragging about peformance on an out-of-date metric. Another demonstration of Defending and Extending a broken Success Formula when what’s needed are entirely different measures to drive new behavior.