Mattress retailer Select Comfort Corp., maker of the Sleep Number bed, is closing 55 stores as auditors question the company's ability to stay afloat. These financial problems reflect the same questionable business judgment that caused the company's IT failures.
Accounting industry watchdog, Francine McKenna, brought this issue to my attention with an important question:
It would be interesting to examine IT project failures to see how many of these companies later received "going concern" opinions by auditors. Did IT failure precipitate total business collapse or did faulty IT projects mask other, more serious business issues?
In an email, Francine added:
IT failure is often a symptom of management that doesn't prioritize; properly allocate resources (time and money) to what's important for long term business health; and can't delegate or manage complex, multiphase initiatives.
This correlates strongly with a kind of "instant gratification" management malaise, where a company uses tricks and techniques to control its short-term financial results. These folks don't focus on long-term fundamentals and often avoid taking responsibility for problems of their own creation.
My previous analysis of Select Comfort's IT failure summarized several issues that are consistent with Francine's comment:
- Select Comfort replaced a working Oracle system without apparent justification
- It implemented SAP with in-house resources, an inefficient strategy for a company of this size and IT maturity
- A splashy CEO, rather than a hands-on CIO, appears to have developed IT strategy
These problems suggest that Select Comfort adopted a cavalier and ego-driven attitude toward IT, where the CEO led the charge to acquire new and larger systems without proper regard to need, cost, or process.
Select Comfort is not alone among companies where IT problems masked underlying business or financial issues. For example, Levi Strauss appeared to obscure financial controls problems by blaming a failed ERP implementation. From my blog post on the topic:
For private companies, the IT blame game is a political maneuver used by an individual or group to push culpability onto others. Public companies may sometimes use IT scapegoating to shift investor attention away from strategic management or financial challenges toward narrow technical issues.My take. It's obvious that IT failures are generally associated with lapses in judgment and management. In some cases, these IT problems reflect deeper strategic flaws that eventually mature as serious business failures.
As Francine suggests, correlating IT failures with downstream business collapse would be a worthwhile research project. If you are interested in studying this subject, I'm happy to share thoughts.