How to Drive Growth & Profitability with Your IT Department
If you asked your IT team how they contribute to your company’s profitability, would you get a good answer? Or would you just get a blank stare?
To be fair, it might be an odd question. After all, most distributor IT departments have never been seen in terms of profitability. Technology has historically been all about uptime, security, and cost containment – just doing enough to keep orders moving through the pipeline. The technology team is expected to work in the background, staying out of the way of the things that drive growth.
That mindset made sense back when the goal was operational stability. But in recent years, margins have been getting thinner as costs have been rising. There’s more competition than ever. And not only are customer journeys becoming more digital, they’re also increasingly influenced by AI. Under these conditions, IT can’t just stay out of the way and under the radar; it needs to become an engine for profitability.
But It’s Not Just Infrastructure
Definitionally, infrastructure is not just important, but vital. It’s what you need for a system to function. But often when we think about something as “infrastructure,” it becomes something that needs to be maintained. We fill the potholes on a road so cars can pass through, but we don’t really consider how the road itself could better serve the area around it. And if it costs too much to fill the potholes, maybe they won’t get filled after all.
When IT is viewed purely as an infrastructural cost center, technology teams optimize for risk reduction. But it’s not enough to broadly keep costs down while trying to sell as much as you can to whoever you can. Many distributors know exactly how many orders they processed yesterday; far fewer know which of those orders actually made money.
IT departments are now capable of contributing directly to operational intelligence, which can in turn lead to customer acquisition, revenue growth, and margin expansion. But taking advantage of those capabilities requires calculated risk and proactive strategic thinking. It requires breaking through entrenched tendencies toward risk aversion and reactiveness.
Start by changing the department’s culture and incentive structure so that they understand how their role has evolved.
Breaking the Pattern
Some companies have started to do just that. For example, a major North American foodservice distributor began rotating its rising leaders between business operations and IT, exposing them to the intricacies of both units. Now, they have a talented CIO who started out as a business analyst. When your technology leader understands margin and operations as well as they understand the technology running underneath it all, it’s a lot easier to get the rest of the department on board. It’s how you change team culture from the top down.
Of course, you can also make key changes from the bottom up. One global pizza chain charged its IT organization with the task of contributing a target EBITDA each year. Incentivized to hit that mark, people at all levels of the department began thinking in terms of not just support, but innovation. The company now has a reputation for developing technology products that drive franchisee profitability, thanks to that shift in incentives.
The Risks of Risk Aversion
IT departments that continue to emphasize traditional risk aversion are walking a tightrope without a net. And as with a literal tightrope, the most dangerous thing you can do is stand still.
In today’s market, technology shapes so much, including:
● Customer discovery and digital buying behavior
● Market visibility and sales intelligence
● Go-to-market execution
That puts IT in a position to influence more than internal systems and operations. Your toughest competitors are already bringing their tech teams closer to the business and investing in technology that helps them better understand their customers.
IT leaders are gaining visibility into where their customers are researching, what other companies are doing to draw attention, how buyers discover new suppliers, and how AI tools can influence all of it. In other words, they’re expanding their view of what IT can contribute to the business.
I’m not saying you need to uproot all your systems and start over with something bigger and shinier to keep up. In fact, the distributors that are pulling ahead are those who are increasing their expectations of their existing systems. They’re leaning on their IT teams to devise and implement solutions that can be plugged in to leverage the data and infrastructure they’ve already invested in. Their business-oriented technology leadership is setting the tone. And as a result, distributors are gaining greater visibility, accountability, and alignment.
With so much at stake, you can’t afford to continue thinking about IT as a cost to be managed. To achieve the customer intelligence and operational efficiency you need to drive growth and protect margins, you need to think of IT as a contributor to growth and profitability – and act accordingly. Just “keeping the lights on” will leave you in the dark.