Competing in Tomorrow’s World: Can IT Deliver Business Value?

The future is near. The strategic use of information and technology is continuing to transform the world. Consumers are demanding more. They want constant, uninterrupted connection to information services through the systems in their homes, their vehicles, personal digital assistants, computing networks and even appliances. Businesses are expanding in new directions to drive lean, strategic operations that link to customers, suppliers and partners-instantaneously sensing and adapting to changes in the supply chain network. Products once delivered as stand-alones now harbor embedded technologies, allowing them to meld into an integrated flow of information and services.

But as remarkable as this future looks, two questions remain: What is the role of IT in this new world? How do CIOs prioritize scarce resources to address the new and innovative needs of their businesses?

Today’s IT: A Business Perspective

Increasingly, there is a disconnect between the way IT views the organization and the way the business views IT. While more than 70 percent of business executives think their business strategies are highly dependent on information technology, few consider the source of that success to be in their IT functions.

The same research also illustrates how executives view the future. For example, executives think information assets and technology solutions are crucial to their competitive differentiation in the marketplace. And they know that innovation in products and services as well as the value chain will differentiate them in the marketplace. At the same time, they do not believe the source of technology innovation is found in their IT organizations. Indeed, 72 percent of executives say technology innovation is typically found within the business-well outside the IT organization. Further, the cost and time it takes to integrate innovative solutions with their existing IT infrastructures often causes more problems. In short, the IT organization does not deliver its full value to the enterprise.

Increasingly, business leaders are focused on the future while most IT organizations are rooted in today, contemplating new ways to cut costs and improve efficiencies. Yet rather than focusing solely on driving the last penny of waste out of their own organizations, IT organizations should be finding ways to help their companies improve business operations and create new growth opportunities (see figure 1).

Focusing on Business “Value”

Telling someone to focus on value is a far cry from doing it. Today’s IT organizations are simply not structured to focus on value. IT organizations tend to be segmented by functional areas, with applications in each function maintained by a support structure of dedicated analysts and programmers. Within this approach, organizations treat all of their IT assets alike. A mature asset gets the same level of support as an asset that increases business value despite the fact that the latter asset has the potential to create significant value for the company. For example, many companies over-invest in mature financial applications that offer limited competitive value. After all, there is a finance programming staff and a yearly budget that must be spent. These same companies will under-invest in the challenging architectural foundation necessary to support an improved customer capability or digital products.

How can the IT organization focus resources and effort on improving business value? There are three steps:

1. Focus on strategic priorities

   It may sound intuitive, but the first step to improving IT’s value contribution to the overall business is understanding where you are today. Are you paying attention to the strategic priorities of the business? Is your IT portfolio segmented in a way that will increase business value and competitive advantage?

   Answers to these questions can be ascertained by a thorough assessment of your IT portfolio-examining each set of functional applications and segmenting them based on their strategic value, competitive capability and your current budget (see figure 2). Once the portfolio is segmented, you’ll have a clearer view of investment priorities.

   

   Typically, the assessment is the point at which companies find they are over-investing in mature applications and under-investing in applications that have the potential to deliver strategic value. The goal is to refocus resources on the high value, differentiating technologies. But before resources can be sent elsewhere, the company must free-up resources from the mature or maturing areas. This leads to the second step.

2. Manage and force the maturation of current technologies

   All technologies mature over time, which means they become standardized and usually require fewer resources and smaller budgets. It is important to appropriately manage the maturing process. Top companies move quickly to trim their support of mature functions and look for ways to accelerate the process. How a company manages its mature technologies is often the key to freeing up investments for new business opportunities.

   There are several ways to force the maturation of current technologies. Some companies choose outsourcing. Others turn the process over to outside service providers. Still others choose to go it alone. But regardless of approach, the key is to drive down long-term maintenance and support costs while providing an adaptable architecture that can easily accommodate new enhancements and new technologies. Even in the most mature applications, you should anticipate and expect the development of new technologies and new interfaces or extensions. For example, financial applications will likely need to accommodate new forms of electronic payments and new interfaces to partners.

3. Prepare for strategic technologies

   New technologies are on our doorstep. How many possible ways can you communicate with your customers in their cars? How will ubiquitous IP change your IT infrastructure? How will multiple technologies merge together to change your business?

   Clearly, IT should be leading the way in generating valuable business solutions. Yet, as mentioned earlier, the majority of executives think their best technology ideas are generated outside of their IT organizations. This is not good news for IT organizations. How can IT executives change business executives’ minds? One way is to first change the mindset of the IT organization. Rather than focusing solely on technologies, it is time to concentrate efforts on finding business solutions as well. An IT organization that has a solid understanding of the business and can offer potential solutions to business problems, will be better able to help the company capture value.

   One key to success is collaboration. Indeed, an IT organization that works cooperatively with the business can lead an innovation agenda. The process should begin with creating a “roadmap” of current and future technologies based on where they are in the maturity cycle and the potential business solutions they enable. Discuss the technology roadmap-along with the portfolio segmentation-with business leaders to come up with new solutions that will enhance the value of the business. The technology roadmap will help push thinking in new directions. Working together, IT and business leaders will determine how technology can be used to generate business value.

Summing Up

In the new world order, true success will depend on an IT organization’s ability to split its technology mindset, focusing both on technology and on a forward-looking business strategy. This new thinking begins by stabilizing mature applications and speeding the maturation process to refocus resources and efforts where they matter most on creating business value.