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IT and business
strategies
In
most organisations, IT does not form the core competency;
however, technology forms an integral part of the strategic
mix. IT managers are beginning to realise the truth that some
strategic decisions are best left to business unit managers,
says MOHAN BABU
As
the slowdown in the tech sector thaws, IT managers and business
leaders are beginning to revisit their technology strategies.
Alongside, business leaders are becoming aware of the need
to be responsible for formulation of overall business strategies
with IT in the mix, instead of passively observing their technology
managers recommend IT solutions. Even IT managers and executives
are beginning to realise the significance of this shift, knowing
that their existence depends on the success of the overall
business strategy of the company and business units they support.
During
the past few years, a new reality has dawned among business
mandarins—that IT alone cannot be the core competency for
every business that it supports. Remember the furore and debate
over Nicholas Carr’ Harvard Business Review article: “IT Doesn’t
Matter?”. Core competencies are defined as: “Areas of expertise
that may be in any area but are most likely to develop in
the critical, central areas of the company where the most
value is added to its products.”
For
an auto manufacturer the core competency could be the manufacturing
process or innovativeness in design. During the nineties,
IT leaders were drumming up successes of a few niche applications
in business strategies of companies like UPS’s customer relationship
database and Wal-Mart’s datawarehouse could be replicated
in any business. They were also busy hyping up the theory
that software systems could be a panacea for all business
problems. The fact of the matter is that in most organisations,
IT does not form the core competency; however, technology
forms an integral part of the strategic mix. This is something
that IT managers are beginning to realise. An interesting
Harvard Business Review article titled “Six IT decisions your
IT people shouldn’t make” is perhaps a must-read for all managers.
The article argues that the following six decisions, the first
three strategic decisions, are best left to business unit
managers:
1.
How much to spend on IT?
2.
Which business processes should receive our IT dollars?
3.
Which IT capabilities need to be company-wide?
4.
How good do our IT services really need to be?
5.
What security and privacy risks will we accept?
6.
Whom do we blame when IT initiatives fail?
The
article goes on to successfully argue that “IT department
should not be left to make, often by default the choices that
determine the impact of IT on a company’s business strategy.”
There are lessons here for leaders across the spectrum of
the industry.
As
the economy starts stabilising and businesses start increasing
spending on core strategic initiatives, managers of high-tech
companies need to recognise the emerging opportunities by
moving up the value chain.
They
need to realign their marketing strategies to focus on business
problems at corporate strategic levels instead of being content
to sell products and solutions to IT departments alone. Both
technology vendors and IT departments can realign themselves
to benefit from a shift in the strategic mindset of business
leaders.
Business
strategy and technology vendors
Technology
vendors need to get more involved in strategic business processes
of their clients. At the end of the day, most companies that
use IT and software systems are looking for solutions to their
business problems or ways to streamline their businesses processes
to make them more efficient. For most business leaders, IT
is yet another tool in their toolkit that they can use to
ensure that their businesses generate higher revenues.
Maximising
shareholder wealth still remains the number one priority.
Case in point is Big Blue’s strategic move to merge business
and IT consulting. IBM’s acquisition of PriceWate-rhouseCoopers
(PWC), and its decision to spend over $1 billion on R&D
in its Business Solutions division is a move towards positioning
the company to sell business solutions using IT.
IT
departments and data centres
Managers
of IT departments need to realise that their very existence
depends on the success of business unit(s) they are trying
to support. No amount of technical innovation is going to
buy a company anything till the company can sell more widgets,
burgers (or whatever else that it sells). It does not matter
if the new supply-chain, ERP, EAI or CRM initiative is successful
unless more orders are processed, more customers are satisfied
and more competitors thwarted.
As
companies emerge from the current downturn, they are bound
to rethink their overall corporate strategies.
IT
managers can ensure the success of their departments by ensuring
that the projects they are undertaking and the systems they
are managing are closely aligned with the needs of their business
sponsors.
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