#7 Executives misunderstand IT in strategy — twelve things every business leader should know about IT
Strategy drives executive thinking and forms the context for executive decision-making. Over the last ten years new strategy tools and techniques have come into the market based to clarify and increase the executability of corporate strategy. The strategy maps and balanced scorecards authored by Kaplan and Norton are examples.
Strategists are concerned with issues of gaining and holding advantage over your competitors in your market. Models like, Porter’s Four Forces, revolve around making decisions about what is the company’s advantage, where we choose to compete, how we use that advantage and why the company will grow. These issues are important to making sound decisions.
Strategists can easily view IT as not strategic. They view strategic resources as those that supply competitive advantage. Strategists require a source of advantage to be unique, not easy to duplicate, and not readily substitutable by customers or competitors. Strategists apply these three conditions in determining sorting out strategic vs. tactical resources. Applying these conditions strategists find IT to be a tactical resource because there are market available solutions, those solutions are readily repeatable by others and customers or competitors can substitute their technology for yours.
Strategists take a narrow view of IT in strategic deliberations. Information technology for many strategists is the network, datacenter, personal computers and package applications such as ERP. Taking this view its easy to see that people can believe “IT Does Not Matter” as the definition of IT concentrates on the generic stuff and there is little generic solutions can do on their one to contribute to competitive advantage which is the only thing that matters to a strategies.
That view is reflected in the sample strategy map shown in the figure below. Here IT, HR and the organization are seen as remove from customer value. They are part of the company to be sure, but they are low-level building blocks. The issue is how can executives take advantage of the strategic potential of IT?
IT will be tactical as long as executives think of it as the individual parts, the projects they fund, the assets that IT manages. Executives need an approach for connecting IT as an integral part of the company strategy and resources that contribute to competitive advantage. CIOs facing this challenge report that this comes through connecting IT to customer and financial performance — most often through IT’s relationship with Business processes.
Recognizing that IT is part of a capability helps. It also helps to connect IT to enterprise business processes that define the way the enterprise works. This connection makes IT integral to the activities that support competitive advantage and value delivery. Managing IT assets is a tactical endeavor concentrating on enabling the business. Managing value creation process is strategic and properly recognizes IT’s strategy contribution.
Another approach is to view information and technology as one of the critical resources available to the enterprise. This Resource Based View of the Firm, then focuses strategy on how best to apply these resources to win in the marketplace. The figure below represents such a model developed by Tom Coleman at Sloan Valve Company. While the model is generic, the implications are clear in terms of strategy’s role as the direction and glue that connects enterprise resources.
A narrow definition of what is strategic produces a narrow strategy creating unnecessary execution and market vulnerabilities. These can be seen in companies that chase multiple and potentially conflicting initiatives all in the name of strategy. Remember if everything is strategic than nothing is strategic. That pitfall is possible when you do not have a good definition and filter on the things that are really important — defining how you win in the marketplace and separate those things from what you need to play the game well.
IT is strategic because it delivers the deep changes and operational capabilities needed to win every day and in multiple ways. Sure much of IT is concentrated on current operations and seems to be less strategic, but that does not mean that all of IT should be relegated to the ‘tactical’ pile. That is what executives and industry pundits do when they say that IT does not Matter, or that you do not need to consider information, automation, technology in determining how you compete and win.
CIOs and IT executives need to recognize that not everything, nor everything that takes a lot of time or costs a lot of money in IT is strategic. The parts of IT that directly connect, create or open the door for new ways to win — new sources of advantage are the strategic parts. The rest is more than important enough in terms of delivering operations, cost savings and customer service. Recognize those things for what they are and the strategic aspects as being a part, but something slightly different.
Executives misunderstand IT in strategy when they either negate the role of information and technology in competitive advantage or they tune-out IT executives who insist that everything is strategic. Executives how look at the enterprise and how their execution capabilities define and deliver their sources of competitive advantage know the criticality of information, insight, technology and automation. Taking that view removes a blind spot for IT and for enterprise strategy.
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