IT - does your organisation embrace it or tolerate it?

Organisations’ perceptions of how IT contributes to the bottom line vary widely. Some organisations see IT as a necessary overhead, but no more than that, and their strategy is to determinedly minimise the costs. On the other hand, some organisations see their investment in IT infrastructure as leverage, increasing their competitiveness and keeping ahead of competition.  The word innovation is overused, but it is still a useful catch-all for the various approaches that organisations employ to gain competitive advantage in the market place, both from use of technology, or by utilising a novel approach.


So, where is your organisation on the love it or hate it continuum? Look within your organisation and identify the main initiatives and use of IT to gauge the overall perception of the IT contribution to the organisation’s revenue stream.  Try and work out whether your organisation is ‘Type1’ – seeing IT as an overhead or ‘Type 2’ with the view of IT/technology as an enabler.  You may find that your organisation is a ‘Type 3’ - a blend of both, seeking to maximise the use of technology for increased revenue, but continually striving to optimise costs benefit of IT by reuse, strong oversight and governance.


Enterprise Architecture, including TOGAF, incorporates analysis of strategy and strives to align business strategy and IT, harnessing technology to support organisational goals and objectives.


Modelling approaches, such as ArchiMate and other Enterprise Modelling help model the organisation top down, starting from the SWOT analysis and balanced scorecards, identifying capabilities that support high level drivers.  The high level analysis cascades from the high level initiatives through to individual projects and transitional architectures, giving traceability from strategy through to implementation.  The overall model aids communication and collaboration between stakeholder groups and also within the overall organisational business and operational hierarchy.
 

Balanced score card analysis
Balanced Scorecard Analysis - showing Financial, Customer, Internal (excludes Learning and Growth section)

Organisations geared to reduce IT costs – (Type1)
Some organisations see IT as an overhead and adopt a strategy to minimise overheads often referred to as ‘keeping the lights on’.


Organisations wishing to exploit technology – (Type2)

Conversely, other organisations see the impact that technology can have for increasing the overall contribution to the bottom line. This second type of organisation views the technology costs proportional to their potential to increase revenue streams within the business.


How can technology be harnessed to satisfy business needs?


1.    Technology used to differentiate the service model
Organisations which are open to utilising technology see increased performance benefits, exploiting the IT capability in the organisation to support the delivery of superior service to their more traditional rivals.  These types of organisations utilise technology to differentiate themselves from their market rivals through convenience and service – Wonga is a prime example here. Wonga, a relatively new digital finance company, offers a loan service that provides loans in 15 minutes.  Wonga have a completely different business model and approach, with technology used to support ‘quick and easy’ service model.  Another often cited example of using technology to increase sales is when an organisation invests in new technology to sell their products via the digital channel.


2.    Data mining and analysis trends

Another much publicised aspect of generating new revenue streams is demonstrated by the growing interest in big data. We have all seen the rise in interest in analysing our data - where the analysis of customer data uncovers opportunities in cross selling and demand trends. The analysis results uncover revenue opportunities that are appraised and often successfully implemented.  Food stores often utilise weather data to assess demands for their products i.e. demand for ice-cream and barbeque supplies increase in hot weather. As a result the large food retailers utilise weather data to meet defined customer demand on a just-in-time basis.
 


3.    Process improvement

The use of IT technology is used to improve efficiencies – examples such as straight through processing and automation of end to end processing.  These process improvements can result in de duplication of processes and re-input of data per department.  It can reduce resource within the organisation, whilst also improving capabilities and functionality if the processes are designed well in line with agreed business needs and requirements.  Examples in industry are widespread across many vertical markets for example, taking a look at some specific objectives within banking - a bank is targeting a 10 percent reduction of operating costs through automation of end-to-end processes.
 


4.    Use of technology to mitigate weaknesses found in SWOT analysis
A company building and selling laptops identified that a key organisational weakness was their high stock costs, and that the stock was quickly out of date as the technology changed so quickly.


A smart use of technology alleviated this weakness by providing on online portal where customers could input their own PC specification. The new automated process radically changes the existing selling process, and includes built logic that validates basic design choices, which previously shop assistants provided.  The PC can be designed using a step by step wizard, and the newly designed product is then added to a shopping cart and paid by the customer online prior to the organisation ordering the parts. Only after goods are sold is the specific stock ordered.  The stock request is automated, automatically sent to the relevant supplier for order using a direct automated route to the stock suppliers system.  This new approach, which utilises technology, is feasible and workable for both the customer, stock supplier and the organisation.


 The overall benefit of the new process, utilising technology, means that the issue of redundant and high stock costs are substantially reduced The approach of brainstorming possible solutions to improving organisational weaknesses and creating new strengths requires input from both the business strategy and IT departments.  It needs input from the business stakeholders to highlight weaknesses and specific goals and then a collaborative approach with both business and IT stakeholders to table possible options and on-going joint collaboration through to completion.


5.    User awareness of pricing mechanisms – technology resulting in ‘smarter, more informed’ customers.

Customers are also using technology for the benefit of their own bottom line. The relative ease of comparing products, price and service levels leads to a more transparent market, and greater competitiveness.

Therefore the organisation may be forced to amend its pricing strategy based on their customer and suppliers behaviour. Technology affects the internal and external drivers faced by an organisation.  In order to stay competitive the organisation must be sensitive to both internal and external forces affected their markets.

What is your perception of your current organisations IT strategy – is it an integral part of business strategy to leverage increased revenue – or  is it simply used to provide the base technology required to process day to day tasks?  View your organisations initiatives, overall strategy and assess their attitude to technology – does the organisation exploit technology for competitive advantage or focus more on the financial costs of keeping existing services running.

What dashboards do they use to track technology performance?  Have they a process for tracking value realisation?

Looking at the whole life cycle required to exploit technology, an organisation should have a current SWOT analysis (Strengths, Weaknesses, Opportunities and Threats), and explore how technology can be exploited by providing strengths and differentiators over their competitors.

Summary

This article has explored technology usage within organisations.  The follow on article will explore how, once initiatives and the business vision is defined at a high level, the business can absorb organisational change effectively.  The agreed approach should adopt a realistic and workable approach to transforming the business from the baseline state to the target operating model effectively, whilst enabling the business to carry on business as usual. Another key feature of the the next article is a discussion of the factors that contribute to the perceived success or failure of the transformation.

 

 


Benefits of Modelling


  • Ability to articulate strategic view of landscape Optimise data use
  • Reduce infrastructure duplication and optimise non-functional aspects
  • More effective decision making due to up front options analysis with simulation of key requirements
  • Ability to communicate conflicting goals and drivers and facilitate conflict resolution
  • Highlight misalignment of priorities
  • Show competing demands for business services allowing compromise service levels to be defined
  • Improve oversight and Architectural Governance

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