Analyst Outlook: Do you really have an IT strategy?

Conventional wisdom has it that IT strategy is such an old chestnut there’s nothing more that can possibly be said about it. Unfortunately, in this instance, conventional wisdom is wrong.

The survey work we did recently on IT strategies highlighted a serious problem: most IT strategies are strong on how IT will deliver applications and infrastructure but weak on why IT contributes to enterprise advantage. Completing the IT strategy requires defining that contribution.

Complete strategies look inward and outward

A contribution strategy (how IT contributes to competitive advantage) illuminates how an enterprise gains and holds some advantage over its competitors. It contain decisions about which customers, markets, products, operations and IT are going to be invested in, and which are not. These decisions, taken together, set the enterprise strategic direction, and IT’s role in it.

The secret to a good contribution strategy is working collaboratively with other parts of the business, influencing their thinking about what is possible due to IT. Customer strategies, sales strategies, service strategies and fulfillment strategies collectively define how the enterprise competes and wins so called sustainable advantage.

Isn’t operational excellence (straightforward cost reduction) enough? Unfortunately no. The problem with a simple (low) cost target is that it’s too easy to copy. What is really needed is a more complex combination of things that need people, products, assets, training and logistics all to play together. It’s the team as a whole – not just the left wing on its own – that wins the game.

Two types of framework

Creating a contribution strategy that delivers sustainable competitive advantage takes two important ingredients: the right framework for finding and exploring opportunities, and the right climate for cooperation with the business.

In our research work, it is possible to divide frameworks into two sorts: those that are mostly financial planning frameworks and those that are mostly strategic planning frameworks.

Of the first sort, a commonly used one is the return on capital employed (ROCE) framework. ROCE is useful because it indicates how well a company is using its capital assets, such as equipment and machinery. Companies with a high ROCE gain higher market values than companies that need more capital to generate the same earnings. Improbable as it may seem, many interesting conversations can be sparked by talking about the role that IT can play in changing these key financial ratios.

Of the second sort, strategy frameworks created by management gurus prove popular. One that was created by Michael Porter and described in the Harvard Business Review (“What is Strategy” November-December 1996) tackles the question of business position head-on: its management trade-offs and its internal consistency. This and similar strategy frameworks can prove very useful in steering the conversation about IT’s contribution.

Measure your success

Measuring the success of a contribution strategy is difficult. To paraphrase hard-working golfer Gary Player, it seems that the more effort an enterprise puts into its contribution strategy, the more happy accidents it gets in terms of the benefits.

Nevertheless, there are ways of measuring. One effective method is a monthly scorecard, which uses a tangible set of measures to report on progress against the plan to the IT steering committee.

These progress reports need to include soft measures, too. For example, a measure of success might be whether IT is being engaged by the business or whether the business can now do things that it could only dream of three years before.

Completing the IT strategy means communicating what IS will deliver, as well as its contribution to competitive advantage. Without both, CIOs and IS planners will continue to fight for enterprise resources, attention and relevance with one arm tied behind their back, and conventional wisdom will continue to be proved wanting. Everyone should have a complete IT strategy.

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–Andrew Rowsell-Jones is vice president and research director for Gartner’s CIO Executive Programs.

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