Chief information officers and other IT leaders have had their hands full during the past few years, coping with disruptive change. The global economic downturn has limited the technological investment available to most companies. Because of an aging workforce and insufficiencies in science and technology education, the overall skill level of the IT talent pool is declining. Mergers and acquisitions have forced IT functions to link up ill-matched technologies from different legacies. Vendors are rapidly consolidating as well. Employees demand access to mobile devices, tablets, and social media. The growth of cloud computing and the acceptance of software-as-a-service, while sharply reducing costs, have added a new level of complexity to IT strategies and raised questions about information security. Advances in robotics and digital fabrication are beginning to have an effect on prototyping and supply chain practices.
Meanwhile, the demands placed on IT functions by most companies have increased in scale and number. IT leaders are expected to simultaneously improve the quality of the services they provide, keep up with technological advances, reduce errors and mishaps, simplify the customer and employee experience, protect the company against cybersecurity threats, embrace openness and social media, and realize the benefits of digitization—all while spending less. The net effect has been a rise in sophistication, and the outsourcing of many formerly transactional services. In the near future, IT leaders and employees in most large businesses and government agencies will work on activities such as predictive analytics—setting up systems that capture information in real time and using these systems to enable better decisions or to program automated customer-tailored responses. IT staffers who specialize in more familiar tasks (for example, coding or providing tech support) will end up moving to dedicated outsourced organizations that are equipped with the scale to offer those services more effectively and inexpensively.
A sophisticated, strategically oriented IT function is a desirable goal for any company. It’s especially desirable when the business’s distinctive capabilities rely heavily on information technology. If you are a chief information officer (CIO), a chief technology officer (CTO), or any other senior IT leader, you need to make the same kinds of disciplined choices for your department that the CEO and top leadership team are making about the strategic direction of the enterprise.
When redesigning their function, IT leaders tend to look for guidance outside the enterprise, toward the experts and acolytes of leading-edge technology companies. But their generic advice on IT strategy, by its nature, does not take into account the circumstances of any particular company. Therefore, it leads to a merely transitory advantage. For example, you might be told that companies should focus their IT strategy on serving customers; or to outsource as much as possible to keep costs low; or to be “strategic,” which means focusing on long-term projects tied to corporate priorities. All of these approaches will work well for a while, because they help to focus the IT function in some way. But as product lines shift, technologies evolve, customers migrate, business processes digitize, and strategies change, the organization starts making demands for new services and new technologies, and the focus dissipates again.
Six Value Drivers
We recommend a process for discovering and putting into place a coherent focus for the IT function targeted to the particular value proposition of your company. It starts with a look at your current offerings, and how they provide value. We have identified six ways for IT to create value for an enterprise through the improved deployment of technology (see Exhibit 1).
These six value drivers remain consistent priorities for IT functions, no matter what changes take place in technology, business, regulation, competition, and global markets. At the same time, IT leaders have discovered that no single organization can possibly excel at all six of these drivers. Each requires its own form of investment and competence.