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 / Spring 2013 / Issue 70(originally published by Booz & Company)


Well-Tailored IT

Thus, in many organizations, these value drivers are locked in some degree of tension with one another. Attention to cost-effectiveness is seen as a curb on quality; eager responsiveness may seem to undermine the independent thinking needed for innovation. Each value driver is worthy in itself, but together they add up to incoherence—for the IT function, and for the company as a whole.

The first step in your analysis should be to assess your current situation. Which of these value drivers represent strengths in your organization? In which of them do you have weaknesses or gaps? Which are in conflict with one another? Where do you feel the greatest demand from the larger organization, and how well are you meeting that demand? To help them conduct this analysis, some companies have ranked the value drivers according to how well the IT department can deliver them.

The value drivers show what you’re doing now. But they do not define your primary role going forward, which is to help create and sustain the differentiating capabilities that the enterprise needs most. This role is not focused on issues solely related to information and communications technology (ICT)—providing technical services, keeping up with developments such as cloud computing, fixing problems in business systems, or making sourcing decisions. Rather, it is focused on contributing to the enterprise’s strategy. Thus, as your second step, you must build a richer understanding of your organization’s strategic imperatives—its value proposition in the market if it is a business, and its core mission if it is a government agency or a not-for-profit organization.

Each enterprise has its own unique mix of capabilities, but all enterprises have one thing in common: The IT organization plays a significant role. It contributes to—or even co-creates—the company’s differentiating capabilities, working with the other functions that are responsible for them, developing solutions, and leading the way across the gap between where the organization is and where it needs to be. For example, supply chain logistics is a key differentiating capability at Avon Products, and its IT department played a critical role in making the company truly world-class.

IT is also a primary enabler of those less strategically relevant capabilities, such as basic production and distribution, which are competitive necessities if a company is to remain viable in its industry. For example, every financial-services institution needs to process transactions quickly and accurately. The IT department must be able to ensure this ability without putting more money and time into the effort than necessary.

Five Archetypal Agendas

In a typical IT function, dozens or hundreds of activities must be thought about in this context: Are they part of a differentiating capability, or are they competitive necessities? To develop an internally consistent approach, it is helpful to think of the strategic role that the IT function plays as an archetype: a well-established identity for your department, which guides the agenda for the function, influences the way it operates within the enterprise, and defines and clearly communicates the contribution that it makes to the strategy.

There are five archetypal agendas to consider (see Exhibit 2). Each is named for the way it resolves the tensions that exist among the IT value drivers.

• Value player. Focused on cost and efficiency, this IT department has mastered standardization and basic functionality, rolling out each service as broadly as possible to maximize the return on investment while greatly limiting the number of products, variations, and services. If your company is an overall value player, distinguishing itself through low prices, this IT agenda is usually a prerequisite for success.

• Operator. This IT department focuses on providing high-quality service with low risk by emphasizing execution and operational excellence. It is valued in companies that depend on technology to avoid mishaps and damages, or to maintain high volumes or extra reliability. If you pursue this agenda, you may need to resist the temptation to overinvest; world-class technological excellence may not be justified, especially if it comes at extra cost.

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