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strategy and business
 / Winter 2010 / Issue 61(originally published by Booz & Company)


Road Map to Relevance

• Invest to sustain. Some strategically important capabilities may already be relatively well developed in your company, in which case further investment has low value potential. For example, some companies rely on ERP to outmatch competitors in logistics, but they have not made full use of all the data that the system produces. It may require only marginal improvement to realize the full potential of these projects. Plan your investments accordingly, aware that you may need to increase funding if competitors catch up.

• Invest to refine. Most CIOs have become adept at fine-tuning projects, gaining efficiencies, improving operations, and cutting head count. The projects in this category often benefit from that type of attention. They are economically viable, but not tied to the strategic priorities of the firm. Many of them amount to “table stakes,” the capabilities that every company needs just to stay in business. For example, companies can’t operate without e-mail and a firewall. But these capabilities may not need to be world-class. How can you outsource them or provide them at a lower cost, or else make them more effective?

• Invest to keep the lights on. Take a hard look at projects with little discernible strategic importance and low intrinsic value potential. These may be legacy projects or projects supported by only a small part of the organization. Should they remain part of your portfolio? If they are needed to “keep the lights on” for some part of your business, can you scale them back?

Your categorization will probably reflect the needs of your particular industry. For example, in an expanding consumer products company with multiple new offerings and markets, you can expect a large number of projects to fall into the “invest to grow” category. But in a commodity-oriented chemicals company, the total investment will be smaller and the proportion of “invest to refine” and “invest to keep the lights on” projects should be higher.

Finally, having sorted the projects into these categories, evaluate the levels of investment they will need. This process is akin to the “solution blueprinting” processes that many IT departments conduct. Which gaps need to be filled? How large an investment will be needed to bring each project to fruition, and what will be the benefits? The lion’s share of investment will probably flow to the “invest to grow” category, but you may also need to reserve some extra support elsewhere — for example, in some “invest to refine” projects.

3. What’s the Right Sequence?

The third stage involves developing a more detailed road map for using IT to deliver these capabilities. What is the right sequence of investments? What technical constraints and interdependencies among projects should be taken into account? How will your new investments alter the underlying information architecture that you have developed? What assets can be retired, and how soon? How many of the one-off requests that have filled up your investment portfolio in the past can be eliminated? This is also the stage during which you set design and technical specifications and select particular enterprise solution packages.

This stage does not require a multiyear planning outlook. Instead, after an initial launch session your IT road map should become a living document, jointly maintained with the business organizations and continually updated as the company’s strategic priorities change. Make regular course corrections based on rigorous value, risk, and market assessments; refresh the road map as new opportunities arise to generate value. At the same time, keep your decisions tightly linked to the portfolio decisions you made in stage two.

A good example of the road map process took place in 2009 at an electric utility company in the United States. Before building its road map, the IT department received funding requests based on historic allocations for dozens of different projects, including six related to its supply chain. Most of the business cases were not well substantiated. Then the IT leaders reviewed the company’s overall strategy. They saw that it incorporated a sophisticated supply chain capability encompassing efficient procure-to-pay processes, better management of working capital, and the minimization of commodity risk exposure. They realized that their function could contribute several components: analytics on spending, “demand planning” (using statistical methods to more accurately forecast customer needs), end-to-end online management of contract workflow, market intelligence, and improved category management.

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