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 / Second Quarter 1997 / Issue 7(originally published by Booz & Company)


The C.E.O.'s Information Technology Agenda: Seizing the Right Opportunities

Regardless of the history, it is prudent to "take the test" and get on with curing whatever the illness might be. There are three simple questions that the C.E.O. should ask the senior management team during this testing

Are we building the right set of market-driving capabilities?

The right market-driving capabilities are those in which excellence yields a sustainable competitive advantage and allows the leaders to
drive the market. Recognize that often it is as challenging to determine which core competencies the corporation must have as it is to develop and build them. Without question, I.T. is now an emerging -- if not yet a critical -- component of most market-driving capabilities.

Are we delivering I.T. services at the right level of cost and quality?

The challenge on the delivery side is to be a low-cost supplier, not necessarily the low-cost supplier. Traditional I.T. delivery components (e.g., data center operations, networks and software maintenance) are not typically market-driving capabilities in most industries. Each of these components is scale-intensive and has lower cost profiles with increased volumes. Top management will quickly ascertain the right cost versus quality level and make the appropriate trade-offs. Surprisingly, more often than not, it is not necessary to be the lowest-cost or highest-quality supplier. The real issue involves understanding the different levels and making the necessary trade-offs.

Do we have the right kind of information to manage the business effectively?

Most businesses have undergone major transformations over the past several years. The end result of many of these efforts has been the ability -- and the desire -- to look at individual business units at a very granular level of performance measurement. The focus is now on customer profitability, supplier performance, category management and the key data and processes that drive these metrics.

As the push for performance measurement and accountability becomes an agreed-upon initiative, a corporation's data and supporting processes are often unable to cope with these new reporting demands. The challenge becomes two-dimensional: to determine the right set of performance measurement reporting tools to run the business and to insure that the existing data are in the right format to be reported.

If the set of answers to these questions contains one or more "we don't know" or "no" responses, then it is highly likely that the corporation is receiving low payback, high risk and few advantaged capabilities from its I.T. investments. In other words, senior executives have either under-invested or invested unwisely in I.T., and are probably getting what they have paid for.

On the other hand, if the responses to the questions are strongly affirmative, then the corporation is either truly "best in breed" or management may not really understand what the market leaders in their industry are doing on the I.T. front. The real thrusts of this diagnostic exercise should be to understand the corporation's relative positioning and to gain a clinical view of where market leaders in the industry reside currently -- and where they are headed.

This high-level diagnostic often provides good leading indicators. Recognize, however, that these exercises are typically only directional; they don't yield much prescriptive insight. The challenge for the C.E.O. is to make sure that the organization and the senior management team are aware of both I.T.'s potential and the downside risk involved in turning around a corporation exhibiting one or more of the top-line symptoms described above.

Answering the three questions provides a simple top-down perspective that the C.E.O. should be able to use to engage the organization quickly without a lot of posturing. The first two questions can and should be viewed together if possible since, if there is a disadvantaged cost position, the potential savings can be redirected to pay for high-priority investments.

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