Technology can’t be an afterthought in forming business strategy. It's either a driver that helps achieve business goals or it holds the company back.
You would probably recognize the symptoms if your car’s wheels were out of alignment -- you’d see that you were drifting off course. The problem is obvious, and so is the solution.
Would you be able to tell if your approach to technology was similarly pulling your business off track? Often the answer is no. The leadership team is unhappy with IT but doesn’t realize the magnitude of the problem, nor the cost to the business, when technology is not in alignment with the larger business strategy. In today’s business environment, technology can’t be an afterthought in forming strategy. Depending on your approach, technology is either a driver that helps the business reach its potential, or it can hold the company back.
Before the days of enterprise resource planning (ERP) systems, E-commerce, and Web 2.0, businesses managed to be successful and create strategies that led many of them into the age of technology. So why align IT and business?
One reason is that technology has accelerated the pace of change, and keeping up with emerging technology has become a competitive imperative. Business leaders need to increase efficiency, cut costs and implement innovative strategies while maintaining successful daily operations. If you aren’t viewing IT as a business function that is as integral to your strategy as marketing or product development you find it increasingly difficult to compete.
Let’s look at an example. Atlanta-based Caraustar Industries, a recycled packaging company, had grown profoundly, but its systems weren’t integrated and sharing information between facilities was virtually impossible. Viewing IT as a cost center had left the company behind its peers in adoption of technology with significant benefits.
Caraustar recognized that changing its approach to technology would inevitably help lower costs, create differentiation and improve customer support. Since realigning their systems and streamlining their technology, they have been able to “drill down” into data that offers sharper views of their day-to-day inventory levels, operational efficiency and financial metrics.
So how do you understand and improve the state of your technology alignment? Here are some things to keep in mind:
Gain an understanding of external drivers that could be a competitive issue. Federal and state regulations such as Sarbanes-Oxley, HIPAA and California’s Senate Bill 1386 have placed additional IT needs on organizations to ensure the reliability, availability and confidentiality of their information and information services.
When assessing your IT systems, keep compliance in mind. Ask yourself how you are managing compliance and governance issues and if your intellectual property is protected. Think about how secure your IT environment is and whether you have business continuity and disaster recovery plans in place. According to IDC, the Framingham, Mass. research firm, businesses are expected to spend $860 million on e-mail archiving software and services through 2009 -- just one of the necessary IT components that should be considered when evaluating your system. If your data security measures are inadequate competitors may be able to use this fact to steal your largest customers.
Understand the difference between utilities and strategic business drivers. Utility computing consists of routine infrastructure systems such as: productivity applications (Microsoft Office, etc.), e-mail and instant messaging, networks and accounting systems. Strategic information systems are vastly different in scope and business value. These are applications like integrated ERP systems, supply chain optimization and E-commerce. A strategic IT system uses technology to help an organization gain competitive advantage, reduce disadvantage and meet other strategic enterprise objectives.
Create objectives and define benefits. Take a look at the strategic context and organizational structure surrounding your company’s IT infrastructure. Evaluate your current systems and think about how to use IT to provide a competitive advantage or align with your strategic plans. Ask yourself whether you have the right IT leadership to meet your operational needs and strategic goals and if your architecture will support your growth strategy.
Think about business benefits before you think about costs regarding technology leadership. The IT expertise required today is far greater than in the past and reliable, highly available systems require high quality IT management. To get the best results a company needs to do more than install new hardware and applications. You don’t necessarily need a world-class CIO, but you might get tremendous rewards from getting occasional advice from an expert whose knowledge exceeds that of your internal team.
If you are frequently unhappy with your systems and they seem to be a constraint rather than an enabler for your business, it could be your alignment needs attention. You probably need to stop thinking of IT as a utility and an expense and start thinking about what changes would make technology a strategic asset. Once you’ve made this shift in perspective, your systems will help you accelerate results, rather than dragging you off course.
Lisa Metcalfe is a Regional Practice Leader in the Technology Leadership Practice of Tatum LLC. Tatum is the nation’s largest executive services firm, providing financial and technology leadership nationwide.