Information technology is, of course, an integral part of running a business. Too often, however, it’s not an integral part of a company’s strategic goals.
“Organizations probably don’t think of their IT environment as a business enabler or as business empowerment,” says Elizabeth Roche, strategist, worldwide portfolio management, at HPTechnology Consulting. “They’re not looking at the business value of IT services.”
Increasingly, that business value comes from the information portion of IT. Experts say companies that don’t make IT a part of their overall strategy are missing an opportunity to grow their business, expand into new markets, and operate more efficiently.
New Markets, New Business Models
You don’t have to work hard to find examples of businesses that failed to capitalize on IT as a means of business growth. The music industry was notoriously slow to embrace technology as part of its business model. The entertainment, media and book publishing industries have similarly been caught flatfooted.
“Regardless of what industry you’re in, it’s hard to think about a business that couldn’t exploit IT for competitive advantage if they chose to,” says Barbara Gomolski, an analyst at Gartner , a technology research firm. “If you don’t have that, then you tend to have a separation with IT being done outside of the core business strategy. And our experience is that you’re not getting as much business value.”
The industries that do recognize IT’s strategic importance have fundamentally changed the way they do business and interact with their customers. The airline industry leveraged IT to allow customers to deal directly with carriers instead of going through third-party agents. Banks have similarly made technology an essential aspect of customer interaction.
“The banking industry initially looked at IT as a cost center—calculating balances and so forth in the back office,” says Scott Hopkins, IBM’s general manager of strategic outsourcing. “Then they began to align IT goals with what the business was trying to do. They moved IT closer to the consumer with ATMs, and now you have the ability to do real-time payments with smartphones.”
Leveraging IT isn’t only about creating new uses for technology systems. Many companies are realizing that social media is a useful tool for customer relationship management and product innovation.
“Consumer products companies and manufacturers are exploiting social media and capturing a lot of product innovation ideas, a lot of customer feedback,” she says. “Product development groups are totally plugged into those outlets and a lot of their new ideas are being fueled by the great input they’re getting from customers.”
“I” is for Information
Tapping directly into user feedback is an example of a larger trend. Within large corporations, the emphasis on IT is shifting from building out systems for running a company’s internal operations to analyzing the data collected by technology.
“A big breaking wave is sentiment analysis—really understanding the market sentiment toward your products and services,” says Michael Farber, senior vice president at Booz Allen Hamilton, a management and technology consultancy. “How do you mine that information to give you a competitive advantage or open up new segments of the market, or to inform where you might want to invest in your R&D. It’s less about the technology and more about the data and how to transform that into business intelligence.”
Farber notes that it’s essential to have people in the IT department who understand how to analyze this influx of data and apply it to the company’s business strategy. That also means the role of the CIO will evolve to focus more on information rather than building out systems.
“The CIO role changes to the point where we originally envisioned it,” Farber says. “It’s about information. It’s about the partnership and the relationship between information and business intelligence. It’s about using IT not for IT’s sake. It’s about the value proposition that IT creates.”
As a company’s IT focus shifts toward business intelligence — and as more flexible, cost-effective solutions for running back-office operations become available — organizations can significantly reduce their technology expenditures. Cloud computing, in particular, becomes an important component, as IT leaders concentrate less on managing hardware and software and more on business strategy.
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“Figure out which of your IT services directly contribute to revenue and competitive advantage, and which ones are not core competencies but are required to keep the lights on,” Roche says. “If a process is not competitively advantageous but is needed to keep the lights on, maybe you send that off to a third-party cloud provider and you really spend your money and investment dollars in those processes that deliver innovation and competitive advantage.”
Making IT an essential component of business strategy requires a philosophical shift. But experts note that by moving some internal processes to cloud providers, an organization can quickly reap the benefits of lower costs and greater efficiencies. From there, a company can begin to focus on the business value of IT.
“What is it you have that’s of value that people want to buy?” Gomolski says. “Is there a way that can be optimized or enabled better with IT? Or does IT actually become the thing you sell? It’s rethinking the business. In a digitized economy, what do we have to offer? It could be something totally different from what the company is currently selling. It’s about moving [IT] from an internal focus to an external focus.”