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Creating Value From IT

Start with a deep and real understanding of what is important, and importantly start from a place that is devoid of technology

Background

In the Real Business of IT (Hunter, Westerman, 2009), the authors present a very clear and definitive position that IT can only create organizational value through information or process. They suggest that you can either increase the quality or timeliness of information or increase the efficiency, quality or functionality of processes. This is a wonderful guiding mental model to think about how technology can/will improve business performance. This is echoed, albeit from a different direction, in Enterprise Architecture as Strategy (Ross, Weill & Robertson, 2006) where the authors state that enterprise architecture is “the organizing logic of business process and IT infrastructure, reflecting the integration and standardization requirements of the company’s operating model.”

What can be taken away from this is that a focus on process (i.e. business process re-engineering, process automation, business process innovation) provides organizations the best opportunity to create high value, high impact transformative gains which are directly translated from the understanding/insights of how the core and critical process across the organization can be optimized. IT comes in to enable those improvements with information and process automation. Even in the case of business transformation, there is new information and processes to be designed and integrated into the operating model.

Reinforcing this concept The Real Business of IT authors present their revelation (they surveyed non-IT executives attending executive education at MIT) that Application Development, BPR/Organizational Change, Needs Identification and IT Oversight are the key IT value generators (Hunter & Westerman, 2009). Three of the four value generators are highly business process oriented.

For the most valuable, highest impact gains, process optimization should be approached at the Organizational (Enterprise) level. Enterprise Architecture is the path to understand the ‘what, who and why’ in terms of what the organization needs, who are its stakeholders and what the real value proposition is. IT is more about the ‘how and when’, and it is in the IT organization’s best interest to leverage the Enterprise Architecture capacity of the organization to derive insights about the organization’s core and critical processes.

In “Does IT Matter”, Carr’s 2003 often cited (and debated) Harvard Business Review article, which for me the essence of which is that IT on its own is not strategic and should be managed defensively.

There is value in this idea, and I put it into practice as IT must closely align to the core strategic business if value is to be achieved (aside from just keeping ‘the ship afloat’). What does that mean in a practical sense? Well, if the team is out there trying to deepen customer relationships or getting new customers or engaging them in innovative ways, IT ONLY really wins when IT initiatives are successful at enabling the organization to achieve those core strategies (obviously outside of major business overhaul). You still need to upgrade your mail server, and improve your support process and deliver ‘run the business’ IT. But it is with the ‘transform/grow’ the business initiatives that visible success will be attained, and IT will win. Give the team great email; but in this example you also must understand that you need to give the team advanced analytics and behaviour centric CRM technologies to deepen relationships and seamless mobile/tablets integrated into your information foundation so they can better engage those customers when face to face and push those innovations into the wild (e.g. online, social, mobile) and into the customers hands to drive engagement to new levels.

IT, not for IT’s sake

Jeff Bezo’s early management of Amazon (as explained by Werner Vogels in his excellent InfoQ presentation from several years ago) is an excellent example of strategic business leverage of IT. It is a master class (at least in retrospect) of IT understanding who and what it should be to enable a business strategy.

To paraphrase, Vogels explains that Bezo’s in the early days just wanted to be get big… fast and was willing to sacrifice technical quality (trading off sound system design). For me, a person who guides the designs of systems within systems, this on first contact is unsettling. But that is a technologist’s reaction,… that the system’s design is unappealing is in consequential in this context, since without business success, there is no system. Bezo’s visionary view was that scale, massive scale is (correctly, in hindsight) his future market advantage. Technology, well aligned to this business strategy is to get Amazon big, really big, as fast as is technically possible… the result is from Vogel’s description is a un-standardized, un- structured ad hoc collection of interacting systems, that at some point thereafter was becoming debilitating (this is several years ago now).

So, while by some measures these systems would be seen as a technical failure (there is still plenty of technical merit for them to even have been operational at that scale, just watch the documentary ‘Startup’ for example of an organization being crippled by scale and system design),… the old Amazon platform still ends up being a strategic business success. Those intentionally technical weak systems (from the enterprise and integration perspectives) are a huge success, if only because they successfully enabled the business to achieve its goal. Vogel’s goes on to explain how the systems end up being restructured via a multi-year 8 billion dollar investment, the result of which is now what is known as Amazon Web Services (AWS). AWS demonstrates both business and technical excellence.

Approach

First step is to gain business clarity and clarity of focus. Obvious, and often stated, but just as difficult and oftenly poorly achieved. Before you can build it (and based on the Amazon story, know how to build it) you need to know what is important. Whatever is important should then be built into your decision making framework (see “IT Strategy – The Single Most Important Thing”) to then cascade through the team.

Once that is in place, the next step is to gain deep understanding into process and information enablement. These insights are then the catalysts for your business process re-engineering (BRP) and enablement of the business through technology.

Al-Noor (mentioned in the “Real Business of IT” book) created an approach that I am now planning to experiment with, where a business process task works with a business department/unit to deliver business process improvements (with or without technology). Basically, your business process swat team goes in and works with a business team for several weeks and optimizes process (some of those optimizations are automatable through technology).

In practice what you want to do is start to build a view of IT that is process and information oriented and at the same time laser focused on business strategy. Without this connection in place, you may have difficult delivering long range value and you run the risk of IT investments failing to deliver on their promises. If the business cannot do something valuable with its new IT capability you are building(IT enabling business performance improvement) … the IT leaders have failed to do their job of creating value from the IT investment.

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