Business, Strategy, and Technology
IT Strategy:
There are several thousand articles in web and in print on Business and IT alignment. They are all true in certain ways - Some articles are focused more on IT, some on Business, and few strike a balance between IT and Business. This article is no different and all I intend to do is to stitch my IT/Finance/Process knowledge together in this short article.
In my opinion, A true alignment engenders from good understanding of the Business, Corporate Strategy, and Technology. In this blog post, I highlight my thoughts on how a good understanding of these various forces will be help to achieve superior operational results. But, before we get into the subject - here are the key assumptions. In my opinion these assumptions are a "given" in IT planning for "Medium to Big" businesses. The smaller businesses/operational units/lean-models can change their processes to technology, but that is not the discussion point here.
Key Assumptions:
1) Analyzing the Business:
The key to analyze a business is in understanding the Industry in which the business functions. Certain Industries can have rapidly changing regulations which could impact your solution development in the later period. In order to save life/time, its always better to go with a top-down approach. Having a in-depth analysis of an Industry is certainly helpful, but not a requirement. The key here is to focus on a) Regulation, b) Key Industry players and how they influence the industry (i.e. Standards, Methodologies, Processes, Supply Chain). A cursory knowledge will give us a base on how to develop our solution design in the later stage. There are several articles/published reports on industries. Notably, Euromonitor and Country Specific statistics from ministry of labor, world bank, and IMF.
The second step in analyzing a business is in understanding where the company is positioned in its Industry(i.e. Competitive Position). As a solution consultant, its imperative that he/she understands what the company intends to achieve and how to achieve. Ideally, the company management will provide you with all the basic requirements but its required of a consultant to anticipate and provide value-added recommendation to the management. We can start with company's Annual Report to understand the business, its future prospects, and goals. Especially, the section on management discussion and analysis will provide insight on company resources, competition, policies, and risks. Besides, if he/she is financial savvy, consultant can look at the Price Multiples and compare it with peer mean/median to get a sense of what the company will be doing in the future. However, note that price multiples may lead to incorrect interpretation if the accounting numbers of the company vastly differs with peer group (i.e. Using LIFO instead of FIFO, Depreciation Methods etc).
The point here is - Understand the Industry/Business and anticipate what the business will do.
2) Understanding Corporate Strategy:
The fundamental to corporate strategy is to trace back to organizational goals. Ideally, companies should have a long-term goal when making critical transformation decisions. Unfortunately, there are several parameters that comes in-play when designing the corporate strategy. For instance, a company that is focused on meeting analyst estimates will have a short-term view. There may be pressure from boardroom and controlling shareholders to improve short-term profits. Although, the short-term views are dangerous, this is what differentiates a good leader from a bad one. A good leader is one who balances the short term expectations with the long term view. The Business needs are always changing and balanced between achieving short-term and long-term goals of the stakeholders. As a solutions consultant, one should be able to build IT Solution/Strategy that is AGILE and MODULAR such that it meets the changing business needs of the CEO.
Examples: Building a multi-million dollar ERP solution when the company is making consecutive yearly-loss is not a good solution. So, is the case when you rely on arcane legacy systems when the business is in a rapid growth phase.
I am emphasizing the above examples as there are several companies that have failed due to a failed IT implementation/strategy. Technology SHOULD scale up/down in a lock step fashion with business strategy - period. Its an enabler to meet business goals.
3) Technology Transformation:
Technology transformation does not always result in updating/upgrading systems. A solution consultant has to focus and decide between multiple alternatives. Some of the key aspects for deciding solutions: Build vs Buy, Insource vs Outsource vs Rightsource vs Offshore, Strategic vs non-strategic vendor, lean vs asset heavy, centralized vs federated vs distributed, Cloud vs On-Premise vs Managed etc. Besides making the above strategic IT decisions, a solution consultant also needs to look at the product fit for the organization. Here's an important factor that a consultant needs to evaluate - Risk. With a niche-player, given its financial status, there is generally more risk related to future support and upgrades of its products. On the other hand, when evaluating a product from a global player, look for product road map,lock-in,integration with other systems etc(applies to niche-player as well).
Future of IT Strategy:
In my opinion, the IT strategists/CIOs will play a role akin to COO in the future. They will be accountable for operational effectiveness and firm competitiveness. As far as technology is concerned, Cloud computing will definitely play a big role - so will the need for robust security and access systems. Security, Networking, Cloud Computing will be the buzzwords for the next 7-10 years. Social Media, mobile computing will also play a big role in IT Decision making.
There are several thousand articles in web and in print on Business and IT alignment. They are all true in certain ways - Some articles are focused more on IT, some on Business, and few strike a balance between IT and Business. This article is no different and all I intend to do is to stitch my IT/Finance/Process knowledge together in this short article.
In my opinion, A true alignment engenders from good understanding of the Business, Corporate Strategy, and Technology. In this blog post, I highlight my thoughts on how a good understanding of these various forces will be help to achieve superior operational results. But, before we get into the subject - here are the key assumptions. In my opinion these assumptions are a "given" in IT planning for "Medium to Big" businesses. The smaller businesses/operational units/lean-models can change their processes to technology, but that is not the discussion point here.
Key Assumptions:
- Technology works in lock-step mode to achieve superior results.
- Technology does not bring transformation but rather enables Corporate Transformation.
- Technology does not guide Corporate goals/strategy but rather enables Corporate Strategy.
1) Analyzing the Business:
The key to analyze a business is in understanding the Industry in which the business functions. Certain Industries can have rapidly changing regulations which could impact your solution development in the later period. In order to save life/time, its always better to go with a top-down approach. Having a in-depth analysis of an Industry is certainly helpful, but not a requirement. The key here is to focus on a) Regulation, b) Key Industry players and how they influence the industry (i.e. Standards, Methodologies, Processes, Supply Chain). A cursory knowledge will give us a base on how to develop our solution design in the later stage. There are several articles/published reports on industries. Notably, Euromonitor and Country Specific statistics from ministry of labor, world bank, and IMF.
The second step in analyzing a business is in understanding where the company is positioned in its Industry(i.e. Competitive Position). As a solution consultant, its imperative that he/she understands what the company intends to achieve and how to achieve. Ideally, the company management will provide you with all the basic requirements but its required of a consultant to anticipate and provide value-added recommendation to the management. We can start with company's Annual Report to understand the business, its future prospects, and goals. Especially, the section on management discussion and analysis will provide insight on company resources, competition, policies, and risks. Besides, if he/she is financial savvy, consultant can look at the Price Multiples and compare it with peer mean/median to get a sense of what the company will be doing in the future. However, note that price multiples may lead to incorrect interpretation if the accounting numbers of the company vastly differs with peer group (i.e. Using LIFO instead of FIFO, Depreciation Methods etc).
The point here is - Understand the Industry/Business and anticipate what the business will do.
2) Understanding Corporate Strategy:
The fundamental to corporate strategy is to trace back to organizational goals. Ideally, companies should have a long-term goal when making critical transformation decisions. Unfortunately, there are several parameters that comes in-play when designing the corporate strategy. For instance, a company that is focused on meeting analyst estimates will have a short-term view. There may be pressure from boardroom and controlling shareholders to improve short-term profits. Although, the short-term views are dangerous, this is what differentiates a good leader from a bad one. A good leader is one who balances the short term expectations with the long term view. The Business needs are always changing and balanced between achieving short-term and long-term goals of the stakeholders. As a solutions consultant, one should be able to build IT Solution/Strategy that is AGILE and MODULAR such that it meets the changing business needs of the CEO.
Examples: Building a multi-million dollar ERP solution when the company is making consecutive yearly-loss is not a good solution. So, is the case when you rely on arcane legacy systems when the business is in a rapid growth phase.
I am emphasizing the above examples as there are several companies that have failed due to a failed IT implementation/strategy. Technology SHOULD scale up/down in a lock step fashion with business strategy - period. Its an enabler to meet business goals.
3) Technology Transformation:
Technology transformation does not always result in updating/upgrading systems. A solution consultant has to focus and decide between multiple alternatives. Some of the key aspects for deciding solutions: Build vs Buy, Insource vs Outsource vs Rightsource vs Offshore, Strategic vs non-strategic vendor, lean vs asset heavy, centralized vs federated vs distributed, Cloud vs On-Premise vs Managed etc. Besides making the above strategic IT decisions, a solution consultant also needs to look at the product fit for the organization. Here's an important factor that a consultant needs to evaluate - Risk. With a niche-player, given its financial status, there is generally more risk related to future support and upgrades of its products. On the other hand, when evaluating a product from a global player, look for product road map,lock-in,integration with other systems etc(applies to niche-player as well).
Future of IT Strategy:
In my opinion, the IT strategists/CIOs will play a role akin to COO in the future. They will be accountable for operational effectiveness and firm competitiveness. As far as technology is concerned, Cloud computing will definitely play a big role - so will the need for robust security and access systems. Security, Networking, Cloud Computing will be the buzzwords for the next 7-10 years. Social Media, mobile computing will also play a big role in IT Decision making.
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