INNOVATE. INTEGRATE. TRANSFORM.

Business Solutions with SAP

What is IT Strategy?

July 7th, 2014 by
What is Business and IT Strategy?

Business & IT Strategy

We hear it almost every day, IT Strategy, Business Strategy, strategic customer accounts, strategic widgets, etc. Strategy is applied to so many areas and so many things that the word has almost become meaningless.  The term “strategy” has become trite because it is used so much with so little understanding.

I decided to build my own research based model around strategy because of all of the buzz and the lack of clarity or simplicity.  In other words, how do you really determine if you are being strategic or just using tactics you are calling a strategy?

 

Making IT and ERP Investments Strategic and Business Aligned

What I discovered is almost universal confusion of what is tactical and strategic. The reason is simple, strategy is hard–, really, really hard. Also, strategy depends on your position and direction.  You can take a more limited and more focused approach to produce tactical advantages, and in turn many refer to a tactical advantage as a strategy. Here is an oversimplification:

  • Tactics – execution steps which provide short term wins (short term competitive advantage)
  • Strategy – methods, which includes tactics, to prevent opponents from winning (mid-long term barriers to competition)

Tactics are often related to operational effectiveness, or, how well you execute in a given area or context.  You gain an advantage for a period of time but your improvements (tactics) can be reproduced by competitors.  Strategy is more directly related to market strength. How well you engage, penetrate, and hold markets compared to your competitors.

For an illustration of tactics vs. strategy, hockey player Wayne Gretzky said: “I skate to where the puck is gonna be, not where it has been.” Most hockey players ran to the puck where it was in play, just in time to see it passed to another player. Gretzky would go to where the puck was going to be and was prepared for the puck when it arrived.

A Simple Sports Illustration of Strategy Layers

To understand the strategic perspective, consider a football team.  The Quarterback’s strategy is how do I win this game?  To the coach, the quarterback’s strategy is a tactic, because his strategy is how do I get my team to win the season.  To the owner, winning the season is a tactic because the owner’s strategy is how do I fill the seats, sell advertising, and create a long term winning team that brings in revenue.

The key to successful strategy is in understanding where you are in relation to the broader organization and goals.  Then determine YOUR unique strategy.

Do You Have an IT Strategy?

At the risk of offending my CIO and CTO friends at some pretty large companies, I’m not sure there is a genuine “IT Strategy.” Unless you are in a Technology business, I don’t think the term applies.

There IS however an IT Enabled Business Strategy. By ensuring IT is focused on Business Strategy, the IT organization becomes a strategic business asset. By focusing on how IT can help a business to become more competitive now (tactical), by gaining market share, demonstrates IT value. By focusing efforts at creating barriers to competition (holding market share), IT becomes strategic. A business example would be,

Customer acquisition is more like a tactic (an event) while customer retention and selling into your customer base is strategic.

What Does an IT Strategy Look Like?

If your IT organization is able to engage, penetrate, and hold the “internal IT market” within your enterprise, you might have an “IT Strategy.” Like any marketspace, if you are doing this through monopoly power, then you are not strategic but relying on enterprise enforcement to ensure your monopoly position. It is only a matter of time, or changing leadership, that this monopoly will be broken up. Business units across various enterprises are taking their own budgets and bypassing the “IT monopoly” through BYOD (Bring Your Own Device), Cloud, etc.

If you are not operating in a monopoly environment, the way to engage, penetrate, and hold the IT organization’s “market” is to deliver lasting, and hard to duplicate value, to the greater enterprise.

Conclusion on Building a Strategy

This short post only scratches the surface of strategy development. However, if you really want to become strategic you must learn your enterprise’s competitive landscape. If you can’t identify your enterprise’s marketspace competitive pressures, and understand your place in those areas, then real strategy will be elusive if not impossible. In fact, even genuine tactical advantage will be extremely difficult. After all, what are you trying to gain competitive advantage against?

So, if you want to make an SAP, ERP, or other IT project strategic it is important to understand how to design for business value and competitive advantage.

Related Posts:

Dear SAP — IT’s Past HANA TIME

June 16th, 2014 by
In-Memory DB

In-Memory DB

Recently there has been a lot of activity around in-memory database processing.  Oracle announced in-memory which it is positioning as a direct competitor to HANA [Fn1]; IBM, Microsoft, and others are getting on the “in-memory” bandwagon as well [FN2].  A quick check of Wikipedia indicates there are numerous companies claiming “in-memory” database processing as well [FN3]. Then there is the huge performance difference between Solid State Drives (SSD) and physical media Hard Drive Disks (HDD), being somewhere around 75 times or greater the Database I/O performance (from about a year ago) [Fn4].  The cost difference for SSD vs Memory is significant and SSD technology is still in its infancy but improving quickly.

This all creates a recipe for “in-memory” database processing becoming a commodity. SAP, there is a forward looking option where you can be strategic about increasing application sales, license revenue, and maintenance revenue.  You can do this while making customers happy.

Aren’t “win-win” situations great when they are available?

What Does Strategic Mean?

There is so much talk about “strategy” these days that it has become an overused word with little meaning.  Too many think strategy means “clever.”  While strategy is often “clever” in the business context it has a very specific meaning.  Over the years I’ve developed the following model to define the strategic journey for any area of business.  In this case, when I refer to strategic sales, I mean that you are creating real barriers to entry and real pressure for competitors.

Making IT and ERP Investments Strategic and Business Aligned

R3Now.com IT – ERP Strategy Model

Strategic Sales Thinking on Managing SAP HANA Competitors

SAP, you have certainly recovered any R&D or development costs invested in HANA.  Not only that, you’ve made some money along the way and will continue to leverage HANA as a revenue stream.  However, you have a unique, AND NARROW, window of opportunity.  As the dominant presence in the “in-memory” space, your opportunity is to limit Oracle’s new database sales growth while still growing your revenue and application footprint with customers. You can use a similar approach to the one I outlined for keeping customers happy and growing revenue in .  Basically, give customers something of meaningful value while growing your revenue and application footprint.  Fence out the competition.

Use HANA to get out in front of Oracle database sales by bundling HANA with certain application and license sales as a “free” application but with some ongoing maintenance fees.  You can limit the “amount” of HANA, for example make it the first 1, 2, or 3 64GB units as “free.”  For existing customers who may have purchased a promoted combination of application(s) and HANA, provide them some future discount for Net NEW application (or license) purchases.  You could also revive your old “safe passage” approach to get existing Oracle installed base customers OFF of the Oracle Database.  By giving existing Oracle Database customers an equivalent HANA value to replace their Oracle Databases, but charging maintenance, you create tremendous pressure on Oracle to “cannibalize” their own installed base. This approach does a LOT of things:

  1. Continued revenue generation by promoting the sale and license growth of existing applications.
  2. Some revenue generation from HANA maintenance for those customers who accept the bundled version.
  3. Targeted sale and promotion of the applications SAP as a company wants to more aggressively market such as mobility, CRM, or Business Objects.
  4. Net NEW database sales by Oracle, or other competitors, are more difficult to position against a MUCH higher performance “free” HANA database application option.
  5. Establishes a competitive environment where Oracle has to dilute its own sales and marketing efforts to pursue existing customer while competing against HANA adoption for new applications.
  6. It allows you (SAP) to continue to sell HANA into the existing database space.
  7. HANA is well positioned as the future defacto In-Memory database (similar to what IBM did with the PC in its early days).
  8. You create more “stickiness” with any customers using HANA over the rival database companies.

Conclusion for SAP HANA in the Future

HANA’s In-Memory dominance is challenged by numerous competitors entering (or already in) the marketplace.  When you combine improvements in SSD performance and cost the pressure grows stronger.  Oracle has just finished spending a significant amount of R&D on their In-Memory database product and is preparing to aggressively market it.  By providing HANA so that it promotes the sale of the SAP application portfolio, while undermining the viability of new Oracle Database sales, Oracle will struggle to recover R&D while you (SAP) raises their expense to acquire and retain customers.

Done properly Oracle would be placed in a position to cannibalize their own installed base to retain their customer base, all while SAP is left focusing on selling solutions from the SAP application portfolio.

Don’t let this opportunity slip away.  You can gain additional application market share while placing your biggest competitor, Oracle, in a difficult competitive situation.

==============

[FN1]  Oracle’s In-Memory Option Aims To Beat The Rest Within 12 Months.  ZDNet, June 10, 2014.  http://www.zdnet.com/oracles-in-memory-option-aims-to-beat-the-rest-within-12-months-7000030382/

[FN2] In-Memory Databases: Do You Need The Speed?  Information Week, March 3, 2014.  http://www.informationweek.com/big-data/big-data-analytics/in-memory-databases-do-you-need-the-speed/d/d-id/1114076

[FN3] In-Memory Database.  Wikipedia, retrieved June 16,2014.  http://en.wikipedia.org/wiki/In-memory_database

[FN4] Tom’s Hardware, 2013 HDD Database I/O performance: http://www.tomshardware.com/charts/hdd-charts-2013/-20-IOMeter-2006.07.27-Database,2922.html; SSD Database I/O Performance: http://www.tomshardware.com/charts/ssd-charts-2013/IOMeter-Database-Benchmark,2817.html.  retrieved June 16,2014

Related Posts:

Will SAP HANA Lead to a Big Data Revolution?

December 17th, 2012 by

SAP HANA – Big Data

Lots of folks focus on HANA as a competitor to Oracle, and it is.  Even if HANA adoption and sales were to completely devastate SAP’s biggest competitor (Oracle) that would not be HANA’s biggest impact–, the HANA product has the potential to disrupt entire industries in the context of Big Data.

Unlike Big Data, I’ve been skeptical about the benefits and use of social media in the enterprise, writing about it in Why Social Media Marketing Success Is Elusive for Business and Social Media Fads and the Risk to the Enterprise.  On the other hand, Big Data hasn’t gotten anywhere near the attention even though it has a fairly clear business case.  Big Data has the capability to transform enterprises, organizations, and even entire industries.  We are not talking about abstract “build it and they will come” theories here either.  We are talking about a revolution in the way business is done.

Big Data will have huge impacts on customers, products, even whole regions of the world.  What do I mean when I refer to Big Data?

BIG DATA:  The ability to analyze large volumes of both structured data (like transactional data streams) AND unstructured data (social media, industry information, news trends, etc.) leading to market makers and market losers across virtually all industries.

This ability to synthesize structured and unstructured data streams with technology advances WILL transform companies and industries.
 
Over the next 5 – 10 years:

  • Computing power will continue to grow.
  • High speed memory processing (like in SSD drives) will improve.
  • Massive memory storage will come down in price.
  • In-memory database technologies will mature.

This “perfect storm” of Big Data know-how and technology advances will lead to the ability to identify:

  •  Subtle and even unknown market segments.
  •  Market and sales trends.
  •  Customer sentiments, needs, and wants.
    • Leading to new product or service opportunities.
  • Competitor strengths or weaknesses.
  • Etc., etc., etc.

Big Data will be part of the ERP iii [FN1] technology innovation driving customer focus related to customer acquisition, customer retention, and marketplace performance.  Big Data represents a business transformation shift in how business will be done in the future–, it represents a potential seismic shift in business performance in the marketplace.

The Big Data Revolution

The struggles are the semantics in how to synthesize the information and filter the nuggets from the noise.  Big Data allows you to understand what the keys are in terms of words, concepts, and ideas.  It then allows you to synthesize those keys with the various data sources.
 
In other words, how do you take the product sales information (transactional data), customer demographics (transactional), corporate market knowledge (unstructured internal), key word search (semi-structured internal and external such as with Google or Bing), with marketplace intelligence (unstructured external, including external social media), and innovate new or existing products and services?  That is the challenge that some folks are beginning to work on today.  That is the challenge that SAP’s HANA product enables for the future enterprise. 

Big Data means “Business Intelligence” will finally become, well, intelligent!

————————-

[FN1]  For more information on ERP 3 see this comprehensive ERP treatise ERP vs. ERP II vs. ERP III Future Enterprise Applications.

Related Posts: