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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.

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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!

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

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SAP Third Party – Indirect Usage Licensing Part 2

December 3rd, 2012 by
SAP Indirect Usage Licensing

SAP Software License

For those who may not be aware, SAP is not the first company to require user licenses for third party or “indirect usage.”  It is becoming more commonplace and some companies are quite aggressive with it.  This follow up to last week’s post on SAP Third Party – Indirect Usage Licensing Part 1 will address real opportunities here.

Over the years SAP has set itself apart by aggressively pursuing sales while generally maintaining good customer relations.  It is a balancing act that has served SAP well.  Over the years SAP has avoided the market perception of a ruthless, do anything to get the sale, software vendor. 

This whole third party, indirect software usage can undermine that. 

But there IS an answer!

SAP Are You Listening?  There IS a Third Party / Indirect Usage WIN-WIN Here!

Like any other company, revenue growth is a primary focus.  For software companies, directly related to revenue growth there is also expanding the software footprint within the customer base. 

SAP as a company wants to grow revenue and expand their software footprint. What if there IS a way to achieve this AND satisfy your customers too. 

Would you agree this would be a WIN-WIN?

Customer Perception of the SAP Third Party Indirect Usage Licensing

Purchasing licenses for “indirect usage” feels to a customer like they are paying for something and not receiving any benefit.  There is no “value” in this approach from a customer perspective.  Yes SAP, you have your Intellectual Property (“IP”) to protect, and yes, you developed that IP. 

I am not talking about a legal issue with your IP, instead I am referring to a sales, marketing, and customer relations issue.

Add a customer’s lack of awareness to the perception of “no value” and you have a recipe for difficult customer relationships.  SAP third party or indirect software usage presents an unbudgeted “pure expense” from a customer viewpoint.  Most customers really are not aware of the indirect usage requirement so they don’t budget for it

SAP, Your Third Party or Indirect Usage Answer

Provide your customers a value added alternative to indirect usage or third party compliance issues.  Give them an option to substitute the third party or indirect usage cost they would have incurred in the form of other SAP applications or solutions.  In this way your customers are receiving something of value, you are expanding your software footprint, and you are still gaining the revenue you were looking for without the nasty reputation.  If necessary, give them a deferred payment window so they can plan for and budget the change.

Provide your customers a value added alternative to indirect usage or third party compliance issues.

You can gain a HUGE advantage by targeting certain application deployments–, for example if you want to expand your Cloud sales, HANA, or mobile, you could pick the various products you will allow as a substitute for the indirect usage fees.  This in turn boosts your sales of these newer products and provides your customers with something that is meaningful.  This has huge strategic benefits, for example, each HANA sale potentially displaces Oracle.  Each CRM sale substitute (for the indirect usage) potentially displaces Salesforce. 

Expand Application Footprint and Increase Revenue

ALWAYS be ready to trade the 3rd party integration for a deeper footprint which keeps a competitor out of the client.  Clients benefit from new software capabilities and SAP benefits from a revenue stream WITHOUT the negative relationship consequences of “forcing” the 3rd party maintenance issue.  This also becomes a differentiator with Oracle and other vendors who will push the 3rd party issue.  SAP STILL gains the additional revenue.

ALWAYS be ready to trade the 3rd party integration for a deeper footprint which keeps a competitor out of the client

You could structure contracts to defer 3rd party usage fees by adding some tradeoff in contracts like “as long as annual license revenue is at least ‘x’ no 3rd party licenses.” By doing this you are taking a “gentler” approach in preparing customers for a possible future license event.  This takes the surprise, frustration, and shock out of the equation while keeping your revenue stream more predictable and giving them a chance to budget for the spend.

Conclusion on SAP Indirect Usage or Third Party Usage Sales and Marketing Options

Seriously SAP, you have a LOT of options here.  You can be less adversarial and note that you will defer indirect usage or third party fees as long as a customer’s annual, net new license spend is “X” amount a year.  If they need new licenses for additional users the customer perceives this as a benefit and they can gain additional time to budget for an eventual indirect usage fee.  You are still satisfying your CORE requirement to grow revenue while increasing your solution footprint within your customer base AND in a way that is less offensive than the customer perception of a cost for no benefit.  Many customers look at this as a penalty for choosing SAP solutions.  While the IP is yours SAP, it is offensive to a customer because the data and business are theirs.

This creates a more open environment and many more customers may be willing to “come clean” about indirect usage.  By providing some kind of perceived benefit they are more likely to address the compliance (rather than hiding it) AND the customer AND SAP gain something of value.  Talk about a “Win-Win”!




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