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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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SAP Service Delivery versus Value Delivery

April 30th, 2012 by
SAP Value Delivery

SAP Value Delivery

In my review of academic literature around SAP or ERP implementations I find some thought provoking items.  Recently I reviewed a study which helped me to form a more complete picture of important issues in IT delivery.  Even though I’ve been writing about it for years I gained a new clarity around evaluating some of the existing delivery models [FN1].  What it comes down to is are you looking for service delivery or business results for your SAP project?

SAP Service Delivery or Business Value Delivery – You Determine Your Future

Because my career started in business and later was exposed to SAP as part of the client core team, and then finally moved on to consulting, I have always recognized the importance of business value.  At the same time much of the System Integrator marketplace has been promoting the same old service delivery model they are familiar with. The biggest reason so many system integrators struggle with business value delivery is because they often focus on hiring a lot of really smart college graduates with little or no business experience.  Fresh out of college and heads filled with textbook ideas about how business works. 

If you just want services delivered then no matter what the sales pitch, all of the system integrators are the same

SAP, ERP, or Enterprise Application customers are looking for something more.  As a recent article I read noted, CIOs do not command the respect of the other key disciplines within the enterprise.  In fact, many of their “C” suite peers question whether or not the technology organization serves much of a useful purpose at all.  That my friends is a frightening and shocking perspective to me.  Stop and think about that a minute, many organizations question whether IT organizations serve a useful purpose in the enterprise.  Is it any wonder outsourcing and off-shoring have become so popular?

What Does This Mean for SAP Projects?

At the end of your SAP project are you satisfied that a project was delivered?  Hopefully on time and on budget, but delivered nonetheless?  If you are satisfied that your SAP project was delivered on time and on budget then you are focused almost exclusively on service delivery

Many senior level IT leaders and delivery folks just want something to get in as quickly as possible.  This is exclusively a service delivery oriented project.  The only thing you are concerned about are the skills needed to address the particular technology / application / solution need right now.  This will not however provide you any type of ROI (Return on Investment) or ROE (Return on Equity) because ROI and ROE (along with other measures) are pure business metrics.  These are not IT metrics and do not measure things like uptime, response time, # of service tickets closed, etc.  The idea of ROI, ROE, or Asset Turns are reflections of business activity and investor / owner value.  Although they may be seen as irrelevant by many in IT they are still useful to understand if any value was delivered for the investment that is made.

Do you want services delivered or business value delivered?

Truth is, if you just want services delivered then no matter what the sales pitch, all of the system integrators are the same.  For that matter, why even bother with a system integrator or SAP consultants at all?  Why not just go to your nearest college and recruit a bunch of really smart graduates for a temporary project and pay them about half what the system integrators charge for a temporary contract? 

Seriously, why even bother with experienced consultants at all? 

If SAP service delivery is your focus and not business results it is just a game of who can best make it through the sales process.  Whether it is IBM and their premium rates or Rajakrishna’s Consultant Shack and their all you can eat offshore rates.  If they can’t speak the local language it really doesn’t matter.  On the other hand if you are looking for business results that is entirely different.

If your only focus is on time and on budget then you are only looking for service delivery.  You are not looking for results, or business change, or IT transformation, or business strategy.

Let me make clear I am not suggesting on time and on budget projects should be ignored.  What I am suggesting is that if your only focus is on time and on budget then you are only looking for service delivery.  You are not looking for results, or business change, or IT transformation, or business strategy.  You are merely looking for resources to deliver services to get you to some date at some budget amount.  Any offshore or consulting shack fake will get you to a dollar amount (that is the brutal truth but they will deliver “services”).

Where is the SAP Value Proposition Focus on Business Results?

While SAP Implementation is an Investment NOT an Event many organizations fail to consider their enterprise application deployments as strategic assets designed to produce business results.  The good news is that is changing.  So the next question is Where do you Start with SAP Return on Investment or SAP ROI?  This goes right back to the basics, you must focus on the WHY of Achieving Business Value from SAP Investment.  Is the effort about technology replacement or is there some business reason behind the initiative?

A recent IBM study under the heading of “The CIO as change catalyst” noted:

As the executive working at the nexus of business and technology, CIOs are uniquely qualified to help their companies leverage available tools to meet current economic challenges and to exploit the opportunities that will arise during this crisis—and opportunity will arise for those businesses bold enough to disrupt competition and restructure their industries. CIOs can help transform their companies by better capitalizing on the value of information assets.  They can help manage and mitigate business risk through better, more timely information. They can improve service management. They can lower enterprise-wide operational costs—including IT’s—through automation. [FN2]

SAP and IT organization heads are gaining insight and experience but at the same time they are being squeezed to cut costs and find value.

Focusing on value entails cutting discretionary spending, deploying resources for the highest return, bolstering core competencies and redefining relationships. Cash flow is central to survival and strategic flexibility, which means businesses and business units need to do more with less. Corporations must conserve capital and cut spending where it produces minimal return. Funds must then be redeployed to activities, products and markets that generate growth, improve margins and truly differentiate one business from another. [FN3]

Make Sure You Are Headed Down the Right SAP Path

To make the transition your SAP project must begin with Creating a Knowledge Centered Learning Organization for Business Transformation for IT Leadership.  Whether you are already live with SAP, in the middle of a project, or just starting out, I would strongly encourage you to get serious about Organizational Change Management Inside the SAP IT Support Organization

What most customers do not know is that SAP has offered the “Value Delivery” methodology as part of the ASAP Methodology for many years

If you want to know Why Use the SAP ASAP Methodology? for your SAP project consider the fact that SAP has offered the “Value Delivery” methodology as part of the ASAP Methodology for many years.  Over the years it has taken many forms, all the way back to the early versions of the ASAP Methodology with the old “KPI” lists.  Today it is integrated into the ASAP Methodology structure. 

Isn’t it time to pursue the value delivery method regardless of whether your system integrator is capable of this or not?

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

[FN1]  Kieninger, A. and Satzger, G., Risk-Reward Sharing in IT Service Contracts – A Service System View, 2011 Proceedings of the 44th Hawaii International Conference on System Sciences.

[FN2]  From fear to value: CIO strategies for propelling business through the economic crisis, pg. 5.  Retrieved 4/24/2012 ftp://ftp.software.ibm.com/common/ssi/sa/wh/n/ciw03057usen/CIW03057USEN.PDF

[FN3] Ibid. pg. 6.




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Steps to Achieve SAP IT Convergence

August 22nd, 2011 by
SAP IT Convergence Best Business Practices

SAP IT Convergence Practices

Last week’s post on SAP IT Convergence is About Business Focused Integration provided an overview of Business – IT Convergence and why it is important.  This week we look at some of the key principles around creating SAP IT Convergence including some steps on the path to convergence.

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What is the Difference Between Business to IT Alignment and Business – IT Convergence?

There is an important distinction between convergence and alignment. Business to IT alignment works to mature the IT organization for synergy in applying technology to business goals.  Convergence on the other hand seeks to blur the lines between IT and business–, IT becomes a key component of the business itself.  The alignment seeks to get IT and the business to work together, convergence seeks to fully integrate the IT organization into the business.  Alignment is more like transactional processing and is focused on operations, convergence seeks to integrate IT functions so they have a direct impact on customers and markets.

Business & IT Alignment is the degree to which the IT applications, infrastructure and organization, the business strategy and processes enables and shapes, as well as the process to realize this (Silvius and Smit, pg. 2, 2011 citing Silvius, 2007).

In the last several years there has been progress in Business to IT Alignment through employing the “SAM” (Strategic Alignment Model) (Silvius and Smit, pg. 2, 2011 citing Luftman, 2000) but there is still much further to go.  Rather than alignment, the real domain of IT Convergence is around business value and one widely accepted academic definition around this is “[b]usiness value can only be derived from the efficient and effective utilization of information” (Hedman pg. 2, 2010 citing research from 2000).

What is Wrong with Business to IT Alignment?

As I continue to explore these topics a consistent theme continues to emerge–, SAP, IT, or the technology organization are supposed to “work with” the business toward alignment.  So what’s wrong with that?  This approach allows your technology organization to stay separate from the business –, true integration or convergence never really occurs.

IT Convergence occurs where business and technology grow together causing business opportunities to expand

Business to IT Alignment creates a focus on operations (which is important) but too many information silos continue to exist.  Convergence on the other hand creates efficient and effective utilization of information to affect business outcomes, not just measure business activity. 

Business to IT Alignment is focused on business activity (transactions) while Business to IT Convergence is focused on business outcomes (results).

Because of the lack of IT Convergence the separation of the technology organization from the business causes them to specialize in providing information, they leave the business portion of the “utilization” of the information up to the business.  Some of the symptoms of this are when IT waits for the business to tell them “we need x report in y format” or “we need to do z type of processing.”

SAP IT Convergence Integrates the Technology Organization and Busines

During your SAP project one of the key benefits to the business is the process oriented integration of all departments.  The whole business comes into a single database with opportunities for both improvement and standardization.  Organizational silos are broken down and dependence across the entire process chain is created.  Throughout this difficult transition  (and after the SAP go-live) the SAP or IT organization remains separated.  Beyond reactive support (help desk, enhancement requests, bug fixes, etc.) there is little done to create IT Convergence between the business and IT functions.

SAP IT Convergence is Focused on Business Integration and IT Innovation

Stop and think about this recent quote by Mark Dean, Engineer of the original IBM PC:

Innovation flourishes best, not in applications or hardware but, in social places where people and ideas meet and interact…

This is what SAP IT Convergence is about.  How does this apply to your SAP or IT organization?  This whole idea goes beyond technology and integrates the interaction of business and IT to converge the organizations.

A converged SAP organization uses technology as a change lever for business competitive advantage.  The primary focus is on innovation and customers by leveraging SAP, IT support staff, and other technology investments to achieve measurable business outcomes.

SAP IT Convergence occurs when IT is part of the business and not just SAP, IT support, or the IT organization.  A few of the characteristics of what an SAP IT Converged organization looks like:

  • SAP and IT staff communications, internally and externally, are more in business language rather than technology.
  • Proactively seeks out new business opportunities.
  • Able to interpret, and then implement, business marketplace requirements by turning them into technology solutions.
  • Adapts to business market conditions.
  • Not worried about the latest “techie buzz” like social media (Twitter, Facebook), cloud, etc. unless there is a direct business marketplace connection.

I describe this full SAP IT Convergence as an SAP Center of Excellence–, if you would like more understanding around the SAP Center of Excellence concept please see this SAP ASUG presentation on SAP & Business Convergence.

Conclusion on Steps to Achieve SAP IT Convergence

As time goes on I will address many of the items below in more detail.  Here are some of the key things to consider for creating IT Convergence within your SAP organization:

  • KPI full court press
  • Steering Committee Engagement
  • MBA in the organization
  • Mobile BYOD
  • Internal consulting on business direct buy technology solutions
  • “Exchange staff program” to integrate the IT organization into the business
  • Invest in technical and NON-TECHNICAL IT training
    • Facilitation skills
    • Questioning and Negotiation
    • Meeting skills
    • Conflict management and resolution
    • Managerial skills

This approach helps your organization develop business skills and business understanding which naturally leads to the better utilization of technology and information.  SAP IT Convergence is impossible if you can’t both speak the same language and have a similar cultural understanding.  Since it is unlikely that the business is going to learn ABAP, Java, SQL, or how to make settings in the IMG, it is up to you to be the Business IT ambassador to bridge the gap.

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For more information and background on the concept of IT Convergence in the SAP enterprise you might want to consider the following posts:

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Hedman, J. (2010), ‘ERP Systems: Critical Factors in Theory and Practice’, Center for Applied ICT, Copenhagen Business School.

Luftman, J. (2000), ‘Assessing Business-IT Alignment Maturity’, Communications of the Association for Information Systems, Vol 4, Article 14.

Silvius, A. (2007), ‘Business & IT Alignment in Theory and Practice’, 40th Hawaii International Conference on Systems Sciences (HICSS-40).

Silvius, A. and Smit, J. (2011), ‘Maturing Business and IT Alignment Capability; the Practitioner’s View’, 44th Hawaii International Conference on System Sciences (HICSS-44).

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