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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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Sustained Business Value from SAP Business Software

February 20th, 2012 by
SAP Benefit and ROI

SAP Benefit and ROI

From time to time I review academic literature about the application of technology and offer my SAP experience based perspective.  Recently I was reviewing one of these studies from a few years ago when the authors made a key clarification: they recognized two types of implementations which are  problem-based (i.e. address your “pain points”) or innovation based.

Their suggestion was that some elements of both would be present on any large scale IT project, like an SAP implementation for example, but each type of application presented its own special set of challenges.

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Throughout the study (linked to at the end) the authors managed to clarify key points so they are easy to understand.  I have always considered the hallmark of genius the ability to take the complex and make it simple. 

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There are many situations where a strong business case has been made for an investment together with a well-considered ROI calculation, yet the business benefits sought never actually materialized, despite the fact that the project was delivered on time, within budget, and met the technical specification.

The benefits to an organization from IT-enabled change essentially emerge from three causes: either stopping doing activities, doing what [was] always being done but better (i.e., cheaper and/or faster), or doing completely new things. If organizations are to increase the likelihood of success from their IT investments, they must separate out the different sources of the benefits before developing an implementation plan.  (Peppard and Ward, pg. 53).

They warn against one of the most common hidden pitfalls of Enterprise Software (ES) like SAP turning into a technology project rather than a change lever for advancing corporate strategy.  It is sadly very common to lose sight of the purpose of the technology being applied.  The study authors’ description provides great insight around enterprise applications.  Read carefully how they describe CRM.  Substitute your favorite SAP application, whether it is ERP (ECC), HCM, SRM, SCM, APO, BI/BW, or any other product for their description of CRM and the message is the same.

CRM is not a product that can be purchased; it is a discipline, a framework, [an] integrated approach to managing relationships with customers that requires continuous improvement.  It is a strategy, not a tactic; and although supported by IT, it involves considerable organizational re-design, often changing the focus and culture of the organization.  CRM implementation is not easy and the evidence suggests that many companies are struggling with their efforts. (Peppard and Ward, pg. 54).

One of the problems they noted with the case study they used was at a retail bank they wanted inconsistent goals for their CRM system.  I run into these frequently and call them “mutually exclusive requirements.”  Or, as some say, they “want their cake untouched and want to eat it too.” 

The case study noted the company wanted to implement a CRM system for better customer management and servicing but at the same time wanted a quick payback.  The whole idea of developing customer relationships–, through gaining intelligence, aggregating customer data, and analyzing customer interactions so you can manage and service customers better takes time.  Not only that, one of the key goals of the initiative was to deepen customer relationships to reduce their servicing costs while selling them better products and services.  If they had that level of awareness of their customers to do this within a short payback time period they wouldn’t have been looking at the CRM project.  The company had set themselves up for failure by insisting that a business approach which naturally takes time should have an immediate payback.

Attempting to resolve the current and future business models often highlight a major disconnect between the strategic intent of implementing the system and the resulting actions that must be completed. One UK bank had difficulty in getting branch staff involved in defining requirements during their CRM project. Senior management’s vision of the project was built around customer retention and cross-selling. Branch staff, on the other hand, just wanted a system to process transactions speedily and to get the customer out of the branches as quickly as possible. Getting appropriate engagement and buy-in proved difficult and progress was laborious at times. Yet, after the system had been up and running for a year, staff began to see what was possible and became very active in making suggestions for further development.  (Peppard and Ward, pg. 59).

This point where I will leave off this week is critical.  Frequently companies purchasing enterprise software solutions like SAP are not aware of the capabilities or how to apply them.  Only after some period of time, or a shakeout period, users begin to see and understand how the functionality and information can help achieve strategic business goals.  That is generally when the second phase of implementation, or new functionality, or new enhancements, or even a reimplementation begin to gain consideration.

This study was really well written and easy to understand.  The authors offered tremendous insights into the world of Enterprise business applications which are important for every business software customer and consultant.  I’ve included a link below and it really is worth taking the time to read through. 

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Peppard, J. and Ward, J. “Unlocking Sustained Business Value from IT Investments,” California Management Review, vol. 48, 2005, pp. 52-70.

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