SBA

 

Within most businesses IT is Reactive - the business declares what it wants when it wants it and the IT function struggles to catch up. If we're honest many decisions we take in business are reactive, or just late in the day, so it's not surprising that IT is often behind the ball.

 

Strategy is generally defined as "A Plan Of Action Designed To Achieve A Particular Goal". So we decide up front where we want to be, and how we're going to get there. This is exactly what happens in Strategic IT, normally on two levels: "What IT do we need to operate the business?" and "What IT do we need to develop the business?".

 

 

As business leaders we often know that we're planning to expand headcount, open a new branch office, relocate etc. well in advance of divulging this information to the world at large. Each of these will have an impact on the IT needed by the organisation, and the sooner the provision of it is factored into IT planning the more smoothly and cheaply the required IT can be provided. Early notice of expected change pays dividends.

 

Even if no significant changes are planned, the person responsible for IT should be taking a strategic line on maintenance. How many PCs will we need to replace next year, what will they be and who will we buy them from? What new software will be deployed? Who will need training? How much more server capacity / disk storage space will we require? How congested is the network and when do we expect to need to upgrade? Foresight on these day to day practicalities enables the organisation to plan, budget and control its IT expenditure.

 

Similarly, the substance of what IT provides can be influential. Deciding what software and hardware you are going to use, training staff to use it effectively, and controlling unplanned introduction of new technologies can have a massive effect on operating costs. In some businesses the ratio of IT support staff to IT users is as high as 1:20, in others, through better training and control of the IT environment, it can be as low as 1:500.

 

How we approach the problem of providing the IT needed to operate the business requires strategic planning to maximise worker enablement, minimise operating costs and ensure resilience and recoverability. The head of IT should be able to create such a strategic plan, in consultation with senior executives about the likely business needs over the next year or so, maintain it as circumstances change and make it available to colleagues as both a communication tool and a reality check.

 

Fine words in theory, but is strategic planning in IT worthwhile? Some will argue that it creates additional administration work and reduces operational flexibility, so consider this: according to industry surveys the average UK mid-sized enterprise spends c. 7.8% of turnover on IT (more in the finance sector, less in retail). In the last business of which I was IT Director we reduced this to under 2% of turnover - recovering almost 6% of turnover back to the bottom line, funding product development, growth and shareholder returns. The savings we made were achieved through careful strategic planning - bulk purchases of hardware & software, lowering costs where cheaper solutions would do the job required, standardisation reducing the support burden, cross-training to maximise skills availability and reduce headcount etc. The cynic might argue that we must have had very simple IT systems, but the opposite was true. We were dependent on some very complex systems, and were one of six finalists for the "Most IT-Enabled Business In The UK" award. Given the potential benefits, company directors who fail to take a strategic view on the burden of operating IT are probably missing a trick.

 

 

Does IT have a role in developing the average business? Well we all have customers, and their decisions to choose us as suppliers are influenced by how we communicate with them and what they see of our business operations. Parcel Delivery companies routinely use "Track & Trace" technologies to demonstrate their ability to deliver their customers shipments. The UPS / DHL/ Fedex courier arrives at your door and requests an electronic signature from you on a handheld computer. The purpose of this - to show the customer who despatched the goods that they have been delivered on time to the right person. When Track & Trace technology was first deployed it was as a key business differentiator separating out the men from the boys  in the parcel courier industry and demonstrating commitment to delivering customer service. Track & Trace is not about tracking parcels, it is about showing customers that their goods are tracked and traceable.

 

A case study: in 2000 my previous employer wanted to move the business from a sales model into rental, which looked like being much more profitable. In examining why customers would buy a rental service over the significantly cheaper option of buying the equipment we supplied, we identified that the key differentiator would be field service, and that in order to convince customers to rent from us we would have to demonstrate the ability to provide field service far exceeding that offered by competitors.

 

We invested in new field service technologies - hand-held wireless computers delivering real-time information to engineers, vehicle tracking enabling us to see which engineer was nearest to a customer etc. At the time these were novel and expensive. We installed large display screens in the offices enabling us to demonstrate this technology investment to visiting prospects and customers. We created marketing collaterals around the theme of "Service on Time" showing our technologies for our sales people to hand out and talk about. We publicised our investment in technology to satisfy the needs of our customers.

 

We signed rental contracts, lots of them. We gained sole supplier status with major key accounts in the hotel, leisure and healthcare sectors and with many government bodies - all based upon the confidence that we would deliver the service that they needed when they needed it. We were the only business in our sector which could offer such confidence, and we achieved a dominant position, with c. 50% UK market share. The company grew massively in turnover, profit and shareholder value. We followed up the "Service on Time" initiative with additional customer-facing IT investments such as machines that automatically reported faults via the internet, so that engineers appeared to fix them before the customer knew they were faulty, and reporting systems that allowed customers to see the utilisation and performance of the equipment we rented to them.

 

In short, we used IT as a business differentiator to place ourselves above our competition. 10 years on and the company is still the market leader, based upon service differentiation. Our competitors are still fighting amongst themselves for cost-leadership, but our lead in demonstrable customer-facing IT investment is so high that none of them can afford the hurdle costs of catching up with us.

 

In the finance and utilities sectors businesses have taken a similar approach with customer information, employing dynamic composition systems to construct "personal" documents - investment reports, pension statements etc. showing clearly and simply the benefits they are achieving for their customers. Later this year we can expect to see some financial advisors visiting customers interactively demonstrating the potential returns of increased payments or investments on customer-friendly computing devices such as the new Apple i-Pad. These are all clear examples of businesses seeking differentiation and value creation through the innovative use of IT.

 

Strategic IT is about both the strategic management of IT to maximise business performance whilst minimising cost, and the use of IT innovation to develop new business differentiation or cost leadership strategies in the pursuit of growth. For businesses that care about how they operate and where they're going IT has become and will remain a strategic issue, taking a strategic view of IT delivers both significant savings and real business advantage.