February 20, 2011

Road Map to Relevance: Strategies for Differentiating Companies

A capabilities-driven IT strategy is a road map to strategic relevance when it comes achieving optimal IT and operational leadership. Over the past five years, a number of companies have put these road maps in place and achieved a new kind of IT and operational leadership. If you want to join them, your journey will have four stages and four fundamental questions to be answered.

If you are a CEO or an executive leader seeking better strategic value from IT, or a CIO determined to provide it, there’s great news for you. You can efficiently achieve this goal through a capabilities-driven IT strategy: a road map to strategic relevance. Several companies have already put these road maps in place in the last five years, achieving new kinds of IT and operational leadership. Companies can now reap the same success simply by following suit.

In order to achieve this optimal IT and operational leadership, companies need to undertake a four stage journey, in which they will have to answer a fundamental question about the role of IT in their business in each phase. The questions are as follows. First, what are your company’s distinctive capabilities—those that support your strategic priorities—and how can they be improved with information technology? Second, how should you prioritize your IT projects accordingly? Third, what sequence of investment and activity will allow you to reach the goals you’ve set, and close the gaps you need to close? And fourth, what kinds of cultural and governance support do you need to put this IT strategy into practice?

“An explicit road-mapping exercise can play a vital role in recasting your IT function. In this respect, it is very different from a conventional “big bang” technology plan, such as an enterprise resource planning (ERP) renewal effort. The road map forces you to put aside any current efforts to define IT projects or assess solutions packages, and to base your judgment instead on the way your company creates value, on the investment needed for your differentiating capabilities, and on the contribution that IT must make,” said Ramez Shehadi, Partner Booz & Company.

Additionally, if you are a CEO, a CFO, or a business leader you should insist that the IT function develop a complementary road map for its investments. Your business and IT leaders should develop this road map collaboratively. Conversely, if you are a chief information officer seeking to adopt this sort of road map, you may find yourself alone at first. You will need to influence the culture and governance systems of the larger and relevance of IT projects. You will need to insist on broad business participation in high-level IT decisions.

Finally, companies might seek IT oversight policies such as those imposed at Royal Dutch Shell PLC, where 80 percent of IT spending was dedicated to the 200 most strategically important applications. Now is the time to raise the bar on IT investment planning, to make sure investment capital is used to position the business for success, insists the study. CIOs and IT leaders must focus on enabling the corporate strategy, not fighting about technology standards or managing budgets. “As a CEO, a CFO, or a business leader, you must seek to understand how technology can enable your capabilities, instead of simply trying to reduce your unit service cost. The integral role of IT gives you a unique vantage point from which to help the business identify the right capabilities and bring them together across the value chain. With a well-designed road-mapping process, you can give IT the role that it deserves,” said Shehadi.