Kumar Krishnamurthy, Varun Sharma, Ramya Sarangarajan, Nakul Uppal
November 20, 2015
As technology reshapes virtually all industries, companies continue to make sizable investments. Yet many such investments fail to deliver their promised returns. We recently analyzed 250 global companies to determine whether increased technology spending could lead to improved financial performance. The results clearly show no direct correlation between technology investments and profitable growth; spending more on technology does not necessarily lead to better financial performance. This by itself is not a new revelation, but our research further shows a strong correlation between technology and profitable growth if the investments are focused on targeted capabilities, augmented with the right operating model and implementation skills.
Based on this research, we developed an index to assess the effectiveness of technology spending in improving corporate performance: the Technology Investment Fitness Index (TIFI). Using TIFI, companies can assess their position relative to peers and better understand the steps they can take to maximize value from IT investments. This index includes four components:
In developing a technology strategy to improve corporate performance, management teams should consider several key questions.
As technology becomes more pervasive in all industries, IT investments can make the difference between being a winning company or a losing one. Yet writing a big check is not enough. Rather, IT investments must be strategic. By focusing on the areas discussed in this report, companies can improve their Technology Investment Fitness Index score and make sure they are investing in technology that can have a true impact on the bottom line.