M is for growth

1. M is for growth Jyoti Banerjee, M INSTITUTE

2. Question: Does IT matter? • Robert Solow: no evidence that IT made any difference to US productivity across the 80s and 90s • Nicholas Carr: IT is an essential infrastructural element, like electricity or air-conditioning, but without any competitive advantage

3. IT really does matter • Keystone: IT matters in mid-size firms because it enables • Profitable business growth • Scale – increases in the complexity of business processes, organisation and business model.

4. Mid size enterprises power the UK economy • Only 6% of UK companies are in the £10m - £250m turnover bracket • Yet they employ 30% of the British workforce • And generate 20% of corporate profits • And grow at over 8% per annum • Despite their performance, they are nearly invisible • They are usually lumped together with small and micro enterprises which are very different from them in character and operation.

5. Understanding M companies • M-focused research from the Institute of Chartered Accountants: • Taking the M out of SME – a research study from the ICA and BDO Stoy Hayward

6. Seven differences – different ballpark? Source: 2005 research by the Institute of Chartered Accountants and BDO Stoy Hayward

7. How IT is analysed makes a big difference • The amount of money spent on IT is a poor indicator • Keystone analysed what IT does in all major areas of a business: • Sales and marketing • Finance • Operations • Product development • Supply chain management • Human Resource Management • Infrastructure

8. Scenario-based IT Scorecard Sales/Marketing Operations Finance & Administration • Project Planning and Mgmt. • Contract & Change Order Mgmt. • Time and Expense Reporting • Resource Management • Procurement and Subcontractor Management • Document Management and Delivery • Benefits & Administration Mgmt. • Performance & Incentives Mgmt. • Sales Pipeline Mgmt. • Proposal Development and Management • Relationship Management Database • “Big company” web presence • Customer self service • Marketing & Campaign Management • Complete insight about my customers • Easy period close • Effectively pay suppliers/partners on time • Automated and timely collections • Automated Payroll • Online, integrated banking • Taxes across products and regions • Automated corporate governance • Effective forecasting • Complete insight about my finances Empowered Professionals • Easy to find information • Easy to use information 3. Easy to Communicate 4. Easy to Coordinate Teamwork IT Infrastructure • A network ties all computers and devices together • Easy access to the Internet • Pervasive Security • Mobile and remote access to information and processes 5. Manage and Protect Data 6. Manage and Configure Devices 7. Update SW on all desktops

9. 1999 2005 20% 73% Overall Score 25% 75% Sales & Marketing 10% 60% Operations 40% 67% Finance 20% 83% Empowered Professionals 43% 86% IT Infrastructure Sample IT Scorecard for PrintForLess.com

10. Operating Margin Employee Count Quartiles based on IT Capability 10.58 228 2003 Revenue, $$Millions 10.21 250 21.36 Top 25% 12.42 257 23.59 2nd 25% 197 7.29 23.52 3rd 25% Bottom 25% 19.43 Proposition: larger firms can make better use of IT Proposition not supported by the data

11. Quartiles based on IT Capability IT Dollars (K) Spent per Employee IT Spend % Revenue # PC’s per Employee 7.50 7.02 0.990 Top 25% 2nd 25% 11.65 10.97 1.122 3rd 25% 6.36 5.82 0.979 Bottom 25% 3.21 3.17 0.997 Better IT Capability costs marginally more. Other factors increase the cost of IT significantly without providing better capabilities. In all cases, roughly one PC to one employee Proposition: spending more on IT gives you more capability Proposition not supported by the data

12. ? Business Strategy Business Process Technology Implementation A data-driven vision of how to use the key economic and competitive levers in your business to drive success. Identifying the specific process changes needed to drive each key business lever. Implementing the process changes in software and systems. Multi-step / process-led IT works

13. Profitable Sales Growth Business Strategy Business Process Technology Implementation A data-driven vision of how to use the key economic and competitive levers in your business to drive success. Identifying the specific process changes needed to drive each key business lever. Implementing the process changes in software and systems. Ability to scale up the business at minimal incremental cost. Multi-step / process-led IT works • Formalised processes: easier to handle complexity • Streamlined operations: growth without headcount increases • Flexibility: take advantage of new opportunities • Better decisions: visibility of critical business issues

14. Profitable Sales Growth Business Strategy Business Process Technology Implementation A data-driven vision of how to use the key economic and competitive levers in your business to drive success. Identifying the specific process changes needed to drive each key business lever. Implementing the process changes in software and systems. Ability to scale up the business at minimal incremental cost. PrintForLess.Com Example Vision: Increasing capacity utilization through leveraging partners. • Expand effective capacity via partners: • New work sorted for profit potential • Lower profit work dispersed to partners. Implemented new order processing system and developed partner portal. Business achieves utilization of 120% of capacity; dramatic increase in profitability. Applying the model to PrintForLess.com

15. Bottom Line On a 100 point IT capability scale, 10 points of improved IT capability delivers 1.9% of compounded annual revenue growth • Result applies to product and service companies • Model works in US / Latin America / Europe surveys

16. M-scaled challenges

17. Find out more www.minstitute.org

18. M is for growth Jyoti Banerjee, M INSTITUTE