Creating competitive advantage with it a business value perspective
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Creating Competitive Advantage with IT: A Business Value Perspective. EMBA 514 Rob Anson, Ken Wiley March 15, 2013. Readings IT Doesn’t Matter? Nicholas Carr, HBR, 2003 IT Does So Matter! Kathleen Melymuka , Computerworld, 7/7/2003

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Creating competitive advantage with it a business value perspective

Creating Competitive Advantage with IT:A Business Value Perspective

EMBA 514

Rob Anson, Ken Wiley

March 15, 2013

Readings

  • IT Doesn’t Matter? Nicholas Carr, HBR, 2003

  • IT Does So Matter!Kathleen Melymuka, Computerworld, 7/7/2003

  • The Grill:Nicholas CarrJoyce Carpenter, Computerworld, 3/3/2008

  • A Simple Framework to Translate IT Benefits Into Business Value Impact Richard Hunter, et. al., Gartner, 2008

  • Defining the Business Value of Cloud Computing Tyson Hartman and Larry Beck, 2009 White paper from Avanade consulting

Pre Session Assignment: (Individual) One-Minute Brief

Take a stand on whether or not IT matters in your organization (where you currently or recently worked) by recommending a new information technology or a new approach to IT.

Briefly identify the technology or approach, and position it within the Gartner investment framework.

Then argue for its adoption. In your argument, draw upon the discussions for or against Carr’s position, and the framework from the Gartner report.


Agenda

Agenda

  • Does IT Matter?

    • In Principle

    • Discussion

  • Strategic and Business Value Views of IT

    • In Organizations

    • Stories--In your organization

  • Obtaining Business Value From IT

    • Investments in IT

    • Investment Competition

  • Business Value Considerations in Cloud Computing

    • Guest Speaker: Ken Wiley,

      Managing Principal, Wiley & Associates, LLC

    • Q & A


Does it matter

Does IT Matter?


It doesn t matter does so

IT Doesn’t Matter. Does so!

  • Competitive Advantage at best fleeting

  • IT ubiquitous, standardized, commoditized—opposite of scarce

  • IT is a utility, an infrastructure, not a differentiator

  • Firms should:

    • Spend less

    • Follow, don’t lead

    • Focus on vulnerabilities, not opportunities

  • IT is inherently strategic because it enables new things, which enables differentiation

  • Computers are ubiquitous, but insight to use them is scarce

  • IT enables incremental (not big bang) improvements  business change  advantage

  • IT co-creates capacity


Strategic and business value views of it

“Conventional IT strategic planning is similar to a funeral for a head of state. It is infrequent, requires very powerful people to come together and be miserable, and the end result is buried and quickly forgotten.” (Anonymous)

strategic and Business Value Views of IT


Business value for it equation

Business Value for IT Equation

(Hunter, 2007)

Business performance:

The ability of the enterprise to achieve or exceed its objectives.

Business performance

BV(IT) =

IT Spending

Mathematically, there are two ways to increase BV(IT)


It doesn t matter interpretation

“IT Doesn’t Matter” Interpretation

How can you improve the Business Value of IT spending?

Option One

IT Spending is a cost to minimize in order to improve the business value of IT

Business performance

BV(IT) =

IT Spending

“Most strategies focus on providing efficient and effective IT services...”


It does matter interpretation

“IT Does Matter” Interpretation

How can you improve the Business Value of each IT dollar spent?

Option Two

IT Spending is a critical factor in achieving Business Performance.

Business performance

BV(IT) =

IT Spending

“IT spend that improves business performance is the cost of doing business in a particular way—not the cost of IT.”


How can it spending help achieve business performance create business value

How can IT spending help achieve Business Performance—create Business Value?


Porter generic strategies framework

Porter Generic Strategies Framework

(Pearlson & Saunders, 2010)

Porter identifies three primary strategies for achieving sustained competitive advantage that derive from the company’s relative position in the marketplace.

Uniqueness Perceived by Customer

Low Cost Position

Differentiation

Overall Cost Leadership

Industry wide

Focus

Particular Segment Only

Differentiation

Focus

Cost

Focus


Disruption and the 7 s s

Disruption and the 7 S’s

(Pearlson & Saunders, 2010)

  • Vision for Disruption

  • Identifying and creating opportunities for temporary advantage through understanding

    • Stakeholder Satisfaction

    • Strategic Soothsaying

  • Directed at identifying new ways to serve existing customers better or new customers that are not currently served by others

Market

Disruption

  • Capability for Disruption

  • Sustaining momentum by developing flexible capacities for

    • Speed

    • Surprise

  • That can be applied across actions to build temporary advantages

  • Tactics for Disruption

  • Seizing the initiative to gain advantage by

    • Shifting the rules

    • Signaling

    • Simultaneous and sequential strategic thrusts

  • With actions that shape, mold, or influence the direction or nature of the competitors response


7 s s

7 S’s

(Pearlson & Saunders, 2010)


Organizational views of it

Organizational Views of IT

(Hunter, 2007)

High

IT delivers business performance

IT spend perceived as investment in business performance

All IT + businessconversations conducted in business terms

IT performance metrics reflect business priorities

All initiatives are business initiatives

CIO leads business initiatives

IT delivers technology

Business Perception of IT value

  • IT perceived as cost, not an investment in business performance

  • CIO and IT team talk technology performance, not business performance

  • IT performance metrics are technically-oriented

  • IT follows business lead

IT doesn’t deliver

  • IT perceived as expensive and unresponsive

  • Prelude to IT turnaround situation

Low


Perceptions of it in your organization

Perceptions of IT in your organization

  • How is IT perceived in your organization? Doesn’t Deliver….Delivers Technology…. Delivers Business Performance

    • Evidence?

      • How is IT involved in the business?

      • How is IT measured?

      • How is IT managed?

      • How is IT discussed?


Obtaining business value from it

Obtaining Business Value From IT


Specific governance practices for it investments can help achieve strategic goals cio 2003

Specific Governance Practices for IT Investments Can Help Achieve Strategic Goals (CIO, 2003)

  • Market Leaders, relative to other companies have greater alignment of IT with Business

    • IT – Business management collaboration

    • BU participation in IT Budget

    • Cross-functional governance teams direct resources and adjust priorities

    • Use business performance-based metrics for IT investments


Specific areas of it investment can help achieve strategic goals

Specific Areas of IT Investment Can Help Achieve Strategic Goals

(CIO Magazine, 2003)

The most effective companies at managing their IT investments generate 40% higher returns than their competitors

  • Market Leaders, relative to other companies…

    • Larger proportional investment in automation higher business performance

    • More investment in decision support applications  improved decision making

    • More investment in supplier-collaboration applications  efficient response to customer needs

    • More IT investment on business agility to respond to demand fluctuations (vs. forecasting customer demand) improve responsiveness

    • More focus on customer self-service applications  improve service quality, speed, control, reduced costs

(Ross & Weill, 2002)


Business context appropriate metrics can improve it investment decision making

Business Context-Appropriate Metrics Can Improve IT Investment Decision Making

(Hunter et al, 2008)

  • Measure business value of IT in improved business performance as perceived by business stakeholder

  • Use appropriate business metrics to build value proposition:

    • Run-the-Business

    • Grow-the-Business

    • Transform-the-Business


Determining the business context

Determining the Business Context

(Hunter et al, 2008)


Apply business context appropriate metrics for it investments

Apply Business Context-Appropriate Metrics for IT Investments

(Hunter et al, 2008)


Summary business value is obtained from it investments when

SummaryBusiness value is obtained from IT investments when…

  • IT is closely aligned with business

  • Business & IT leaders are collaborators

  • ROI is measured in terms of business performance

  • The value metrics are appropriate to the purpose of the investment


Forming a compelling business value statement for an it investment

Forming a Compelling Business Value Statement for an IT Investment

  • Business Context for Proposal

  • Run, Grow, Transform

  • Business Goals

  • Competitive Strategies

IT Capabilities

Changes to Business-- processes, capabilities, etc.

Business and Operational Measures


Example compelling business value statement for an it investment

Example: Compelling Business Value Statement for an IT Investment

Business Context for Proposal

Our Business needs to run its operations more efficiently in order to reduce prices relative to our competitors.

IT Capabilities

Changes to Business

Business Measures

We need the ability to integrate our data on sales transactions from each store,

so that we can centralize our ordering and distribution, to gain economies of scale, and quantity discounts.

Our target is to cut vendor costs by 5% and reduce distribution costs by 10% within six months.


It investment competition

IT Investment Competition

Goal: Select the best IT Investment for the Firm

  • Develop (in groups)

    • Select one OMB proposal

    • Strengthen its compelling value statement (One flipchart)

      A. Business Context

      B. IT Capabilities

      C. Business changes to enable

      D. Measurable business effects

  • Presentations (Elevator Pitch)

    • Each team: 5 min presentation, 2 min Q&A

  • Decide

    • Class is the Board of Directors


Ken wiley managing principal wiley associates managing member command trends international

What’s up with that Cloud thing?

Guest

Speaker

Ken WileyManaging Principal, Wiley & AssociatesManaging Member, Command Trends International


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