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Recently I was reading on article on CIO.com (where I also contribute).  The basic premise of the author was that IT is already integrated with business and all of the hype about business to IT alignment is overblown.  This is not entirely true.  As I commented:

 

Traditional business schools teach two key concepts around business (once you have settled on a product or service) and those are value propositions and competitive pressures.

 

IT (Information Technology) has NOT integrated with business well EXCEPT in the commodity markets. The universally zealous focus on process improvements, process automation, and business process management only addresses ONE of the three value propositions. And that type of a focus ends up creating commodities of the product or service (if it is not already a commodity).

 

IT has only aggressively addressed the “operational excellence” pillar of business. They are only now BEGINNING to seriously look at customer focus and innovation is just barely a blip on the radar screen.

 

None of this even addresses the competitive pressure landscape either. So when you say that IT is already integrated with business you are looking at just one dimension of a 3 dimensional picture. IT has focused on OPERATIONS and NOT on business (unless your products or services are commodities, or you want your marketplace to become a commodity!).

 

I’ve written LOTS of material on this subject to help IT professionals and IT decision makers make the distinction. Once they “get it” and change how they look at their role, then they avoid being reduced to little more than a cost based charge-back center of their business.

 

The reality is that until IT starts to more aggressively focus on the business side of the equation (like revenue, profitability, customer retention, customer acquisition, product development and engineering, etc.) then IT is little more than a “process PLC” (Programmable Logic Controller).  These are useful devices that help to auto-mechanically, or electronically, trigger some follow up event for equipment, machinery, or other electronic devices.  These PLCs coordinate mechanical or electronic processes, generally related to process control.

 

The zealous fixation by IT on business processes and automation is needed, just as PLCs are used and needed in industry.  However I am not aware of any PLC that retains or acquires customers or generates revenue by innovating new products or services.

 

Today’s technology to business alignment is very one-dimensional in relation to value propositions–, they focus almost exclusively on the “operational excellence” proposition which is a perfect fit for commodities.

 

And in case this doesn’t all make sense to the technically oriented, let me put it another way.  Business without customers is bankrupt or non-existent.  Business without profit is headed for bankruptcy and for non-existence.  Business without new, or innovative products or services will become little more than a commodity (if it is not already).  The three value proposition areas are:

 

  1. Operational excellence (focus on processes, automation, and quality control with lagging financial controls).
  2. Customer focus (customer retention and customer acquisition with lagging financial controls and leading strategy integration).
  3. Innovation (new or improved products and services – lagging financial indicators and leading strategy integration).

 

As you can see from the three generalized value proposition areas technology integration is fairly one-dimensional, focusing almost exclusively on the “operational excellence” value proposition.  Even for those companies who pursue CRM (Customer Relationship Management) initiatives, the big, fancy, expensive, and complex CRM systems are usually little more than giant contact capture systems with some additional reporting capabilities from the backend ERP application.  As a result, many of today’s CRM initiatives are little more than glorified “operational excellence” applications of technology that masquerade as being ”customer focused.”  Unless there is a clear connection to customer acquisition, customer retention, upselling within various channels, and improving business revenue and sales through the use of the CRM application in my opinion it does not qualify for the second value proposition of “customer focus.”

 

So, the next time someone tries to convince you that IT is already focused on business maybe you should step back and ask yourself “what is business” and what are the goals of business? 

 

Additional Reading on Business and Technology or IT Alignment and IT to Business Integration:

Using SAP to Improve Revenue and Profitability
http://www.r3now.com/using-sap-to-improve-revenue-and-profitability

Tactics, Strategy, ROI, TCO and Realizing Business Benefit from SAP
http://www.r3now.com/tactics-strategy-roi-tco-and-realizing-business-benefit-from-sap

CRM, ERP, BI, and IT Investment — Where Do You Find the Business Benefit?
http://www.r3now.com/crm-erp-bi-and-it-investment-where-do-you-find-the-business-benefit

Competitive Pressures and Value Propositions, Is Lean the Answer?
http://www.r3now.com/competitive-pressures-and-value-propositions-is-lean-the-answer

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2 Comments

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  1. Clinton Jones
    I would even contend that even in commodity markets IT and the business don’t walk lock-stepped and the automated and systems based means to do business are more likely sub-optimal than optimal. Technical glitches are often attributed to resource constraints, whether these are directly attributable to IT spend, is debatable I guess.

    Your comments  strike a chord though and getting appropriate and relevant IT spend is going to probably be a challenge in perpetuity.

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    1. Bill Wood
      Thanks Clinton, I would agree that most implementations (even in commodity companies) are not optimal.  On the other hand I’ve seen that the challenges for IT decision-makers are increasing because they only focus on lagging indicators of “operational excellence” and not on leading indicators of customers and innovation.  Until that happens IT will continue to face greater and greater budget and financial pressures.
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