Beyond Two-Speed IT – Part 3

Summary

This blog is about shifting gears and the ability to offer cars in other colors than T-Ford-black. It is the third and last part of a blog focusing on the importance of translating market and business context into the value proposition offered by IT.

You can find the first part here and the second part here.


 

FedEx and UPS dominate their markets, again using slightly different value propositions. Compared to UPS, FedEx offers its customer more flexibility at a slightly higher price point. More price sensitive customers opt for UPS and the more standardized value proposition that comes with it. More pronounced is the difference between Walmart and Amazon. The first has its roots in physical retail outlets while the second started as a native digital business model.

Differentiation can also be observed at an operational level. Marketeers want to try new things on a daily basis, while the controllers and bookkeepers of the finance and administration (F&A) department prefer stability and predictability. Marketeers enjoy rally and off-road racing, while controllers tend to take the train for its excellent safety record.  When it comes to IT, the marketeers want to be behind the steering wheel with IT as the co-driver, knowing that only as a team they can win. For the controller, a Commercial of the Shelf (COTS) SaaS solution will do just fine.

The higher the technology-density of the market, the more important it becomes for IT to sense and act on the relative importance of co-creation, speed-to-market, flexibility, robustness, efficiency or other sources of contextual value. In hybrid and native digital markets this value can be equal or even surpass the base value represented by the functional requirements

Less uniform, more differentiated represents the ability to deliver context-aware IT solutions.

At company level, think of effectively positioning IT as either a Faithful Servant, Business Partner, John Average or Prima Donna. At operational level, the two key archetypes are Entrepreneurial IT and Foundation IT. The first is also known as ‘Strategic IT’or ‘Enabling IT’, but in hybrid and digital markets it is entrepreneurship that is required from IT. Being an entrepreneur means ‘one who undertakes an endeavor’ or an ‘enterpriser’ (I), a far better term when business and IT are together in pursued of more revenue, profit or less strategic risk.

Foundation IT, also known as ‘Transactional IT’ or ‘Factory IT’, is the traditional sweet spot of the IT department. Even though most consider it less sexy than Entrepreneurial IT, the majority of companies’ revenue and margin is generated by business processes enabled by this part of the IT portfolio. Entrepreneurial IT is in most cases a source of expected future cash flows, funded by current cash flows enabled by Foundation IT. The latter’s portfolio also contains the capabilities required to ‘glue’ IT systems together, like the Enterprise Service Bus, and the platform required by Lean and Business Process Management initiatives. As such, it acts as the solid foundation required by other initiatives to succeed.

To survive, companies need both flavors, differing only in the relative amount.

 


Notes and references

(I) Technically, the term should be intrapreneur as IT would be acting as in entrepreneur within the company. As this term is not widely used, I use the more common term.


Further reading

Enabling IT and Factory IT are introduced in the McKinsey article Reshaping IT management for turbulent times. It explicitly covers the importance to differentiate between ‘fast’ and ‘slow’ change.

The Harvard Business Review article Mastering the three worlds of information technology from 2006 describes three varieties of work-changing IT. The article relates investments in IT to organizational change, but does not differentiate between ‘fast’ and ‘slow’ change.

One of the first articles emphasizing the importance to differentiate is from Peter Weill:  The relationship between investment in information technology and firm performance in the manufacturing sector. Ph. D. dissertation, New York University, New York.

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