How To Turn IT into an Asset Rather than a Liability
Note: This article is updated at How To Turn IT Into an Asset Rather than a Liability.
Why do some companies survive and thrive in the face of global competition? What do some companies do differently so they are growing and making money, having more productive employees, getting more from their investments, and having more success with their strategic initiatives?
They digitize their core processes.
In the book, Enterprise Architecture as Strategy, Jeanne Ross, Peter Weill, and David Robertson write about how to turn IT into an asset rather than a liability.
Digitize Your Core Operations
Companies that survive and thrive can execute their core operations in a reliable and efficient way. They can do so because they’ve digitized their core operations. In this way, they’ve turned their IT investment into an asset versus a liability, and they’ve achieved business agility. Ross, Weill, and Robertson write:
“We believe these companies execute better because they have a better foundation for execution. They have embedded technology in their processes so that they can efficiently and reliably execute their core operations of the company. These companies have made tough decisions about what they must execute well, and they've implemented the IT systems they need to digitize those operations. These actions have made IT an asset rather than a liability and have created a foundation for business agility.”
More Value from IT Investments AND Lower IT Costs
Digitizing your core operations can lead to higher profitability, faster time to market, and more value from IT investments. And, lower IT costs. Ross, Weill, and Robertson write:
“We surveyed 103 U.S. and European companies about their IT and IT-enabled business processes. Thirty-four percent of those companies have digitized their core processes. Relative to their competitors, these companies have higher profitability, experience a faster time to market, and get more value from their IT investments. They have better access to shared customer data, lower risk of mission-critical systems failures, and 80 percent higher senior management satisfaction with technology. Yet, companies who have digitized their core processes have 25 percent lower IT costs. These are the benefits of an effective foundation for execution.”
Cutting Waste, but Not Adding Value
Some companies just don’t get it. They cut, but they don’t create value. Meanwhile, the companies that do get it, pull further ahead. Ross, Weill, and Robertson write:
“In contrast, 12 percent of the companies we studied are frittering away management attention and technology investments on a myriad of (perhaps) locally sensible projects that don't support enterprise-wide objectives. Another 48 percent of the companies are cutting waste from their IT budgets but haven't figured out how to increase value from IT. Meanwhile, a few leading-edge companies are leveraging a foundation for execution to pull further and further ahead.”
A Strong Foundation for Execution Accelerates Your Advantage
With a strong foundation for execution, you can achieve business agility and profitable growth. Ross, Weill, and Robertson write:
“As such statistics show, companies with a good foundation for execution have an increasing advantage over those that don't. In this book, we describe how to design, build, and leverage a foundation for execution. Based on survey and case study research at more than 400 companies in the United States and Europe, we provide insights, tools, and a language to help managers recognize their core operations, digitize their core to more efficiently support their strategy, and exploit their foundation for execution to achieve business agility and profitable growth.”
I’m lucky enough to be on the Enterprise Strategy team at Microsoft. A focus in Enterprise Strategy is to help a company identify their core business and IT capabilities and to pick the best opportunities to transform their business in a scenario-based way. Changes at the capability level have a ripple effect across people, process, and technology. It’s effectively the business of business transformation. The goal is to accelerate business value and help these companies survive and thrive in changing times.
Speaking of changing times, the Cloud is really a great forcing function for business transformation. More and more companies are looking at what they should do to make the most of what Cloud, mobile, social, and big data bring to the table. I’ve been watching the transformations unfold and hearing the stories from the trenches.
I’ll be talking more about the book, Enterprise Architecture as Strategy, in the near future, as it’s one of the best books on how to create a foundation for business execution, and I get to see it in action. Our Enterprise Architects tell me stories about how they are leading their customers on journeys to the Cloud and transforming IT for competitive advantage.
These are truly exciting times to be at the leading edge of business transformation.