Strategy is about making deliberate tradeoffs, and Technology strategy is no exception to this. You have many good ideas, but not enough time, money or people to pursue them all.
There are many articles and IT strategy frameworks out there that cover the topic well, but are dense, jargon filled and theoretical. This article is focused on 6 different elements that feed your technology strategy and some of the tradeoffs you may face in your organization.
The 6 elements are;
- Business strategy
- Business process differentiation
- Current state inventory
- Future state roadmap
- Security and business risk
- People and knowledge
To start with an obvious statement- your technology strategy should be aligned with the overall business strategy. Your technology investments will be quite different if the company is focused on top line revenue growth (new products, markets, business models), bottom line margin growth (productivity, cost savings) or customer satisfaction / centricity.
Where it gets interesting is that in reality you will be pursuing some mix of all of those goals at the same time, and they may be different for various lines of business and geographies. It is very possible that individual business leaders have conflicting goals that you will have to navigate.
For example, you may be pursuing an initiative on customer centricity which may reduce costs in the long run, but will raise costs in the short run. This may be in conflict with a short-term margin improvement / cost savings goal of a business operations leader. Many technology initiatives have failed to deliver their full potential since these types of inherently conflicting goals were either not well understood or not acted upon.
One last word of caution; there is a natural tendency to focus on tactical plans for the next 12 months since they are more tangible. It is key to is to ensure you are truly connected to the company’s overall strategic plans (e.g. 3 to 5-year horizon) since the technology investments you make are for the long haul.
Business process differentiation
What are the elements of your internal business processes that (would) truly set you apart from the competition? Why do people buy from you? Why are you more successful in the marketplace? In other words, how do you want to differentiate yourself. Understanding this will help to determine in which area technology investments have the biggest impact on business results.
For example; If you are a utility company, TV or Phone provider, you will likely invest in Customer Service to the point that you are on par with your competition. But since real competition is limited and service a not a main driver for the customer buying decision there is no upside to invest in better service beyond that point. You would rather choose to invest in technology that results in increased productivity and reduced cost. For other industries, Customer service is a major factor in future buying decisions and therefore should be treated as a differentiating factor with a goal of delighting your customer in order to set yourself apart from your competition.
Your Accounts Receivable process is another good example. This is easily one of the most boring business processes in your company. Nobody buys your products because of your gorgeous invoices. However, if you get paid faster or have a lower amount of aging AR / bad debt can have a major impact. You can reduce borrowing costs or free up cash that can be invested elsewhere. Many growing startups fail because of cash flow problems and therefore having a good handle on this process is essential.
Current state inventory
It is vital to understand the position you are in today; what technologies you have in place, how they are being used, their cost to run, when they need to be upgraded / replaced and what business risk they pose. The jargon term we use for this is “IT Asset management”.
The vast majority of IT costs are tied up in “keeping the lights on” for your existing technology, supporting the current business processes. For established companies it gets even worse since you likely have pockets of outdated technology that do not meet the business need, are hard to maintain and even harder to replace. This could be a major obstacle in your ability to meet changing business needs, and innovation and digital transformation initiatives.
When you combine your current state inventory with the business process differentiation pillar you will start to see different areas that are not in good setup for success, pointing to areas for future investments.
Future state roadmap
Now we bring the previous elements together to determine what your technology landscape of tomorrow should look like. The jargon term we use for this is enterprise “IT architecture roadmap” or “IT capabilities roadmap”. While this may sound straightforward, doing this well is quite difficult as business priorities and the technology landscape shift and new technologies are brought to market daily.
You would be trying answer questions like;
- What is our data strategy, e.g. how to manage big data, what data to keep internally vs what data to share openly to foster collaboration and innovation?
- What is our Cloud strategy, e.g. on-premise vs private cloud vs public cloud vs SaaS, how to prevent vendor lock in?
- What is our strategy around Open source vs proprietary software?
- What is our strategy around Custom built applications vs packaged application / COTS (Commercial off the shelf)?
- How can we make use of new innovations, e.g. AI, Blockchain, IOT (Internet of Things)?
For example, for your core CRM platform you choose a COTS solution rather than build something unique since your business process is similar to the rest of your industry, but for warehouse management you build a unique solution that fits your unique need to fit your highly differentiated supply chain model.
A few words of caution;
- Business leaders may come to you with a cool solution they have seen from a vendor, another company or the like. You have to be prepared to try to reframe the conversation in terms of the business need rather than the specific solution that was brought forward. Balancing that while not being perceived as a “the department of no” is quite challenging, but can be made a whole lot easier if you have your ideas on future state already worked out
- You may get stuck in analysis paralysis and keep trying to optimize for new situations. You will have to start to move into implementation mode at some point.
- You need to ensure your vision is both aspirational and pragmatic at the same time. It is easy to get people excited and get caught up in the possibilities of the future yourself. You have to keep in mind it may take multiple interim steps to get to the future vision, which takes time and money.
Security and business risk
Properly securing your intellectual property and your ability to run your day to day business operations is mission critical and therefore deserves its own pillar. Your cyber security strategy should be based on the risk you perceive and the impact if any event should occur. From an investment perspective you should be focused not just on detection and prevention, but also on response and recovery.
In addition to specific cyber-attack related threats you will also have to assess and mitigate other risks that impact your ability to run your business, such as natural disasters and other events. For instance, a winter storm could shut down your main call center for a few days. If your agents have laptops they can work from home, assuming they did not lose power and assuming that your call center telephony system is flexible enough to route calls to remote users. You will need to build a detailed playbook on what to do in this type of situation and run actual drills to test and ensure your backup plans actually work. The jargon term we use for this is “Disaster recovery” or “Business continuity”.
People and Knowledge
Technology is a people business. The knowledge of your business processes, how current systems work and how future changes may be implemented all live in the head of your people.
Deciding on what knowledge you want to have in house vital. There is a substantial cost tied to this, which can be reduced significantly through outsourcing and offshoring. The challenge is that a new offshore / outsourced team can bring in highly qualified software developers but they cannot hire “10 years of experience in business process X in our company” of the street. There are many variants of these models that have been implemented with varying degrees of success.
Key variables to consider
- How differentiated is a particular business process (see the previous gorgeous invoices example)? More complex and more differentiated would benefit from experienced in-house staff and knowledge
- The specific technologies you have; people with skills on older technologies may be harder to find so you may be better off keeping this knowledge in house until the technology can be replaced
- The cost profile of your IT spend; If you spend the vast majority of your budget on “keeping on the lights” you may be forced to lower costs in some area through outsourcing / offshoring in order to free up capital that can be used for innovation
- Your ability to attract and hire people; you are probably not a hot Silicon Valley company and even for large household name companies it may be difficult to attract people with specific skill sets that are in high demand. This gets exponentially worse if you are a small to mid-size company with a limited budget and very little in terms of career path to offer since you only have a handful of people
Feeds technology strategy
All the above brought together shapes your Technology strategy. The broader question to ponder is how should Technology be viewed in your company. Are you running IT as a Cost center, are you driving business innovation through technology or are you a revenue generator? The paradox is that you are probably expected to drive change and innovation but get measured supporting existing business operations while reducing costs. The strategy you have put together should serve you well on this journey to make the hard tradeoffs and drive the business of technology forward.
Easy to read, hard to do
So where do you start? Well that will be a topic for a separate article. In the meantime, let’s build on this and make it even better. What did I miss? Leave a comment or send me a message.