A global survey of CEOs shows increasing awareness of how important
IT is to business success, but a startling lack of appreciation of
how quickly technology moves on. Companies that don't review IT
every few months risk being left standing.
There was a time when a company chief would rather have had his
teeth pulled than get involved with corporate IT strategy. But
business processes have become more dependent on computer systems
and involvement from the top has become essential.
The advent of e-business has accelerated this process, although a
number of difficulties remain.
"There has been an improvement of the importance of IT to the CEO,"
said Andy Chestnutt, head of consulting services at Compass
Management. "They are starting to understand the importance of
e-business and technologies."
Last week Compass published its World IT Strategy Census - a survey
of more than 200 CEOs from Europe and North America. The research,
which examined how CEOs were involved with business, e-business and
IT strategy, showed increasing top level involvement.
"The reaction [from a CEO] was once - this is too technical, I'll
give it to the IT director. But now there is increasing realisation
that companies are becoming dependent on IT," Chestnutt said.
The research identified many reasons for optimism. For instance, it
found that 80% of CEOs believe IT strategies are reasonably well
aligned with their business strategies. Nearly 70% said their
e-business and business strategies were well aligned.
However, when Compass looked at the review period for e-business
strategies, there was cause for concern. Half of the CEOs reviewed
e-business strategies only after a year or even longer.
"It's great that CEOs are taking an interest in e-business and
technology, but they are just applying a traditional approach to
it, and transfering the time frames. There is a danger in that,"
Chestnutt said. "If they review e-business every three years the
world may have moved on. Do they know what technologies are going
to be available in three years?"
Evidence from successful e-business companies suggests frequent
strategy reviews are required. Directline.com launched in 1999 and
handled more than 100,000 insurance policies in its first year. The
Direct Line Group has also launched another profitable e-business,
Jamjar.com, to sell and
rent cars online.
Richard Beal, IT director of Direct Line Group, said frequent
reviews of e-business strategy are essential to success.
"E-business is integrated with everything else we do.
"We work on [e-business] strategy and review it almost continually.
There are high level management meetings at least every month to
review our e-business strategy. We have them less formally more
often than this."
But in other businesses, not enough time was spent considering how
a successful e-business operation helped to review the direction of
conventional business, said Chestnutt. "My concern is that although
people are doing e-business, and review it, they are not reviewing
the impact of e-business on traditional business.
"Firms need to start putting e-business in the context of the whole
business. Often e-commerce is simply considered by the e-commerce
team who are outside the main business and considered wacky. If we
don't feed back how this affects the traditional business we cannot
take full advantage of it."
Direct Line has found it essential to develop its e-business
offering in a way that is integrated with its conventional
telephone-based business.
In March last year the company began work to integrate telephone
and Internet customer relationship management with the introduction
of Chordiant Software to its call centres.
"We have found an increased use of our telephone service since we
launched Directline.com, but they have to be integrated," said
Beal. "A customer can start an insurance application on the Web and
finish it over the phone with any of thousands of call centre
representatives - but you have to have the IT to support
that."
Another problem raised by the Compass research is that future
technology trends are not fed into business strategy, and future
opportunities could be missed.
Chestnutt said, "I do not think technology changes inform business
strategy enough. The concern is that [CEOs] think the IT people
will worry about it. They are not looking at what is coming on and
how that was to the business' advantage. Sometimes IT is seen as a
supply function - that's wrong. But it is getting better."
Direct Line has developed a business where senior management have a
high understanding of the potential of future computer and
communications technologies, said Beal.
"We have committees that review things as they come up - for
instance we are interested in telematics [telephone technology] in
cars at the moment. There is a massive interest in technology
across our organisation, not just the IT department. It is
something everybody should know.
"Other people from outside IT will often come to me to talk about
technologies they've just heard about and we'll discuss what
opportunities could be there for our business. This has happened
with Wap, for instance."
Beal even went further to suggest that an understanding of the
potential of information systems should be an essential part of the
skill set of any senior business manager.
"I'm sure there was a time when the people who ran businesses could
not write - they would get a scribe to do it. The same was once
true of IT but now I think to run a business and not know about IT
would not be good.
"If you are a CEO you need to know about IT just like you know
about financial accounts or a balance sheet. It is part of being
educated. The majority of our senior management have a strong
knowledge of IT or even come from an IT background."
Direct Line may be a special case - it has evolved from a
telephone-based business and has not had to cope with adapting a
retail or manufacturing organisation to e-business. But the
management's interest in technology issues should be a lesson for
all sectors.
Challenges for e-business strategy
The survey found the
main challenges for strategy formulation were:
1. Achieving return on investment for e-business projects -
15%
2. The need to deliver customer benefits while educating the
customer to take advantage of e-business offerings - 14%
3. Achieving effective systems and software alignment, both
internally and externally, including finding the right partners and
suppliers - 11%
Other main challenges respondents listed included:
1. Dealing with technology change
2. Implementing a single strategy within a large, complex
and ever-changing organisation
3. Doing business with customers who have limited e-business
capabilities
4. Winning over employees
5. Project prioritisation.
Source: Compass Management
Lindsay Clark
lindsay.clark@rbi.co.uk