IT should be at the heart of corporate strategy
- Posted:
- 00:00 28 Jun 2001
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."
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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
