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.
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