Do you spend a significant amount of time measuring performance and looking for ways to improve your service? When you delve into that process of evaluating your effectiveness and efficiency of service, you are, in fact, evaluating your value. Typically, big companies invest one percent to four percent of revenue in IT. This investment is usually spent on integrated digitized platform implementations, continuous innovations, and day-to-day IT operations. Businesses must see the value and return of these investments; otherwise, they won’t put their money in it. What are businesses doing with all that hardware and software IT is providing?
Andrew McAfee is a principal research scientist at the Center for Digital Business in the MIT Sloan School of Management. In one of his articles for the Harvard Business Review entitled IT’s Three Key Organizational Transformations, he outlined what he thinks are main organizational transformations that IT provides the businesses. He wrote that companies in all industries are using Information Technology to accomplish three broad and deep transformations: they’re becoming more scientific, more orchestrated, and more self-organizing.
Run Scientific Methods
Andrew McAfee mentioned the need for making the company more scientific. He meant that companies are able to use advanced scientific methods using new technology. “Computers, of course, are amazing tools for science” he wrote, “they can gather huge amounts of data, conduct sophisticated analyses of it in the blink of an eye, run elaborate simulations, and serve as experimental testbeds.”
I attended the most recent SAPPHIRE conference hosted by the German software giant SAP in Orlando, Florida. SAP presented its newest innovation on In-Memory computing. Co-founder of SAP, Hasso Plattner, declared that by using In-Memory Computing technology, companies can now store data of the whole enterprise in memory. This technology will increase the computing and processing speed of enterprise applications and will give rise to next generation business analytics. You can just imagine the type of scientific analysis companies can run with such high speed databases.
Orchestrating End-to-End Business Processes
In this article, McAfee defined orchestration as designing how work will be done, and then assuring that it is actually executed as designed. Once re-engineered processes gets embedded in ERP and other enterprise systems it becomes much easier to ensure compliance. He gave an example to illustrate his point saying that applications like— CRM, sales force automation, supply chain management, procurement, and so on have brought tight orchestration to every part of the company, and pushed it down to almost microscopic levels.
One of IT’s major roles in most big firms is to implement and run digitized platforms. It is usually anchored on a major piece of purchased enterprise resource planning software- such as SAP and Oracle. Software companies are moving quickly on innovating applications to keep up with business demands. The unforgiving global economy brokers no excuse. Business expects IT to provide solutions that help them to stay competitive and in position for growth.
“Self-organization, the most recent IT-fueled transformation”, McAfee wrote, “is the exact opposite of orchestration. It is employing technology to let people interact as they wish, with few or no workflows, rules, or hierarchy, and then harvesting the good results that emerge.” The paradigm of self organization has exploded in this part of the decade. In some ways, it started outside the confines of enterprises. There are over a billion users of social media sites on the Internet. Between Facebook and Twitter alone there are more than to 500 million unique user accounts. Companies, with the help of IT organization, have stepped up to leverage these new social tools to enable self organization teams in the business with the objective of encouraging more collaboration, information sharing and innovation.
How does your IT contribute to these key organizational transformations in your company? Does the business you serve view you as a value creator and partner? What’s your value proposition?
7 thoughts on “Understanding IT’s Value in Organizational Transformation”
Amazing article, quite good. Lemuel hammers the point well organization do spend a lot on IT. I believe in IT being use as a company wide transformation tool and one that delivers value from end to end of the business but costs has to coincide with business need and potential has to coincide with actual output. In the end with all the enabling capability new software, upgraded ERP systems, hosts of hardware etc. can provide it will boil down to user acceptance and company IT process culture before IT value is fully realized.
a complicated science of change… but like any other process, you should first get all the basics right before you can maximize the use of technology to drive business innovation! Just a thought 🙂 im really learning a lot from your articles. Thanks Glenn!
Thanks Art…you are right, now is probably the best time to resort to the time-tested principle of ensuring the basics and keeping things simple – and that investment is carefully placed only on solutions and innovations that are cost effective and that deliver better value and greater performance for the business.
Very good article. You mentioned that 1% to 4% of revenue of big companies are spent on IT. Considering a 10 billion revenue would have spent 100 to 400 million for IT. This is staggering amount but information is already a value imbedded in the revenue and to value the benefits IT brings is often understated by the users and overstated by the sellers. Ultimately, the value it brings depends upon the users. Take for example SAP, it is a great tool of real time transaction recording, data consolidaton and analysis, but primary users, like for example in production level, often circumvent proper recording and often justifying the need to. These instances tarnish the value of the system and information value it brings. In the end, no matter how great the tool is, the value is in its proper utilization.
Thanks for your comments and observation. I understood your point when you said that value creation depends upon the users; however, I think that’s just one component of the bigger picture. Extracting the most value out of your IT investment is a concern of both the business and IT- it’s two way, a partnership, a service provider to internal customer relationship. There has to be business to IT strategy alignment. The example you mentioned on SAP is great. SAP is a leading providing of digitized platform that helps businesses orchestrate end-to-end processes. But you see, SAP is just a tool- a platform, an enabler. You said it right; it won’t work when users circumvent rules… that bring us to another more important component to this – organizational transformation (people, processes and roles). This is an even bigger challenge than to put SAP in place— support from top management, change management, knowledge management, are critical drivers. When implementing digitized platform, you have to think strategy- that’s the only way the business can get return on investment.
Facinating it is. Thanks Steve.