IT intensity defines future success

50 %
50 %
Information about IT intensity defines future success
Business & Mgmt

Published on March 25, 2014

Author: TerryWhite01

Source: slideshare.net

Description

The concept of IT intensity is explained, and I show how an organisation with the correct IT intensity will be better able to survive future threats. This little understood concept can change the way you do business and the way you think about IT.

However IT intensity is much more than just adding more technology. This must be linked with your processes and strategy.

The bottom line: Do it to yourself before someone does it to you

CXO Advisor Insight – Innovation - Acceleration IT intensity and your organisation’s ability to change quickly

Why does IT Intensity matter? Many authors talk about IT intensity:  Most refer to it as the spend on IT versus the cost base of the business This may be too narrow. I believe that IT intensity is:  The amount of IT needed/used in the production/operation/innovation of a company’s products/services . IT intensity relates to both business cost and revenue

IT Intensity – increasing your scale and reach without increasing your mass Using IT you can reach new clients, increase customer loyalty, open new channels to customers, and create new products (scale) – IT intensity allows companies to compete convincingly no matter the size of the companies IT intensity allows companies to leap-frog competitors more easily IT intensity allows companies to propagate innovations that are less structured than entire business processes (Trial, Proof of concept, Minimum viable products) IT intensity allows companies to capture and retain customers remotely IT intensity is more than a financial measure – it is a measure of use and dependency on IT to deliver business products and services

IT Intensity – increasing your scale and reach without increasing your mass Using IT you can reach new clients, increase customer loyalty, open new channels to customers, and create new products (scale) – without opening new branches, increasing production facilities etc. (mass) IT intensity allows companies to compete convincingly no matter the size of the companies IT intensity allows companies to leap-frog competitors more easily IT intensity allows companies to propagate innovations that are less structured than entire business processes (Trial, Proof of concept, Minimum viable products) IT intensity allows companies to capture and retain customers remotely IT intensity is more than a financial measure – it is a measure of use and dependency on IT to deliver business products and services

Sample IT Intensity by industry The numbers are variable across samples but consistent within a single sample Source: Gartner

Sample IT Intensity by industry The numbers are variable across samples but consistent within a single sample – this is just the top 20 of 94 Rank Industry Name Average IT Intensity HIGH IT INTENSITY 1 Computer systems design and related services 46.09514 2 Miscellaneous professional, scientific, and technical services31.66354 3 Information and data processing services 31.00029 4 Publishing industries (includes software) 15.44312 5 Securities, commodity contracts, and investments 13.45748 6 Administrative and support services 12.67477 7 Legal services 11.1754 8 Insurance carriers and related activities 10.77791 9 Rental and leasing services and lessors of intangible assets 10.63165 10 Computer and electronic products 9.622643 11 Other transportation equipment 9.1888 12 Machinery 8.920644 13 Credit intermediation, and related activities 8.850244 14 Wholesale trade 6.304108 15 Motor vehicles, bodies and trailers, and parts 6.059119 16 Chemical products 5.65757 17 Construction 5.163015 18 Miscellaneous manufacturing 4.595446 19 Electrical equipment, appliances, and components 3.835276 20 Broadcasting and telecommunications 3.821168 Source: Brynjolfsson, et al. (2008) Scale without Mass: Business Process Replication and Industry Dynamics; Electronic copy available at: http://ssrn.com/abstract=980568

Ad Hoc Service Process Differentiate Core Definition Don’t use much IT at all. E-mail, word etc. Use IT to service business administratio n needs. Some GL, HR Fully automated and integrated business processes Use IT to differentiate products and services, reach new markets and provide new channels IT products and services are the business product and services IT Intensity – five levels The amount of IT needed/used in the production/operation/innovation of a company’s products/services . IT intensity relates to both business cost and revenue. IT Intensity increases scale without increasing mass

Ad Hoc Service Process Differentiat e Core IT Dept. Posture Ad hoc Supplier IT Experts Business Partner Core Use IT straight from the store, as and when needed IT department told what the business wants. They get it and run it IT department are experts in IT, but not business experts. Business have a problem, IT looks for the IT solution IT and business work together on business problems. IT brings a unique technology perspective to business issues IT and business are the same. IT innovation is business innovation. New products, markets and channels are a business imperative. Business increases scale without increasing mass IT Intensity affects IT Department posture Posture: The way business sees and uses IT in relation to their business activities, products and services

Ad Hoc Service Process Differentiate Core < 0.5% 0.5% - 1.0% 1.0% - 2.0% 2.0% - 5.0% 5.0% - 10.0% IT spend as a percentage of business revenue Tends to be ad hoc, low spend. Use ad hoc support from outside if something goes wrong. Business spends on IT (often reluctantly) to service business administration needs. IT often feels undervalued, under-resourced and unappreciated. May go up to 2% Business processes are fully automated and integrated. IT spend focused on business improvement at best. May go up to 3.0% Business understands that IT can change the game for them, and uses IT to differentiate their offerings. May go up to 10% IT is the business offering. Internal IT has an external focus. Internal IT used as the test-bed for new products and services. May go up to 45% IT Intensity and IT spend There is a proven relationship between IT spend and business performance. However this relationship is often skewed by poor spend decision making, and definitely affected by legacy spend. (IT spend to business improvement does reach a stage of diminishing returns)

Ad Hoc Service Process Differentiate Core Above the momentum line spend 0 % 5% 20% 30% 40% IT budget (How IT spend is used in the company) Below the line = “Keep the lights on” Above the line = Resourcing IT for business improvement No business improvement initiatives using IT Business improvements focused on improving admin processes and automation. Above the line spend tends to be ad hoc, as needed Business understands they need IT to operate efficiently. They tend not to fund strategic, innovative, or speculative IT initiatives Business knows that a constant stream of differentiating technologies links them closer to customers and markets. They also understand that differentiation is temporary and fund constant development Business is IT. They know that R&D is essential to business success, and fund new IT effectively. They understand that constant funding of development, innovation and breakthrough products is essential IT Intensity and business momentum Business momentum is the amount of money a company needs to spend on IT to maintain the existing momentum of business: Mass (geography, staff, assets etc.), Speed (How fast the business/product/customer cycle works), and Direction (acquisitions, growth, defence of share)

Ad Hoc Service Process Differentiate Core IT Projects None 1-2 per annum 5 – 15 pa 15-30 pa > 30 pa Do no IT projects Any “project” is ad hoc as business administration requirements dictate A number of business (and IT) improvement projects are undertaken In addition to business improvement projects, there are a number of new products, markets, and channel projects. Usually Proof of Concept and Pilot projects Much of what the business does is new business using IT. Maintenance and improvement of IT products / services is well funded. New IT products and services are also extensively pursued. IT Intensity and projects “Projects” may reflect the change using IT in a business. Depends on the nature of the project – four value layers – fix (broken), maintain, improve, create value

Ad Hoc Service Process Differentiate Core Applications Office Admin System System of record Business process Differentiating Applications Core product / service Use off the shelf personal productivity tools Use off the shelf administration IT tools Use COTS ERP systems. Use business process automation tools Have rapid application development tools, to trial and deploy differentiating applications to customers Develop, test, deploy, and maintain IT services and applications into the customer base IT Intensity and applications Typical applications used per intensity level. Cumulative from the left.

Ad Hoc Service Process Differentiate Core IT Dept. Posture Ad hoc Supplier IT Experts Business Partner Core IT Spend / TO < 0.5% 0.5% - 1.0% 1% - 2 % 2% - 5% 5%-10% IT Budget Below Above Below Above Below Above Below Above Below Above 100% 95% 5% 80% 20% 70% 30% 60% 40% IT Projects None 1-2 pa 5-15 pa 15-30 pa > 30 pa Applications Office Admin System System of record Business process Differentiating Applications Core product / service Industry Norms Education IT Intensity – the big picture Farming Manufacturing Food industry Logistics Retail Banking Software Media IT Services Consulting Telecommunications Healthcare Energy & Utilities Government Mining Cloud services Big Data services IT Intensity increases scale without increasing mass BPO Airlines

IT Intensity Scenarios Scenarios define possible future paths and the “road-signs” that will indicate which path is unfolding Scenarios allow for rapid and intelligent response to different paths Scenarios aid future decisions Discontinuous Technological Change Predictable Technological Change Low IT Intensity High IT Intensity

IT Intensity Scenarios Scenarios define possible future paths and the “road-signs” that will indicate which path is unfolding Scenarios allow for rapid and intelligent response to different paths Scenarios aid future decisions Discontinuous Technological Change Predictable Technological Change Low IT Intensity High IT Intensity Aliens at the Door (Surprise!) Boiling Frogs (What happened?)

IT Intensity Scenarios Scenarios define possible future paths and the “road-signs” that will indicate which path is unfolding Scenarios allow for rapid and intelligent response to different paths Scenarios aid future decisions Discontinuous Technological Change Predictable Technological Change Low IT Intensity High IT Intensity Aliens at the Door Me too (Fast follower) Shapers (Leaders / disrupters) Boiling Frogs

IT Intensity Scenarios Scenarios define possible future paths and the “road-signs” that will indicate which path is unfolding Scenarios allow for rapid and intelligent response to different paths Scenarios aid future decisions Aliens at the door Discontinuous Technological Change Predictable Technological Change Low IT Intensity High IT Intensity Aliens at the Door Me too ShapersBoiling Frogs Roadmap Organisationsuccess Time

IT Intensity Scenarios Scenarios define possible future paths and the “road-signs” that will indicate which path is unfolding Scenarios allow for rapid and intelligent response to different paths Scenarios aid future decisions Aliens at the door Discontinuous Technological Change Predictable Technological Change Low IT Intensity High IT Intensity Aliens at the Door Me too ShapersBoiling Frogs Roadmap Organisationsuccess Time

Summary IT intensity is about business understanding of what IT can and should do for the organisation Often the IT Department acts as a brake on increased IT intensity  Through their posture  Defence of their delivery model  Lack of agility  Inability to communicate at a business level Increasing IT intensity (the right way) increases an organisation’s ability to respond to economic and competitive threats Optimum IT intensity allows organisations to disrupt their market… To lead rather than follow None of this matters if the relationship between IT and the organisation is not a full partnership striving for business success

IT INTENSITY INCREASES SCALE WITHOUT INCREASING MASS Terry White terryw@cxo-advisor.co.za

Add a comment

Related presentations

Canvas Prints at Affordable Prices make you smile.Visit http://www.shopcanvasprint...

30 Días en Bici en Gijón organiza un recorrido por los comercios históricos de la ...

Con el fin de conocer mejor el rol que juega internet en el proceso de compra en E...

With three established projects across the country and seven more in the pipeline,...

Retailing is not a rocket science, neither it's walk-in-the-park. In this presenta...

What is research??

What is research??

April 2, 2014

Explanatory definitions of research in depth...

Related pages

Low Intensity Terrorist Threats – A Future Trend in Europe?

The US Army defines Low Intensity Conflict, ... future. The 2006 ... attacks in Madrid and London its level of success has been marginal at best and a ...
Read more

Men's Soccer | Intensity Defines Muyl’s Performance

His efforts when the opposition has the ball have been key to Georgetown’s defensive success, ... intensity has been left behind ... political future of ...
Read more

Intensity: the secret to training success - Fitness First ...

One thing a program cannot enforce or teach is intensity. By intensity, I refer to how hard you push yourself. To understand . CLOSE. Home; Workouts. All ...
Read more

What Matters to Student Success: A Review of the Literature

What Matters to Student Success: A Review of the Literature ... Academic Intensity in High School..... 19 Family Educational Background ...
Read more

Work motivation - Wikipedia, the free encyclopedia

Work motivation "is a set of ... intensity, and duration" ... Much of the success of implementation of JCT practices is dependent on the organization ...
Read more

terminology - Is there a conceptual definition of "success ...

Is there a conceptual definition of “success ... the hearts and minds of future ... to achieve through intensity and the accretion of value as ...
Read more

New to LD - Learning Disabilities Association of America

The earliest possible intervention is critical to your child’s success in ... Your child can still have hope for a wonderful future if given the proper ...
Read more

Fault Tree Analysis (FTA): Concepts and Applications

Fault Tree Analysis (FTA): ... An Inductive Model Defines Scenarios ... Mission Success Starts With Safety
Read more