IT-Enabled Business Transformation

by Kenneth Rau, Senior Consultant, Cutter Consortium

IT-enabled business transformations occur when technology is used to fundamentally alter the way business is conducted in an industry. The organization that successfully implements the industry-altering technology can gain a competitive advantage so profound that others in the industry can no longer compete and either go out of business or, upon implementing "me too" technologies, find regaining customers to be extremely difficult. In the public sector, these transformational technologies tend to fundamentally change what services are offered or the way services are provided to their constituents.

But what are the factors critical to success in such undertakings? How are IT-enabled business transformation opportunities identified and pursued? When should they be attempted, and how does the organization and its IS¹ department get ready? In all cases, pursuit of IT-enabled business transformation opportunities involves a state change. The change is from one of several enabling strategy formulation states that the organization presently occupies to the IT-enabled state.

States of IT Strategy Formulation

There are six states from which organizations and their IS function may formulate IT strategy:

1. The burning platform state -- in which demand for IT services exceeds supply and where IS is engaged in reacting to crises, repairs, and competing critical demands.

2. The support role state -- in which demands for IT services have been controlled, captured, categorized, and prioritized.

3. The business-IT strategic alignment state -- where IS recognizes and utilizes the organization's business strategy as the basis for opportunity prioritization and the design of its organizational structure, processes, and infrastructures.

4. The linked business-IT strategy state -- in which IT and business strategies are aligned through codevelopment and the IT strategy is embedded in the business strategy.

5. The IS-led business-IT strategy state -- where major components of business strategy are identified and contributed by IS.

6. The IT-enabled business transformation state -- where industry-altering technological concepts are pursued and become all consuming for IS and the business.

Each state presents its own challenges to IS and organizational leadership that must be mastered before transition to others states can be expected to succeed. Transitions need not be sequential and sometimes are abrupt and unexpected.

For many organizations the business-IT strategic alignment state is desirable and appropriate. Organizations enter the state to ensure alignment between IT initiatives and business strategy. Experience leads to the understanding that alignment also requires consistency between IS governance, organizational structures, processes, infrastructure, and culture to be successful. Successful alignment between IT and the business provides stability, predictability, and a high level of satisfaction with the use of technology in the organization. The mature aligned state provides a platform for aggressive technological pursuits by the organization.

In the business-IT strategic alignment state, the IT strategy is derived from and supportive of the independently developed business strategy. Many organizations that use technology aggressively in their business seek to refine the derivative nature of the relationship between business and IT strategy by codeveloping the two and embedding the IT strategy in their business strategy. This is the fundamental distinguishing characteristic of the linked business-IT strategy state.

The impetus for entry into the IT-enabled business transformation state can be the identification of an industry-altering idea or the response to a significant threat to the business. Ideas can be serendipitous or derived through considered planning. Sources of inspiration for IT-enabled business transformation are varied and include:

• The entrepreneur -- some of the most significant transformations ever seen have come from entrepreneurs who have had a vision or idea, developed the concept by themselves or with a few friends, and then lined up the venture capital necessary to turn their idea into reality.

• In response to a threat -- the threat of extinction is an amazing catalyst of creative ideas.

• In response to a problem -- a related but less severe situation than having one's survival threatened is the case where a business problem leads to a transformation.

• As a result of an available technology -- a technologically well-informed IS department that is able to respond to a business problem by pulling the appropriate technological arrow out of the quiver of emerging technologies can provide a solution and perhaps a transformation.

• Rank-and-file sources -- employees that work in customer service, sales, purchasing, manufacturing, or elsewhere, when asked about how they could use technology, often come up with outstanding ideas.

• Engineering, product development, R&D -- some functions within the organization are strong enough technologically to bring fairly well-developed ideas to IS. The engineering, product development, and R&D functions are particularly good at conceiving breakthrough ideas that utilize IT as part of what they are working on or sometimes as standalone service offerings.

Having prepared by achieving state maturity and having the organizational attitude, courage, and veracity to pursue these inspirations are the traits demonstrated by organizations that have reaped the benefits of IT-enabled business transformations.

-- Kenneth Rau, Senior Consultant, Cutter Consortium

Notes

¹I use IT (information technology) to refer to the use of technology by an organization to improve performance, reduce cost, or better serve customers. I use IS (information systems) to refer to that organizational department responsible for identifying, selecting/building, implementing, and operating technology.