Information technology systems are the beating heart of any enterprise, and the key to ensuring business runs smoothly from one day to the next. They can also confer a real competitive advantage. Businesses like Amazon built their success on superior systems and use of information. What’s perhaps less obvious is the fact that any enterprise that gets the right data into the hands of decision makers can make thousands of daily decisions just a little bit better. This can add up to a huge gain in profitability and rapidly transform overall performance.
There’s been plenty of hype about “big data.” But what we have in mind is subtly different: finding ways of helping decision makers cut through complexity, making their lives easier. Rather than “making use of that mountain of data on your server,” it’s about enabling what one of our clients once called “business – fast and simple.” The key to pulling this off is to develop an explicit, differentiated strategy for IT investment across your business, focusing on those areas where agile systems can deliver an edge.
It’s nice to have the latest system, but it’s also expensive. As with any other investment, spending on information technology needs to be targeted where it delivers the greatest returns. This tends to be in areas in which better management of information means better (and faster) decisions about things that really matter.
Where these opportunities lie is rarely obvious from the outset. But it’s something senior executives are well-placed to figure out. To identify the areas with greatest potential, ask the following:
- For each of the key levers in my business, how good are my decision making capabilities? And how far, and in what ways, do they rely on high quality management of information?
- Do I know how my capabilities and my rate of innovation compare to my competitors? Do I believe I’m driving more value from my IT projects annually than they are?
Answering these questions allows you to build a development plan that can deliver real value to the business – a nuanced investment strategy in which you deliberately choose to lag your competitors in some areas, and forge ahead only where it’s worthwhile. This is in stark contrast to many IT procurement strategies, which can often be caricatured as being either "it’s vital that we stay on the leading edge" or "if it ain’t broke…" – usually with little assessment of how much value is at stake either way.
In our experience, there are three competing needs when setting IT development strategy: resilience, agility, and cost. For many systems, robustness and reliability are everything; the business risk is just too high otherwise. But this isn’t always the case, and often the areas where resilience matters most have limited scope for innovation, while the areas where improving capabilities can drive real financial returns often have lower reliability needs.
This allows a more flexible approach to IT development, and gives room to tailor the strategy to meet different priorities. The exhibit gives a schematic picture of how they tend to vary across different areas of IT – in this case focusing on retail.
Most businesses have opportunities to reallocate their IT resources toward a much more agile, value-focused agenda that can improve their overall commercial success. The right approach can accelerate the pace of innovation, shorten time-to-value, and greatly improve the productivity of IT investments. In any data-rich, slim margin industry, “business – fast and simple” is critical.
Paul Beswick is a Boston-based partner at Oliver Wyman and leader of the North American Retail practice.