Category Archives: IT Investment

The Technology Strategy

Many organizations are to some extent dependent on using information technology to deliver products or services to its customers. This applies to organizations within the private as well within the public sector.

There is some form of hierarchy among strategies that relates to the enterprise information technology strategy (IT strategy) and there might be some need to divide the strategies in order to specialize them e.g. through different persons who have the responsibility for the strategies or ensuring that the relevant information is screened to the relevant stakeholders. I hereby assume that the chief executive officer wouldn’t be that interested in particular technological products e.g. which edition of JAVA should the company’s IT-department be using or which particular server platform would be preferable in order to keep track of smartphones and tablets?

The technology strategy deals with the “hard side” of the technology. Which products, programming languages, databases, hardware, operating systems, back end platforms, ERP systems should the organization make use of.

What is the Technology Strategy?

The technology strategy deals with articulation of plans, roadmaps and principles for which information technologies that the enterprise should make use of.

The technology strategy is all about giving the decision makers some guidance on how to ensure to get rid of systems that only adds risks to how the organization does its business.

Systems that potentially will not add any kind of value to the business and instead seems like a liability own and be a part of the application portfolio.

Relations to IT-strategy

The technology strategy is delimited to deal with information technology (abbreviated IT) and as such the technology strategy can be related to the usage of IT strategy.

The difference between the technology strategy and the IT strategy; is that the IT strategy usually makes use of a long term description of goals that ensures that the IT department will enable the “business” with achieving its goals and adding bits to the a platform that could be turned into competitive advantage if used correctly.

Who formulates the Technology Strategy?

In many medium and large sized organizations have usually two types of technically related chief executives. The first one is the Chief Information Officer. The second one is the Chief Technology Officer (abbreviated CTO) who is more focused on the application portfolio, platforms and hardware.

The two of them are responsible for different perspectives of the enterprise’s usage of information technology; however it is more likely that the CTO reports to the CIO than the other way around.

The two would have to collaborate on delivering plans that can improve the organization and its usage of information technology.

How do You Formulate a Technology Strategy?

There are many ways to formulate a technology strategy and the way I see it the most important thing is to deliver results through changes investments behavior.  In this regard I assume that a technology strategy would have to be dealt with through the articulation of principles.

Greefhorst & Proper (2011) have written a rather interesting book named “Architecture Principles” and as such their approach to formulating principles can be made use of in order to formulate proper principles that can be incorporated in the technology strategy.

Conclusions

A technology strategy is usually used for ensuring the organization’s ability to gain a return of value of the investments it has committed to the applications, systems, platforms and development can be gained and turned into an advantage.

In order to do so the CTO has to collaborate with other profiles like the CIO in order to develop coherent strategies for the organization’s it-architecture. In order to make a sustainable and resilient strategy it has to be build upon principles.

The next blog post that I plan to publish will deal with principles and how a good principle is formulated.

Drifting the Enterprise: Ensuring Solutions for the Enterprise.

Markets and Drifting

Most organizations operates within an environment that develops constant changes, that enforce the need for innovation and change within the enterprise. The market usually ensures that the enterprise has to re-structure, re-organize and adapt to the situation at hand.

Drifting is the industry paradigm, and there is nothing to do about it if the enterprise wants to develop and keep innovating.

The organization has to adapt, and that leads to the situation where the organization should have to be able to adjust to its enterprise architecture and its information systems in order to ensure that the problems at hand are solved. Since globalization has increased the degree of competition from easy to intense from competitors that can mobilize resources from various countries (markets) and transfer the resources to the markets that they want to gain a market share in.

Many small and medium sized enterprises would have to “hack” their enterprise in order to find processes, technology and organizational structures that can lead to synergies that in turn can lead to a competitive advantage. By acknowledging this the chief architect has to recognize that the Enterprise Architect program can’t be designed for a stabile environment or for idealistic conditions. The Enterprise Architecture program has to be designed upon an idea that the entire model and process has to be easy to change in order to achieve the crystallization of short term wins.

Competitive Advantages

In order to gain competitive advantages the enterprise has to organize and enable as many processes as possible to empower the organization to do something that it can provide better, cheaper or faster than any of its competitors.

These processes would have to be enabled through planning, skills and the ability adapt to the situation at hand. Drifting within the enterprise is in other words an imperative that the executives, the chief architect and the enterprise architects would have to deal with in their establishment of the enterprise architecture program.

The competitive advantages are realized through the members of the enterprise are able to identify solutions that can overcome the problems that they face in their own segment of the enterprise and this first hand knowledge can lead to a greater understanding of how they can optimize their ability to produce. However the ad hoc solutions that Ciborra’s idea of bricolage and hacking can lead to sub-optimization of the enterprise and eventually it would lead to silos.

In order to cope with the problems of the drifting and in the same time enabling the benefits of drifting for the enterprise.

The Enterprise Architecture Program

I define the concept of Enterprise Architecture as a process of adapting the standards, principles and objectives for the enterprise. This process is also a form of blue printing for how the enterprise’s architecture should develop and that enables a form of enterprise engineering as well.

Enterprise Architecture is both a form of enterprise engineering and a project-governance process. Enterprise Architecture is a program since EA is a continuous process that consist of a portfolio of projects that step by step alters and develops the enterprise from its current situation (AS-IS) to a future desired state. This is known as the to-be situation.

The principal idea with the program is that the change will take place over time in small steps and that would in principle ensure that the big bang changes wouldn’t allocate too many resources and it would in the same time ensure that the changes would alter too much at the same time and thereby make the changes manageable. The manageable size minimizes the risks for the enormous project will fail to realize the benefits promised before the project was initiated.

Drifting leads to a need to deal with the problem of inconsistent technologies and solutions, that in turn would make it very expensive and difficult to manage. In order to deal with the negative impact of the tendencies of bricolage and hacking, it becomes clear that the enforcement of certain principles, standards, methodologies and approaches should be enforced and that the concept of Enterprise Architecture is capable to deal with. Enterprise Architecture has to be enforced through the culture of the various segments of the enterprise. However a too tough enforcement of the principles dealt with in the Enterprise Architecture program will eventually lead to a problem with enablement of innovation (process innovation and product innovation) for the enterprise.

The chief architect has to try to deal with informing the various creative elements within the enterprise in order to make them understand how they can apply the various applications and solutions to deal with the problems that their segment faces, but they would have to deal with the standards and principles defined in the Enterprise Architecture program in order to ensure alignment, agility and assurance.

The chief architect has to deal with this delicate issue, and it can only be dealt with in a continuous process from the day that the Enterprise Architecture program is initiated until the end of the enterprise.

 

Enterprise Architecture is more than IT

This blog post is based on the guest lecture that Chris Potts performed at the course B30 Enterprise Strategy, Business and Technology at the IT University of Copenhagen the 25th of October 2010.
It is growing sense around the world that Enterprise Architecture is dealing with more than IT; however since the concept’s origin from the world of IT has often been portrayed as an IT concept, and implemented as a rather IT centric tool.
Chris Potts asked the class at the lecture: “Can you recognize this architecture (this building – showing a picture of the insides of the Sydney opera house). This is a picture from the inside of the architecture. It proved to be the Sydney opera house but it is often hard to identify buildings (architectures) from the inside but it is rather easy to identify it from the outside”.
According to Potts is the biggest difference between an Enterprise Architect and a building’s architect, and that is “a building cannot change its own architecture” but an enterprise can, and Potts views on the definition of architects in enterprises deals mainly with that all the members in the enterprise in some way are architects. When it came to the role of Enterprise Architect is to change the world. Potts made use of the quotation below.
“According to Potts then Enterprise Architecture is about changing the world into something it probably wouldn’t otherwise have been.” – Chris Potts (2010b).
The question then becomes how to challenge the status quo, and the approach doesn’t always tells people what to do. So you may have an architecture but it doesn’t tell people what it is. According to Potts then sometimes the Enterprise Architect need to risk a lot as strategist and you would need to be ruthless.
Potts is of the opinion (an opinion he shares with Mintzberg and Ross & Weill) that strategy has to be embedded into the behavior of the actors within the enterprise. When it comes to behavior then there are two different forms that needs to be dealt with. The de facto behavior and the formalized behavior. The formalized approach to behavior deals with articulating the desired behavior in work structures through formalized descriptions of what is desired into the various artifacts.
When working with Enterprise Architecture then it might be a focus to use an argument as “Enhancing Enterprise Performance With Structural Innovations”. The hard part of this is the structural innovations part. The Enterprise Architect has to force himself to become innovative in using Enterprise Architecture and innovative in ways to improve the enterprise, and to create value for the enterprise as a whole.
“The whole is greater than the sum of its parts” – Aristole
Structural performance of the enterprise architecture is a principle that needs to be dealt with. Chris Potts mentioned that many investors work with analyzing the profits and costs of the enterprise but they usually fail with understanding or investigating if the enterprise is about to collapse from within due to bad architectural design.
There are many fundamental truths according to Potts. The first one is that the structural performance of an enterprise depends on its architecture, and the second one deals with an enterprise has an architecture regardless it is formalized or not.
The third truth that any enterprise architect should adapt is that the actual shape and structure of an enterprise’s architecture is the aggregated output of all its invests in change.
The fourth principle deals with the value of the structural innovation depends on the wider architectural context and last the enterprise architecture is about scenarios not certainties.
In this context the work with the core tactics is that the chief architect should bring both the explicit and implicit enterprise architects and make them work together.
Chris Potts introduced a new framework for change called the double e, double a journey.
Establish and explorer. These two steps are private to the chief architect and the activate and apply are public to the chief architect. It simply deals with taken over the enterprise through a guiding coalition which in principle can be related to the change framework that John P. Kotter who made the famous eight steps for change program (dating back to 1995).

The Scope of Enterprise Architecture was discussed and the class reached the following conclusions:
1. Activities and Processes.
2. Boundaries.
3. People.
4. Capabilities.
5. Resources.
6. Data.
7. Information.
8. Government and governance.
9. Environment.
10. Technology.
According to Potts markets do also have architectures and this approach leads to a fundamental focus on business architecture since the business architecture can’t stand alone to the market architecture. The market architecture contains the customer experience and from this perspective the architectures needs to be aligned to the market architecture to provide what the customers want. The business architecture in the other hand deals with the virtual organization (or more or less the virtual organization) and it is directly connected to the partners and suppliers that delivers materials and services to the enterprise.
According to Potts then structural performance is the key for measuring how well the enterprise is doing Enterprise Architecture. For this a cash-flow analysis based on the annual reports from the enterprise can be applied; however it is greatly encouraged to make use of other forms of analysis to come to this particular approach e.g., activity based costing. This approach might not give a correct view of status quo of the various lines of business and therefore other key performance indicators and methods needs to be applied.
Therefore should an Enterprise Architect make use of context specific strategies for each line of business. The example that Chris Potts made use of was a bit simplified in relation to measuring the different initiatives the enterprise works with; however it is a needed technology.
Chris Potts emphasize that the politics of management and the politics of organization is of great importance when it comes to Enterprise Architecture, and if the chief architect doesn’t understand the dialectic struggle within the enterprise then it certainly will become a problem for implementing Enterprise Architecture, and according to Potts the political aspect of governance is rather often worse in the public sector than it the private sector.
The interesting part about the approach that Potts makes use of is that he actively tries to describe how a chief enterprise architect has to be able to play many roles and he has to be able to facilitate innovation and development issues within both the lines of business and enable the top management of the enterprise to govern the various lines of business. In other words he has to be able to facilitate innovation while tightening control which usually is a contradiction.

IT Strategy Paradigms: Ways to understand and develop IT strategies in a Coherency Management Context.

What is an IT strategy

I have been able to identify two major approaches to articulate IT strategies.

The first major approach is the typical MIT Sloan School of Management approach that support the issues of a some how detached IT strategy from the corporate strategy. The strategy is build upon the assumption that IT is complex, and needed to compete with other organizations on particular issues. IT is a vital component and can’t be ignored in the ever changing competitive environment that most enterprises are in.

The notable theoreticians within the paradigm of the MIT Sloan School of Management are Erik Brynjofsson, Jeanne Ross and Peter Weill.

I title this approach the separated IT approach.

I have likewise been able to identify an opposing approach. The opposing approach deals with that IT is that dominant that the executives have to include IT in their corporate strategy. IT can’t be seen as a unique form of investment since IT is equal to many other forms of technology e.g., machines, cars, boats etc.

There are so far rather few theoreticians who commit openly to this approach to IT strategy, the most notable is properly Chris Potts and Scott Bernard (who indirectly support this approach through his views on Enterprise Architecture).

The later approach seems promising since it promotes that the various actors within the enterprise should work along side in a coherent fashion which is in the spirit of Enterprise Architecture.

The two approaches do share some common features e.g., the time frame, the focus on technology and principles needs to be addressed and that IT is a necessity to compete in the modern economy.

IT-strategy paradigms.
IT-strategy paradigms.

The Integrated Strategy Approach

The executives have to understand IT when they work with strategy and they have to understand the impact of applying Information Technology to e.g., Information Systems such as ERP systems, CRM systems or similar. McKeen & Smith (2004) that Information Technology is in nearly all aspects of an enterprise today. That means that the enterprise and the management of the enterprise needs to adjust to the new situation. McKeen & Smith argues that the IT department needs to be proactive to cope with the changes in the industry and the social conditions of the enterprise.

The IT managers don’t necessarily understand the future work with the business and it might lead that they develop assumptions that are out of touch with reality. Neither can we expect that IT persons (or for that matter other persons) knows everything or equally good at anything.

What is important in tis particular approach Potts argues that the need for governing the enterprise as a coherent entity and therefore should the enterprise avoid the detached IT department.

Chris Potts works with the assumption that any kind of modern and Western economies have to include IT in some way. Therefore should the executives (or other strategists) include IT in the articulation process of the corporate strategy. Potts argue that the IT department shouldn’t be separating from “the business” will lead to that the IT department, and the services the IT department provides the business will be seen as an external entity and therefore can’t the IT department have any influence on the corporate strategy.

This leads to the separated strategy approach that have some opposing views on how the enterprise should be dealing with IT in the strategy planning session.

The Separated Strategy Approach

The operating model is what the enterprise should be working with. This particular model maps how the enterprise works. Ross & Weill”s approach is that there are four different generic approaches that the enterprise can make use of (Ross & Weill 2009).

The operating models are then deal with through the needs of the business; but the assumption that Ross & Weill works with is that IT is complex and that executives from the business don’t understand how IT works.

Along side McKeen & Smith they claim that IT needs to become a proactive force but yet IT is that complex that it needs to be governed and dealt with by specialists or generalists who have an understanding of how IT works and how the various implementation approaches of IT works.

What The Approaches Share

Both approaches share features from one another e.g., the both approaches defines IT as a complex form of investments that needs to be governed. Likewise does both approaches suggests that the articulation of the strategy isn’t enough. The strategy needs to be embodied in the actions of the executives.

Both approaches suggests that IT is a corner stone in how the enterprises do business now a days. Both approaches argues that “the business” and the IT department needs to understand one another to make the necessary decisions to create synergy and through that make the business perform as it had more resources at hand.

Coherency Management

In a context of Coherency Management IT plays a decisive role in the foundation architecture, and the ideas presented in Ross & Weill (2006 & 2009) and FruITion both appeal to the usage of Enterprise Architecture to combine business and IT to create competitive advantages. The foundation architecture is characterized by the CIO and the IT department is the driver for enabling an Enterprise Architecture program. It is essential for any enterprise that pursues assurance, alignment and agility to establish an understanding of how the enterprise works and then apply the tools to elevate the Enterprise Architecture program to embrace more than just the IT department.

In conclusion an IT strategy should be tightly coupled to the corporate strategy to make any kind of benefit from working and governing IT.

Appendix

McKeen, J.D. & Smith, H.A., 2003. Making IT Happen: Critical Issues in Managing Information Technology, John Wiley & Sons.

Potts, C., 2008. fruITion: Creating the Ultimate Corporate Strategy for Information Technology illustrated edition., Technics Publications, LLC.

Ross, J.W., Weill, P. & Robertson, D.C., 2006. Enterprise Architecture as Strategy: Creating a Foundation for Business Execution illustrated edition., Harvard Business School Press.

Download the paper here .

Can IT Make a Competitive Difference: From a Coherency Architect’s Point of View.

The Introduction

Erik Brynjolfsson and Andrew McAfee has written the paper “Investing in the IT That Makes a Competitive Difference” that was published in 2007 in by Harvard Business Review. The paper deals with how enterprises deals with competition in the United States. McAfee & Brynjolfsson argues that most enterprises are in state of hard competition and it will increasingly become more difficult to deal with the competition. They claim that they have found a collaboration between the investment in IT and the way enterprises are able to manage competition.

Premises of the Paper

The first premise of investing in IT that makes a competitive advantage is that the authors claims that the enterprise can gain a competitive advantage through investing in IT. The authors are of the opinion, that they can conclude that investments in IT can create competitive advantages from statistics.
McAfee & Brynjolfsson concludes that many industries experience though (almost perfect) competition. This form of competition has lead to a focus on operational efficiency where IT has become a key factor to achieve operational efficiency. This argument can be supported by Ross & Weill and their research into achieving competitive advantages through IT governance and IT strategies. McAfee & Brynjolfsson works with data that suggest that IT intensive companies can generate more value through governing their IT assets and applying IT to re-build their business processes.

“The firm with the best processes will win in most of the all markets. At the same time, competitors will be able to strike back much more quickly: Instead of simply copying the first mover, they will introduce further IT-based innovations […]”

- McAfee & Brynjolfsson (2007), p. 6.

The authors suggest that there are six elements of the successful IT – enabled process. The first element is that it cover a wide span, the process produce results immediately, the process is precise, the process is consistent, the process makes monitoring easy and last but not least the process has embedded enforceability.
The three companies that McAfee and Brynjolfsson put their attention is on Cisco Systems, Otis (the elevator company), and CVS.
What is the common key for the three companies is that they make use of enterprise wide systems to somehow revolutionize and optimize their business processes. I believe that Harmon entitled this “obliteration of processes” which suggests that the business processes could be re-invented along side the addition of Information Technology. This would lead to that the true benefits of Enterprise Architecture can be reached.
The two authors then discuss two different approaches to enabling the IT processes. The first one is the “Top Down approach” and the second approach is the “Bottom Up approach”.
According to McAfee & Brynjolfsson then the authors makes use of the CVS as a case. They claim that while the enterprise made use of highly centralized systems then some discontent employees (they where discontent with the service the IT department provided for their Macs). The employees created a Wikipedia where they wrote articles on how to overcome the obstacles they experienced when they made use of their macs in the enterprise.
The later example was an example of a decentralized service.

Criticism

The article suggests that IT savvy enterprises do often perform better than enterprises that aren’t. This is in line with the MIT approach to IT strategy that McAfee, Brynjolfsson, Ross & Weill are working with. The role of IT needs to be addressed compared to organizational culture, the employees and their capabilities and their focus on adding value for the enterprise.
The classical anti-thesis to the MIT approach is Carr’s view of investments in Information Technology. Carr is of the impression that the investment in IT often leads to quite an opposite of what the intention was. Carr argues that when enterprises invest in IT then they often over emphasize the cost reduction.
The reductions are then re-invested into lower prices which is easily matched by a company that are in an industry that experience perfect competition.
Carr suggests that enterprises should follow other enterprises when it comes to the usage and investment in IT, likewise should the enterprises focus on risk instead of potential (innovate when the risks are low) and last should the enterprise invest less in IT.

Competitive Advantage

When it comes to competitive advantage then Porter (1998) suggests that the enterprise can’t achieve competitive advantages through focusing on operational efficiency. The enterprise has to focus on innovation to enable positioning the products the enterprise produces in a different way. Through positioning then competitive advantage should be enabled.
Likewise does Porter (1998) suggest that the enterprise has to be enable several processes to enable a sustainable competitive advantage.
Carr (2004) argues that Information Technology only leads to short term competitive advantages and is therefore not desirable to invest in. Instead should the enterprise focus its attention to work with several non-IT related competencies and eventually apply IT support them or re-invent them.
Patrick Turner (2010) suggests that IT needs a strong governance to become an enabler.

“When giving a high profile IT project to a junior project manager is like giving a teenager a rather powerful racing car, he will eventually crash it into a tree.”

- Patrick Turner

Ross & Weill (2009) suggests that Information Technology is only good for two specific things. Standardization that deals with the standardization of data and then integration which deals with information sharing through the entire process.

Reflection

McAfee & Brynjolfsson suggests that IT can make a strategic advantage (competitive advantage), if the enterprise understands to invest in the right IT and re-thinking its processes(the IT that makes a competitive advantage). However many other theoreticians suggest that operational efficiency which investments in IT can be identified as isn’t a strategy or for that matter a strategic enabler. The enterprise needs to invest in business processes and re-invent the processes when it makes sense for the enterprise to do so. McAfee & Brynjolfsson suggests that the schumpeterian competition that many enterprises have experienced in the U.S.
IT might become an enabler for most enterprises if they re-think their business processes by adding IT when it makes sense. McAfee & Brynjolfsson suggests that IT can be an innovation enabler since the enterprise IT can give technical assistance to support the employees.

Appendix

Carr, N.G., 2004. Does IT Matter?: Information Technology and the Corrosion of Competitive Advantage, Harvard Business School Press.
McAfee & Brynjolfsson, 2007, Harvard Business Review.
Porter, M.E., On Competition, Harvard Business Review, Boston, 1998, p.40-42.
Turner, P., 2010, On IT strategies, Enterprise Architecture Summer Camp.
Weill, P. & Ross, J., 2009. IT Savvy: What Top Executives Must Know to Go from Pain to Gain, Harvard Business School Press.

Download the paper here.