Strategy Execution Impossible Without IT

An overview of the history of information technology in organizations shows that at one time, decisions about IT spending were simple cost-benefit calculations made to reduce labor. Things are very different today.

Our look at the rise of Blockbuster to dominance in the video rental business, and its demise at the hands of Netflix reveals what is understood by savvy technology and business leaders today, that technology has the power to completely change the competitive environment. But many firms continue to rely on cost-benefit decisions for IT expenditures, and fail to see the centrality of IT to the value proposition of the enterprise.

Organizations exist to create value. Organization behavior is an academic discipline that teaches us that in order to create value in the future organizations must evolve to ensure their survival. As the organization changes, so does its value proposition.

Business strategy begins with the expectation of how the organization will create value in the future. The execution of strategy is the deliberate changes that the organization makes to sustain its value-creating capability. We saw that Blockbuster was simply unable to effectively change itself to confront the threat posed by Netflix’s technology-intensive business model.

So strategy execution means change. In the modern enterprise, every change in a business process, entering a new market, introducing a new product, changing the capability of the business, changing the way it deals with customers and suppliers, changing the very value proposition of the enterprise itself requires change to the underlying information technology. This has not always been the case. But today, even in firms where IT is seen as tangental, the value proposition of the firm often directly depends upon, and would not otherwise be possible without, the information technology. This leads to the first of my three principles of the alignment of information technology with the strategy of the enterprise:

Principle I: Strategy execution cannot be accomplished without information technology.

This has important implications for the way an enterprise manages its information technology. Effective management of information technology enables the enterprise to more quickly and effectively execute its business strategy. Failure to manage information technology effectively makes strategy execution difficult or impossible.

(read the previous and next articles in the SFITO series)

(note: This is the second in a series of posts on the topic of the Strategy-Focused IT Organization. The subject of this post is the principles of aligning IT with business strategy that I first outlined in an article in CIO Insight Magazine in 2003, and later elaborated in an article in Harvard Business School Press’ Balanced Scorecard Report in 2004.)