Keep Strategy in Sync

By Eric Lundquist  |  Posted 2004-11-29

Keep Strategy in Sync

What is your complementary technology investment strategy for next year? Technology investments that are not in accord with business goals are doomed to failure. The converse is true as well. Setting business goals without considering what technology investments are needed to support those goals will also leave you with your wheels spinning as competitors move ahead.

According to Erik Brynjolfsson, director of the Center for eBusiness at the Massachusetts Institute of Technology, for every $1 in IT capital investments, companies spend on average $9 to $10 on the intangible technological and organizational assets to accompany that capital spending. However, capital assets are much easier to measure (you know what you spend for a desktop computer or a server), while the intangibles of restructuring a business process, training or time lost in technological transformation are much more difficult to assess. Getting a handle on those intangibles may spell the difference between success and failure in your IT projects next year.

Click here to read Eric Lundquists column entitled "How to Spend Wisely".

Thinking of forsaking old paper-based travel-and-expense reports in favor of digital ones? Rather than fixating on which of the many digital systems is best for your company, spend time (maybe five to 10 times the amount you spend on product selection) figuring out what the change will mean for your company in terms of organization and business process.

Thinking of making a really big change, such as moving all your business processes to a portal to provide a real-time view of how your business is performing? Make sure you spend plenty of energy planning for the business process associated with the change as well as the particular portal product you will select.

Brynjolfsson was speaking about the process of business transformation and the matrix of change during a recent breakfast I attended, hosted by MITs Center for eBusiness. The timing seemed appropriate as research organizations such as Meta Group have started issuing their spending forecasts for next year.

Meta forecasts IT spending will increase by 1 percent to a growth rate of 4 percent. I think that modest growth forecast means three things for IT. First, you must make sure your projects are successful. Second, the best place to find technology investment money will be in further controlling your system maintenance and administration costs. And third, outsourcing will be an increasing competitor to your internal operations.

Next Page: Anticipate All the Changes

Anticipate All the Changes

The benefit of building a digital business is continued growth in productivity, Brynjolfsson contends. The proper use of technology can provide a means to "leverage existing assets," he said. However, before you throw technology at the problem, you have to examine how that technology will change your business process, all the way from process flow to the way you talk about your business operations.

One conversation at the breakfast emphasized for me the shift in vocabulary needed in changing a business process. In a discussion of application development at one attendees company, the attendee said that, in the past, the application business could be described as silos of applications, each application built from scratch; rewards were developed for the application creator, and each solution was unique. In the new environment, applications are built on a shared platform using a component-based architecture; rewards go to application integrators, and solutions are model-driven and designed to be shared.

Too often, IT projects diverge at the point where technologists and business executives meet, with the two sides finding themselves speaking different languages. The greatest need is to prevent that divergence by making sure that technology capital investments are made on projects that will accommodate a change in business processes.

Without a complementary process, you are risking not only that capital investment but also the substantially larger intangible investment tied to the project. And next year, just as this year, you dont want those limited investment dollars headed toward failed projects.

Editor in Chief Eric Lundquist can be reached at

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