Aligning technology to business requirements is based on a few underlying assumptions that are often lacking from SAP projects. Those assumptions are 1) the business actually knows what their requirements are, 2) the project scope includes those requirements, 3) the right management and internal employees are committed and engaged, and 4) the system integrator you select has consultants with the required experience.
Often, I see businesses fail to look beyond operational excellence areas of the business, overlooking what SAP or any other ERP application can do for innovation or customer focus. In an article that I read on CIO.com, the author stated that IT is already integrated with business and all of the hype about business to IT alignment is overblown. This is not entirely true. As I commented:
Traditional business schools teach two key concepts around business (once you have settled on a product or service) and those are value propositions and competitive pressures.
IT (Information Technology) has NOT integrated with business well EXCEPT in the commodity markets. The universally zealous focus on process improvements, process automation, and business process management only addresses ONE of the three value propositions. And that type of a focus ends up creating commodities of the product or service (if it is not already a commodity).
IT has only aggressively addressed the “operational excellence” pillar of business. They are only now BEGINNING to seriously look at customer focus and innovation is just barely a blip on the radar screen.
None of this even addresses the competitive pressure landscape either. So when you say that IT is already integrated with business you are looking at just one dimension of a 3 dimensional picture. IT has focused on OPERATIONS and NOT on business (unless your products or services are commodities, or you want your marketplace to become a commodity!).
I’ve written LOTS of material on this subject to help IT professionals and IT decision makers make the distinction. Once they “get it” and change how they look at their role, then they avoid being reduced to little more than a cost based charge-back center of their business.
The reality is that until IT aggressively focuses on the business side of the equation (such as revenue, profitability, customer retention, customer acquisition, product development, and engineering), IT is little more than a process PLC (Programmable Logic Controller). PLCs are useful devices that auto-mechanically, or electronically, trigger some follow-up event for equipment, machinery, or other electronic devices. These PLCs coordinate mechanical or electronic processes, generally related to process control.
IT needs to zealously fixate on business processes and automation, just as they need PLCs. However I am not aware of any PLC that retains or acquires customers, or generates revenue by innovating new products or services.
Today’s technology to business alignment is very one-dimensional in relation to value propositions– they focus almost exclusively on the operational excellence proposition. Unfortunately, this focus creates commodities.
Let me further break down my points. Business without customers is bankrupt or non-existent. Business without profit is headed for bankruptcy and for non-existence. Business without new, or innovative products or services will become little more than a commodity (if it is not already). The three value proposition areas are the following:
- Operational excellence (focus on processes, automation, and quality control with lagging financial controls).
- Customer focus (customer retention and customer acquisition with lagging financial controls and leading strategy integration).
- Innovation (new or improved products and services – lagging financial indicators and leading strategy integration).
As you can see from the three generalized value proposition areas, technology integration is fairly one-dimensional, focusing almost exclusively on the operational excellence value proposition. Even for those companies that pursue CRM (Customer Relationship Management) initiatives, the big, fancy, expensive, and complex CRM systems are usually little more than giant contact capture systems with some additional reporting capabilities from the backend ERP application. As a result, many of today’s CRM initiatives are little more than glorified operational excellence applications of technology that masquerade as being customer focused. Unless the initiatives are clearly connected to customer acquisition, customer retention, upselling within various channels, and improving business revenue and sales, I do not believe they qualify for the second value proposition of “customer focus.”
The next time someone tries to convince you that IT is already focused on business, take a step back to see how they are doing so.
Additional Reading on Business and Technology or IT Alignment and IT to Business Integration:
Using SAP to Improve Revenue and Profitability
Tactics, Strategy, ROI, TCO and Realizing Business Benefit from SAP
CRM, ERP, BI, and IT Investment — Where Do You Find the Business Benefit?
Competitive Pressures and Value Propositions, Is Lean the Answer?
business can only benefit if process is defined, and to define and run a process you need IT.